1
EXHIBIT 13
TECUHMSEH PRODUCTS COMPANY AND SUBSIDIARIES
FINANCIAL SUMMARY
(Dollars in millions except per share data)
1994 1993 1992
------- ------- --------
Net sales $ 1,533.4 $1,314.2 $1,258.5
Net income before accounting changes 120.3 81.4 52.3
% of net sales 7.8% 6.2% 4.2%
Cumulative effect of changes in accounting
for nonpension postretirement benefits
and income taxes -- -- (95.0)
Net income (loss) 120.3 81.4 (42.7)
Capital expenditures 136.2 51.1 56.6
Total assets 1,289.8 1,132.7 1,078.6
Stockholders' equity 785.5 686.8 639.8
Return on average
stockholders' equity 16.3% 12.3% 7.7%(a)
Per share of common stock:
Net income before accounting changes $5.50 $3.72 $2.39
Cumulative effect of accounting changes -- -- (4.34)
------- ------- --------
Net income (loss) $5.50 $3.72 ($1.95)
Cash dividends declared 1.35 1.15 0.80
Book value 35.90 31.39 29.24
Average number of employees 14,400 12,400 12,600
Note: The above per share amounts have been adjusted as necessary to reflect
the 100% stock dividend paid June 30, 1993 and the 100% stock dividend paid
May 29, 1992.
(a) Calculated on net income before accounting changes.
2
TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
BUSINESS SEGMENT DATA
(Dollars in millions)
Industry Segment Information
Income Before
Net Sales Income Taxes
------------------------------- --------------------------
1994 1993 1992 1994 1993 1992(a)
---- ---- ---- ---- ---- ----
Compressor
Products . . . . $ 881.2 $ 809.4 $ 836.5 $ 87.3 $ 71.7 $ 51.6
Engine & Power
Train
Products . . . . 563.8 426.9 360.2 80.3 40.9 20.8
Pump
Products . . . . 88.4 77.9 61.8 13.1 11.6 7.7
Corporate
Expenses . . . . - - - (11.5) (9.9) (10.3)
Net Interest
Income . . . . . - - - 22.7 13.5 18.6
-------- -------- -------- ------ ------ ------
Total . . . . . $1,533.4 $1,314.2 $1,258.5 $191.9 $127.8 $ 88.4
======== ======== ======== ====== ====== ======
Capital
Year End Assets Expenditures Depreciation
----------------------------------- ------------------------- -----------------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
---- ---- ---- ---- ---- ---- ---- ---- ----
Compressor
Products . . . . $ 609.3 $ 485.5 $ 488.2 $119.2 $36.8 $37.7 $41.7 $39.4 $40.1
Engine & Power
Train
Products . . . . 249.1 206.6 201.4 14.6 13.7 17.6 13.1 12.3 12.8
Pump
Products . . . . 42.9 35.7 33.5 2.4 0.6 1.3 0.9 0.8 0.7
Corporate . . . . 388.5 404.9 355.5 - - - - - -
-------- -------- -------- ------ ----- ----- ----- ----- -----
Total . . . . . $1,289.8 $1,132.7 $1,078.6 $136.2 $51.1 $56.6 $55.7 $52.5 $53.6
======== ======== ======== ====== ===== ===== ===== ===== =====
Geographic Segment Information
Income Before
Net Sales Income Taxes Year End Assets
----------------------------------- ------------------------- -----------------------------
1994 1993 1992 1994 1993 1992(a) 1994 1993 1992
---- ---- ---- ---- ---- ---- ---- ---- ----
North America . . $1,104.8 $ 930.5 $ 840.3 $135.3 $ 95.4 $78.1 $ 876.7 $ 812.7 $ 729.4
Europe . . . . . . 280.5 260.7 322.2 9.6 (1.6) (5.7) 279.6 246.1 272.3
Brazil . . . . . . 148.1 123.0 96.0 47.6 34.6 16.7 134.1 78.5 82.9
Inter-area:
North America . . 13.8 11.6 11.7 - - - - - -
Europe . . . . . 3.1 0.1 0.1 - - - - - -
Brazil . . . . . 39.5 23.8 22.7 - - - - - -
Eliminations . . . (56.4) (35.5) (34.5) (0.6) (0.6) (0.7) (0.6) (4.6) (6.0)
-------- -------- -------- ------ ------ ----- -------- ------- --------
Total . . . . . . $1,533.4 $1,314.2 $1,258.5 $191.9 $127.8 $88.4 $1,289.8 $1,132.7 $1,078.6
======== ======== ======== ====== ====== ===== ======== ======== ========
(a) The 1992 results are before cumulative effect of changes in accounting
for non-pension postretirement benefits and income taxes.
Transfers between geographic areas are accounted for at cost plus a
reasonable profit. Export sales of domestic operations were $213.2, $206.2,
and $226.5 million in 1994, 1993 and 1992, respectively. Of these sales,
approximately two-thirds were to customers in the Far and Middle East.
The Company's share of net unremitted earnings of its foreign subsidiaries
was $44.2 million in 1994, $14.0 million in 1993, and none in 1992.
Accumulated unremitted earnings of foreign subsidiaries at December 31, 1994
were $118.8 million.
Certain amounts previously reported have been reclassified to conform with
the current presentation.
12
3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1994 COMPARED TO 1993
Sales for 1994 reached a record level $1,533.4 million and were 17%
higher than 1993 sales. Net income of $120.3 million, or $5.50 per share, for
1994 was 48% higher than 1993, and also represented a record level for the
Company. The improved operating results were due primarily to the strong sales
of the Company's Engine and Power Train Products.
COMPRESSOR PRODUCTS
The Company's worldwide Compressor Products sales for 1994 reached
$881.2 million and were 9% higher than 1993. Double-digit volume increases in
North and South America were the major factor in the overall sales gain. Sales
in Europe rebounded in the second half of 1994 and ended with an 8% increase
over 1993. This additional volume, along with cost-cutting initiatives in the
Company's European compressor operations in 1993, were key contributors to the
1994 profit gains for the Compressor Products segment. The Company expects
moderate growth from its compressor business in Europe for 1995.
