Tecumseh Products 2014 Annual Report Download - page 12

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Our results of operations may be negatively impacted by litigation and environmental claims.
Our business exposes us to potential litigation and environmental claims, such as environmental clean-up obligations, resource
damage claims and product liability suits that are inherent in the design, manufacture and sale of our current products and some
products that we sold in the past. We are also potentially exposed to litigation related to prior sales of businesses, securities
laws, antitrust laws or other types of business disputes. Results of legal proceedings and environmental claims cannot be
predicted with certainty. Regardless of merit, litigation and environmental claims can be both time-consuming and disruptive to
our operations and can cause significant expense and diversion of management attention. We estimate loss contingencies and
establish reserves as required by generally accepted accounting principles in the United States (“U.S. GAAP”) based on our
assessment of contingencies where liability is deemed probable and the amount is reasonably estimable in light of the facts and
circumstances known to us at a particular point in time. Subsequent developments in legal proceedings, volatility in foreign
currency exchange rates and other factors may affect our assessment and estimates of the loss contingency recorded and could
result in an adverse effect on our results of operations in the period in which a liability would be recognized or cash flows for
the period in which amounts would be paid. Actual results may significantly vary from our reserves.
We self-insure a portion of product liability claims; an unsuccessful defense of a product liability claim or series of successful
claims against us could materially and adversely affect our product reputation and our financial condition, results of operations,
and cash flows. Even if we are successful in defending against a claim relating to our products, claims of this nature could
cause our customers to lose confidence in our products and our company.
Given the inherent uncertainty of litigation and environmental claims, we cannot be certain that existing litigation or
environmental claims or any future adverse legal developments will not have a material adverse impact on our financial
condition, liquidity or results of operations. See Item 8 – Financial Statements and Supplementary Data – Note 16,
“Commitments and Contingencies – Litigation” of Notes to Consolidated Financial Statements for a description of our legal
matters.
We are subject to, and could be further subject to, governmental investigations and actions by other third parties
relating to antitrust laws that could have an adverse effect on our results of operations, liquidity and financial
condition.
We are one of several companies involved in investigations by government regulators in various jurisdictions into possible anti-
competitive practices in the compressor industry. While we have entered into conditional amnesty agreements under which we
do not expect to be subject to criminal prosecution with respect to the investigations, we are not exempt from civil litigation.
We have been named as a defendant in numerous related class action lawsuits in various jurisdictions; these lawsuits seek
damages in connection with the pricing of compressors. Additional lawsuits could be filed in the future. The impact of these
and other investigations and lawsuits could have a material adverse effect on our financial condition, liquidity and results of
operations.
Our global operations subject us to risks associated with changes in government regulations.
Our international sales and operations, including our purchases of raw materials from international suppliers, are subject to risks
associated with changes in local government laws, regulations and policies, including those related to tariffs and trade barriers,
investments, taxation, exchange controls, governmental expropriation and governmental regulations that may be
disadvantageous to businesses owned by foreign nationals, and instabilities in the workforce due to changing political and
social conditions. Our international sales and operations are also sensitive to changes in foreign national priorities, including
government budgets, as well as to political and economic instability. International transactions may involve increased financial
and legal risks due to differing legal systems and customs in foreign countries. The ability to manage these risks can be difficult
and may limit our operations, as well as cause the manufacture and sale of our products to become more difficult, which could
negatively affect our business and results of operations. See “Item 7– Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Executive Summary – Liquidity” and “Liquidity Sources – Cash inflows related to
taxes” for a description of our outstanding refundable non-income taxes in Brazil and India.
We also face risks arising from the imposition of exchange controls and currency devaluations. Exchange controls may limit
our ability to convert foreign currencies into U.S. Dollars or to remit dividends and other payments by our foreign subsidiaries
or businesses located in, or conducted within a country imposing controls. Currency devaluations result in a diminished value
of funds denominated in the currency of the country instituting the devaluation. Actions of this nature, if they occur or continue
for significant periods of time, could have an adverse effect on our results of operations and financial condition in any given
period.