Tecumseh Products Company Reports 2012 Results

                Tecumseh Products Company Reports 2012 Results

-- Net sales for the year decreased 1.1% to $854.7 million. Excluding the
decrease in sales due to the effect of changes in foreign currency translation
of $63.1 million, net sales increased by 6.2% from 2011, primarily due to net
increases in volume and mix, as well as net price increases.

-- Net income for the year was $22.6 million, or $1.22 per share, and the
operating income was $19.9 million. Included in our net income is a
non-recurring, non-cash postretirement benefit curtailment gain of $45.0
million.

-- The Company plans to continue implementing initiatives to re-engineer its
product lines, reduce costs and increase organizational efficiency and
operational performance.

PR Newswire

ANN ARBOR, Mich., March 7, 2013

ANN ARBOR, Mich., March7, 2013 /PRNewswire/ --Tecumseh Products Company
(Nasdaq: TECUA, TECUB), a leading global manufacturer of compressors and
related products, today reported net income of $22.6 million, or $1.22 per
share, on net sales of $854.7 million for the year ended December31, 2012.
This compares with a net loss of $73.2 million, or $3.96 per share, on net
sales of $864.4 million for 2011.

"Last year was a year of focus and reinvestment. I'm proud of the work our
team did in launching new products, quality improvements, cost reduction
initiatives, and the performance at our facilities," said Jim Connor,
President and CEO. "We believe that 2012 represents a turning point on our
commitment to improve shareholder value. In keeping with these improvements,
in 2013 we also implemented a functional reporting structure for North America
and Europe to streamline the organization and expedite the required decisions
to move forward."

REVIEW OF OPERATIONS

Net sales in the year ended December31, 2012 decreased by $9.7 million, or
1.1%, compared with the same period of 2011. Excluding the decrease in sales
due to the effect of changes in foreign currency translation of $63.1 million,
net sales increased by 6.2% from 2011, primarily due to net increases in
volume and mix, as well as net price increases.

Sales of compressors used in commercial refrigeration and aftermarket
applications represented 58.9% of our total sales and increased by 0.2% to
$503.6 million in 2012, when compared to 2011. Excluding the decrease in
sales due to the effect of changes in foreign currency translation of $24.5
million, net sales increased by 5.1%, when compared to 2011. This increase is
primarily due to higher volume and favorable changes in sales mix of $20.1
million and price increases of $5.6 million. The volume increase is mainly
attributable to increases in regional demands for these types of products in
India and Brazil, as well as a small improvement in market conditions in
Europe and North America compared to 2011.

Sales of compressors used in household refrigeration and freezer ("R&F")
applications represented 21.8% of our total sales and increased by 1.9% to
$186.0 million in 2012, when compared to 2011. Excluding the decrease in
sales due to the effect of changes in foreign currency translation of $21.8
million, net sales increased by 13.9%, when compared to 2011. This increase
is primarily due to higher sales volume and favorable change in sales mix of
$30.5 million, partially offset by price decreases of $5.2 million. The volume
increases are primarily the result of new business with one major customer at
our Indian operations and an increase in regional demand in Brazil.

Sales of compressors for air conditioning applications and all other
applications represented 19.3% of our total sales and decreased by 8.0% to
$165.1 million in 2012, when compared to 2011. Excluding the decrease in
sales due to the effect of changes in foreign currency translation of $16.8
million, net sales increased by 1.3% when compared to 2011. This increase is
primarily due to price increases of $2.9 million, partially offset by lower
volumes and unfavorable change in sales mix of $0.5 million. Volume decreases
are primarily due to a temporary shutdown of a plant by one of our major
Brazilian customers which lasted six months in 2012, continued competition
from Asian supply sources in this market, as well as a decrease in volume in
the North American market due to soft market conditions.

Gross profit increased by $26.8 million from $37.9 million, or 4.4% of net
sales, in 2011 to $64.7 million, or 7.6% of net sales in 2012. The increase in
gross profit in 2012 was primarily attributable to $11.6 million of favorable
changes in other material and manufacturing costs, favorable changes in
commodity costs of $9.1 million, favorable changes in currency exchange
effects of $4.5 million and net price increases of $3.3 million, partially
offset by unfavorable changes in volume and sales mix of $1.0 million and
increased other expenses of $0.7 million.