The Company's compressor sales within the United States were up by 14%
for 1994. This gain was primarily attributable to sales of compressors used in
room air conditioners and various commercial refrigeration applications. Early
summer near-record heat favorably affected the sales of rotary compressors used
in room air conditioners. The strong U.S. demand, coupled with a good season
in Japan and certain areas of southeast Asia, has resulted in a global shortage
that should keep Tecumseh's rotary production schedules near capacity
throughout 1995. The Company reported strong year-to-year gains in its sales
of compressors that utilize R-134a, a non-CFC refrigerant. Despite a robust
year for the residential air conditioning market, the Company experienced a
decline in sales of reciprocating compressors to this market, due to the
industry trend toward the use of scroll compressors. The Company is currently
making a significant investment in a scroll compressor facility in Tecumseh,
Michigan. Customers are receiving sample compressors for testing, but the
Company does not expect this line to significantly contribute to revenues
before 1996.
The Company's Brazilian subsidiary, SICOM Ltda., reported a 20%
increase in sales for 1994, due primarily to the strong local demand for
appliances. The country's economic stabilization program initiated in mid-1994
has been its most successful in recent history, slashing monthly inflation from
50% in June to 2% in December. The resultant consumer confidence has driven
demand for consumer durables, in spite of high interest rates. Although the
high interest rates have generated significant financial income for Tecumseh,
the accompanying appreciation of Brazil's new currency began to negatively
impact export margins during the fourth quarter of 1994. The Company is
cautiously optimistic on Brazil, despite recent events in Mexico that serve as
a caution against being too confident of apparent solutions to fundamental
economic, social and political problems. In 1994, SICOM accounted for 10% of
consolidated sales and 26% of consolidated net income.
ENGINE AND POWER TRAIN PRODUCTS
The Company's worldwide Engine and Power Train Products sales were
$563.8 million in 1994 which was 32% higher than 1993. Sales of engines used
in snow thrower applications more than doubled in 1994 and were the leading
factor in explaining year-to-year sales gains. Despite the mild winter thus
far in 1995, retail inventory levels for snow throwers are quite low which
should result in a good year for 1995, albeit at lower levels than 1994.
Tecumseh's sales of engines used on walk-behind mowers also increased
significantly in 1994, both in North America and in Europe, reflecting good
market conditions and some gain in market share. The Company is well
positioned in the mass merchandisers' planned product offerings for the 1995
seasonal year, which is expected to grow 5% in U.S. lawn and garden equipment
sales according to the most recent industry forecast.
Primarily due to the favorable impact of higher sales volume and a
more profitable product mix, the profit margin for this segment improved from
9.6% in 1993 to 14.2% in 1994. This segment is experiencing inflationary
pressures on its raw material costs, particularly aluminum. The rapidly rising
cost of aluminum is beginning to put pressure on Tecumseh's engine and power
train margins, and pricing of its product will be an important issue for the
coming year.
PUMP PRODUCTS
The Company's 1994 Pump Products sales of $88.4 million were 13%
higher than those of an unusually robust 1993 which was aided by widespread
flooding. The sales increase was primarily due to growing demand for consumer
pumps, such as for water gardening, along with increases to certain industrial
customers. Water gardening and other consumer applications should continue to
provide growth opportunities for this segment, which has grown at an annualized
rate of 11% over the past five years.
INTEREST INCOME
Interest income for 1994 was significantly higher than 1993. This
increase was primarily attributable to the Company's Brazilian subsidiary, and
was the direct result of higher interest rates in Brazil and the Company
maintaining somewhat higher cash balances in Brazil in 1994 than in 1993.
INCOME TAXES
The effective tax rate was 37% for 1994 as compared to 36% for 1993.
The 1993 rate included a net favorable adjustment for the increase in the U.S.
corporate tax rate from 34% to 35%, due to the Company's large deferred tax
asset position.
13
4
1993 COMPARED TO 1992
Consolidated earnings for 1993 were $81.4 million, or $3.72 per share,
which was an increase of 56% compared to prior year's earnings, exclusive of
the 1992 cumulative effect adjustment for changes in accounting for non-pension
postretirement benefits and income taxes. Sales reached $1,314.2 million in
1993, which was a 4% increase over 1992. The improved operating results were
due primarily to record-setting profit levels at the Company's Brazilian
compressor operations along with strong sales of the Company's Engine and Power
Train Products.
COMPRESSOR PRODUCTS
Sales for 1993 were 3% lower than the prior year reflecting reduced
sales in Europe and Asia, offset to a considerable extent by increased sales in
the United States and Brazil. A rebounding Brazilian economy allowed
Tecumseh's subsidiary, SICOM Ltda., to achieve growth in sales and net income
despite accelerating inflation and growing economic and political
uncertainties. SICOM accounted for 9% of 1993 consolidated sales (8% in 1992)
and 27% of 1993 consolidated net income (15% in 1992).
The Company's compressor sales within the United States were up by 17%
for 1993 compared to 1992. A significant portion of the sales increase came in
the unitary air conditioning market. The Company's U.S. compressor exports for
1993 were 17% below the 1992 record levels due primarily to continued
restrictions on foreign currency in China. In addition, the Company's sales
volume and prices were impaired by an excess inventory of rotary air
conditioning compressors in the Far East following an unusually cool summer in
Japan.
Sales for Tecumseh's European compressor operations were down over
20% in 1993 resulting in a small operating loss for the year. The sales
decline reflected continued weak economic conditions in Europe along with a
currency-related reduction in market share in the refrigerator compressor
market. Manufacturers in Italy and Spain increased their sales volume through
aggressive pricing following the depreciation of the currencies in those
countries beginning in mid-1992.
ENGINE AND POWER TRAIN PRODUCTS
Sales for 1993 were up 19% over the prior year. The increase was due
to improved industry conditions for walk-behind and riding lawn equipment as
well as some gain in share. Industry sales of snow throwers doubled in 1993
after several disappointing seasons for a market where Tecumseh is the dominant
supplier.
The profit gain for the Engine and Power Train Products was primarily
a result of the increase in sales volume compared to 1992. In addition,
Tecumseh's Italian-based European engine operation benefited in 1993 from a
depreciated lira along with the positive effect of a 15% work force reduction
in late 1992.
