-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RY0S9whR/EldefYEo7/7pWT4xZgz6e+rBk34CqgfRR0c6oUGYDcba3h5wgK4sV1V cmtv8BbU9yO2Hg0eYchNeg== 0000950124-96-003619.txt : 19960816 0000950124-96-003619.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950124-96-003619 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TECUMSEH PRODUCTS CO CENTRAL INDEX KEY: 0000096831 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 381093240 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00452 FILM NUMBER: 96612748 BUSINESS ADDRESS: STREET 1: 100 E PATTERSON ST CITY: TECUMSEH STATE: MI ZIP: 49286 BUSINESS PHONE: 5174238411 MAIL ADDRESS: STREET 1: 100 EAST PATTERSON STREET CITY: TECUMSEH STATE: MI ZIP: 49286 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 For the quarterly period ended June 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 For the transition period from______to______ COMMISSION FILE NUMBER: 0-452 TECUMSEH PRODUCTS COMPANY (Exact name of registrant as specified in its charter) MICHIGAN 38-1093240 (State of Incorporation) (IRS Employer Identification Number) 100 EAST PATTERSON STREET TECUMSEH, MICHIGAN 49286 (Address of Principal Executive Offices) Telephone Number: (517) 423-8411 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class of Stock Outstanding at July 31, 1996 - ------------------------------------------------------------------------------- Class B Common Stock, $1.00 par value 5,470,146 Class A Common Stock, $1.00 par value 16,410,438 2 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION - ITEM 1 CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited and subject to year end adjustments)
(Dollars in millions) JUNE 30, December 31, 1996 1995 ====================================================================================================== ASSETS CURRENT ASSETS: Cash and cash equivalents $244.9 $261.6 Accounts receivable, trade, less allowance for doubtful accounts of $7.1 million in 1996 and $6.9 million in 1995 300.4 225.5 Inventories 249.4 260.0 Deferred income taxes 34.4 33.9 Other current assets 9.4 10.2 - ------------------------------------------------------------------------------------------------------ TOTAL CURRENT ASSETS 838.5 791.2 PROPERTY, PLANT AND EQUIPMENT, at cost, net of accumulated depreciation of $433.5 million in 1996 and $419.1 million in 1995 505.5 477.0 EXCESS OF COST OVER ACQUIRED NET ASSETS 57.5 60.9 DEFERRED INCOME TAXES 19.6 19.9 PREPAID PENSION EXPENSE 41.9 37.6 OTHER ASSETS 22.0 21.0 - ------------------------------------------------------------------------------------------------------ TOTAL ASSETS $1,485.0 $1,407.6 ====================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable, trade $ 136.6 $ 129.5 Income taxes payable 10.3 7.5 Short-term borrowings 8.4 13.5 Accrued liabilities 141.6 119.4 - ------------------------------------------------------------------------------------------------------ TOTAL CURRENT LIABILITIES 296.9 269.9 LONG-TERM DEBT 13.7 14.7 NON-PENSION POSTRETIREMENT BENEFITS 176.9 174.0 PRODUCT WARRANTY AND SELF-INSURED RISKS 31.1 30.0 ACCRUAL FOR ENVIRONMENTAL MATTERS 27.7 27.3 PENSION LIABILITIES 15.0 14.6 - ------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES 561.3 530.5 - ------------------------------------------------------------------------------------------------------ STOCKHOLDERS' EQUITY: Class A common stock, $1 par value; authorized 75,000,000 shares; issued and outstanding 16,410,438 shares 16.4 16.4 Class B common stock, $1 par value; authorized 25,000,000 shares; issued and outstanding 5,470,146 shares 5.5 5.5 Capital in excess of par value 29.9 29.9 Retained earnings 861.5 808.0 Foreign currency translation adjustment 10.4 17.3 - ------------------------------------------------------------------------------------------------------ TOTAL STOCKHOLDERS' EQUITY 923.7 877.1 - ------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,485.0 $1,407.6 ======================================================================================================
The accompanying notes are an integral part of these statements. Page 2 3 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION - ITEM 1 CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited and subject to year end adjustments)
(Dollars in millions Three Months Ended Six Months Ended except per share amounts) June 30, June 30, -------------------- ------------------ 1996 1995 1996 1995 ===================================================================================================== INCOME: Net sales $ 490.9 $ 467.3 $ 987.1 $ 940.9 Interest income 4.9 7.3 10.2 15.5 Other income 1.9 3.0 4.0 4.6 - ------------------------------------------------------------------------------------------------------ TOTAL INCOME 497.7 477.6 1,001.3 961.0 - ------------------------------------------------------------------------------------------------------ EXPENSES: Cost of sales and operating expenses 416.7 395.1 845.2 796.9 Selling and administrative expenses 25.4 24.0 50.3 47.8 Interest expense 1.7 2.0 3.6 4.0 Other expenses 0.1 -- 0.2 0.1 - ------------------------------------------------------------------------------------------------------ TOTAL EXPENSES 443.9 421.1 899.3 848.8 - ------------------------------------------------------------------------------------------------------ INCOME BEFORE TAXES ON INCOME 53.8 56.5 102.0 112.2 Taxes on income 19.9 21.2 37.1 42.0 - ------------------------------------------------------------------------------------------------------ NET INCOME $ 33.9 $ 35.3 $ 64.9 $ 70.2 ====================================================================================================== NET INCOME PER SHARE $ 1.55 $ 1.62 $ 2.97 $ 3.21 ====================================================================================================== CASH DIVIDENDS DECLARED PER SHARE $ 0.26 $ 0.25 $ 0.52 $ 0.50 ======================================================================================================