Selling and administrative ("S&A") expenses decreased by $0.4 million from
$108.1 million in 2011 to $107.7 million in 2012. As a percentage of net
sales, S&A expenses were 12.6% in 2012 compared to 12.5% in 2011. The decrease
was due to a decline in payroll, benefits and other employee related expenses
of $2.1 million as a result of our continued restructuring efforts and a
decline in other selling and administrative expenses of $2.1 million,
including a decrease in professional fees of $0.6 million, partially offset by
an expense of $3.8 million related to our annual incentive plan.

Other income (expense), net, increased by $7.6 million from $14.7 million in
2011 to $22.3 million in 2012. The increase is mainly due to $2.9 million of
income due to our sale of the right to proceeds from a future potential
settlement of a lawsuit involving our Brazilian location received in the
second quarter of 2012, $1.3 million due to a mutual release agreement that we
signed in the second quarter of 2012, $2.4 million due to increases in various
Indian government incentives, $3.6 million due to an increase in the net
amortization of gains for our postretirement benefits due to curtailment of
these benefits, a $0.9 million favorable change in foreign currency exchange
rates and a net increase of $0.2 million of miscellaneous other income,
partially offset by $3.7 million gain on sale of fixed assets that occurred in
2011.

We recorded income of $40.6 million in impairments, restructuring charges, and
other items in 2012 compared to $8.5 million of expense in 2011. In 2012,
this included a postretirement curtailment gain of $45.0 million and income of
$0.1 million related to a refund of notice and administrative costs related to
the antitrust investigation settlement agreement which we entered into in
October 2012, partially offset by severance expense of $3.8 million associated
with a reduction in force at our Brazilian ($2.6 million), North American
($0.3 million), French ($0.6 million), and Corporate ($0.3 million) locations,
$0.6 million for additional estimated environmental costs associated with the
remediation activities at our former Tecumseh, Michigan facility, and $0.1
million of costs related to relocation of our corporate office.

Net income from continuing operations for the year ended December31, 2012 was
$23.1 million, or $1.25 per share, as compared to a loss of $71.3 million, or
$3.86 per share for the year ended December31, 2011. This change was
primarily related to the postretirement benefit curtailment, improved gross
profit, higher tax benefit (primarily related to a refund received from the
IRS related to a previously unrecognized tax benefit) and other income.

CASH AND LIQUIDITY

The Company ended 2012 with cash and cash equivalents of $55.3 million, up
from $49.6 million at the end of 2011. For the full year, cash provided by
operations was $8.8 million, as compared to cash used in operations of $5.3
million in 2011. Net income included a non-recurring $4.4 million refund from
the IRS related to a previously unrecognized tax benefit and $1.3 million in
interest income related to the refund, income of $2.9 million due to the sale
of proceeds from a future potential settlement of a lawsuit involving our
Brazilian location and a $1.7 million payment received from a mutual release
agreement that we signed in the second quarter of 2012.

With respect to working capital, reduced inventory levels provided $9.4
million of cash. Inventory days on hand decreased by 19 days to 71 days at
December31, 2012, primarily due to increased sales for the three months ended
December 31, 2012 as compared to the three months ended December 31, 2011 and
continued cost containment measures.

Increased accounts receivable resulted in a use of cash of $15.4 million
during the year primarily as a result of our increased sales in the fourth
quarter of 2012 compared to the fourth quarter of 2011. Our days sales
outstanding increased by one day as compared to December 31, 2011 to 55 days
at December31, 2012. This increase was primarily related to a decrease in
factoring of our receivables as a percentage of the outstanding receivables
balance in Brazil, partially offset by increased factoring due to our new
European facility.

Payables and accrued expenses provided $12.4 million of cash mainly as a
result of an increase in inventory purchases and timing of those purchases, as
well as an increase in accrued expenses due to our annual incentive plan.
Payable days outstanding remained at 63 days at both December31, 2012 and
December 31, 2011.

