Federal-Mogul Reports Q1 2009 Net Loss on Reduced Revenue
Sales Better than Global Market Production Decline
Company Liquidity Remains Strong
SOUTHFIELD, Mich., May 5 -- Federal-Mogul Corporation 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.
"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.