Tecumseh Products 2014 Annual Report Download - page 47

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45
the effect in 2014 would have been anti-dilutive, and there were no outstanding rights to acquire our equity securities at
December 31, 2013 or December 31, 2012.
Research, Development and Testing Expenses – Our research, development and testing expenses related to present and future
products are expensed as incurred and were $14.3 million, $14.7 million, and $15.1 million in 2014, 2013 and 2012,
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.
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, litigation and other contingent
liabilities, pension obligations as well as the evaluation of long-lived asset impairments, determination of share-based
compensation and the realizability of our deferred tax assets.
Certain reclassifications of prior years' amounts have been made to conform with the current year's presentation.
NOTE 2. Discontinued Operations
In 2007 and 2008, we completed the sale of the majority of our non-core businesses; however, we continue to incur legal fees,
settlements and other expenses based on provisions in the purchase agreements.
Charges to discontinued operations are as follows:
Years Ended December 31,
(in millions) 2014 2013 2012
Environmental and legal charges and settlements $ (3.6)$ (0.7)$ (0.9)
Workers' compensation and product liability claims (0.8)(2.4)(0.8)
Legal fee reimbursements — — 0.8
Grafton operating costs — — (0.4)
Mutual release agreement — — 0.4
Gain on sale of Grafton — — 0.4
Total loss from discontinued operations, net of tax $ (4.4)$ (3.1)$ (0.5)
For the year ended December 31, 2012, legal fee reimbursements were for the Platinum lawsuit received under our Directors
and Officers insurance. We sold our Grafton facility in the fourth quarter of 2012 for net cash consideration of $0.9 million.
See Note 12, “Income Taxes”, for a discussion of income taxes included in discontinued operations.
NOTE 3. Inventories
The components of inventories are as follows:
December 31,
(in millions) 2014 2013
Raw materials, net of reserves $ 57.8 $ 81.1
Work in progress 0.5 1.2
Finished goods, net of reserves 37.3 45.4
Inventories $ 95.6 $ 127.7