Recoverable non-income taxes provided cash of $1.1 million, which included
$9.2 million cash received from the Brazilian government and $15.8 million
cash received from the Indian government, partially offset by accruals of
additional recoverable non-income taxes.

Employee retirement benefits were a use of cash of $1.7 million due to benefit
payments and contributions related to our non-U.S. pension and U.S.
postretirement benefit plans.

Cash used in investing activities was $5.7 million in 2012 as compared to $9.1
million in 2011. The 2012 use of cash in investing activities includes $13.8
million of capital expenditures. This use of cash was partially offset by the
release of restricted cash of $7.1 million and proceeds from the sale of
assets of $1.0 million, primarily related to the sale of our Grafton facility.
The release of restricted cash primarily relates to $2.4 million of restricted
cash that became available to fund our 401(k) matching contributions and a
$4.9 million decrease in cash pledged on our derivatives related to our
hedging activities, partially offset by a $0.2 million increase in cash
collateral on our letters of credit.

Cash provided by financing activities was $3.1 million in 2012 compared to
$0.6 million provided by financing activities in 2011. The increase in
borrowings in 2012 is mainly due to financing our regional operating needs,
partially offset by our cash management strategy to increase our usage of
accounts receivable factoring programs from December 31, 2011 levels.

BUSINESS OUTLOOK

Sales declined in 2012 due to the unfavorable foreign currency exchange rate
impact, partially offset by net favorable changes in volume and product mix
and net price increases. We expect to see continued demand volatility in the
first half of 2013 as a result of uncertainties and current events around the
world. For 2013, we currently expect net sales to increase in the range of 3
percent to 8 percent from 2012 levels. The potential improvement is based on
our internal projections about the market and related economic conditions,
expected price increases to our customers, estimated foreign currency exchange
rate effects, as well as our continued efforts in sales and marketing. We
cannot currently project whether market conditions will improve on a sustained
or significant basis. If the economic improvement in our key markets does not
occur as expected, this could have an adverse impact on our current outlook.

The prices of some our key commodities, specifically copper and steel, have
remained volatile. The weighted average market prices of copper decreased
11.6% while costs of steel decreased 9.4% in 2012 compared to 2011. We expect
the full year change in average cost of our purchased materials in 2013,
including the impact of our hedging activities, to have a slightly favorable
impact in 2013 when compared to 2012, depending on commodity cost levels and
the level of our hedging over the course of the year. We expect to continue
our approach of mitigating the effect of short term price swings through the
appropriate use of hedging instruments, price increases, and modified pricing
structures.

The outlook for 2013 is subject to many of the same variables that negatively
impacted us in recent years, which have had significant impacts on our results
of operations. The condition of, and uncertainties regarding, the global
economy, commodity costs, key currency rates and weather are all important to
future performance, as is our ability to match our hedging activity with
actual levels of transactions. The extent to which adverse trends in recent
years continue, will ultimately determine our 2013 results. We can give no
guarantees regarding what impact future exchange rates, commodity prices and
other economic changes will have on our 2013 results.

The Brazilian Real, the Euro and the Indian Rupee continue to be volatile
against the U.S. Dollar. We have considerable forward purchase contracts to
cover a portion of our exposure to additional fluctuations in value during
2013. In the aggregate, we expect the changes in foreign currency exchange
rates, after giving consideration to our hedging contracts and including the
impact of realized gains/losses, to have minimal impact on our net income in
2013 when compared to 2012.

After giving recognition to the factors discussed above, we expect that the
full year 2013 operating profit could improve compared to 2012, exclusive of
the $45.0 million curtailment gain on our postretirement benefits recognized
in 2012, if we are successful at offsetting volatility in commodity costs and
foreign exchange rates and implementing initiatives for re-engineering our
product lines to reduce our costs, price increases, restructuring activities
and other cost reductions. We also expect that our operating cash flow could
be sufficient to maintain current cash balances and fund ongoing business
requirements if we are successful at achieving the improved operating profit
discussed above and the tax authorities do not significantly change their
pattern of payments or past practices for the expected outstanding refundable
Brazilian and Indian non-income taxes. Furthermore, we expect capital spending
in 2013 to be approximately $20.0 million to $25.0 million.

