Federal-Mogul Reports Second Quarter Results
SOUTHFIELD, Mich., July 19 Federal-Mogul Corporation
today announced second quarter 2001 sales of $1,425 million
compared to $1,593 million in 2000. Federal-Mogul reported a second quarter
loss of $(.44) per share from operations versus earnings of $.65 per share
from operations in 2000. Excluded from earnings from operations were charges
for restructuring, impairment, gains/losses on sales of businesses and gains
on debt to equity swaps. Including these items, Federal-Mogul reported a
second quarter loss of $(.25) per share compared to net earnings of $.65 in
2000. For the quarter, free cash flow from operations was about breakeven,
including a decrease in inventory of $26 million, and the company reduced debt
by $29 million.
(Photo: http://www.newscom.com/cgi-bin/prnh/20000525/DETH025LOGO )
By region, the Americas and Asia reported second quarter sales of $952
million compared to $1,082 million in 2000. Europe and Africa reported sales
of $473 million compared to $512 million in 2000. The original equipment
market represented 56% of the company's global sales with the replacement
market accounting for 44% of second quarter sales. Excluding exchange impacts
and divestitures, original equipment sales were down by 7% and aftermarket
sales were down 7% compared to second quarter 2000.
"The original equipment market strengthened overall in North America due
to the product offerings of the European and Japanese car manufacturers.
Unfortunately, our business did not enjoy that success because in North
America these customers do not yet represent a strong market for us; however,
our new global product line strategy cuts to the core of this issue. We will
have global processes, global products and global technologies to serve
manufacturers no matter what markets they are in," said Frank Macher, chief
executive officer. "In Europe, even though automotive sales are down, we did
have strong diesel sales and we see that continuing in the third quarter. The
aftermarket showed signs of strength in North America as the second quarter
came to a close, but that was countered with much softer sales than
anticipated in Western Europe."
During the second quarter, Federal-Mogul made $82 million of asbestos-
related payments. The company continues to receive a high volume of new claim
filings. The recent bankruptcies of certain co-defendant companies in
asbestos litigation, and the resulting decrease in voluntary asbestos
liability settlements and payments by such companies, are contributing to
increased financial demands against Federal-Mogul. In addition, while
Federal-Mogul was able to maintain its trial list strategy financial targets,
it continues to face increasing trial pressure from a variety of state
jurisdictions.
"Federal-Mogul continues to advocate federal legislation relating to
asbestos that enhances medical criteria for determining eligibility for
recovery, establishes procedures to limit the consolidation of claims, and
establishes venue requirements for where claims can be filed," Macher said.
"The recent political leadership shift in the United States Senate increases
the difficulty, particularly in the near term, of achieving a legislative
solution to the asbestos liability issues faced by Federal-Mogul and others."
Federal-Mogul Hosts Second Quarter Conference Call
Federal-Mogul will be hosting a conference call at 1:30 p.m. EDT today,
Thursday, July 19, to discuss the company's second quarter 2001 earnings
release. The conference call will feature Frank Macher, chief executive
officer; Chip McClure, president and chief operating officer; and Mike Lynch,
executive vice president and chief financial officer. To access the audio web
cast, visit the Federal-Mogul web site at http://www.federal-mogul.com and
click the web cast link. To receive the dial-in number for the conference
call, participants should call 800-289-0579 (for domestic callers) and
719-457-2550 (for callers outside the United States) and give 691041 as the
confirmation code. A recording of this call will be available at 5 p.m. EDT
July 19 and can be accessed through July 23. To access this recording, dial
719-457-0820, enter 691041 for the confirmation code.
Headquartered in Southfield, Michigan, Federal-Mogul is an automotive
parts manufacturer providing innovative solutions and systems to global
customers in the automotive, small engine, heavy-duty and industrial markets.
The company was founded in 1899. Visit the company's web site at
http://www.federal-mogul.com for more information.
Information in this press release contains forward-looking statements,
which are not historical facts and involve risks and uncertainties. Actual
results, events and performance could differ materially from those
contemplated by these forward-looking statements including, without
limitation, the company's ability to implement and achieve the intended
results of its strategic initiatives, the cost and timing of implementing
restructuring actions, conditions in the automotive components industry,
certain global and regional economic conditions, changes in asbestos-related
litigation, exposure, claims or legislation and other factors detailed from
time to time in the company's filings with the Securities and Exchange
Commission. Federal-Mogul undertakes no obligation to update any forward-
looking statement to reflect events or circumstances after the date of this
press release.
