Tecumseh Products 2014 Annual Report Download - page 25

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23
Year Ended December 31, 2013 vs. Year Ended December 31, 2012
A summary of our operating results is shown below:
Twelve Months Ended December 31,
(in millions) 2013 % 2012 %
Net sales $ 823.6 100.0% $ 854.7 100.0%
Cost of sales (745.5) (90.5%) (790.0) (92.4%)
Gross profit 78.1 9.5% 64.7 7.6%
Selling and administrative expenses (104.9) (12.7%) (107.7) (12.6%)
Other income (expense), net 21.4 2.6% 22.3 2.6%
Impairments, restructuring charges, and other items (13.6) (1.7%) 40.6 4.7%
Operating (loss) income (19.0) (2.3%) 19.9 2.3%
Interest expense (9.2) (1.1%) (10.2) (1.2%)
Interest income 1.5 0.2% 3.2 0.4%
Income (loss) from continuing operations before taxes (26.7) (3.2%) 12.9 1.5%
Tax (expense) benefit (7.7) (0.9%) 10.2 1.2%
(Loss) income from continuing operations $(34.4) (4.1%) $ 23.1 2.7%
Net sales in the year ended December 31, 2013 decreased by $31.1 million, or 3.6%, compared with the same period of 2012.
Excluding the decrease in sales due to the effect of changes in foreign currency translation of $24.4 million, net sales decreased
by 0.8% from 2012, primarily due to net decreases in volume and mix, partially offset by net price increases.
Sales of compressors used in commercial refrigeration and aftermarket applications represented 59% of our total sales and
decreased by 3.2% to $487.7 million in 2013, when compared to 2012. Lower volume and unfavorable changes in sales mix of
$16.1 million and unfavorable changes in currency exchange rates of $2.5 million were partially offset by price increases of
$2.7 million. Volume decreases are mainly attributable to our European and North American markets due to continued soft
market conditions, partially offset by volume and mix improvements attributable to our Indian and Brazilian operations.
Sales of compressors for air conditioning applications and all other applications represented 22% of our total sales and
increased by 9.6% to $180.9 million in 2013, when compared to 2012. This increase is primarily due to higher volumes and
favorable changes in sales mix of $25.4 million and price increases of $0.7 million, partially offset by unfavorable changes in
currency exchange rates of $10.3 million. Volume increased in Brazil primarily due to a temporary shutdown of one of our
major Brazilian customers in 2012 which did not recur in 2013. Volume also increased as a result of improved demand in
Europe, partially offset by reduced sales in North America due to soft market conditions in the first half of 2013, specifically in
the trucking industry, as well as lower volumes in India in the second half of the year related to a warranty claim that originated
in the second quarter.
Sales of compressors used in household refrigeration and freezer (“R&F”) applications represented 19% of our total sales and
decreased by 16.7% to $155.0 million in 2013, when compared to 2012. This decrease is primarily due to lower sales volume
and unfavorable changes in sales mix of $20.4 million and unfavorable changes in currency exchange rates of $11.6 million,
partially offset by price increases of $1.0 million. Volume decreases are primarily the result of lower local demand at our
Brazilian location.
Gross profit increased by $13.4 million from $64.7 million, or 7.6% of net sales, in 2012 to $78.1 million, or 9.5% of net sales
in 2013. The increase in gross profit in 2013 was primarily attributable to favorable changes in currency exchange effects of
$14.4 million, favorable changes in commodity costs of $6.1 million and net price increases of $4.4 million, partially offset by
unfavorable changes in other material and manufacturing costs of $6.4 million and net unfavorable changes in volume and sales
mix of $5.1 million. The changes in material and manufacturing costs primarily relate to a warranty claim in India that
originated in the second quarter of 2013, for which we recorded expense of $5.6 million, as well as a warranty claim in Europe,
for which we recorded expense of $2.7 million. The unfavorable impact of these warranty claims was partially offset by other
favorable changes in material and manufacturing costs of $1.9 million.
Selling and administrative (“S&A”) expenses decreased by $2.8 million from $107.7 million in 2012 to $104.9 million in 2013.
As a percentage of net sales, S&A expenses were 12.7% in 2013 compared to 12.6% in 2012. The decrease was due to lower