The accompanying notes are an integral part of these statements. Page 3 4 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION - ITEM 1 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited and subject to year end adjustments)
Six Months Ended (Dollars in millions) June 30, --------------------------- 1996 1995 ======================================================================================================== CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 64.9 $ 70.2 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 31.8 30.6 Accounts receivable (77.4) (77.6) Inventories 9.6 (11.3) Payables and accrued expenses 36.4 53.4 Other (2.4) 0.9 - -------------------------------------------------------------------------------------------------------- CASH PROVIDED BY OPERATIONS 62.9 66.2 - -------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (59.8) (64.9) - -------------------------------------------------------------------------------------------------------- CASH USED IN INVESTING ACTIVITIES (59.8) (64.9) - -------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid (11.4) (10.9) Decrease in borrowings, net (5.6) (0.3) - -------------------------------------------------------------------------------------------------------- CASH USED IN FINANCING ACTIVITIES (17.0) (11.2) - -------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (2.8) 3.5 - -------------------------------------------------------------------------------------------------------- DECREASE IN CASH AND CASH EQUIVALENTS (16.7) (6.4) CASH AND CASH EQUIVALENTS: BEGINNING OF PERIOD 261.6 283.2 - -------------------------------------------------------------------------------------------------------- END OF PERIOD $ 244.9 $ 276.8 ========================================================================================================
The accompanying notes are an integral part of these statements. Page 4 5 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION - ITEM 1 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. The condensed consolidated financial statements are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The December 31, 1995 condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report for the fiscal year ended December 31, 1995. Due to the seasonal nature of the Company's business, the results of operations for the interim period are not necessarily indicative of the results for the entire fiscal year. The financial data required in this Form 10-Q by Rule 10.01 of Regulation S-X have been reviewed by Ciulla, Smith & Dale, LLP, the Company's independent certified public accountants, as described in their report contained elsewhere herein. 2. Inventories consisted of:
(Dollars in Millions) JUNE 30, December 31, 1996 1995 ======================================================================================= Raw material and work in process $144.7 $162.8 Finished goods 87.7 80.4 Supplies 17.0 16.8 --------------------------------------------------------------------------------------- $249.4 $260.0 =======================================================================================
3. The Company has been named by the U.S. Environmental Protection Agency (EPA) as a potentially responsible party in connection with the Sheboygan River and Harbor Superfund Site in Wisconsin. At June 30, 1996, the Company had an accrual of $30.5 million ($30.1 million at December 31, 1995) for the estimated costs associated with the cleanup of certain PCB contamination at this Superfund Site. The Company has based the estimated cost of cleanup on ongoing engineering studies, including engineering samples taken in the Sheboygan River, and assumptions as to the areas that will have to be remediated along with the nature and extent of the remediation that will be required. Significant assumptions underlying the estimated costs are that remediation will involve innovative technologies, including (but not limited to) bioremediation near the Company's plant site and along the Upper River, and only natural armoring and bioremediation in the Lower River and Harbor. Page 5 6 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION - ITEM 1 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, CONTINUED The EPA has indicated it expects to issue a record of decision on the cleanup of the Sheboygan River and Harbor Site in the second half of 1996, but the ultimate resolution of the matter may take much longer. Ultimate costs to the Company will be dependent upon factors beyond its control such as the scope and methodology of the remedial action requirements to be established by the EPA (in consultation with the State of Wisconsin), rapidly changing technology, and the outcome of any related litigation. The Company, in cooperation with the Wisconsin Department of Natural Resources, is conducting an investigation of soil and groundwater contamination at the Company's Grafton, Wisconsin plant. Certain test procedures are underway to assess the extent of contamination and to develop remedial options for the site. While the Company has provided for estimated investigation and on-site remediation costs, the extent and timing of future off-site remediation requirements, if any, are not presently determinable. In addition to the above mentioned sites, the Company also is currently participating with the EPA and various state agencies at certain other sites to determine the nature and extent of any remedial action which may be necessary with regard to such other sites. Based on limited preliminary data and other information currently available, the Company has no reason to believe that the level of expenditures for potential remedial action necessary at these other sites will have a material effect on its financial position. 