Tecumseh Products 2012 Annual Report Download - page 44

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from the conversion of, or exercise of a right to acquire, equity securities. Diluted earnings per share are not presented because
there were no outstanding rights to acquire our equity securities at December 31, 2012 and the effect in 2011 and 2010 would
have been anti-dilutive.
Research, Development and Testing Expenses – Our research, development and testing expenses related to present and future
products are expensed as incurred and were $15.1 million, $19.8 million, and $18.6 million in 2012, 2011 and 2010,
respectively. Such expenses consist primarily of salary and material costs and are included in selling and administrative
expenses.
Share-Based Compensation – We account for share-based compensation using the fair value for awards issued. See Note 10,
“Share-based Compensation Arrangements” for a description of the types of awards we grant.
Reclassification - Certain reclassifications have been made to prior results to conform to classifications used at December 31,
2012. This includes $2.4 million reclassified into pension liabilities from other postretirement benefit liabilities at December
31, 2011 on our Consolidated Balance Sheets. These reclassifications have no impact on our Consolidated Statements of
Operations.
Estimates – Management is required to make certain estimates and assumptions in preparing the consolidated financial
statements in accordance with U.S. GAAP. These estimates and assumptions impact the reported amount of assets and
liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also
impact the reported amount of net earnings or losses during any period. Actual results could differ from those estimates.
Significant estimates and assumptions used in the preparation of the accompanying consolidated financial statements include
those related to: accruals for product warranty, self-insured risks, environmental matters, pension and postretirement benefit
obligations, litigation and other contingent liabilities, as well as the evaluation of long-lived asset impairments, determination
of share-based compensation and the realizability of our deferred tax assets.
NOTE 2. Discontinued Operations
In 2007 and 2008, we completed the sale of the majority of our noncore businesses; however, we continue to incur legal fees,
settlements and other expenses based on provisions in the purchase agreements.
For the year ended December 31, 2012, total loss from discontinued operations, net of income taxes was $0.5 million. This
included $0.9 million related to environmental and legal charges and settlements, $0.8 million for an increase in anticipated
claims related to workers’ compensation and product liability and $0.4 million related to our Grafton facility for operating
costs, partially offset by $0.8 million of legal fee reimbursements for the Platinum lawsuit received under our Directors and
Officers insurance, $0.4 million of income due to a portion of a mutual release agreement that we signed during the second
quarter and $0.4 million of gain on sale of our Grafton facility. We sold our Grafton facility in the fourth quarter for net cash
consideration of $0.9 million. See Note 12, “Income Taxes”, for a discussion of income taxes included in discontinued
operations.
For the year ended December 31, 2011, total loss from discontinued operations, net of income taxes was $1.9 million. This
included $2.0 million related to environmental and legal charges and settlements and $0.2 million related to our Grafton
facility (formerly of the Engine and Power Train Group) for operating costs, partially offset by $0.3 million for a reduction in
anticipated claims related to workers’ compensation and product liability. See Note 12, “Income Taxes”, for a discussion of
income taxes included in discontinued operations. See Note 15, "Commitments and Contingencies", for additional information.
For the year ended December 31, 2010, total gain from discontinued operations, net of income taxes was $1.8 million, which
primarily relates to a non-cash curtailment gain of $6.6 million as a result of terminating postretirement benefits for a sold
business, partially offset by $1.4 million related to our Grafton and New Holstein facilities (formerly of the Engine and Power
Train Group) for environmental accruals ($1.0 million) and operating costs ($0.4 million), $1.8 million for legal fees and
settlements for other sold businesses, and income taxes of $1.6 million.