EXHIBIT 99.1
TECUMSEH PRODUCTS COMPANY REPORTS THIRD QUARTER 2006 RESULTS
Tecumseh, Michigan, December 19, 2006 . . . . Tecumseh Products Company
(NASDAQ-TECUA, TECUB) announced today its 2006 third quarter consolidated
results as summarized in the following Consolidated Condensed Statements of
Operations.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended
(Dollars in millions except per share amounts) September 30, September 30,
---------------------------------------------- --------------------------- ----------------------------
2006 2005 2006 2005
-----------------------------------------------------------
NET SALES $ 429.4 $ 449.9 $ 1,331.8 $ 1,322.9
Cost of sales 407.9 409.8 1,251.8 1,224.9
Selling and administrative expenses 42.4 37.2 131.9 121.4
Impairments, restructuring charges and other items 8.4 1.4 14.0 111.3
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OPERATING PROFIT (LOSS) (29.3) 1.5 (65.9) (134.7)
Interest expense (10.0) (6.3) (29.4) (18.0)
Interest income and other, net 2.1 1.9 10.0 6.9
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LOSS FROM CONTINUING OPERATIONS BEFORE TAXES (37.2) (2.9) (85.3) (145.8)
Tax provision (benefit) 8.1 34.9 (3.7) 28.3
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Loss from continuing operations (45.3) (37.8) (81.6) (174.1)
Income from discontinued operations, net of tax 7.5 0.6 65.1 2.5
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NET LOSS ($ 37.8) ($ 37.2) ($ 16.5) ($ 171.6)
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Basic and diluted income (loss) per share:
Continuing operations ($ 2.45) ($ 2.05) ($ 4.42) ($ 9.42)
Discontinued operations 0.40 $ 0.04 3.52 $ 0.13
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NET LOSS PER SHARE ($ 2.05) ($ 2.01) ($ 0.90) ($ 9.29)
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WEIGHTED AVERAGE SHARES (in thousands of shares) 18,480 18,480 18,480 18,480
===========================================================
Consolidated net loss from continuing operations for the third quarter of
2006 was $45.3 million ($2.45 per share) compared to loss of $37.8 million
($2.05 per share) in the third quarter of 2005, as restated. The change in loss
from continuing operations reflected a $30.8 million increase in operating loss
before interest and taxes, driven primarily by unfavorable foreign currency
fluctuations, higher costs for copper and other commodities, and writedown of
impaired assets.
Reported results for the third quarter of 2006 included restructuring and
asset impairment charges of $8.4 million, related to asset impairments in the
Engine & Power Train business for the writedown of assets that have become idled
under the segment's overall restructuring program. Reported results for the
third quarter of 2005 included restructuring and asset impairment charges of
$1.4 million related to the European Engine & Power Train ($0.4 million),
Compressor ($0.5 million) and Electrical Components ($0.5 million) segments.
Interest expense amounted to $10.0 million in the third quarter of 2006,
compared to $6.3 million in the third quarter of 2005. The increase was
primarily related to the higher average interest rates associated with the
Company's current borrowing arrangements.
1
In determining the loss from continuing operations, the Company recognized
a tax provision of $8.1 million, which includes a valuation allowance of $5.9
million ($0.32 per share) established against its remaining foreign deferred tax
assets in Brazil, and reversal of tax benefits recorded during the first half of
the year. The Company also booked a tax expense of $0.9 million recognized in
conjunction with the gain on sale of a subsidiary, which is included in
discontinued operations. This compares to a $34.9 million income tax provision
in the third quarter of 2005, which primarily reflected the recognition of
deferred tax asset valuation allowances for tax jurisdictions in which the
Company is in a three year cumulative loss position, including the U.S.
During the second quarter of 2006, the Company completed the sale of 100%
of its ownership in Little Giant Pump Company. The operating results of Little
Giant Pump Company for 2006 and the comparable prior year periods have been
reclassified from continuing operations to income from discontinued operations.
Under accounting rules, the Company has also allocated the portion of its
interest expense associated with this operation to the discontinued operations
line item. Proceeds from the sale were approximately $121 million. The Company
recognized a pre-tax gain on the sale of $77.9 million. The gain on the sale,
plus earnings during the Company's period of ownership, net of taxes and
interest, is presented in income from discontinued operations and amounted to
$65.1 million net of tax ($3.52 per share). Gains of $8.4 million ($7.5 million
net of tax) primarily associated with curtailment of employee benefits formerly
provided to Little Giant employees were reflected in third quarter financial
results. As required by the Company's lending agreements, the proceeds were
utilized to repay a portion of the Company's debt.
