Tecumseh Products 2012 Annual Report Download - page 21

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20
For further information related to other factors that have had, or may in the future have, a significant impact on our business,
financial condition or results of operations, see “Cautionary Statements Relating To Forward-Looking Statements” above,
“Results of Operations” below, and “Risk Factors” in Item 1A.
RESULTS OF OPERATIONS
A summary of our operating results as a percentage of net sales is shown below:
Year Ended December 31, 2012 vs. Year Ended December 31, 2011
(in millions) 2012 % 2011 %
Net sales ............................................................................... $ 854.7 100.0% $ 864.4 100.0%
Cost of sales .................................................................. (790.0)(92.4%) (826.5)(95.6%)
Gross profit........................................................................... 64.7 7.6% 37.9 4.4%
Selling and administrative expenses ............................. (107.7)(12.6%) (108.1)(12.5%)
Other income (expense), net ......................................... 22.3 2.6% 14.7 1.7%
Impairments, restructuring charges, and other items .... 40.6 4.7% (8.5)(1.0%)
Operating income (loss) ....................................................... 19.9 2.3% (64.0)(7.4%)
Interest expense............................................................. (10.2)(1.2%) (10.5)(1.2%)
Interest income.............................................................. 3.2 0.4% 2.3 0.3%
Income (loss) from continuing operations before taxes ....... 12.9 1.5% (72.2)(8.3%)
Tax benefit..................................................................... 10.2 1.2% 0.9 0.1%
Income (loss) from continuing operations ........................... $ 23.1 2.7% $(71.3)(8.2%)
Net sales in the year ended December 31, 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. Higher volume and favorable changes in sales mix of
$20.1 million and price increases of $5.6 million were offset by unfavorable changes in currency exchange rates of $24.5
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. This increase is primarily due to higher sales volume
and favorable changes in sales mix of $30.5 million, partially offset by unfavorable changes in currency exchange rates of
$21.8 million and 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. This decrease is primarily due to unfavorable changes in
currency exchange rates of $16.8 million and lower volumes and unfavorable changes in sales mix of $0.5 million, partially
offset by price increases of $2.9 million. Volume decreases are primarily due to the 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.
The new Mini compressor platform for use in household refrigerators and freezers and the Midi compressor platform for use in
commercial refrigeration have been launched and commercial sales started in the fourth quarter of 2011 to several customers.
The full offering of these products to our remaining customers took longer than originally expected. Management identified
bottlenecks and released 90% of the Mini compressor models for production by the end of 2012. We believe these new
products improve the quality, sound, and performance of our products and lower their manufacturing cost with enhanced
internal design and the use of lower cost materials, such as aluminum motor windings. We believe that these new products
better position us by providing efficiency improvements required by customers as well as providing products designed for more
environmentally-friendly hydrocarbon refrigerants.