Tecumseh Products to record $16.5 million writeoff over PCB problem
Tecumseh Products Co. will recognize pretax charges totaling $16.5 million against fourth quarter 2004 results related to environmental matters and the collectability of accounts receivable. The charge involves a consent order with the Wisconsin Department of Natural Resources regarding PCB contamination at the company's New Holstein, Wis., facility...
TECUMSEH, MI, Jan. 4, 2005 (PRNewswire-FirstCall) -- Tecumseh Products Co. will recognize pretax charges totaling $16.5 million against fourth quarter 2004 results related to environmental matters and the collectability of accounts receivable.
As previously disclosed, Tecumseh has been participating in a cooperative, voluntary cleanup effort with the Wisconsin Department of Natural Resources (DNR) to investigate and cleanup PCB contamination in the watershed of the south branch of the Manitowoc River, at and downstream from its New Holstein, Wis., facility. On Dec. 29, the company and TRC Companies Inc. entered into a consent order with the Wisconsin DNR relating to this effort known as the Hayton Area Remediation Project (HARP). The order provides a framework for the completion of the remediation and regulatory closure at HARP.
Also on Dec. 29, Tecumseh and two of its subsidiaries and TRC Companies and TRC Environmental Corp. -- collectively TRC -- entered into an Exit Strategy Agreement, whereby the company transferred to TRC substantially all of its obligations to complete the HARP remediation pursuant to the consent order and in accordance with applicable environmental laws and regulations. TRC's obligations under the agreement include any ongoing monitoring or maintenance requirements and certain off-site mitigation or remediation, if required. TRC will also manage any third-party remediation claims that might arise or otherwise be filed against the company.
As required by the agreement, Tecumseh also purchased a Pollution Legal Liability Select Cleanup Cost Cap Policy from American International Specialty Lines Co. The term of the policy is 20 years with an aggregate combined policy limit of $41 million. The policy lists Tecumseh and TRC and includes a number of first and third party coverages for remediation costs and bodily injury and property damage claims associated with the HARP remediation and contamination. The total cost of the exit strategy insured remediation arrangement to Tecumseh was $16.4 million. This amount includes $350,000 that was paid to the WDNR pursuant to the consent order to settle any alleged liabilities associated with natural resource damages.
As of Sept. 30, Tecumseh had accrued $2.4 million representing the estimated cost of cleanup efforts to which the company had previously voluntarily agreed. The difference in Tecumseh's costs under the agreement and the amounts previously accrued will result in a non-recurring charge in the fourth quarter 2004 of $14.0 million.
"Like the Sheboygan Liability Transfer Agreement related to the Company's PCB cleanup at its former Sheboygan Falls, Wis., site, this Exit Strategy Agreement brings a degree of financial certainty to the cost of cleaning up our two PCB cleanup sites," said James S. Nicholson, Tecumseh vice president, treasurer and CFO. "These agreements are good for the people of the state of Wisconsin as they fund and initiate comprehensive cleanup plans, and they demonstrate the Company's continued commitment to be environmentally responsible. Furthermore, approximately 50% of the Company's operating facilities throughout the globe are certified under ISO 14001 Environmental Management Standard, and we expect every one of them to achieve certification by the end of 2005."
In addition, during the fourth quarter, Murray Inc., a customer of the Engine & Power Train Group filed for bankruptcy. At the time of the filing Tecumseh's outstanding accounts receivable with Murray was $3.3 million, for which it had previously established a specific reserve of $0.8 million. Based upon the bankruptcy proceedings, it is likely that the receivable is fully impaired, and the company will recognize an additional charge of $2.5 million in the fourth quarter of 2004.
About Tecumseh Products
Tecumseh Products Company (www.tecumseh.com) is a full-line independent global manufacturer of hermetic compressors for residential and commercial refrigerators, freezers, water coolers, dehumidifiers, window air conditioning units and residential and commercial central system air conditioners and heat pumps; gasoline engines and power train for lawn mowers, lawn and garden tractors, garden tillers, string trimmers, snow throwers, industrial and agricultural applications and recreational vehicles; electric motors and components, including AC and DC motors, blowers, gear motors and linear actuators for a wide variety of industrial and consumer applications across a broad range of industries; and centrifugal pumps, sump pumps and small submersible pumps for industrial, commercial, marine and agricultural applications.