Tecumseh Products 2014 Annual Report Download - page 24

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and unfavorable changes in sales mix of $14.1 million and unfavorable changes in currency exchange rates of $8.3 million,
partially offset by price increases of $2.9 million. The lower net volumes and unfavorable changes in sales mix were primarily
due to declines at our Brazilian location due to the competitive pricing environment, partially offset by increases at our Indian
location due to increased contractual volumes with a major original equipment manufacturer.
Gross profit decreased by $7.4 million from $78.1 million, or 9.5% of net sales, in 2013 to $70.7 million, or 9.8% of net sales
in 2014. The decrease in gross profit in 2014 was primarily attributable to unfavorable changes in other material and
manufacturing costs of $15.6 million, net unfavorable changes in volume and sales mix of $5.0 million and increases in
commodity costs, primarily steel, of $3.6 million, partially offset by favorable changes in currency exchange effects of $8.8
million and net price increases of $8.0 million. Warranty claims in 2014 compared to 2013 was favorable $3.4 million as we are
experiencing lower claims in India and Europe related to quality concerns.
Selling and administrative (“S&A”) expenses decreased by $12.7 million from $104.9 million in 2013 to $92.2 million in 2014.
As a percentage of net sales, S&A expenses were 12.7% in both 2014 and 2013. The decrease was primarily due to a decline in
depreciation expense of $5.7 million due to an information technology asset that became fully depreciated in late 2013, a
decline of $3.0 million related to our incentive compensation awards, a decrease of $1.1 million in payroll and other employee
benefits, a decrease of $0.9 million in professional fees and a net decrease of $2.0 million in other miscellaneous expenses. The
decrease in payroll and other employee benefits included severance of $0.9 million for our former Chief Executive Officer,
more than offset by other declines in payroll and employee benefits. Included in our professional fees are the fees for our board
of directors, which decreased during 2014 as a result of restricted stock units awarded in 2014 compared to deferred stock units
awarded in 2013 (see Note 10, "Share-Based Compensation Arrangements", in Part II, Item 8 of this report for additional
information). We record expense related to our incentive compensation plan awards when we estimate that it is more likely than
not that we will achieve the threshold level of performance as outlined in the incentive compensation awards. As of
December 31, 2014, we estimated that it is more likely than not that we will not achieve our threshold level of performance. As
a result, we recorded no incentive compensation expense related to our incentive compensation awards for the year 2014. The
decrease related to our incentive compensation awards was also due to the re-measurement of the value of our outstanding
share-based compensation awards, as our Common Share closing price at December 31, 2014 was $3.09 compared with the
Class A Common Stock closing price of $9.05 at December 31, 2013.
Other income (expense), net, decreased by $12.1 million from $21.4 million in 2013 to $9.3 million in 2014. The decrease was
primarily due to recording no net amortization of gains related to our postretirement benefits due to the curtailment of these
benefits that was effective after December 31, 2013, as well as lower income related to various Indian government incentives
and a $1.4 million gain on sale of securities in 2013 that did not recur in 2014, partially offset by a gain of $3.0 million on the
sale of fixed assets at one of our U.S. locations and favorable changes in foreign currency exchange rates.
We recorded expense of $8.8 million in impairments, restructuring charges, and other items in 2014 compared to $13.6 million
of expense in 2013. In 2014, this expense included $4.0 million related to severance, $1.8 million related to business process
re-engineering, $1.5 million related to a legal settlement signed in the first quarter of 2014 and a $1.5 million environmental
reserve with respect to a sold building. The severance expense was associated with a reduction in force at our Brazilian ($3.3
million), French ($0.6 million) and Indian ($0.1 million) locations. 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 $10.0 million in 2014 compared to $9.2 million in 2013. Our weighted average borrowings and weighted
average interest rates for our borrowings increased in 2014 as compared to 2013. The average amount of accounts receivable
factored decreased in 2014, with decreases at our Brazilian, European and Indian locations, while the weighted average interest
rates for our discounted accounts receivable increased in 2014 as compared to 2013.
Interest income was $3.2 million in 2014 compared to $1.5 million in 2013. This increase is primarily due to interest on cash
collateral placed in an interest-bearing account in Brazil, associated with our special term FINEP loan, as well as an increase in
the interest rate on a judicial deposit in Brazil that is being held in an interest-bearing court appointed cash account.
For 2014, we recorded a tax expense of $0.5 million from continuing operations, which related to foreign income and
withholding taxes. The $7.7 million in tax expense from continuing operations for 2013 was primarily due to tax expense
reclassified out of AOCI in relation to our postretirement benefit plan that was curtailed.
Loss from continuing operations for the year ended December 31, 2014 was $28.3 million, or a loss from continuing operations
per share of $1.53, as compared to loss from continuing operations of $34.4 million, or $1.86 per share for the year ended
December 31, 2013. This change was primarily related to lower gross profit and lower other income, partially offset by lower
impairments, restructuring charges, and other items and lower S&A expenses in 2014, as compared to the same period of 2013.