Consolidated net loss from continuing operations for the first nine months
of 2006 was $81.6 million ($4.42 per share) compared to a loss of $174.1 million
($9.42 per share) for the same period in 2005, as restated. Year-to-date results
reflected a $68.7 million reduction in operating loss before interest and taxes
including lower restructuring charges of $97.3 million, partially offset by
lower product margins in the second and third quarters due to unfavorable
foreign currency rates, higher commodity costs, and fees to AlixPartners for
consulting services provided to our Engine & Power Train business.
Interest expense for the nine months ended September 30, 2006 amounted to
$29.4 million, compared to $18.0 million in the period ended September 30, 2005.
The increase was primarily related to the higher average interest rates
associated with the Company's current borrowing arrangements.
For the nine months ended September 30, 2006, the Company recognized a tax
benefit of $3.7 million, which includes a U.S. tax benefit of $11.2 million,
partially offset by the valuation allowance of $5.9 million established against
foreign deferred tax assets in Brazil in the third quarter and other foreign tax
provisions. The U.S. tax benefit is offset by tax expense recorded in
discontinued operations and Other Comprehensive Income. This compares to a $28.3
million income tax provision for the nine months ended September 30, 2005, which
primarily reflected the recognition of deferred tax asset valuation allowances
for tax jurisdictions in which the Company is in a three year cumulative loss
position, including the U.S.
Consolidated net sales from continuing operations in the third quarter of
2006 decreased to $429.4 million from $449.9 million in 2005. Excluding the
increase in sales due to the effects of foreign currency translation of $10.2
million, 2006 third quarter sales decreased by 6.8%. Sales increases
attributable to the Compressor and Electrical Components segments were more than
offset by a substantial decline in sales in the Engine & Power Train segment.
2
Consolidated net sales from continuing operations for the first nine
months of 2006 increased to $1,331.8 million from $1,322.9 million. Excluding
the increase in sales due to the effects of foreign currency translation of
$30.2 million, 2006 nine month sales decreased by 1.6%. Like the third quarter,
increases attributable to the Compressor and Electrical Components segments were
more than offset by a substantial decline in the Engine & Power Train segment.
The Company has restated the consolidated financial statements for the
three and nine months ended September 30, 2005 for errors in the interim period
tax provisions. Generally accepted accounting principles require interim period
income taxes to be recorded based on an estimated annual effective rate. The
Company in error combined the income from foreign jurisdictions with losses from
foreign jurisdictions for which tax benefits are not expected to be realizable,
which resulted in an understatement in the tax provision of $4.4 million and
$3.9 million for the three and nine months, respectively, ended September 30,
2005. While these errors impacted the quarterly tax provisions, they had no
impact on the full year 2005 income tax provision. Additionally, as a result of
the sale of Little Giant Pump Company in the second quarter of 2006, the Company
has recasted the Consolidated Statement of Operations for the three and nine
months ended September 30, 2005 to show the Little Giant Pump Company as a
discontinued operation.
The Company has also restated its consolidated financial statements for
the first and second quarters of 2006 for errors in interim period tax
provisions. Previously reported net loss for the three month period ended March
31, 2006 increased by $3.0 million, and the previously reported net income for
the three month period ended June 30, 2006 increased by $0.2 million.
COMPRESSOR BUSINESS
Third quarter 2006 sales in the Compressor business increased to $230.8
million from $218.6 million in the prior year. Compressor business sales in the
first nine months of 2006 increased to $755.6 million from $707.2 million in the
first nine months of 2005. Excluding the increase in sales due to the effects of
foreign currency translation of $9.3 million for the third quarter and $28.9
million for the first nine months, sales increased by 1.3% and 2.8% in the third
quarter and first nine months, respectively. The balance of the increases was
primarily attributable to higher unit volumes in aftermarket and commercial
distribution markets in the U.S. and Europe as a result of favorable weather
conditions, and higher selling prices implemented over the course of 2006 to
offset increases in material costs.