PUMP PRODUCTS
The Company's Pump Products sales for 1993 increased 26% over 1992
reflecting abnormally high sump pump sales in areas affected by the 1993
floods, along with continued growth in water gardening pump products.
INTEREST INCOME
Interest income for 1993 was considerably below the previous year's
level due principally to SICOM's lower financial income. Real interest rates
declined in Brazil in late 1992 in the government's attempt to boost consumer
spending. In addition, the Company reduced cash balances held in Brazil during
1993 through dividend remittance and other transactions.
INCOME TAX
The effective income tax rate was 36% for 1993 as compared to 41% for
1992. The rate decline was primarily a result of a tax refund in Brazil along
with a reduction in net operating losses at the Company's Italian engine
subsidiary. The Company recorded a net favorable adjustment for the increase
in the U.S. corporate tax rate from 34% to 35%, due to its large deferred tax
asset position.
14
5
LIQUIDITY AND CAPITAL RESOURCES
The Company continued to maintain a strong and liquid financial
position. Working capital of $504.2 million at December 31, 1994 was up from
$473.6 million at the end of 1993, and the ratio of current assets to current
liabilities was 3.0. Capital expenditures for 1994 were significantly higher
than 1993 due to the funding of a scroll compressor manufacturing facility
along with the purchase (and retooling) of rotary compressor manufacturing
equipment from General Electric. Total capital spending for 1995 should
approximate $150-175 million as the Company completes the scroll and rotary
programs, expands productive capacity for its TP refrigeration compressor, and
expands capacity of both its engine and pump businesses. Working capital
requirements and planned capital expenditures for 1995 and early 1996 are
expected to be financed primarily through internally available funds, although
the Company may utilize long-term financing arrangements in connection with
state investment incentives. In addition, the Company obtained a $100 million
revolving credit facility in July 1994 which has a three-year term and is
available for general corporate purposes.
Pursuant to the National Appliance Energy Conservation Act, the U.S.
government will require higher energy efficiency ratings on room air
conditioning products and on refrigerator and freezer products. Final
regulations are expected to be issued in 1995 for implementation in 1998. It
is not presently possible to estimate the level of expenditures which will be
required to meet the new standards nor the effect on the Company's
competitive position.
The U.S. Environmental Protection Agency (EPA) is developing emission
standards for utility engines which include the two- and four-cycle engines
produced by the Company. The development consists of two phases. Phase I
is expected to be published in May 1995 with an effective date as early as
August 1, 1996, but the EPA may accommodate an industry requested 1997
effective date. The Company believes that it will be prepared to meet the EPA
Phase I standards with competitively priced engines. The California Air
Resources Board (CARB) has mandated exhaust emission standards for utility
engines. These standards became effective January 1, 1995, followed by a
non-enforcement period of approximately six to eight months. An adequate
cross-section of the Company's engine products have or will be modified to meet
the 1995 CARB requirements. Current negotiations of the EPA Phase II standards
are expected to be completed by June 1995 with a proposed rule issued in early
1996. It is not currently possible to determine the compliance cost thereof
nor the impact on the competitive position of the Company.
The Company has been named by the EPA as a potentially responsible
party in connection with the Sheboygan River and Harbor Superfund Site in
Wisconsin. At December 31, 1994, the Company had an accrual of $31.9 million
for 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. The
Company has been informed by the EPA that it expects to issue a record of
decision on the cleanup of the Sheboygan River and Harbor site late in 1995,
but ultimate resolution of the matter may take much longer. The 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 being
planned over the next year 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.
15
6
TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(Dollars in millions except per share data)
For The Years Ended December 31,
-----------------------------------------------------------
1994 1993 1992
---- ---- ----
INCOME:
Net sales $1,533.4 $1,314.2 $1,258.5
Interest income 29.2 17.5 24.6
Other income 6.8 5.6 3.6
-------- -------- --------
1,569.4 1,337.3 1,286.7
-------- -------- --------
EXPENSES:
Cost of sales and operating expenses 1,279.5 1,124.0 1,109.3
Selling and administrative expenses 88.8 78.4 78.8
Interest expense 6.5 4.0 6.0
Other expenses 2.7 3.1 4.2
-------- -------- --------
1,377.5 1,209.5 1,198.3
-------- -------- --------
INCOME BEFORE TAXES ON INCOME
AND CHANGES IN ACCOUNTING PRINCIPLES 191.9 127.8 88.4
Taxes on income 71.6 46.4 36.1
-------- -------- --------
INCOME BEFORE CHANGES IN ACCOUNTING PRINCIPLES 120.3 81.4 52.3
Cumulative effect of changes in accounting
for non-pension postretirement benefits
and income taxes (Note 1.) - - (95.0)
-------- -------- --------
NET INCOME (LOSS) $120.3 $81.4 ($42.7)
======== ======== ========
Net income per share before changes in accounting principles $5.50 $3.72 $2.39
Cumulative effect of changes in accounting
for non-pension postretirement benefits and
income taxes (Note1.) - - (4.34)
-------- -------- --------
NET INCOME (LOSS) PER SHARE $5.50 $3.72 ($1.95)
======== ======== ========
The above per share amounts have been adjusted as necessary to reflect the 100%
stock dividend paid June 30, 1993 and the 100% stock dividend paid May 29,
1992.
The accompanying notes are an integral part of these statements.
