Tecumseh Products 2012 Annual Report Download - page 28

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CONTRACTUAL OBLIGATIONS
Our payments by period as of December 31, 2012 for our contractual obligations are as follows:
Payments due by Period
(in millions) Total 2013 2014/2015 2016/2017 After 2017
Debt and Capital Lease Obligations..................... $ 61.4 $ 55.6 $ 4.9 $ 0.4 $ 0.5
Purchase Obligations............................................ $ 24.8 $ 24.8 $ — $ — $ —
Operating Leases (1) .............................................. $ 16.3 $ 3.7 $ 5.2 $ 2.6 $ 4.8
Pension and Postretirement Obligations .............. $ 119.9 $ 10.7 $ 22.8 $ 23.0 $ 63.4
(1) Operating lease obligations do not include payments to landlords covering real estate taxes and common area maintenance.
We have not included, in the table above, other long-term liabilities net of current portion in the amount of $14.5 million which
include product warranty and self-insured risk, deferred tax and environmental liabilities, because they do not have a definite
payout by year.
As of December 31, 2012, we also had $3.4 million in outstanding domestic letters of credit and $8.7 million in outstanding
foreign letters of credit issued in the normal course of business, as required by some vendor contracts.
CRITICAL ACCOUNTING ESTIMATES
In preparing our consolidated financial statements in accordance with U.S. GAAP and pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC"), we make assumptions, judgments and estimates that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We base our
assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under
the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a
regular basis, we evaluate our assumptions, judgments and estimates.
We believe that the assumptions, judgments and estimates involved in the accounting for Accrued and Contingent Liabilities,
Employee Related Benefits, Impairment of Long-Lived Assets, Share-based Compensation and Income Taxes have the greatest
potential impact on our consolidated financial statements. These areas are key components of our results of operations and are
based on complex rules which require us to make judgments and estimates, so we consider these to be our critical accounting
policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed
materially from actual results.
Accrued and Contingent Liabilities
We have established reserves for legal contingencies, self-insured product liabilities, workers compensation claims,
environmental contingencies and warranty claims in accordance with U.S. GAAP. We also have liabilities with regard to
certain indemnification claims and litigation related to our divested operations, which could be material. A significant amount
of judgment and use of estimates is required to quantify our ultimate exposure in these matters. The valuation of reserves for
contingencies is reviewed on a quarterly basis at the operating and corporate levels to assure that we are properly reserved.
Reserve balances are adjusted to account for changes in circumstances for ongoing issues and the establishment of additional
reserves for emerging issues. While management believes that the current level of reserves is appropriate, changes in the future
could impact these determinations. Historically, reserves for accrued and contingent liabilities typically have not differed
materially from actual results; however, unanticipated events such as the discovery of new facts could result in material
changes to our reserves in future periods.
Employee Related Benefits
Significant employee related benefit assumptions include, but are not limited to, the expected rates of return on plan assets,
determination of discount rates for re-measuring plan obligations and determination of inflation rates regarding compensation
levels. Differences among these assumptions, specifically our actual return on assets and financial market-based discount rates,
will impact future results of operations.
We develop our demographics and utilize the expertise of actuaries to assist with the measurement of employee related
obligations. The discount rate assumption is established based on Towers Watson's Rate:Link 40/90 yield curve. For the
purpose of setting the discount rate, the U.S. Pension Plans (including non-qualified plans) are treated as one plan. The
expected return on plan assets reflects our current asset allocation and investment strategy. The inflation rate for compensation
levels reflects our actual historical experience as well as our outlook on near-term compensation increases. Assuming no