Sales Better than Global Market Production Decline
Company Liquidity Remains Strong
SOUTHFIELD, Mich., May 5 /PRNewswire-FirstCall/ -- Federal-Mogul Corporation (Nasdaq: FDML) today reported its first quarter 2009 financial performance, with sales of $1,238 million. Federal-Mogul's sales in Q1 2009 declined 27 percent on a constant dollar basis, or 33 percent including exchange, versus the same period of the prior year. The company's sales were better than the global automotive production downturn of 39 percent versus Q1 2008, with the U.S. and European markets suffering a 56 percent and 41 percent decline, respectively. The company reported a net loss of $101 million which includes a $38 million restructuring charge as Federal-Mogul continues to align capacity and costs to the current market. Federal-Mogul reported positive Operational EBITDA of $70 million with the earnings impact of reduced sales in the quarter partially offset by a $50 million reduction in the company's cost base versus the same period of 2008.
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Financial Summary (in $millions) Three Months Ended
March 31
2009 2008
---- ----
Net sales $1,238 $1,859
Gross margin 158 266
Selling, general and administrative expenses 184 209
Pre-tax loss (97) (11)
Net loss (101) (31)
Operational EBITDA (1) 70 207
Cash flow(2) (196) (163)
'Federal-Mogul's financial results for the first quarter of 2009 reflect the global automotive market downturn and its related effects. The company's Q1 2009 revenue declined, although less than the global markets. We continue to aggressively implement right-sizing actions to have the maximum impact on near-term results, while simultaneously protecting the company's business strategy,' said Jose Maria Alapont, President and Chief Executive Officer.
The company in Q1 2009 recorded sales of $1,238 million, which is a 27 percent decline on a constant dollar basis, or 33 percent currency-impacted decline, when compared to a Q1 record of $1,859 million for the same period in 2008. This reduced revenue, although better than the global production decline, reflects the severity of the unprecedented global market downturn and the weakness of international currencies compared to the U.S. dollar. When comparing Federal-Mogul sales to global automotive production, the company's market, customer and product diversity together with Federal-Mogul's strong presence in the global aftermarket further mitigated the impact of the market decline in the quarter.
Federal-Mogul continued to implement its variable cost company strategy in Q1 2009 and expects to gain additional momentum with this strategy in subsequent quarters. Federal-Mogul recorded $38 million of restructuring expenses in the quarter as part of comprehensive restructuring plans announced in the second half of 2008. The company recently announced the closure of its Summerton, South Carolina and Dumas, Arkansas facilities and completed numerous actions throughout its global network resulting in the reduction of more than 2,500 operational and staff positions during the quarter. The company's global employment of about 40,000, at the end of Q1 2009, is 20 percent lower than the same period of 2008. Further, Federal-Mogul is in consultation with several of its trade unions and other social partners as it prepares to implement other planned restructuring actions.
The company recorded gross margin of $158 million, or 12.8 percent of sales in the first quarter of 2009. Federal-Mogul implemented numerous actions throughout the company's global operations and functional teams to improve operating performance. Approximately $25 million of cost reductions were achieved through operational productivity and cost management including labor flexing, short work weeks, down weeks, modified shift patterns, elimination of premium shifts and tight control on discretionary spending.
Selling, general and administrative expenses for the quarter were reduced to $184 million, or a $42 million improvement including favorable exchange, partially offset by $17 million non-cash pension expenses recorded in the quarter. This Q1 2009 SG&A expense compares favorably to $209 million for the same period in 2008.
The company recorded positive Operational EBITDA(1) of $70 million during the first three months in 2009 and continues to benefit from aggressive restructuring plans established early in the downturn.
Federal-Mogul reported negative cash flow for Q1 2009 of $(196) million, compared to negative cash flow of $(163) million in Q1 2008 when adjusted for a one-time cash receipt of $225 million in Q1 2008 in connection with the company's emergence from Chapter 11.
'Throughout the downturn, we have continued to support the development of leading technologies and innovation while we adapt our cost base to the current sales environment. We remain committed to our sustainable global profitable growth strategy throughout these challenging times,' Alapont said.
(1) Operational EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, and certain items such as restructuring and impairment charges, Chapter 11 related reorganization expenses, gains or losses on the sales of businesses, the impact on gross margin of the fresh-start reporting valuation of inventory, and the non-cash expense relating to U.S. based funded pension plans.