16
7
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in millions)
COMMON STOCK
------------------------------ FOREIGN
CLASS B CAPITAL CURRENCY TOTAL
CLASS A OR PRIOR IN EXCESS RETAINED TRANSLATION STOCKHOLDERS'
$1 PAR VALUE $1 PAR VALUE OF PAR VALUE EARNINGS ADJUSTMENT EQUITY
------------ ------------ ------------ -------- ----------- --------------
BALANCE, DECEMBER 31, 1991 $5.5 $29.9 $653.6 $23.8 $712.8
Net income (loss) (42.7) (42.7)
Cash dividends (17.5) (17.5)
Dividend of Class A common 5.5 (5.5) -
Translation adjustments (12.8) (12.8)
---- ----- ----- ------ ----- ------
BALANCE, DECEMBER 31, 1992 5.5 5.5 29.9 587.9 11.0 639.8
Net income 81.4 81.4
Cash dividends (25.2) (25.2)
Dividend of Class A common 10.9 (10.9) -
Translation adjustments (9.2) (9.2)
---- ----- ----- ------ ----- ------
BALANCE, DECEMBER 31, 1993 16.4 5.5 29.9 633.2 1.8 686.8
Net income 120.3 120.3
Cash dividends (29.5) (29.5)
Translation adjustments 7.9 7.9
---- ----- ----- ------ ----- ------
BALANCE, DECEMBER 31, 1994 $16.4 $5.5 $29.9 $724.0 $ 9.7 $785.5
===== ===== ===== ====== ===== ======
The accompanying notes are an integral part of these statements.
17
8
TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
December 31,
----------------------------------------
ASSETS 1994 1993
------------ --------------
CURRENT ASSETS:
Cash and cash equivalents $283.2 $313.2
Accounts receivable, trade, less allowance for doubtful
accounts of $5.8 million in 1994 and $5.3 million 1993 191.6 158.0
Inventories 235.3 174.9
Deferred income taxes 38.4 30.1
Other current assets 7.8 7.3
-------- --------
TOTAL CURRENT ASSETS 756.3 683.5
-------- --------
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land and land improvements 7.9 7.5
Buildings 127.9 106.3
Machinery and equipment 645.7 539.7
-------- --------
781.5 653.5
Less, accumulated depreciation 379.1 333.1
-------- --------
PROPERTY, PLANT AND EQUIPMENT, net 402.4 320.4
-------- --------
EXCESS OF COST OVER ACQUIRED NET ASSETS, less accumulated
amortization of $12.4 million in 1994 and $10.5 million in 1993 58.0 54.5
DEFERRED INCOME TAXES 21.4 29.0
PREPAID PENSION EXPENSE 31.8 27.2
OTHER ASSETS 19.9 18.1
-------- --------
TOTAL ASSETS $1,289.8 $1,132.7
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade $116.5 $88.1
Income taxes payable 5.1 9.9
Short-term borrowings 11.7 14.0
Accrued liabilities:
Employee compensation 29.6 20.5
Product warranty and self-insured risks 32.3 31.8
Other 56.9 45.6
-------- --------
TOTAL CURRENT LIABILITIES 252.1 209.9
LONG-TERM DEBT 9.1 11.2
NON-PENSION POSTRETIREMENT BENEFITS 169.8 161.3
PRODUCT WARRANTY AND SELF-INSURED RISKS 29.5 26.3
ACCRUAL FOR ENVIRONMENTAL MATTERS 30.7 25.4
PENSION LIABILITIES 13.1 11.8
-------- --------
TOTAL LIABILITIES 504.3 445.9
-------- --------
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 724.0 633.2
Foreign currency translation adjustment 9.7 1.8
-------- --------
TOTAL STOCKHOLDERS' EQUITY 785.5 686.8
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,289.8 $1,132.7
======== ========
The accompanying notes are an integral part of these statements
18
9
TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
For The Years Ended December 31,
--------------------------------------------
1994 1993 1992
-------- -------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 120.3 $ 81.4 ($42.7)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Cumulative effect of changes in accounting for non-
pension postretirement benefits and income taxe - - 95.0
Depreciation and amortization 55.7 52.5 53.6
Accounts receivable (26.6) (2.1) 21.8
Inventories (58.2) (5.0) (19.6)
Payables and accrued expenses 28.0 18.6 (19.3)
Other 8.0 (4.1) 4.5
------- ------ ------
Cash Provided By Operations 127.2 141.3 93.3
------- ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (136.2) (51.1) (56.6)
------- ------ ------
Cash Used In Investing Activities (136.2) (51.1) (56.6)
------- ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (29.5) (25.2) (17.5)
Proceeds from borrowings 9.5 0.9 2.1
Repayments of borrowings (15.4) (10.4) (9.0)
------- ------ ------
Cash Used In Financing Activities (35.4) (34.7) (24.4)
------- ------ ------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 14.4 (5.9) (5.1)
------- ------ ------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (30.0) 49.6 7.2
CASH AND CASH EQUIVALENTS:
Beginning of period 313.2 263.6 256.4
------- ------ ------
End of period $ 283.2 $313.2 $263.6
======= ====== ======
The accompanying notes are an integral part of these statements
19
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of the Company and its subsidiaries. The Company's
investments in unconsolidated affiliates are accounted for on the equity
basis. All significant inter-company transactions and balances have been
eliminated.
CASH EQUIVALENTS -- Cash equivalents consist of short-term investments which
are readily convertible into cash. The carrying amount approximates market
value because of the short duration of these instruments.
INVENTORIES -- Inventories are valued at the lower of cost or market,
generally on the first-in, first-out basis.
INCOME TAXES -- Effective January 1, 1992, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes". The cumulative effect of this change in accounting for income
taxes was to increase 1992 net income by $1.5 million, or $.07 per share. SFAS
No. 109 requires an asset and liability approach to financial accounting and
reporting for income taxes. The difference between the financial statement and
tax basis of assets and liabilities is determined annually. Deferred income
tax assets and liabilities are computed for those differences that have future
tax consequences using the currently enacted tax laws and rates that apply to
the periods in which they are expected to affect taxable income. Valuation
allowances are established, if necessary, to reduce the deferred tax asset to
the amount that will more likely than not be realized. Income tax expense is
the current tax payable for the period plus or minus the net change in the
deferred tax assets and liabilities.
PROPERTY, PLANT AND EQUIPMENT -- Expenditures for additions, major renewals
and betterments are capitalized and expenditures for maintenance and repairs
are charged to expense as incurred. For financial statement purposes,
depreciation is determined using the straight-line basis except for certain
highly automated and specialized machinery which is depreciated using the units
of production method.
EXCESS OF COST OVER ACQUIRED NET ASSETS -- Assets and liabilities related to
business combinations accounted for as purchases are recorded at fair value.
The excess of cost over the net tangible assets acquired is being amortized on
a straight-line basis over forty years.