4. Various lawsuits and claims, including those involving ordinary routine litigation incidental to its business, to which the Company is a party, are pending, or have been asserted, against the Company. Although the outcome of these matters cannot be predicted with certainty, and some may be disposed of unfavorably to the Company, management has no reason to believe that their disposition will have a materially adverse effect on the consolidated financial position of the Company. Page 6 7 August 7, 1996 INDEPENDENT ACCOUNTANTS' REPORT Tecumseh Products Company Tecumseh, Michigan We have reviewed the consolidated condensed balance sheet of Tecumseh Products Company and Subsidiaries as of June 30, 1996, and the related consolidated condensed statements of income and cash flows for the three months and six months ended June 30, 1996 and 1995. These financial statements are the responsibility of the Company's management. We have conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated condensed financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 16, 1996, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated condensed balance sheet as of December 31, 1995, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. CIULLA, SMITH & DALE, LLP Certified Public Accountants Southfield, Michigan Page 7 8 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION -- ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS The Company's sales for the second quarter of 1996 reached $490.9 million and were 5% higher than the same period in 1995. Net income of $33.9 million, or $1.55 per share, was 4% lower than the 1995 second quarter earnings of $35.3 million principally due to lower after-tax net interest income which decreased $1.3 million or $.06 per share. First half sales of $987.1 million were 5% higher than the same period in 1995 and net income of $64.9 million, or $2.97 per share, was down 8% from the first half of 1995. Again, much of the earnings decline was due to lower net interest income. The following table presents results by business segments:
Three Months Ended Six Months Ended (Dollars in millions) June 30, June 30, --------------------- ----------------------- 1996 1995 1996 1995 ==================================================================================================== NET SALES: Compressor Products $318.9 $318.8 $631.6 $602.1 Engine and Power Train Products 146.3 125.2 300.6 285.8 Pump Products 25.7 23.3 54.9 53.0 - ---------------------------------------------------------------------------------------------------- TOTAL NET SALES $490.9 $467.3 $987.1 $940.9 ==================================================================================================== INCOME BEFORE INCOME TAXES: Compressor Products $ 33.1 $ 37.0 $ 58.9 $ 63.4 Engine and Power Train Products 16.2 13.4 33.4 33.9 Pump Products 3.7 3.2 8.0 8.0 Corporate Expenses (2.4) (2.4) (4.9) (4.6) Net Interest Income 3.2 5.3 6.6 11.5 - ---------------------------------------------------------------------------------------------------- TOTAL INCOME BEFORE INCOME TAXES $ 53.8 $ 56.5 $102.0 $112.2 ====================================================================================================
Page 8 9 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION -- ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, CONTINUED Compressor Products The Company's worldwide Compressor Products sales for the second quarter of 1996 were $318.9 million, essentially even with the previous year period. First half sales of $631.6 million were up 5% compared to the first half of 1995. For both the first half and second quarter of 1996, sales of compressors produced in North America showed solid gains, particularly in the domestic markets, but were offset by weaker sales of compressors produced in operations located overseas. First half sales gains were driven by strong North American demand for two recently introduced products, a small rotary room air conditioning compressor and a household refrigeration compressor. Company sales of compressors for the domestic central unitary air conditioning market also continued to experience solid gains. U.S. demand for air conditioning product remains high due to strong housing starts and consumer reaction to last summer's record heat. European operations and markets experienced sales declines in the first half and second quarter of 1996 as a result of an overall economic weakness and cool spring weather in Europe. In Brazil, strong demand for refrigeration products continued. Compressor Products operating margin was 10.4% for the second quarter of 1996 as compared to 11.6% for 1995. Factors affecting margins were primarily higher costs associated with new product sales. For