(2) Cash flow is equal to net cash provided by operating activities less net cash used by investing as set forth on the attached statement of cash flows, excluding cash received from the 524g trust and impacts of the Chapter 11 plan of reorganization.
About Federal-Mogul
Federal-Mogul Corporation is a leading global supplier of powertrain and safety technologies, serving the world's foremost original equipment manufacturers of automotive, light commercial, heavy-duty, agricultural, marine, rail, off-road and industrial vehicles, as well as the worldwide aftermarket. The company's leading technology and innovation, lean manufacturing expertise, as well as marketing and distribution deliver world-class products, brands and services with quality excellence at a competitive cost. Federal-Mogul is focused on its sustainable global profitable growth strategy, creating value and satisfaction for its customers, shareholders and employees. Federal-Mogul was founded in Detroit in 1899. The company is headquartered in Southfield, Michigan, and employs nearly 40,000 people in 36 countries. Visit the company's Web site at www.federalmogul.com.
Forward-Looking Statements
Statements contained in this press release, which are not historical fact, constitute 'Forward-Looking Statements.' Actual results may differ materially due to numerous important factors that are described in Federal-Mogul's most recent report to the SEC on Form 10-K, which may be revised or supplemented in subsequent reports to the SEC on Forms 10-Q and 8-K. Such factors include, among others, the cost and timing of implementing restructuring actions, the Company's ability to generate cost savings or manufacturing efficiencies to offset or exceed contractually or competitively required price reductions or price reductions to obtain new business, conditions in the automotive industry, and certain global and regional economic conditions. Federal-Mogul does not intend or assume any obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release.
CONTACT: Paula Silver (248) 354-4530 for media questions
David Pouliot (248) 354-7967 for investor questions
* Please note accent over 'e' in Jose Maria Alapont
FEDERAL-MOGUL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(Millions of Dollars, Except Per Share Data)
Three Months Ended
March 31
--------
2009 2008
---- ----
Net sales $1,237.5 $1,859.2
Cost of products sold (1,079.8) (1,592.8)
-------- --------
Gross margin 157.7 266.4
Selling, general and administrative
expenses (184.1) (208.7)
Interest expense, net (34.0) (48.2)
Amortization expense (12.2) (16.1)
Chapter 11 and U.K. Administration related
reorganization expenses (0.8) (9.8)
Equity earnings of unconsolidated
affiliates 0.6 8.7
Restructuring expense, net (38.3) (1.7)
Other income (expense), net 14.4 (1.8)
---- ----
Loss before income taxes (96.7) (11.2)
Income tax expense (4.1) (19.6)
---- -----
Net loss (100.8) (30.8)
Less net income attributable to
noncontrolling interests (0.3) (0.7)
---- ----
Net loss attributable to Federal-Mogul $(101.1) $(31.5)
======= ======
Loss per common share:
----------------------
Basic $(1.02) $(0.31)
====== ======
Diluted $(1.02) $(0.31)
====== ======
Basic shares outstanding (in millions) 98.9 100.0
Diluted shares outstanding (in millions) 99.3 100.3
FEDERAL-MOGUL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Millions of Dollars)
(Unaudited)
March 31 December 31
2009 2008
---- ----
Current assets:
Cash and equivalents $663.7 $888.2
Accounts receivable, net 983.1 938.7
Inventories, net 888.3 893.7
Prepaid expenses and other
current assets 281.1 267.4
----- -----
Total current assets 2,816.2 2,988.0
Property, plant and equipment, net 1,820.6 1,910.6
Goodwill and other indefinite-lived
intangible assets 1,406.5 1,430.4
Definite-lived intangible
assets, net 551.4 563.9
Other noncurrent assets 282.4 342.7
----- -----
$6,877.1 $7,235.6
======== ========
Current liabilities:
Short-term debt, including current
portion of long-term debt $100.8 $101.7
Accounts payable 497.4 622.5
Accrued liabilities 508.1 483.1
Current portion of postemployment
benefit liability 60.0 61.0
Other current liabilities 153.2 173.8
----- -----
Total current liabilities 1,319.5 1,442.1
Long-term debt 2,764.8 2,768.0