F E D E R A L - M O G U L C O R P O R A T I O N
S T A T E M E N T S O F O P E R A T I O N S
(Millions of Dollars, Except Per Share Data)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
2001 2000 2001 2000
Net sales $1,425.4 $1,593.2 $2,876.1 $3,236.9
Cost of products sold 1,124.2 1,182.8 2,269.6 2,393.2
Gross margin 301.2 410.4 606.5 843.7
Selling, general and
administrative expenses 205.8 207.9 435.4 418.9
Amortization of goodwill and other
intangible assets 29.8 31.3 60.2 62.5
Restructuring charge 2.1 - 31.9 68.7
Adjustment of assets held for sale
and other long-lived
assets to fair value 0.1 - 0.7 10.0
Interest expense 82.2 71.4 166.0 142.4
Interest income (1.0) (1.0) (2.2) (2.3)
International currency exchange
losses (gains) 2.4 (2.6) 3.1 (2.0)
Other (income) expense, net (30.2) 9.2 (24.4) 16.8
Earnings (Loss) Before Income
Taxes, and
Extraordinary items 10.0 94.2 (64.2) 128.7
Income tax expense 43.8 44.3 31.8 64.9
Earnings (Loss) Before
Extraordinary Items (33.8) 49.9 (96.0) 63.8
Extraordinary items - Gain on
early retirement of debt,
net of applicable income tax
expense (16.3) - (16.3) -
Net Earnings (Loss) $(17.5) $49.9 $(79.7) $63.8
Earnings (Loss) Per Common Share
Basic
Earnings (loss) before
extraordinary items $(0.48) $0.70 $(1.37) $0.89
Extraordinary items - gain on
early retirement of debt,
net of applicable income tax
expense 0.23 - 0.23 -
Net Earnings (Loss) Available
for Common Shareholders $(0.25) $0.70 $(1.14) $0.89
Diluted
Earnings (loss) before
extraordinary items $(0.48) $0.65 $(1.37) $0.84
Extraordinary items - gain on
early retirement of debt,
net of applicable income tax
expense 0.23 - 0.23 -
Net Earnings (Loss) Available
for Common
Shareholders $(0.25) $0.65 $(1.14) $0.84
Weighted Average Shares
(Thousands)
Basic 71,169 70,276 70,880 70,269
Diluted 71,169 85,832 70,880 74,681
F E D E R A L - M O G U L C O R P O R A T I O N
B A L A N C E S H E E T S
(Millions of Dollars)
(Unaudited)
June 30, December 31,
2001 2000
Assets
Cash and equivalents $153.4 $107.2
Accounts receivable 516.5 512.8
Investment in accounts receivable
securitization 310.8 229.1
Inventories 732.8 808.6
Deferred taxes 176.9 235.5
Prepaid expenses and income tax
benefits 193.4 195.1
Total current assets 2,083.8 2,088.3
Property, plant and equipment, net 2,283.5 2,388.8
Goodwill 3,102.7 3,303.1
Other intangible assets 687.6 746.4
Asbestos-related insurance recoverable 731.0 771.1
Other noncurrent assets 1,261.3 1,155.7
Total Assets $10,149.9 $10,453.4
Liabilities and Shareholders' Equity
Short-term debt, including current
portion of long-term debt $121.0 $147.8
Accounts payable 432.4 431.9
Accrued compensation 195.5 157.8
Restructuring and rationalization
reserves 99.7 107.9
Current portion of asbestos liability 350.0 350.0
Interest payable 91.6 94.4
Other accrued liabilities 363.0 410.9
Total current liabilities 1,653.2 1,700.7
Long-term debt 3,737.3 3,559.7
Long-term portion of asbestos liability 1,273.5 1,461.9
Postemployment benefits 622.8 637.6
Other accrued liabilities 945.9 910.8
Minority interest in consolidated
subsidiaries 55.6 57.5
Company-obligated mandatorily
redeemable preferred securities
of subsidiary trust holding solely
convertible subordinated
debentures of the Company 575.0 575.0
Shareholders' equity:
Series C ESOP preferred stock 34.3 38.1
Common stock 369.7 352.5
Additional paid-in capital 1,768.8 1,778.6
Accumulated deficit (194.5) (113.5)
Accumulated other comprehensive loss (691.1) (504.7)
Other (0.6) (0.8)
Total Shareholders' Equity 1,286.6 1,550.2
Total Liabilities and Shareholders'
Equity $10,149.9 $10,453.4
F E D E R A L - M O G U L C O R P O R A T I O N
S T A T E M E N T S O F C A S H F L O W S
(Millions of Dollars)
(Unaudited)
Three Months
Ended Six Months Ended
June 30 June 30
2001 2000 2001 2000
Cash Provided From (Used By) Operating
Activities
Net earnings (loss) $(17.5) $49.9 $(79.7) $63.8
Adjustments to reconcile net earnings
(loss) to net cash
provided from (used by) operating
activities:
Depreciation and amortization 93.3 93.5 191.1 192.6
Restructuring charge 2.1 - 31.9 68.7
Adjustment of assets held for
sale and other
long-lived assets to fair value 0.1 - 0.7 10.0
Gain on early retirement of debt (25.1) - (25.1) -
