Tecumseh Products 2014 Annual Report Download - page 26

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professional fees of $2.2 million, primarily related to fees paid to a financial adviser in 2012 that did not recur in 2013, a
decrease in depreciation of $1.5 million primarily due to an information technology asset that became fully depreciated in the
fourth quarter of 2013, a decrease of $1.2 million related to our incentive compensation awards and a decrease of $0.5 million
in other miscellaneous expenses. These decreases were partially offset by $1.0 million of bad debt expense recognized in the
second quarter of 2013 due to a bankruptcy filing by one of our Brazilian customers and an increase of $1.6 million in
employee benefits which primarily related to an increase in healthcare claims. As of December 31, 2013, we partially achieved
our target levels of performance related to our compensation awards; however, these levels were lower in 2013 as compared to
2012. The decrease in the portion of the incentive compensation earned was partially offset by the re-measurement of the value
of our outstanding share-based compensation awards as our Class A Common Stock closing price at December 31, 2013 was
$9.05 compared with $4.62 at December 31, 2012.
Other income (expense), net, decreased by $0.9 million from $22.3 million in 2012 to $21.4 million in 2013. The decrease is
mainly due to $2.9 million of income due to our sale of the right to proceeds from a future potential settlement of a lawsuit
involving our Brazilian location received in the second quarter of 2012, $1.3 million due to a mutual release agreement that we
signed in the second quarter of 2012 and a $1.8 million decline in income from Indian government incentives, primarily due to
a one-time incentive which occurred in the first quarter of 2012. These decreases were partially offset by $1.4 million of
income related to securities that had zero net book value and were sold during the second quarter of 2013, a $2.8 million
increase in net amortization of gains for our postretirement benefits primarily due to curtailment of these benefits in the second
quarter of 2012, (see Note 5, “Pension and Other Postretirement Benefit Plans” of the Notes to Consolidated Financial
Statements in Item 8 of this report, for additional information), a $0.8 million increase in miscellaneous other income, primarily
due to miscellaneous other expense recognized in 2012 that did not recur in 2013 and a $0.1 million favorable change in
foreign currency exchange rates.
We recorded expense of $13.6 million in impairments, restructuring charges, and other items in 2013 compared to $40.6
million of income in 2012. In 2013, this expense included $9.9 million related to severance, $2.7 million related to business
process re-engineering, $0.5 million of costs related to the relocation of our corporate office, $0.3 million for a contingent legal
liability and a $0.2 million environmental reserve with respect to a sold building. The severance expense was associated with a
reduction in force at our French ($7.8 million), Brazilian ($1.3 million), Indian ($0.5 million) and Corporate ($0.3 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 $9.2 million in 2013 compared to $10.2 million in 2012. Our weighted average borrowings and the
average amount of accounts receivable factored decreased, primarily due to less factoring by our Brazilian location, as well as
lower borrowing levels in Brazil and India. In addition, the weighted average interest rates for our borrowings and factored
accounts receivable decreased in 2013 as compared to 2012.
Interest income was $1.5 million in 2013 compared to $3.2 million in 2012 primarily due to the interest received in the second
quarter of 2012 related to an IRS refund.
For 2013, we recorded a tax expense of $7.7 million from continuing operations, which related to U.S. federal tax, primarily
due to tax expense reclassified out of AOCI in relation to our postretirement benefit plan that was curtailed in 2012. The $10.2
million in tax benefit from continuing operations for 2012 was comprised of $0.7 million in foreign tax benefit, $0.1 million in
state and local tax benefit and $9.4 million in U.S. federal tax benefit, primarily related to the refund received from the IRS
related to a previously unrecognized tax benefit.
Net loss from continuing operations for the year ended December 31, 2013 was $34.4 million, or a net loss per share of $1.86,
as compared to net income from continuing operations of $23.1 million, or $1.25 per share, for the year ended December 31,
2012. The change was primarily related to the postretirement benefit curtailment gain recorded in the second quarter of 2012,
higher other impairments, restructuring charges, and other items in 2013 and an income tax benefit in 2012 compared to
income tax expense in 2013, partially offset by higher gross profit in 2013, as well as due to the other factors described above.
LIQUIDITY AND CAPITAL RESOURCES
Our primary liquidity needs are to fund capital expenditures, service indebtedness, support working capital requirements, and,
when needed, fund operating losses. In general, our principal sources of liquidity are cash and cash equivalents on hand, cash
flows from operating activities, borrowings under available credit facilities and net cash inflows related to non-income taxes. In
addition, we believe that factoring our receivables is an alternative way of freeing up working capital and providing sufficient
cash to pay off debt that may mature within a year.
A substantial portion of our operating income is generated by foreign operations. As a result, we are dependent on the earnings,
cash flows and the combination of dividends, distributions, inter-company loan payments and advances from our foreign