Tecumseh Products 2014 Annual Report Download - page 8

6
The EPA limits the charge size of isobutane to a maximum of 59 grams (2 ounces) for household refrigerator and freezer
applications and the charge size of propane for self-contained commercial refrigeration applications to a maximum of 150
grams (5.3 ounces). We build compressors utilizing HCs for sale into European, Latin American and Indian markets. We also
supply a small volume of HC compressors and condensing units in the U.S., where hydrocarbons are slowly being adopted by
the market. It is not presently possible to estimate the level of expenditures that will be required to meet future industry
requirements or the effect on our earnings or competitive position. Nonetheless, we expect that our product development
process will address these changes in a timely manner.
The U.S. National Appliance Energy Conservation Act of 1987 (“NAECA”) requires specified energy efficiency ratings on
room air conditioners and household refrigerators and freezers. Most of the world markets’ manufacturing communities have
issued energy efficiency directives that specify the acceptable level of energy consumption for refrigerators and freezers. These
efficiency ratings apply to the overall performance of the specific appliance, of which the compressor is one component. We
have ongoing projects aimed at improving the efficiency levels of our compressor products and have products available to meet
energy efficiency requirements as determined by our customers.
Geographic Location Information
The results of operations and other financial information by geographic location for the years ended December 31, 2014, 2013
and 2012, appear in Note 17 “Business Segments – Geographic Information” of the Notes to Consolidated Financial Statements
which is in Part II, Item 8, of this report, “Financial Statements and Supplementary Data,” and that information is incorporated
by reference into this Item 1.
Backlog and Seasonal Variations
Most of our production is against short-term purchase orders and order backlog is not significant.
Compressor products are subject to some seasonal variation among individual product lines. In particular, sales for compressor
products are higher in the first and second quarters for customer needs prior to the commencement of warmer weather in the
northern hemisphere, for both residential air conditioning products and commercial refrigeration applications. This seasonal
effect is somewhat, though not completely, offset by sales volumes in the southern hemisphere. Depending on relative
performance among the regions, and external factors such as foreign currency changes and global weather, trends can vary. In
the past three years, consolidated sales in the aggregate have exhibited a slight seasonal trend, with sales in the first half of the
year higher than sales in the second half of the year.
Patents, Licenses and Trademarks
We own a substantial number of patents, licenses and trademarks and deem them to be important to certain lines of our
business; however, the success of our overall business is not considered primarily dependent on them. In the conduct of our
business, we own and use a variety of registered trademarks, the most familiar of which is the trademark consisting of the word
“Tecumseh” in combination with a blue Native American silhouette.
Research and Development
In addition to compressors, we’ve begun developing value-added systems, providing smart controls and remote communication
controls where we believe that the benefits to our customers outweigh the added costs. These development projects also apply
to our Masterflux line of variable speed products, for emerging mobile applications. We are also developing waste heat
recovery applications and solar technologies.
The ability to successfully bring new products to market in a timely manner has become a critical factor for competing in the
compressor products business. System energy efficiency standards and new eco-friendly refrigerants mandated by
environmental regulations will continue to require advances in compressor designs. Variable speed technology is being applied
where the cost/benefit can be justified.
We develop new product concepts at our research and development center in Ann Arbor, Michigan and in cooperation with
project design teams located at our various regional manufacturing facilities. Compressor simulation software has been
developed in-house which, combined with extensive lab instrumentation and testing capabilities, helps us design the thermal,
fluid, acoustic and mechanical design aspects of our new products.
We focus our design efforts on the reliability of our products and simplicity in manufacturing. We spent approximately $14.3
million, $14.7 million, and $15.1 million during 2014, 2013 and 2012, respectively, on research and development activities
relating to the development of new products and the development of improvements to existing products.