PRODUCT WARRANTY -- Provision is made for the estimated cost of maintaining
product warranties at the time the product is sold.
SELF-INSURED RISKS -- Provision is made for the estimated costs of known and
anticipated claims under the deductible portions of the Company's liability,
disability and workers' compensation insurance policies. In addition,
provision is made for the estimated cost of postemployment benefits at
employment separation, in accordance with Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits".
NON-PENSION POSTRETIREMENT BENEFITS -- Effective January 1, 1992, the
Company adopted the accrual accounting method prescribed in SFAS No. 106 for
its non-pension postretirement benefit plans. As permitted under the
provisions of this standard, the expense attributable to service rendered
through December 31, 1991 has been fully recognized as of the date of adoption.
This non-cash transition effect of the unfunded obligation was a charge of
$96.5 million to 1992 earnings, net of approximately $54.3 million of income
tax effects, reducing earnings per share by $4.41. Prior to 1992, non-pension
postretirement benefits were recognized on a claims incurred basis.
ENVIRONMENTAL EXPENDITURES -- Expenditures for environmental safekeeping are
expensed or capitalized as appropriate. Costs associated with remediation
activities are expensed. Liabilities relating to probable remedial activities
are recorded when the costs of such activities can be reasonably estimated.
RECLASSIFICATIONS -- Certain amounts included in the 1993 and 1992 financial
statements have been reclassified to conform with the 1994 presentation.
NOTE 2. FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the Company's Canadian and European
subsidiaries are translated into U.S. dollars at current exchange rates and
revenues and expenses are translated at average monthly exchange rates. The
resulting translation adjustments are recorded in a separate component of
stockholders' equity:
1994 1993
(Dollars in millions) ------ ------
Balance at January 1 $ 1.8 $ 11.0
Effect of balance sheet
translations:
Amount 11.6 (12.0)
Tax effect (3.7) 2.8
----- ------
Balance at December 31 $ 9.7 $ 1.8
===== ======
For the Company's Brazilian subsidiary, which operates in a highly
inflationary economy, inventory and plant and equipment and related income
statement items are translated at historical exchange rates while other assets
and liabilities are translated at current exchange rates. The resulting
translation adjustment is included in other expense and was $1.1 million, $2.0
million, and $2.1 million in 1994, 1993, and 1992, respectively.
NOTE 3. RETIREMENT PLANS
The Company has defined benefit retirement plans that cover substantially
all domestic employees. Plans covering salaried employees generally provide
pension benefits that are based on average earnings and years of credited
service. Plans covering hourly employees generally provide benefits of stated
amounts for each year of service. The Company's funding policy for retirement
plans is to contribute amounts that meet the minimum funding requirements
specified by the Employee Retirement Income Security Act, plus such additional
amounts as the Company may determine to be appropriate. The domestic plan
assets are invested in a diversified portfolio that primarily consists of
equity and fixed income securities.
-20-
11
Net pension expense of the Company's domestic defined benefit plans
include the following components:
1994 1993 1992
(Dollars in millions) ------- ------- -------
Service cost - benefits
earned during year $ 6.2 $ 5.3 $ 4.8
Interest cost on projected
benefit obligations 16.3 16.5 15.7
Actual (gain) loss on assets 6.0 (43.6) (25.1)
Net amortization and deferral (32.8) 17.2 (1.1)
------ ------ ------
Net pension expense (credit) $ (4.3) $ (4.6) $ (5.7)
====== ====== ======
The following table sets forth the funded status and amounts recognized in
the consolidated balance sheets for the Company's domestic defined benefit
plans at December 31:
1994 1993
(Dollars in millions) --------------- --------------
OVER- UNDER- Over- Under-
FUNDED FUNDED funded funded
PLANS PLANS Plans Plans
------ ---- ------ ----
Plan assets at fair value $353.3 $0.4 $373.3 $0.9
------ ---- ------ ----
Actuarial present value of
benefit obligation:
Vested benefits 209.3 0.4 228.9 0.9
Non-vested benefits 12.3 -- 16.5 0.1
Accumulated benefit ------ ---- ------ ----
obligation 221.6 0.4 245.4 1.0
Effect of projected
future salary increases 18.7 21.1 --
------ ---- ------ ----
Projected benefit obligation 240.3 0.4 266.5 1.0
------ ---- ------ ----
Projected benefit obligation
(in excess of) or less
than plan assets 113.0 -- 106.8 (0.1)
Unrecognized prior
service cost 11.5 -- 12.6 --
Unrecognized net (gain) loss (73.8) -- (71.3) 0.1
Unrecognized net transition
(asset) obligation (18.9) -- (20.9) --
------ ---- ------ ----
Prepaid pension expense $ 31.8 $ -- $ 27.2 $ --
====== ==== ====== ====
Assumptions used in accounting for the domestic defined benefit plans were:
1994 1993
------ ------
Measurement of projected benefit obligation:
Discount rate 7.25% 6.25%
Long-term rate of compensation increases 5.50% 5.50%
Long-term rate of return on plan assets 7.50% 7.50%
The Company's European subsidiaries provide for defined benefits that are
generally based on earnings at retirement date and years of credited service.
The combined expense for these unfunded plans was $1.8, $2.2, and $2.3 million
in 1994, 1993 and 1992, respectively. The net liability recorded in the
consolidated balance sheet was $13.1 and $11.8 million for 1994 and 1993,
respectively.
Consolidated pension expense (credit) of $(0.1) million in 1994, $(0.3)
million in 1993, and $(1.5) million in 1992 includes amounts associated with
the domestic and foreign defined benefit plans described above and certain
defined contribution plans.
NOTE 4. NON-PENSION POSTRETIREMENT BENEFIT PLANS
The Company sponsors a retiree health care benefit plan, including retiree
life insurance, for eligible salaried retirees and their eligible dependents.
The Company also sponsors at certain divisions, retiree health care benefit
plans for eligible hourly retirees and their eligible dependents. Some of the
hourly retiree health care plans include retiree life insurance. The retiree
health care plans are unfunded and provide for coordination of benefits with
Medicare and any other insurance plan covering a participating retiree or
dependent. The plans have annual lifetime maximum benefit restrictions and
pay a stated percentage of covered, medically necessary expenses incurred by
the eligible retiree after applicable deductibles are met. Some of the plans
are contribu tory, with some retiree contributions adjusted annually. The
Company has reserved the right to interpret, change or eliminate these benefit
plans.
