Tecumseh Products 2012 Annual Report Download - page 22

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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 net amortization of gains for our postretirement benefits due to curtailment of these benefits (refer to Note 5,
"Pension and Other Postretirement Benefit Plans" of the Notes to Consolidated Financial Statements in Item 8 of this report), 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 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. Refer to Note 11, “Impairments,
Restructuring Charges and Other Items” of the Notes to Consolidated Financial Statements in Item 8 of this report.
Interest expense was $10.2 million in 2012 compared to $10.5 million in 2011. Our average borrowings declined, while our
weighted average interest rate on debt increased to 8.8% in 2012 as compared to 7.9% in 2011. The increase in our weighted
average interest rate on debt was primarily due to termination of our credit facilities in Europe in January 2012, which were
paid off and replaced with a factoring program. In addition, the weighted average interest rate increased in Brazil and decreased
in India due to changes in mix of the borrowings in these regions. Finally, our average amount of accounts receivable factoring
increased, while the weighted average interest rate of factored accounts receivable decreased to 7.6% in 2012 as compared to
9.5% in 2011, primarily due to our new European factoring facility.
Interest income was $3.2 million in 2012 compared to $2.3 million in 2011, primarily due to interest of $1.3 million, received
from an IRS refund, partially offset by a decline in the interest rate on a judicial deposit in Brazil that is being held in an
interest-bearing court appointed cash account.
For 2012, we recorded a tax benefit of $10.2 million from continuing operations. This tax benefit is comprised of $0.7 million
in foreign tax benefit, $0.1 million in state and local tax benefit, and $9.4 million in U.S. federal tax benefit, primarily related to
the refund received from the IRS related to a previously unrecognized tax benefit. The $0.9 million in tax benefit from
continuing operations for 2011 was comprised of $0.2 million in foreign tax expense, $0.1 million in state and local tax
expense, more than offset by a tax benefit of $1.2 million in U.S. federal tax.
Net income from continuing operations for the year ended December 31, 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 December 31, 2011. This change was primarily
related to the postretirement benefit curtailment, improved gross profit, higher tax benefit and other income.