Postemployment benefits (3.9) (5.5) (0.4) (4.3)
Decrease (increase) in accounts
receivable 49.7 3.4 11.4 (81.4)
Decrease (increase) in
inventories 25.6 (8.5) 34.7 (39.8)
Increase (decrease) in accounts
payable (4.1) 8.9 17.8 (90.7)
Change in other assets and other
liabilities 44.6 39.4 5.8 13.9
Payments against restructuring
and rationalization reserves (21.5) (12.4) (37.5) (27.1)
Payments against asbestos
liability (82.4) (84.1) (170.7) (159.5)
Net Cash Provided From (Used By)
Operating Activities 60.9 84.6 (20.0) (53.8)
Cash Provided From (Used By) Investing
Activities
Expenditures for property, plant and
equipment and
other long-term assets (69.7) (70.4) (146.0) (145.4)
Proceeds from the sale of property,
plant and equipment 7.7 - 19.0 2.2
Proceeds from sales of businesses 160.2 9.4 160.2 14.1
Net Cash Provided From (Used By) 98.2 (61.0) 33.2 (129.1)
Investing Activities
Cash Provided From (Used By) Financing
Activities
Proceeds from the issuance of long-
term debt 110.8 - 346.8 285.0
Principal payments on long-term debt (113.4) (89.8) (135.5) (107.0)
Increase (decrease) in short-term debt 6.8 25.0 (25.3) 1.2
Fees paid for debt issuance and other
securities (4.3) - (18.5) -
Sale (repurchase) of accounts
receivable under securitization (81.4) 29.5 (129.6) (1.5)
Dividends (0.8) (1.0) (1.5) (2.0)
Other (6.4) (2.7) (3.4) (0.6)
Net Cash Provided From (Used By)
Financing Activities (88.7) (39.0) 33.0 175.1
(Increase) Decrease in Cash and
Equivalents 70.4 (15.4) 46.2 (7.8)
Cash and equivalents at beginning of
period 83.0 72.1 107.2 64.5
Cash and Equivalents at End of
Period $153.4 $56.7 $153.4 $56.7
F E D E R A L - M O G U L C O R P O R A T I O N
N E T E A R N I N G S R E C O N C I L I A T I O N
(Millions of Dollars, Except Per Share Data)
(Unaudited)
Three Months Ended June 30, 2001
Adjustments
Restruct- Impair- Gain on
As uring ment Divest- Debt From
Reported Charge Costs itures Exchanges Operations
Net sales $1,425.4 $ - $ - $ - $ - $1,425.4
Cost of
products
sold 1,124.2 - - - - 1,124.2
Gross
margin 301.2 - - - - 301.2
Selling,
general and
administrative
expenses 205.8 - - - - 205.8
Amortization
of goodwill
and other
intangible
assets 29.8 - - - - 29.8
Restructuring
charge 2.1 (2.1) - - - -
Adjustment of
assets held
for sale and
other long-
lived assets
to fair value 0.1 - (0.1) - - -
Interest
expense 82.2 - - - - 82.2
Interest
income (1.0) - - - - (1.0)
International
currency
exchange
losses 2.4 - - - - 2.4
Other (income)
expense, net (30.2) - - 37.6 - 7.4
Earnings
(Loss)
Before
Income
Taxes,
and
Extraordinary
Items 10.0 2.1 0.1 (37.6) - (25.4)
Income tax
expense 43.8 0.7 - (39.3) - 5.2
Loss Before
Extraordinary
Items (33.8) 1.4 0.1 1.7 - (30.6)
Extraordinary
items - Gain
on early
retirement of
debt, net of
applicable
income tax
expense (16.3) - - - 16.3 -
Net Loss $(17.5) $1.4 $0.1 $1.7 $(16.3) $(30.6)
Diluted Loss
Per Common
Share $(0.25) $0.02 $ - $0.02 $(0.23) $(0.44)
F E D E R A L - M O G U L C O R P O R A T I O N
N E T E A R N I N G S R E C O N C I L I A T I O N
(Millions of Dollars, Except Per Share Data)
(Unaudited)
Six Months Ended June 30, 2001
Adjustments
Restruct- Impair- Gain on
As uring ment Divest- Debt From
Reported Charge Costs itures Exchanges Operations
Net sales $2,876.1 $ - $ - $ - $ - $2,876.1
Cost of
products
sold 2,269.6 - - - - 2,269.6
Gross
margin 606.5 - - - - 606.5
Selling,
general and
administrative
expenses 435.4 - - - - 435.4
Amortization
of goodwill
and other
intangible
assets 60.2 - - - - 60.2
Restructuring
charge 31.9 (31.9) - - - -
Adjustment of
assets held
for sale and
other long-
lived assets
to fair value 0.7 - (0.7) - - -
Interest
expense 166.0 - - - - 166.0
Interest
income (2.2) - - - - (2.2)
International
currency
exchange
losses 3.1 - - - - 3.1
Other (income)
expense, net (24.4) - - 37.6 - 13.2
Loss Before
Income
Taxes,
and
Extraordinary
Items (64.2) 31.9 0.7 (37.6) - (69.2)
Income tax
expense 31.8 10.8 0.2 (39.3) - 3.5
Loss Before
Extraordinary
Items (96.0) 21.1 0.5 1.7 - (72.7)
Extraordinary
items - Gain
on early
retirement of
debt, net of
applicable
income tax
expense (16.3) - - - 16.3 -
Net Loss $(79.7) $21.1 $0.5 $1.7 $(16.3) $(72.7)
Diluted Loss
Per Common
Share $(1.14) $0.30 $0.01 $0.02 $(0.23) $(1.04)