The components of the net periodic postretirement benefit cost were:
1994 1993 1992
(Dollars in millions) ------ ------ ------
Service cost-benefits
earned during year $ 3.9 $ 3.7 $ 4.6
Interest cost on accumulated
postretirement benefit
obligation 8.9 10.3 10.9
Net amortization and deferral (1.6)) (1.0) --
----- ----- -----
Net postretirement health care
costs (before tax effect) $11.2 $13.0 $15.5
===== ===== =====
The total of accrued postretirement benefit obligation is presented below as
of December 31:
1994 1993
(Dollars in millions) ------- -------
Accumulated postretirement benefit obligation:
Retirees $ 51.5 $ 57.7
Active, eligible employees 24.6 34.7
Active, not yet eligible employees 52.7 60.7
------ ------
128.8 153.1
Unrecognized plan amendment gain 14.8 4.0
Unrecognized net actuarial gain 32.5 10.2
------ ------
Accrued postretirement benefit cost
in excess of plan assets $176.1 $167.3
====== ======
Assumptions used:
Discount rate 7.5% 6.5%
Health care cost trend rate 11.0% 11.5%
Ultimate health care cost trend rate
in 2003 5.5% 4.5%
At December 31, 1994 and 1993 respectively, $6.3 and $6.0 million were
included in Accrued Liabilities, Other.
-21-
12
The health care cost trend rate assumption has a significant effect on the
amounts reported and increasing the assumed health care cost trend rates by one
percentage point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1994 by $17.8 million and the aggregate
of the service and interest cost components of net postretirement health care
cost for the year then ended by $2.3 million.
NOTE 5. INCOME TAXES
Consolidated income before taxes and cumulative effect of changes in
accounting principles consist of the following:
(Dollars in millions) 1994 1993 1992
------ ------ -----
United States $132.8 $ 94.1 $76.4
Foreign 59.1 33.7 12.0
------ ------ -----
$191.9 $127.8 $88.4
====== ====== =====
Provision for income taxes consists of the following:
(Dollars in millions) 1994 1993 1992
----- ----- -----
Current:
U.S. federal $53.8 $32.7 $23.5
State and local 7.8 4.4 3.4
Foreign income and
withholding taxes 14.7 12.8 11.7
----- ----- -----
76.3 49.9 38.6
----- ----- -----
Deferred:
U.S. federal (4.2) (5.3) (1.7)
Foreign (0.5) 1.8 (0.8)
----- ----- -----
(4.7) (3.5) (2.5)
----- ----- -----
Provision for income taxes $71.6 $46.4 $36.1
===== ===== =====
Income taxes paid $80.7 $43.8 $46.4
===== ===== =====
A reconciliation between the actual income tax expense provided and the
income tax expense computed by applying the statutory federal income tax rate
of 35% in 1994 and 1993 and 34% in 1992 to pre-tax income is as follows:
(Dollars in millions) 1994 1993 1992
----- ----- -----
Income taxes at U.S. statutory rate $67.2 $44.7 $30.0
Excess of foreign taxes over
the U.S. statutory rate -- 0.4 3.0
State and local income taxes 5.1 2.9 2.2
Foreign losses without tax benefit -- 1.0 2.5
Deferred income tax rate changes -- (1.6) --
Tax benefits from
Foreign Sales Corporation (1.0) (1.1) (0.9)
Federal tax refund -- -- (1.4)
Other 0.3 0.1 0.7
----- ----- -----
$71.6 $46.4 $36.1
===== ===== =====
Significant components of the Company's deferred tax assets and liabilities
as of December 31 were as follows:
(Dollars in millions) 1994 1993
------ ------
Deferred tax assets:
Non-pension postretirement benefits $ 65.1 $ 61.9
Product warranty and self-insured risks 20.7 18.8
Net operating loss carryforwards 10.1 9.4
Provision for environmental matters 14.4 10.9
Other accruals and miscellaneous 26.6 25.9
------ ------
136.9 126.9
Valuation allowance 11.2 15.2
------ ------
Total deferred tax assets 125.7 111.7
------ ------
Deferred tax liabilities:
Tax over book depreciation 39.8 37.6
Pension 11.9 10.2
Other 14.2 4.8
------ ------
Total deferred tax liabilities 65.9 52.6
------ ------
Net deferred tax assets $ 59.8 $ 59.1
====== ======
At December 31, 1994, the Company had net operating loss carryforwards
attributable to foreign operations for income tax purposes of $28.0 million
which expire from 1995 to 1999 if not offset against future taxable income.
For financial reporting purposes, a valuation allowance has been established to
offset the deferred tax assets related to those loss carryforwards.
NOTE 6. INVENTORIES
The components of inventories at December 31, were:
(Dollars in millions) 1994 1993
------ ------
Raw materials and work in process $147.6 $107.2
Finished goods 74.3 56.2
Supplies 13.4 11.5
------ ------
$235.3 $174.9
====== ======
-22-
13
NOTE 7. BUSINESS SEGMENT DATA
Business segment data is presented on page 12 of this report.
NOTE 8. DEBT
Short-term debt consists of borrowings by foreign subsidiaries at varying
interest rates under revolving credit agreements and overdraft arrangements
with banks used in the normal course of business. The U.S. dollar equivalent
of this debt was $7.2 million (at 6.5%) at December 31, 1994, and $10.5 million
(at 5.5%) at December 31, 1993.
Long-term debt consists of the following:
1. Unsecured borrowings, primarily with banks, by foreign subsidiaries with
interest rates ranging from 7.9% to 10.3%. The U.S. dollar equivalent of
these borrowings was $6.9 and $9.2 mil-lion at December 31, 1994 and
1993, respectively.
2. A $5.5 million variable-rate bank repurchase agreement (effective
interest rate of 6.69% at December 31, 1994), due in 1997.
