Today 9:45 AM ET (PR NewsWire)
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) (0.3)
Operating loss (5.8) (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 3.4
EBITDAR FROM CONTINUING OPERATIONS $ 4.7 $ 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: Janice Stipp
Tecumseh Products Company
734-585-9507
Investor.relations@tecumseh.com
| |
SOURCE Tecumseh Products Company
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