Compressor business operating results for the third quarter of 2006
amounted to a loss of $6.5 million versus net income of $7.6 million in the
third quarter of 2005. Operating loss for the nine months ended September 30,
2006 amounted to $3.7 million compared to net income of $23.6 million for the
first nine months of 2005. The lower operating income was attributable to
unfavorable foreign currency rates and higher material and other input costs,
and unfavorable variances associated with shipping bottlenecks experienced
subsequent to the conversion to a new ERP management system, partially offset by
price advances, better volumes, headcount reductions, and productivity
improvements. For the third quarter, the Brazilian real was on average 7.3%
stronger against the U.S. dollar in 2006 versus 2005, and the results of hedging
activities were less favorable year over year in the third quarter than compared
to the second quarter. Including the effects of hedging activities, the Company
estimates that changes in foreign exchange rates decreased operating income by
approximately $9.7 million compared to the third quarter of 2005.
3
ELECTRICAL COMPONENTS BUSINESS
Electrical Components business sales were $109.3 million for the third
quarter of 2006, an increase of 5.8% over sales of $103.3 million in the same
quarter last year. Electrical Components business sales in the first nine months
of 2006 increased 6.3% to $325.3 million from $305.9 million. Sales were higher
in the residential and commercial markets (up 10.8% year-to-date) due to strong
HVAC-related sales. Sales in the automotive motor market in the third quarter
were flat versus the same period of 2005; however, sales in that market were
lower in the first and second quarters (down 5.5% year-to-date) as a result of
lower build schedules and market share losses by the Company's customers at
their respective OEM's.
Electrical Components operating results for the third quarter of 2006
amounted to a loss of $0.5 million compared to income of $4.8 million in the
third quarter of 2005. For the first nine months of 2006, operating income was
$2.7 million compared to operating income of $4.0 million in the first nine
months of 2005. Approximately half of the decline during the third quarter was
related to production inefficiencies, including ERP conversion issues,
associated with a facility in Mexico. The remaining differences were primarily
related to a shortfall of price increases versus current commodity costs,
including copper. Commodity cost increases were also a significant factor in the
first and second quarters of 2006 as compared to the comparable period in 2005.
The cost of copper and other commodities were approximately $2.8 million higher
in the third quarter when compared to prices at the beginning of the year.
ENGINE & POWER TRAIN BUSINESS
Engine & Power Train business sales were $85.2 million in the third
quarter of 2006 compared to $124.2 million for the same period a year ago. The
year-over-year decline in sales was partially attributable to lower sales of
generators (down $14.9 million versus 2005) caused by a lack of significant
hurricane or other storm activity during the 2006 season. In addition, sales
volumes of snowthrowers have declined $12.3 million as compared to the third
quarter of 2005, due to a shift by our customers to more aggressive inventory
management policies. In snowthrower units sold, the third quarter of 2006 lagged
the same period of 2005 by approximately 18.2%. The remaining sales decline in
the quarter was due to a decrease in transmission business and loss of sales
into the Europe market. Sales in the first nine months of 2006 amounted to
$237.6 million compared to $297.8 million in the first nine months of 2005. The
most significant decline in the nine month period was primarily attributable to
the loss of sales of $23.9 million into the European market from the Company's
former Italian subsidiary, which was shut down at the end of 2005. A
year-over-year decline in sales volumes for generators reflects the lack of a
significant hurricane or other storm activity during the 2006 season, and is
down $16.3 million versus the same period in 2005. In addition, sales volumes of
snowthrowers declined $13.3 million as compared to the first nine months of
2005, due to a shift by our customers to more aggressive inventory management
policies. In units sold, 2006 volumes of snowthrowers sold year to date lagged
the same period of 2005 by approximately 16.3%. The full year 2006 is currently
forecasted to show a decline of 11.7% when compared to the prior year. The
remaining sales decline was attributable to a decrease in transmission business.
Engine & Power Train business operating loss for the third quarter of 2006
was $9.2 million compared to a loss of $5.2 million during the same period a
year ago. For the first nine months of 2006, the business incurred an operating
loss of $38.9 million compared to an operating loss of $41.6 million in 2005.
Included in the 2006 loss were AlixPartners' fees of $5.5 million in the third
quarter and $18.8 million in the first nine months, and a $3.5 million gain from
the sale of the Douglas, Georgia engine facility in the first quarter of 2006.
Excluding these two items, operating results improved by
4
approximately 40.5% and 43.3% in the third quarter and first nine months of
2006, respectively, versus the comparable prior year periods. The improvement in
the third quarter reflected lower fixed costs associated with plant closures and
higher productivity levels in Brazil, partially offset by higher commodity and
transportation costs and a less favorable value of the Brazilian Real.