Based on our assessment of ongoing economic activity, we realize that we may
not generate cash flow from operating activities unless further restructuring
activities are implemented or sales or economic conditions improve. Additional
restructuring actions may be necessary in 2013 and might include changing our
current footprint, consolidation of facilities, other reductions in
manufacturing capacity, reductions in our workforce, sales of assets, and
other restructuring activities. These actions could result in significant
restructuring or asset impairment charges, severance costs, losses on asset
sales and use of cash. Accordingly, these restructuring activities could have
a significant effect on our consolidated financial position, operating profit,
cash flows and future operating results. Cash required by these restructuring
activities might be provided by our cash balances and the cash proceeds from
the sale of assets. If such restructuring activities are undertaken, there is
a risk that the costs of the restructuring and cash required will exceed the
benefits received from such activities. We have engaged a financial adviser
and are exploring our strategic alternatives.

As we look to the first quarter of 2013, we expect our sales, resulting
operating profit and operating cash flow to be slightly lower than the first
quarter of 2012, reflecting the continuing uncertainty in the global economy.

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") and Earnings Before Interest, Taxes,
Depreciation, Amortization, and Impairments, restructuring charges, and other
items from Continuing Operations ("EBITDAR"); 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 income
(loss).

RECONCILIATION OF EBITDA FROM CONTINUING OPERATIONS AND EBITDAR FROM
CONTINUING OPERATIONS FROM NET INCOME (LOSS)

(In Millions)
                                       Full Year Ended December 31,
                                       2012                    2011
Net income (loss)                      $     22.6              $      (73.2)
(Income) loss from discontinued        0.5                     1.9
operations, net of tax
Tax benefit                            (10.2)                  (0.9)
Interest expense                       10.2                    10.5
Interest income                        (3.2)                   (2.3)
Operating income (loss)                19.9                    (64.0)
Depreciation and amortization          36.4                    40.5
EBITDA FROM CONTINUING OPERATIONS      $     56.3              $      (23.5)
Impairments, restructuring charges,    (40.6)                  8.5
and other items
EBITDAR FROM CONTINUING OPERATIONS     $     15.7              $   (15.0)

Conference Call

Tecumseh will broadcast its financial results conference call live over the
Internet on Friday, March8, 2013, at 11:00 a.m. eastern time. Webcast
information can be found in the Investor Relations section of
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 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 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, or by the fact that they appear under the caption
"Business Outlook." 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) current and future global or regional economic conditions,
including housing starts, and the condition of credit markets, which may
magnify other risk factors; ii) loss of, or substantial decline in sales to,
any of our key customers; iii) our history of losses and our ability to
maintain adequate liquidity in total and within each foreign operation; iv)
our ability to restructure or reduce our costs and increase productivity and
quality and develop successful new products in a timely manner; v) actions of
competitors in highly competitive markets with intense competition; vi) 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;
vii) availability and volatility in the cost of materials, particularly
commodities, including steel and copper, whose cost can be subject to
significant variation; viii) financial market changes, including fluctuations
in foreign currency exchange rates and interest rates; ix) default on
covenants of financing arrangements and the availability and terms of future
financing arrangements; x) reduction or elimination of credit insurance; xi)
significant supply interruptions or cost increases; xii) potential political
and economic adversities that could adversely affect anticipated sales and
production in Brazil; xi) potential political and economic adversities that
could adversely affect anticipated sales and production in India, including
potential military conflict with neighboring countries; xiii) local
governmental, environmental, trade and energy regulations; xiv) increased or
unexpected warranty claims; xv) the extent of any business disruption caused
by work stoppages initiated by organized labor unions; xvi) 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; xvii) the success of our ongoing effort to bring costs in line with
projected production levels and product mix; xviii) weather conditions
affecting demand for replacement products; xix) 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

Website: http://www.tecumseh.com
 
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