3. $1.2 million variable-rate Industrial Development Revenue Bonds
(effective interest rate of 6.44% at December 31, 1994) payable in
quarterly installments from 1995 to 2020.
Scheduled maturities of long-term debt outstanding at December 31, 1994, are
as follows:
1995--$4.5 million; 1996--$1.6 million;
1997--$6.1 million; 1998--$0.1 million;
1999 and beyond--$1.3 million.
Interest paid was $6.4 million in 1994, $3.6 million in 1993 and $5.2 million
in 1992.
The carrying value of short and long-term debt at December 31, 1994 and 1993
approximated fair market value.
In 1994, the Company obtained a $100 million revolving credit facility for
general corporate purposes. The facility has a three-year term which may be
extended annually with the consent of the participating banks. Under the
facility, the Company may select among various interest rate arrangements.
As of December 31, 1994, the Company had not made any borrowings under this
facility.
NOTE 9. ENVIRONMENTAL MATTERS
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 December 31, 1994, the Company had an
accrual of $31.9 million ($26.4 million at December 31, 1993) 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. The
increase in the accrual during 1994 reflects updated cost factors and an
additional provision in the second quarter for identified groundwater
pollution. The provision for additional costs was substantially offset by
insurance settlements received during the second quarter of 1994. The EPA has
indicated it expects to issue a record of decision on the cleanup of the
Sheboygan River and Harbor Site late in 1995, 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.
On June 16, 1994, the Wisconsin Supreme Court, in an unrelated case, held
that insurance coverage was not available for environmental cleanup costs to
the extent the cleanup is done to prevent or mitigate future injury. A motion
for reconsideration has been denied. In a separate matter the Court in the
Company's insurance coverage action has ruled that Michigan Law should be
applied. The Company, in establishing its accrual for environmental cleanup
costs, has not provided for any potential additional recovery of these
estimated cleanup costs.
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 being
planned over the next year 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.
-23-
14
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES
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 of them 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.
NOTE 11. RISK CONCENTRATION
Financial instruments which potentially subject the Company to concentrations
of credit risk are primarily cash investments and accounts receivable. The
Company places its cash investments in investment grade, short-term debt
instruments and limits the amount of credit exposure to any one commercial
issuer. Concentrations of credit risk with respect to receivables are
limited due to the large number of customers in the Company's customer base,
and their dispersion across different industries and geographic areas.
A portion of export accounts receivable of the Company's Brazilian
subsidiary, SICOM, are sold with recourse. Factored Brazilian export accounts
receivable balances at December 31, 1994 and 1993, respectively, were $24.8
million and $23.1 million with discount rates, respectively of 7.5 and 4.5
percent. The Company maintains an allowance for losses based upon the expected
collectability of all accounts receivable, including receivables sold.
The Company enters into forward exchange contracts to hedge certain foreign
currency transactions for periods consistent with the expected cash flows of
the underlying transactions. All foreign exchange contracts are designed to
limit exposure to exchange rate fluctuations because gains and losses on these
contracts are offset by gains and losses on the hedged transactions. At
December 31, 1994 and 1993 respectively, the Company had $62.8 million and
$44.6 million in foreign exchange contracts outstanding. The aggregate value
of these contracts at December 31, 1994 and 1993 approximated fair market
value.
NOTE 12. STOCKHOLDERS' EQUITY
Prior to April 22, 1992, the Company had only a single class of stock, common
stock, $1.00 par value. On April 22, 1992, the common stock was redesignated
as the Class B common stock, and the Class A common stock was authorized. On
May 29, 1992, the Company paid a dividend of one share of Class A common stock
on each outstanding share of Class B common stock. The Class A common stock
became eligible for trading on June 1, 1992. On June 30, 1993, the Company
paid a dividend of one share of Class A common stock on each outstanding share
of common stock.
The shares of Class A common stock and Class B common stock are substantially
identical except as to voting rights. Class A common stock has no voting
rights except the right to i) vote on any amendments that could adversely
affect the Class A Stock Protection Provision and ii) vote in other limited
circumstances, primarily involving mergers and acquisitions, as required by
law.
In 1991, the Company adopted a Shareholders' Rights Plan. This plan was
amended in 1992 to clarify the effect of the Company's reclassification of the
existing common stock to voting Class B common stock. In addition, in 1992,
the Company adopted a new plan for the distribution of a Class A Right for each
share of the newly created Class A common stock. Each Right entitles the
registered holder, subject to the terms of the corresponding Rights Agreement,
to purchase from the Company one share of the corresponding class of common
stock at an exercise price of $80.00 per share, subject to adjustment.
The Rights are not currently exercisable, but would become exercisable if
certain events occurred relating to a person or group (Acquiring Person)
acquiring or attempting to acquire 10% or more of the outstanding shares of
Class B common stock. In the event that the Rights become exercisable, each
Right (except for Rights beneficially owned by the Acquiring Person, which
become null and void) would entitle the holder to purchase, for the exercise
price then in effect, shares of the Company's corresponding class of common
stock having a value of twice the exercise price.
The Rights may be redeemed by the Board of Directors in whole, but not in
part, at a price of $.0025 per Right. The Rights have no voting or dividend
privileges and are attached to, and do not trade separately from the Class A
and Class B common stock. The Rights expire on January 23, 2001.
As of December 31, 1994, 16,410,438 shares of Class A common stock and
5,470,146 shares of Class B common stock were reserved for future exercise
under the Rights Agreements.
-24-
15
MANAGEMENT'S REPORT
TO THE SHAREHOLDERS OF
TECUMSEH PRODUCTS COMPANY
Management is responsible for the integrity and objectivity of the financial
statements and other information presented in this annual report. The
statements were prepared in accordance with generally accepted accounting
principles and, where necessary, include certain amounts based on management's
best estimate and judgment to reflect the expected effects of events and
transactions that have not been completed. All financial information in the
annual report is consistent with the financial statements.
Management has established and maintains a system of internal accounting
controls to provide reasonable assurance that assets are safeguarded and
transactions are executed in accordance with management's authorization.
These controls are documented by written policies and procedures that are
communicated to employees with significant roles in the financial reporting
process. This system is continually reviewed and evaluated and modified to
reflect current conditions.
