ANN ARBOR, Mich., May 12,
2014 /PRNewswire/ -- Tecumseh Products Company (Nasdaq: TECU),
a leading global manufacturer of compressors and related products,
today reported an operating loss of $5.8
million and a net loss of $11.1
million, or a net loss per share of $0.60, on net sales of $179.3 million for the quarter ended
March 31, 2014. This compares with an operating loss of
$5.4 million and a net loss of
$8.4 million, or $0.45 per share, on net sales of $207.6 million for the first quarter of 2013.
"The first quarter of 2014 continued to be a challenging and
difficult time primarily related to our sales, cost structure and
quality issues," stated Jim Connor,
President and CEO. "We hired new talent to address these
operational issues and to assist with restructuring our
business."
REVIEW OF OPERATIONS
Revenue: Net sales in the first quarter of 2014 decreased
by $28.3 million, or 13.6%, compared
with the same period of 2013. Excluding the decrease in sales due
to the effect of changes in foreign currency translation of
$7.8 million, net sales decreased by
9.9% from the first quarter of 2013, primarily due to lower net
volume and unfavorable change in sales mix, partially offset by net
price increases.
Sales of compressors used in commercial refrigeration and
aftermarket applications represented 64% of our total sales and
decreased by 2.8% to $115.3 million
in the first quarter of 2014, when compared to the first quarter of
2013.
Sales of compressors used in household refrigeration and freezer
("R&F") applications represented 21% of our total sales and
decreased by 9.5% to $38.0 million in
the first quarter of 2014, when compared to the first quarter of
2013.
Sales of compressors for air conditioning applications and all
other applications represented 15% of our total sales and decreased
by 44.7% to $26.0 million in the
first quarter of 2014, when compared to the first quarter of
2013.
Gross profit: Gross profit decreased by $5.0 million from $22.1
million, or 10.6% of net sales, in the first quarter of 2013
to $17.1 million, or 9.5% of net
sales in same period in 2014. The decrease in gross profit in the
first three months of 2014 was primarily attributable to
unfavorable changes in other material and manufacturing costs of
$4.3 million, net unfavorable changes
in volume and sales mix of $4.2
million and increases in commodity costs of $0.2 million. These decreases were partially
offset by favorable changes in currency exchange effect of
$2.2 million and price increases of
$1.5 million.
Selling and administrative ("S&A"): Our S&A
expenses decreased by $6.1 million
from $29.1 million in the first three
months of 2013 to $23.0 million in
the first three months of 2014. The decrease was due to a decline
in depreciation expense of $1.9
million due to an information technology asset that became
fully depreciated in late 2013, a decline of $1.9 million related to our incentive
compensation awards, a decrease of $0.7
million in payroll and other employee benefits, lower
professional fees of $0.7 million and
a net decrease of $0.9 million in
other miscellaneous expenses.
Other income (expense), net: Other income (expense), net
decreased $0.8 million from
$5.0 million in the first three
months of 2013 to $4.2 million in the
first three months of 2014. This decrease is primarily due to
recording no net amortization of gains related to our
postretirement benefits due to the curtailment of these benefits
that was effective after December 31,
2013, as well as lower income related to various Indian
government incentives, partially offset by a gain of $3.4 million on the sale of fixed assets at one
of our U.S. locations.
Impairments, restructuring charges, and other items: We
recorded $4.1 million of expense in
impairments, restructuring charges, and other items in the first
three months of 2014, compared to $3.4
million of expense in the same period of 2013. In the first
three months of 2014, this expense included $1.2 million related to severance, $1.5 million related to a legal settlement signed
in the first quarter of 2014, a $1.2
million environmental reserve with respect to a sold
building and $0.2 million related to
business process re-engineering. The severance expense was
associated with a reduction in force at our Brazilian ($1.0 million) and French ($0.2 million) locations.
Loss from Continuing Operations: Loss from continuing
operations for the three months ended March 31, 2014 was
$7.8 million, or a net loss per share
of $0.42, as compared to a net loss
from continuing operations of $7.5
million, or $0.40 per share
for the three months ended March 31, 2013. The change was
primarily related to lower gross profit due to lower volume and
unfavorable sales mix for the three months ended March 31, 2014 compared to the three months ended
March 31, 2013, partially offset by
lower S&A expenses as well as the other factors described
above.
Cash Flow: Cash and cash equivalents were $43.1 million at the end of the first quarter of
2014 while cash balances were $55.0
million and $41.9 million at
December 31, 2013 and March 31, 2013, respectively. Cash
used in operating activities was $19.2
million in the first quarter of 2014, as compared to
$10.2 million in the same period in
2013.
Cash provided by investing activities was $13.4 million in the three months ended
March 31, 2014 as compared to cash used in investing
activities of $1.4 million during the
same period in 2013. The cash provided by investing activities in
the first quarter of 2014 is primarily related to the release of
blocked funds of $12.7 million
relating to our term loan with PNC Bank.
Cash used in financing activities was $5.9 million for the three months ended
March 31, 2014 compared to $2.2
million during the same period in 2013.
Strategic Initiatives Update: Based on a recent review of
the strategic initiatives we discussed in May 2013, we no longer believe that we will
achieve the EBITDAR margin target of 8% - 10% by 2015 (EBITDAR
margin is defined as EBITDAR divided by Net sales; EBITDAR is
defined below).
