Tecumseh Products 2012 Annual Report Download - page 24

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restructuring efforts. All other selling and administrative expenses decreased in the aggregate by $0.5 million. These decreases
were partially offset by an increase in professional fees of $2.8 million.
Other income (expense), net increased by $0.4 million from $14.3 million in 2010 to $14.7 million in 2011. The increase is
mainly due to gain on the sale of asset of $3.7 million, favorable impact of lower other postretirement benefit charges of $4.7
million, partially offset by unfavorable changes in currency exchange rates of $5.3 million and unfavorable changes in all other
income and expense items of $2.7 million.
We recorded expense of $8.5 million in impairments, restructuring charges, and other items in 2011 compared to $50.3 million
in 2010. In 2011, these expenses included $8.0 million related to severance associated with a reduction in force at our Brazilian
($4.1 million), North American ($0.1 million), French ($0.2 million), Indian ($0.1 million) and Corporate ($3.5 million)
locations; $0.1 million for additional estimated environmental costs associated with the remediation activities at our former
Tecumseh, Michigan facility; and $0.4 million for an impairment of an asset. For a more detailed discussion of these charges,
refer to Note 11, “Impairments, Restructuring Charges and Other Items” of the Notes to the Consolidated Financial Statements
in Item 8 of this report.
Interest expense was $10.5 million in 2011 compared to $10.6 million in 2010. Included in 2010 was amortization of $0.6
million for deferred financing costs that were originally incurred in connection with our previous credit agreement and that
were expensed upon termination of that credit agreement in the second quarter of 2010. The weighted average interest rate on
debt at December 31, 2011 was 7.9% compared to 7.4% at December 31, 2010 on higher average debt balances during 2011.
The weighted average interest rate of factored accounts receivable increased to 9.5% in 2011 from 8.7% in 2010 on lower
balances being factored.
Interest income was $2.3 million in 2011 compared to $1.2 million in 2010, primarily as a result of a Brazilian judicial deposit
held in an interest-bearing account.
For 2011, we recorded a tax benefit of $0.9 million from continuing operations. This tax benefit is 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. The $16.6 million in tax benefit recorded against continuing operations for 2010 represented a tax benefit of $16.3 million
for U.S. federal taxes, a tax benefit of $0.4 million for foreign taxes, and a tax expense of $0.1 million for U.S. state taxes.
Net loss from continuing operations for the year ended December 31, 2011 was $71.3 million, or $3.86 per share, as compared
to a loss of $58.6 million, or $3.17 per share for the year ended December 31, 2010. The change was primarily the result of
volume declines and lower restructuring charges in the current year and other factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Our primary liquidity needs are to fund capital expenditures, service indebtedness, support working capital requirements, and,
when needed, fund operating losses. In general, our principal sources of liquidity are cash and cash equivalents on hand, cash
flows from operating activities, borrowings under available credit facilities and cash inflows related to non-income taxes. In
addition, we believe that factoring our receivables is an alternative way of freeing up working capital and providing sufficient
cash to pay off debt that may mature within a year.
A substantial portion of our operating income is generated by foreign operations. As a result, we are dependent on the earnings,
cash flows and the combination of dividends, distributions and advances from our foreign operations to provide the funds
necessary to meet our obligations in each of our legal jurisdictions. There are no significant restrictions on the ability of our
subsidiaries to pay dividends or make other distributions.
Cash Flow
2012 vs. 2011
Cash provided by operations was $8.8 million in 2012, as compared to $5.3 million of cash used in operations in 2011. The
2012 cash flows from operations include our net income of $22.6 million, non-cash depreciation and amortization of $36.4
million and non-cash share-based compensation of $0.5 million, partially offset by a non-cash gain on curtailment of our
postretirement benefits of $45.0 million, a non-cash gain on an adjustment for employee retirement benefits of $8.9 million, a
$3.5 million increase in deferred tax assets, and a gain on disposal of property and equipment of $0.2 million. 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.