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Tecumseh Products Company (TECUA)

Q2 2008 Earnings Call Transcript

August 7, 2008 11:00 am ET

Executives

Teresa Hess – Director, IR

Ed Buker – Chairman, President, and CEO

Jim Nicholson – CFO, VP, and Treasurer

Analysts

Brian Grad [ph] – DLS Capital Management

Charlie Rentschler – Wall Street Access

Presentation

Operator

Good morning everyone and welcome to the Tecumseh Products Company second quarter 2008 earnings conference call. All participants are in a listen-only mode until the question-and-answer session of the conference. This conference is being recorded at the request of Tecumseh Products. I would now like to introduce Ms. Teresa Hess, Director of Financial Reporting and Investor Relations at Tecumseh Products. Ms. Hess, you may proceed.

Teresa Hess

Thank you, Tony. Good morning and welcome to Tecumseh Products second quarter 2008 conference call. On the call today are Ed Buker, President and CEO, and Jim Nicholson, Vice President, Treasurer, and Chief Financial Officer.

Yesterday afternoon, we announced the company’s second quarter 2008 results for the period ended June 30, 2008. If you did not yet receive a copy of the press release, please contact Amanda Passage at 616-233-0500 to have one sent to you. Please note that the release is also available on many news sites and it can be viewed on our corporate website at www.tecumseh.com.

Before I turn the call over to Ed and Jim to comment on our results, I would like to remind you that this conference call contains certain statements regarding the company’s plans and expectations, which are forward-looking statements and are made pursuant to the Safe Harbor provision of the Securities and Litigation Reform Act of 1995. These forward-looking statements reflect the company’s views at the time such statements are made with respect to the company’s future plans, objectives, events, and financial results such as revenues, expenses, income, earnings per share, operating margins, financial position, expected results of operation, and other financial items, as well as industry trends and observations.

In addition, words such as estimate, expect, intend, should, could, will, and variations of such words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence. There are a number of factors, many of which are beyond the company’s control, which could cause actual results and outcomes to differ materially from those described in the forward-looking statements.

Risk factors exist and new risk factors emerge from time to time that may cause actual results to differ materially from those contained in the forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Furthermore, the company expressly disclaims any obligation to update, amend, or clarify forward-looking statements.

In addition to the foregoing, several risk factors are discussed in the company’s most recently filed Annual Report on Form 10-K and other SEC filings under the titles Risk Factors or Cautionary Statements Relating To Forward-Looking Statements and those discussions regarding risk factors as well as the discussion of forward-looking statements in such sections are incorporated by reference in this call.

With that said, I would now like to turn the call over to Ed Buker, President and CEO of Tecumseh Products.

Ed Buker

Thank you, Teresa. Good morning and welcome to our second quarter 2008 conference call. This call is being simultaneously broadcast on the Internet and will also be archived for replay starting this afternoon. The replay can be accessed at our website, www.tecumseh.com.

On our first quarter call, I described in detail the company's ongoing transformation process in the context of three phases. During today's call, I will update our progress and the initial impacts we are seeing in terms of our global operations and financial results. More than a year, our management team has focused on modernizing every aspect of our company, from our products and processes, to our operations and manufacturing footprint, to our corporate governance and capital structure, all with the view of establishing Tecumseh as a world-class competitor and among the leaders in public company governance and structure. During the call today, we will update you on the status of these efforts and our plans to continue moving forward.

Before turning to a detailed review of our compressor operations, I'd like to make note of the fact that we've sold our MP Pumps business to Lionheart Ventures for $14.6 million on June 30. This sale was a continuation of our efforts to divest business lines outside of our core compressors. MP Pumps was relatively small but profitable, accounting for approximately $20 million in revenues. However, it simply did not fit with our core operations. Over the coming months we will likely continue to identify smaller divestitures as we refine our focus. However, the largest steps in this process have already been accomplished.

We've made significant strides in reshaping Tecumseh into a global leader focused on our core compressor business. We've divested our two primary non-core divisions, raising significant levels of cash in the process. Our highly leveraged balance sheet has been dramatically improved as we paid down debt, resulting in lower interest expense and increased flexibility in operating our core business.

Although our work has just begun, we've made the initial critical steps toward improving our operational processes. We've begun to shift our operations through right-sizing our manufacturing to match the needs of our business. We have focused on improving our cost of goods through improved inventory control, better quality control, and effective supply chain management.

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