NON-GAAP FINANCIAL MEASURES
While the Generally Accepted Accounting Principles in
the United States of America
("GAAP") results provide significant insight into our operations
and financial position, Tecumseh
management supplements its analysis of the business using Earnings
Before Interest, Taxes, Depreciation and Amortization from
Continuing Operations ("EBITDA from Continuing Operations") and
Earnings Before Interest, Taxes, Depreciation, Amortization, and
Impairments, restructuring charges, and other items from Continuing
Operations ("EBITDAR from Continuing Operations"); both of these
are non-GAAP financial measures. Management believes that these
non-GAAP financial measures, when taken together with the
corresponding GAAP measure, provide incremental insight into the
underlying factors and trends affecting our performance. However,
EBITDA from Continuing Operations and EBITDAR from Continuing
Operations, as defined below, should be viewed as supplemental
data, rather than as a substitute or an alternative to the
comparable GAAP measure. The table below presents a reconciliation
of EBITDA from Continuing Operations and EBITDAR from Continuing
Operations from our Net loss.
RECONCILIATION OF
EBITDA FROM CONTINUING OPERATIONS AND EBITDAR FROM CONTINUING
OPERATIONS FROM NET LOSS
(in
millions)
|
|
|
|
Three Months Ended
March 31,
|
|
2014
|
|
|
2013
|
|
Net loss
|
$
|
(11.1)
|
|
|
$
|
(8.4)
|
|
Loss from discontinued
operations, net of tax
|
3.3
|
|
|
0.9
|
|
Tax expense
|
0.1
|
|
|
0.1
|
|
Interest expense
|
2.3
|
|
|
2.3
|
|
Interest income
|
(0.4)
|
|
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(0.3)
|
|
Operating
loss
|
(5.8)
|
|
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(5.4)
|
|
Depreciation and
amortization
|
6.4
|
|
|
9.3
|
|
EBITDA FROM
CONTINUING OPERATIONS
|
$
|
0.6
|
|
|
$
|
3.9
|
|
Impairments, restructuring
charges and other items
|
4.1
|
|
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3.4
|
|
EBITDAR FROM
CONTINUING OPERATIONS
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$
|
4.7
|
|
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$
|
7.3
|
|
CONFERENCE CALL INFORMATION
Tecumseh will broadcast its
financial results conference call live over the Internet on
Monday, May 12, 2014, at 1:00 p.m. Eastern Time, and it expects to post,
before the conference call, a slide presentation to be used in
connection with the conference call. Webcast information can be
found in the Investor Relations section of our website at
www.tecumseh.com.
About Tecumseh Products Company
Tecumseh Products Company is a global manufacturer of
hermetically sealed compressors for residential and specialty air
conditioning, household refrigerators and freezers, and commercial
refrigeration applications, including air conditioning and
refrigeration compressors, as well as condensing units, heat pumps
and complete refrigeration systems. Press releases and other
investor information can be accessed via the Investor Relations
section of Tecumseh Products Company's Website at
www.tecumseh.com.
Cautionary Statements Relating to Forward-Looking
Statements
This release may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act 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 us. 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. Our forward-looking statements
generally relate to our future performance, including our
anticipated operating results and liquidity sources and
requirements, our business strategies and goals, and the effect of
laws, rules, regulations, new accounting pronouncements and
outstanding litigation, on our business, operating results, and
financial condition.
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) our history of
losses and our ability to maintain adequate liquidity in total and
within each foreign operation; ii) our ability to develop
successful new products in a timely manner; iii) the success
of our ongoing effort to improve productivity and restructure our
operations to reduce costs and bring them in line with projected
production levels and product mix; iv) the extent of any business
disruption that may result from the restructuring and realignment
of our manufacturing operations and personnel or system
implementations, the ultimate cost of those initiatives and the
amount of savings actually realized; v) loss of, or substantial
decline in, sales to any of our key customers; vi) current and
future global or regional political and economic conditions and the
condition of credit markets, which may magnify other risk factors;
vii) increased or unexpected warranty claims; viii) actions of
competitors in markets with intense competition; ix) financial
market changes, including fluctuations in foreign currency exchange
rates and interest rates; x) the ultimate cost of defending and
resolving legal and environmental matters, including any
liabilities resulting from the regulatory antitrust investigations
commenced by the United States Department of Justice Antitrust
Division and the Secretariat of Economic Law of the Ministry of
Justice of Brazil, both of which
could preclude commercialization of products or adversely affect
profitability and/or civil litigation related to such
investigations; xi) local governmental, environmental, trade and
energy regulations; xii) availability and volatility in the cost of
materials, particularly commodities, including steel, copper and
aluminum, whose cost can be subject to significant variation; xiii)
significant supply interruptions or cost increases; xiv) loss of
key employees; xv) the extent of any business disruption caused by
work stoppages initiated by organized labor unions; xvi) risks
relating to our information technology systems; xvii) impact of
future changes in accounting rules and requirements on our
financial statements; xviii) default on covenants of financing
arrangements and the availability and terms of future financing
arrangements; xix) reduction or elimination of credit insurance;
xx) potential political and economic adversities that could
adversely affect anticipated sales and production; xxi) in
India, potential military conflict
with neighboring countries that could adversely affect anticipated
sales and production; xxii) weather conditions affecting demand for
replacement products; and xxiii) the effect of terrorist activity
and armed conflict. These forward-looking statements are made only
as of the date of this release, and we undertake no obligation to
update or revise the forward-looking statements, whether as a
result of new information, future events or otherwise.
Contact:
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Janice
Stipp
|
|
Tecumseh Products
Company
|
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734-585-9507
|
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Investor.relations@tecumseh.com
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SOURCE Tecumseh Products Company