the second quarter of 1996, the Company's Brazilian subsidiary contributed 16% of consolidated compressor sales and 25% of segment operating profit, versus 17% of consolidated compressor sales and 23% of segment operating profit for the same period in 1995. The operating results for the Company's Brazilian subsidiary remained strong, due to continued high levels of domestic demand for refrigeration products. Although Brazil's current economic program has been successful in controlling inflation and lifting consumer confidence, it has also resulted in an artificially strong currency which is expected to continue to exert pressure on operating margins. Page 9 10 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION -- ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, CONTINUED Engine and Power Train Products Worldwide Engine and Power Train Products sales were $146.3 million in the second quarter of 1996, a 17% increase as compared to the same period in 1995. North American operations posted strong sales gains due to a previous seasonal delay in production start-ups by certain lawn and garden customers, increased sales of utility engines and modest gains in snow thrower engine sales. These sales gains were offset in part by weaker sales in the Company's European engine and North American transmission operations. Sales for the first half of 1996 were $300.6 million, a 5% increase over the prior year period. A strong second quarter performance in North American operations, as noted above, made up for slower sales in the first quarter of 1996. Engine and Power Train Products operating margins were 11.0% for the second quarter of 1996 as compared to 10.7% for the previous year period. Increased sales volume and favorable product mix were the major factors influencing margin gains in the second quarter. First half operating margins decreased from 11.9% to 11.1% due to higher raw material costs and new facility start-up costs. Pump Products Pump Products sales for the second quarter of 1996 were $25.7 million, a 10% increase compared to the same period in 1995. First half sales of $54.9 million increased 4% over the prior year period. Recent flooding in key areas of the U.S. increased demand for pumps. Second quarter operating margins increased to 14.4% as compared to 13.7%, while first half margins decreased to 14.6% as compared to 15.1% in 1995. Volume related margin gains in the second quarter were offset by unrecovered material cost increases on a year-to-date basis. Interest Income Interest income net of interest expense decreased $2.1 million for the second quarter and $4.9 million for the first half of 1996 compared to the same periods in 1995, due in large part to lower financial income reported by the Company's Brazilian subsidiary. Late in the second quarter of 1995, the Company lowered its cash position in Brazil to provide some protection from potential currency devaluations. Page 10 11 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION -- ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, CONTINUED LIQUIDITY AND CAPITAL RESOURCES The Company continued to maintain a strong and liquid financial position. Working capital of $541.6 million at June 30, 1996 was up from $521.3 million at December 31, 1995, and the ratio of current assets to current liabilities approximated 2.8. First half capital spending of $59.8 million included expenditures for a new engine facility in Georgia, and expansion of the TP compressor line and installation of a new small rotary compressor line in Brazil. Total capital spending for 1996 should approximate $120-140 million. Working capital requirements and planned capital expenditures for the remainder of 1996 and 1997 are expected to be financed through internally available funds, although the Company may utilize long-term financing arrangements in connection with various state investment incentives. Page 11 12 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Shareholders of Tecumseh Products Company was held on April 24, 1996. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and there was no solicitation in opposition to management's solicitation. All of the management's nominees for directors as listed in the proxy statement were elected with the following votes.
VOTES DIRECTOR VOTES FOR WITHHELD ------------------- ----------- --------- Kenneth G. Herrick 5,054,161 19,841 Todd W. Herrick 5,054,311 19,691 John H. Foss 5,052,911 21,091 Peter M. Banks 5,052,545 21,457 Jon E. Barfield 5,052,911 21,091 J. Russell Fowler 5,052,911 21,091 John W. Gelder 5,052,911 21,091 Stephen L. Hickman 5,052,911 21,091 Dean E. Richardson 5,052,711 21,291
Item 6. Exhibits and Reports on Form 8-K (a) None. (b) The Company did not file any reports on Form 8-K during the three months ended June 30, 1996. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized: TECUMSEH PRODUCTS COMPANY ------------------------- (Registrant) Dated: August 14, 1996 By: /s/ JOHN H. FOSS ---------------------- ------------------------------ John H. Foss Vice President, Treasurer and Chief Financial Officer Page 12 13 EXHIBIT INDEX
Exhibit No. DESCRIPTION - ----------- ----------- 27 Financial Data Schedule
EX-27 2 EXHIBIT 27
5 1,000 6-MOS DEC-31-1996 JUN-30-1996 244,900 0 307,500 7,100 249,400 838,500 939,000 433,500 1,485,000 296,900 0 0 0 21,900 901,800 1,485,000 987,100 1,001,300 845,200 895,500 200 0 3,600 102,000 37,100 64,900 0 0 0 64,900 2.97 2.97
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