The Audit Committee of the Board of Directors, composed primarily of outside
Directors, is responsible for monitoring the Company's accounting and reporting
practices. The Audit Committee meets regularly with management, the internal
auditors, and the independent public accountants to review the work of each and
to assure that each is carrying out its responsibilities. Both the independent
public accountants and the internal auditors have unrestricted access to the
Audit Committee with and without management's representative present, to
discuss the results of their examinations and their opinions on the adequacy of
internal accounting controls and the quality of financial reporting.
The independent public accountants are engaged to express an opinion on the
Company's financial statements. Their opinion is based on procedures which
they believe to be sufficient to provide reasonable assurance that the
financial statements contain no material errors.
Todd W. Herrick
President and Chief Executive Officer
John H. Foss
Vice President, Treasurer and
Chief Financial Officer
INDEPENDENT ACCOUNTANT'S REPORT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
TECUMSEH PRODUCTS COMPANY
We have audited the accompanying consolidated balance sheets of Tecumseh
Products Company and Subsidiaries as of December 31, 1994 and 1993, and the
related statements of consolidated income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Tecumseh
Products Company and Subsidiaries at December 31, 1994 and 1993 and the
consolidated results of operations and cash flows for each of the three years
in the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
/s/
Moore, Smith & Dale
Certified Public Accountants
February 17, 1995
Southfield, Michigan
25
16
TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
SELECTED FINANCIAL DATA
Years Ended December 31,
1994 1993 1992(a) 1991 1990(b)
---- ---- ------- ---- -------
(Dollars in millions except per share data)
INCOME STATEMENT DATA:
Net sales $1,533.4 $1,314.2 $1,258.5 $1,197.2 $1,318.1
Net income before accounting
changes 120.3 81.4 52.3 42.5 14.2
Cumulative effect of changes
in accounting principles - - (95.0) - -
-------- -------- -------- -------- --------
Net income (loss) 120.3 81.4 (42.7) 42.5 14.2
PER SHARE OF COMMON STOCK:
Net income before accounting
changes $5.50 $3.72 $2.39 $1.94 $0.65
Cumulative effect of accounting
changes - - (4.34) - -
----- ----- ----- ----- -----
Net income (loss) 5.50 3.72 (1.95) 1.94 0.65
Cash dividends declared 1.35 1.15 0.80 0.80 0.80
Balance Sheet Data (at period
end):
Cash and cash equivalents $ 283.2 $313.2 $263.6 $256.4 $240.3
Working capital (c) 504.2 473.6 420.4 403.1 414.3
Net property, plant and equipment 402.4 320.4 322.9 324.3 304.9
Total assets 1,289.8 1,132.7 1,078.6 1,055.4 1,032.2
Long-term debt 9.1 11.2 14.4 17.9 23.6
Stockholders' equity 785.5 686.8 639.8 712.8 692.2
OTHER DATA:
Capital expenditures $ 136.2 $51.1 $56.6 $85.8 $64.8
Depreciation and amortization 55.7 52.5 53.6 49.9 49.6
Note: The above per share amounts have been adjusted as necessary to
reflect the 100% stock dividend paid June 30, 1993 and the 100% stock
dividend paid May 29, 1992.
(a) Reflects cumulative effect of adoption of Statement of Financial
Accounting Standards (SFAS) No. 106, Accounting for Non-pension
Postretirement Benefits, and SFAS No. 109, Accounting for Income Taxes.
(b) The 1990 results include a nonrecurring provision for environmental
cleanup of $19.2 million after income taxes, or $0.88 per share.
(c) Working capital is the excess of current assets over current
liabilities.
26
17
Tecumseh Products Company and Subsidiaries
INFORMATION CONCERNING EQUITY SECURITIES
The Company's Class A and Class B common stock are traded on the NASDAQ Stock
Market under the the symbols TECA and TECB, respectively. The high and
low market prices and dividends per share presented below have been adjusted as
necessary to reflect the 100% stock dividend paid June 30, 1993. The stock
dividend is further discussed in Note 12.
1994
------------------------------------------------------------------------------------
Sales Price
-----------------------------------------------------------------
Class A Class B Cash
------- ------- Dividends
Quarter Ended High Low High Low Declared
------------- ------- ------ ------- ------ ---------
March 31 52 1/4 45 1/4 62 3/4 45 1/4 $0.20
June 30 52 3/4 44 1/4 60 1/4 47 1/2 0.20
September 30 55 1/2 46 3/4 54 46 0.20
December 31 50 3/4 40 3/8 49 3/4 39 0.75
Shareholders of record
at December 31, 1,042 1,010
1993
------------------------------------------------------------------------------------
Sales Price
-----------------------------------------------------------------
Class A Class B Cash
------- ------- Dividends
Quarter Ended High Low High Low Declared
------------- ------- ------ ------- ------ ---------
March 31 32 1/2 26 3/4 33 1/4 28 1/2 $0.20
June 30 37 30 1/2 37 1/2 31 5/8 0.20
Seotenber 30 38 3/4 31 1/4 43 35 0.20
December 31 47 1/4 36 47 1/2 38 0.55
Shareholders of record
at December 31, 1,087 1,054
QUARTERLY FINANCIAL DATA
(Dollars in millions except per share data)
Quarter
------------------------------------------------------------
First Second Third Fourth Total
------ ------ ----- ------ -----
1994
Net sales $386.4 $424.8 $355.0 $367.2 $1,533.4
Gross profit 62.8 73.4 55.8 61.9 253.9
Net income $29.0 $35.9 $26.9 $28.5 $120.3
====== ====== ====== ====== ========
Net income per share $1.32 $1.64 $1.23 $1.31 $5.50
====== ====== ====== ====== ========
1993
Net sales $341.6 $368.6 $301.8 $302.2 $1,314.2
Gross profit 46.7 56.2 38.7 48.6 190.2
Net income $17.9 $24.3 $18.4 $20.8 $81.4
====== ====== ====== ====== ========
Net income per share $0.82 $1.11 $0.84 $0.95 $3.72
====== ====== ====== ====== ========
The above per share amounts have been adjusted as necessary to reflect the 100%
stock dividend paid June 30, 1993.
27