LIQUIDITY AND CAPITAL RESOURCES
Historically, cash flows from operations and borrowing capacity under
previous credit facilities were sufficient to meet our long-term debt
maturities, projected capital expenditures and anticipated working capital
requirements. However, in recent years cash flows from operations have been
negative and the Company has had to rely on existing cash balances, proceeds
from credit facilities and asset sales to fund its needs.
Throughout the third quarter, our main domestic credit facilities were
provided under two credit agreements we signed on February 6, 2006: a $275
million First Lien Credit Agreement and a $100 million Second Lien Credit
Agreement. Both agreements provided for security interests in substantially all
of the Company's assets and specific financial covenants related to EBITDA (as
defined under the agreements and hereafter referred to as our "Adjusted
EBITDA"), capital expenditures, fixed charge coverage, and limits on additional
foreign borrowings. During the third quarter, the weighted average annual
interest rate on our borrowings under these agreements was 8.8%.
During 2006 the Company's results from operations have continued to be
impacted by unfavorable events that have caused a shortfall of Adjusted EBITDA
versus the covenant levels. As a result, the Company sought, and on November 3,
2006 it signed, amendments to its lending arrangements with its first and second
lien lenders. The principal terms of the November 3 amendments were described in
a Current Report on Form 8-K we filed on November 8, 2006.
On November 13, 2006 we signed a new $100 million Second Lien Credit
Agreement with Tricap Partners LLC and a corresponding amendment to our February
6, 2006 First Lien Credit Agreement. The new second lien facility provides the
Company with additional liquidity and greater relief from existing financial
covenants. We borrowed $100 million under the new Second Lien Credit Agreement
and used the proceeds to repay in full the outstanding balance of $54.6 million
under the old Second Lien Credit agreement, plus a 2.0% prepayment premium, and
to repay $40.0 million of borrowings under the First Lien Credit Agreement.
Under the terms of the First Lien Credit Agreement, as amended, the Company has
the capacity for additional borrowings under the borrowing base formula of $65.3
million in the U.S. and $58.3 million in foreign jurisdictions. Both the First
Lien Credit Agreement as amended and the new Second Lien Credit Agreement have
three year terms.
Interest on the New Second Lien Agreement is equal to LIBOR plus 6.75%
plus paid in kind ("PIK") interest of 1.5%. PIK interest accrues monthly on the
outstanding debt balance and is paid when the associated principal is repaid.
This compares to the previous second lien arrangement, as amended, of interest
of LIBOR plus 7.5% plus PIK interest of 2.0%.
While the new Second Lien Agreement has more favorable interest terms than
its predecessor, our weighted average cost of borrowing under the current
agreements is higher than it was before the November 13 refinancing. This is
attributable to a greater proportion of our total debt being borrowed under the
Second Lien Agreement ($100 million versus $54.6 million) and less under the
First Lien Agreement. Giving effect to the Company's new and amended
arrangements, our weighted average interest rate for all borrowings is 10.4%
compared to 8.8% prior to the November 13 refinancing.
5
Other interest rate related terms of the new Second Lien Credit Agreement
provide for additional PIK interest at the rate of 5.0% if outstanding debt
balances are not reduced by certain specified dates. This additional PIK
interest would apply to the difference between a target amount of aggregate
reduction in debt and the actual amount of first and second lien debt reduction
according to the following milestones:
Milestone Date Aggregate Reduction
June 30, 2007 $20.0 million
September 30, 2007 $40.0 million
December 31, 2007 $60.0 million
The new Second Lien Credit Agreement also provides for an additional 2.5% in PIK
interest if certain assets are not sold by December 31, 2007.
Sources of funds to make the principal reductions could include, but are
not limited to, cash from operations, reductions in working capital, or asset
sales.
After giving effect to the refinancing, waivers and amendments discussed
above, we are currently in compliance with the covenants of our domestic debt
agreements. Achieving the level of future financial performance that would
support our lending arrangements, and that is required by the financial
covenants, will depend on a variety of factors, including customer price
increases to cover increases in commodity costs, further employee headcount
reductions, consolidation of productive capacity and rationalization of various
product platforms. While we are currently moving forward with these actions,
there can be no assurance that any of these initiatives will be sufficient if
certain risks continue to impede our progress. Those risks include currency
fluctuations, weather, the extent to which the Company may lose sales in
reaction to higher product prices, or adverse publicity.