Postemployment benefits 1,224.9 1,240.1
Long-term portion of deferred
income taxes 546.9 553.4
Other accrued liabilities 208.4 235.9
Shareholders' equity:
Preferred stock ($.01 par value;
90,000,000 authorized shares;
none issued) - -
Common stock ($.01 par value;
450,100,000 authorized shares;
100,500,000 issued shares; 99,404,500
outstanding shares as of
March 31, 2009 and December 31, 2008) 1.0 1.0
Additional paid-in capital, including
warrants 2,122.7 2,122.7
Accumulated deficit (569.0) (467.9)
Accumulated other
comprehensive loss (768.7) (688.0)
Treasury stock, at cost (16.7) (16.7)
----- -----
Total Federal-Mogul
shareholders' equity 769.3 951.1
----- -----
Noncontrolling interests 43.3 45.0
---- ----
Total shareholders' equity 812.6 996.1
----- -----
$6,877.1 $7,235.6
======== ========
FEDERAL-MOGUL CORPORATION
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended
March 31
--------
2009 2008
---- ----
(Millions of Dollars)
Cash provided from (used by) operating
activities
Net loss attributable to Federal-Mogul $(101.1) $(31.5)
Adjustments to reconcile net loss to net
cash (used by) provided from operating
activities:
Depreciation and amortization 77.3 88.4
Cash received from 524(g) Trust - 225.0
Change in postemployment benefits,
including pensions 14.1 (9.7)
Changes in deferred taxes (3.5) 1.8
Changes in operating assets and
liabilities:
Accounts receivable (66.7) (138.8)
Inventories (22.2) 36.9
Accounts payable (106.9) (42.9)
Other assets and liabilities 48.8 (13.5)
---- -----
Net cash (used by) provided from
operating activities (160.2) 115.7
Cash provided from (used by) investing
activities
Expenditures for property, plant and
equipment (44.7) (64.1)
Net proceeds from the sale of property,
plant and equipment - 2.6
Payments to acquire business - (4.7)
---- ----
Net cash used by investing activities (44.7) (66.2)
Cash provided from (used by) financing
activities
Proceeds from borrowings on exit
facility - 2,082.0
Repayment of Tranche A, Revolver and
PIK Notes - (1,790.8)
Principal payments on long-term debt (7.4) (7.4)
Increase (decrease) in short-term debt 2.1 (6.3)
(Decrease) increase in other long-term
debt (0.9) 9.9
Net payments from factoring arrangements (8.5) (2.4)
Debt issuance fees (0.2) (0.3)
---- ----
Net cash (used by) provided from
financing activities (14.9) 284.7
Effect of foreign currency exchange
rate fluctuations on cash (4.7) 4.8
---- ---
(Decrease) increase in cash and
equivalents (224.5) 339.0
Cash and equivalents at beginning of
period 888.2 425.4
----- -----
Cash and equivalents at end of period $663.7 $764.4
====== ======
FEDERAL-MOGUL CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Millions of Dollars)
(Unaudited)
Three Months Ended
March 31
2009 2008
---- ----
Loss before income taxes $(96.7) $(11.2)
Depreciation and amortization 77.3 88.4
Chapter 11 and U.K. Administration related
reorganization expense 0.8 9.8
Interest expense, net 34.0 48.2
Restructuring expense, net 38.3 1.7
Expense associated with U.S.-
based funded pension plans 16.6 1.4
Fresh-start inventory adjustment - 68.2
Other (0.3) 0.5
---- ---
Operational EBITDA $70.0 $207.0
===== ======
Net cash (used by) provided from
operating activities: $(160.2) $115.7
Adjustments:
Cash received from 524(g) Trust - (225.0)
Net payments for implementation of the Plan,
including settlement of non-debt
liabilities subject to compromise 8.7 13.0
--- ----
Cash used by operations, excluding the
impacts of the Plan (151.5) (96.3)
Cash used by investing activities (44.7) (66.2)
----- -----
Cash flow $(196.2) $(162.5)
======= =======
Management believes that Operational EBITDA most closely approximates
the cash flow associated with the operational earnings of the Company
and uses Operational EBITDA to measure the performance of its
operations. Operational EBITDA is defined as earnings before interest,
income taxes, depreciation and amortization, and certain items such as
restructuring and impairment charges, Chapter 11 related reorganization
expenses, gains and losses on the sales of businesses, the impact on
gross margin of the fresh-start reporting valuation of inventory, and
the non-cash expense relating to U.S.-based funded pension plans.
SOURCE Federal-Mogul Corporation