The principal terms of the November 13 amendments were described in a
Current Report on Form 8-K we filed on November 15, 2006.
In our November 15, 2006 Form 8-K, we disclosed that the Company was in
negotiations with its lenders in Brazil to reschedule maturities of its current
lending arrangements for its Brazilian engine manufacturing subsidiary. The
Company's Brazilian engine manufacturing subsidiary has its own financing
arrangements with Brazilian banks under which it is required to pay principal
installments of various amounts throughout the remainder of 2006 through 2009.
Historically, the subsidiary has experienced negative cash flows from operations
indicating that it may not have sufficient liquidity on its own to make all
required debt repayments as currently scheduled.
On November 21, 2006, lenders representing greater than 60% of the
outstanding amounts borrowed, executed a restructuring agreement whereby
scheduled maturities were deferred for eighteen months, with subsequent
amortization over the following eighteen months. Other provisions of the
agreement included a pledge of certain of the assets of the Brazilian engine
subsidiary, and a parent guarantee of the obligation, which would only become
effective after full repayment of the Second Lien lender.
Two banks representing less than 40% of the outstanding balances did not
participate in the restructuring agreement. We ceased further payments to those
banks effective November 15, 2006 and are seeking remedies available to us under
Brazilian law that would require those banks to abide by the terms of the
restructuring agreement. While the non-payments constitute a default under the
debt agreements, the lenders under the First Lien Credit Agreement, as amended,
and the new Second Lien Credit Agreement have waived, for a time, any
cross-default that otherwise would result from our failing to make a required
6
payment on these Brazilian loans. The waiver will expire 180 days after November
15, 2006, though either the First Lien or Second Lien lenders have the authority
to shorten the 180-day period to 100 days. The waiver will expire immediately if
a Brazilian lender takes legal action to collect and the action is not stayed
within ten days. If, before the waiver expires we succeed in our legal action to
compel the non-agreeing banks to abide by the terms of the restructuring
agreement, the First Lien and Second Lien lenders will have no further right to
declare a cross-default based on the Brazilian non-payments so long as we comply
with our obligations under the restructuring agreement.
The agreement with the Brazilian banks was subject to the approval of our
First and Second Lien credit holders. This approval was obtained through
amendments to our existing agreements, which were effective on December 11,
2006. The principal terms of the December 11 amendments were described on a
Current Report on Form 8-K we filed on December 15, 2006. Terms of the
amendments included fees paid of $750,000, and an additional pre-payment penalty
with respect to the Second lien obligations of $1.0 million. In addition, the
availability reserve of $10.0 million instituted under a previous amendment to
the First Lien credit agreement became permanent.
OUTLOOK
Information in this "Outlook" section should be read in conjunction with
the cautionary language and discussion of risks included below.
The outlook for the remainder of 2006 is subject to the same variables
that negatively impacted the Company throughout 2005 and the first nine months
of 2006. Commodity costs, key currency rates, weather and the overall growth
rates of the respective economies around the world are all important to future
performance. Overall, the Company does not expect these factors to become any
more favorable in the foreseeable future. Certain key commodities, including
copper and aluminum, continue to trade at elevated levels compared to recent
history. From January 1, 2006 through October 31, 2006, the prices of copper and
aluminum have increased approximately 60% and 23%, respectively. Lack of storm
activity has significantly reduced sales of engines used for generators and has
left the Company and the industry with above-normal inventory levels. The
Brazilian real continues to strengthen against the dollar, and as of October 31,
2006 had strengthened 8.5% since the beginning of the year.
Accordingly, the Company expects to continue to incur losses in the fourth
quarter 2006, as we do not expect improvements in any of the key factors noted
above. Specifically, the Compressor and Electrical Components groups' fourth
quarter results are expected to lag the results of the comparable 2005 period.
On the other hand, despite the expectation of continued lower levels of sales in
the Engine group because of unfavorable market conditions, results in the Engine
Group are expected to improve over the very poor 2005 fourth quarter excluding
restructuring charges. This improvement continues to be driven by the overall
restructuring efforts undertaken by AlixPartners and as further restructuring
steps are completed it is expected that additional excess capacity will become
idle and impairments might need to be recognized. While no such actions have
been approved, these actions could have a significant effect on the consolidated
financial position and future results of operations of the Company.
To respond to the continued losses and consumption of capital resources,
the Company is seeking price increases to cover its increased input costs, and
has planned further employee headcount reductions, consolidation of productive
capacity and rationalization of product platforms. We believe that such actions
will contribute to restoring the profitability of the Company, will help to
mitigate such negative external factors as currency fluctuation and increased
commodity costs and will result in improved operating performance in all
business segments in 2007. These actions also could result in restructuring
and/or asset impairment charges in the foreseeable future and accordingly, could
have a significant effect on the consolidated financial position and future
results of operations of the Company.
7
In addition, we are also concerned about the amount of debt carried by
the Company during this period of unfavorable operating environment. As a
result, the Company will be evaluating the feasibility of asset sales as a means
to reduce the overall amount of Company indebtedness. Such transactions could
also have a significant effect on future results of operations.
8
RESULTS BY BUSINESS SEGMENTS (UNAUDITED)
Three Months Ended Nine Months Ended
(Dollars in millions) September 30, September 30,
------------------- ------------------------
2006 2005 2006 2005
-----------------------------------------------
NET SALES:
Compressor Products $ 230.8 $ 218.6 $ 755.6 $ 707.2
Electrical Components Products 109.3 103.3 325.3 305.9
Engine & Power Train Products 85.2 124.2 237.6 297.8
Other (a) 4.1 3.8 13.3 12.0
-----------------------------------------------
Total net sales $ 429.4 $ 449.9 $ 1,331.8 $ 1,322.9
===============================================
OPERATING INCOME (LOSS):
Compressor Products ($ 6.5) $ 7.6 ($ 3.7) $ 23.6
Electrical Components Products (0.5) 4.8 2.7 4.0
Engine & Power Train Products (9.2) (5.2) (38.9) (41.6)
Other (a) -- 0.3 0.7 0.2
Corporate expenses (4.7) (4.6) (12.7) (9.6)
Impairments, restructuring charges, and other items (8.4) (1.4) (14.0) (111.3)
-----------------------------------------------
Total operating income (loss) from continuing operations (29.3) 1.5 (65.9) (134.7)
Interest expense (10.0) (6.3) (29.4) (18.0)
Interest income and other, net 2.1 1.9 10.0 6.9
-----------------------------------------------
LOSS FROM CONTINUING OPERATIONS BEFORE TAXES ($ 37.2) ($ 2.9) ($ 85.3) ($ 145.8)
===============================================
- ----------
(a) "Other" consists of non-reportable business segments.
Previously, the Company also reported a Pump Products business segment. However,
as a result of the decision to sell Little Giant Pump Company, which represented
approximately 90% of the previously reported segment, such operations are no
longer included in loss from continuing operations before tax. As the Company's
remaining pump business does not meet the definition of an operating segment as
defined by SFAS No. 131, "Segment Reporting," the Company will no longer report
a Pump Products segment, and operating results of the remaining pump business
are included in Other for segment reporting purposes.
9
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, December 31,
(Dollars in millions) 2006 2005
-------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 58.7 $ 116.6
Accounts receivable, net 247.4 211.1
Inventories 368.6 346.8
Other current assets 91.2 132.6
-------------------------
Total current assets 765.9 807.1
PROPERTY, PLANT AND EQUIPMENT - NET 569.0 578.6
GOODWILL AND OTHER INTANGIBLES 179.4 185.7
OTHER ASSETS 297.8 229.1
-------------------------
TOTAL ASSETS $ 1,812.1 $ 1,800.5
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade $ 215.1 $ 187.3
Short-term borrowings 95.0 82.5
Accrued liabilities 139.3 135.3
-------------------------
Total current liabilities 449.4 405.1
LONG-TERM DEBT 265.7 283.0
DEFERRED INCOME TAXES 7.6 25.0
PENSION AND POSTRETIREMENT BENEFITS 217.9 226.1
PRODUCT WARRANTY AND SELF-INSURED RISKS 11.3 14.5
OTHER NON-CURRENT LIABILITIES 42.0 32.4
-------------------------
Total liabilities 993.9 986.1
STOCKHOLDERS' EQUITY 818.2 814.4
-------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,812.1 $ 1,800.5
=========================
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
Three Months Ended Nine Months Ended
(Dollars in millions) September 30, September 30,
-------------------- ----------------------
2006 2005 2006 2005
----------------------------------------------
TOTAL STOCKHOLDERS' EQUITY
BEGINNING BALANCE $ 858.0 $ 908.6 $ 814.4 $ 1,018.3
Comprehensive income (loss):
Net loss (37.8) (37.2) (16.5) (171.6)
Other comprehensive income (loss) (2.0) 20.8 20.3 57.3
----------------------------------------------
Total comprehensive income (loss) (39.8) (16.4) 3.8 (114.3)
Cash dividends declared -- -- -- (11.8)
----------------------------------------------
TOTAL STOCKHOLDERS' EQUITY
ENDING BALANCE $ 818.2 $ 892.2 $ 818.2 $ 892.2
==============================================
10
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
(Dollars in millions) September 30,
--------------------
2006 2005
--------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash used by operating activities ($ 129.4) ($ 34.6)
--------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 132.4 --
Capital expenditures (45.6) (88.6)
Business acquisition (2.0) --
--------------------
Cash provided by (used in) investing activities 84.8 (88.6)
--------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid -- (11.8)
Repayment of Senior Guaranteed Notes (250.0) (50.0)
Repayment of Industrial Development Revenue Bonds (10.5) --
Proceeds from First Lien Credit Agreement 147.5 --
Proceeds from Second Lien Credit Agreement 100.0 --
Repayments of Second Lien Credit Agreement (45.4) --
Other borrowings, net 45.6 (38.2)
--------------------
Cash used in financing activities (12.8) (23.0)
--------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (0.5) 2.2
--------------------
DECREASE IN CASH AND CASH EQUIVALENTS (57.9) (144.0)
CASH AND CASH EQUIVALENTS:
Beginning of period 116.6 227.9
--------------------
End of period $ 58.7 $ 83.9
====================
CAUTIONARY STATEMENT RELATING TO FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 that are subject to the safe
harbor provisions created by that Act. In addition, forward-looking statements
may be made orally in the future by or on behalf of the Company. Forward-looking
statements can be identified by the use of terms such as "expects", "should",
"may", "believes", "anticipates", "will", and other future tense and
forward-looking terminology.
Readers are cautioned that actual results may differ materially from those
projected as a result of certain risks and uncertainties, including, but not
limited to, i) changes in business conditions and the economy in general in both
foreign and domestic markets; ii) the effect of terrorist activity and armed
conflict; iii) weather conditions affecting demand for air conditioners, lawn
and garden products, portable power generators and snow throwers; iv) the
success of our ongoing effort to bring costs in line with projected production
levels and product mix; v) financial market changes, including fluctuations in
interest rates and foreign currency exchange rates; vi) economic trend factors
such as housing starts; vii) emerging governmental regulations; viii)
availability and cost of materials, particularly commodities, including steel,
copper and aluminum, whose cost can be subject to significant variation; ix)
actions of competitors; x) the ultimate cost of resolving environmental and
legal matters; xi) our ability to profitably develop, manufacture and sell both
new and existing products; xii) the extent of any business disruption that may
result from the restructuring and realignment of our manufacturing operations or
system implementations, the ultimate cost of those initiatives and the amount of
savings actually realized; xiii) the extent of any business disruption caused by
work stoppages initiated by organized labor unions; xiv)the ability of the
Company to maintain adequate liquidity in total and within each foreign
operation; xv) potential political and economic adversities that could adversely
affect anticipated
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sales and production in Brazil; xvi) potential political and economic
adversities that could adversely affect anticipated sales and production in
India, including potential military conflict with neighboring countries; xvii)
our ability to reduce a substantial amount of costs in the Engine & Power Train
group associated with excess capacity, and xviii) the ongoing financial health
of major customers. These forward-looking statements are made only as of the
date of this report, and we undertake no obligation to update or revise the
forward-looking statements, whether as a result of new information, future
events or otherwise.
Tecumseh Products Company will host a conference call to report on the
third quarter 2006 results on Friday, December 22, 2006 at 11:00 a.m. ET. The
call will be broadcast live over the Internet and then available for replay
through the Investor Relations section of Tecumseh Products Company's website at
www.tecumseh.com.
Press releases and other investor information can be accessed via the
Investor Relations section of Tecumseh Products Company's Internet web site at
http://www.tecumseh.com.
Contact: Teresa Hess
Director, Investor Relations
Tecumseh Products Company
517-423-8455
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