Federal-Mogul Reports Q3Loss
SOUTHFIELD, Mich., Nov. 14 -- Federal-Mogul Corporation today announced third quarter 2001 sales of $1,289 million compared to $1,428 million in the third quarter of 2000. Federal-Mogul reported a third quarter loss of $(1.46) per share from operations versus earnings of $.01 per share from third quarter operations in 2000. Excluded from earnings from operations were charges for restructuring, impairment, losses on divestitures of businesses, gains on debt-to-equity swaps and tax valuation allowances. Including these items, Federal-Mogul reported a third quarter loss of $(10.31) per share compared to a loss of $(.12) in 2000.
Federal-Mogul's third quarter was negatively impacted by three non-cash charges: an increase in the tax valuation allowance; impairment of certain long-lived assets; and losses on the divestitures of certain non-core businesses. Federal-Mogul increased its deferred tax valuation allowance resulting in a $177 million non-cash charge to income tax expense. This charge is a result of the company's filing for financial restructuring limiting the implementation of certain tax planning strategies, current adverse market conditions and recent taxable losses in the United States.
In addition, Federal-Mogul determined that certain assets of its non-core operating units were impaired in accordance with current accounting guidelines. Accordingly, the carrying-value of those assets was adjusted to their fair value resulting in a charge of $496 million. Finally, during the third quarter Federal-Mogul completed the divestiture of six non-core businesses. These divestitures generated cash proceeds of $87 million but resulted in a book loss of $82 million, related primarily to the goodwill associated with those businesses.
The earnings from operations decrease for the third quarter 2001 compared to 2000 is attributable to lower sales volumes; increasing employee benefit costs; and the company's cost reduction activities not keeping pace with lower sales volumes and inflation.
By product group, Powertrain Systems reported third quarter sales of $384 million compared to $421 million in 2000, Sealing Systems and Systems Protection reported $141 million compared to $161 million, Friction reported $78 million compared to $91 million, Aftermarket reported $597 million compared to $654 million and other products, which includes Lighting, Ignition and Wipers-Europe, Asia Pacific and South America, reported sales of $89 million compared to $101 million.
By region, North America reported third quarter sales of $826 million compared to $941 million in 2000, Europe and Africa reported sales of $437 million compared to $455 million in 2000 and the rest of the world reported sales of $26 million compared to $32 million. The original equipment market represented 54% of the company's global sales with the replacement market accounting for 46% of third quarter sales. Excluding exchange impacts and divestitures, original equipment sales were down by 8% and aftermarket sales were down 5% compared to third quarter 2000.
On October 1, Federal-Mogul and certain of its subsidiaries in the United States and United Kingdom filed for financial restructuring in the U.S. and U.K. to resolve its asbestos related litigation in a fair and equitable manner and protect the long-term value of the company's businesses.
``Customer reaction to our filing around the world has been nothing but supportive, '' said Frank Macher, chairman and chief executive officer, adding that the company has been awarded over $30 million in new business contracts since the October 1 filing. ``They believe in Federal-Mogul, our products and our people, and they're looking forward to working with us well into the future.''
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 cost and timing of implementing restructuring actions, the effect of the Chapter 11 voluntary reorganization filing by the company and certain U.S. subsidiaries and the joint filing for Chapter 11 and Administration by the company's U.K. subsidiaries, conditions in the automotive components industry, certain global and regional economic conditions, 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 Nine Months Ended
September 30 September 30
2001 2000 2001 2000
Net sales $1,288.8 $1,427.9 $4,164.9 $4,664.8
Cost of products sold 1,050.4 1,089.2 3,320.0 3,482.4
Gross margin 238.4 338.7 844.9 1,182.4
Selling, general and
administrative expenses 213.7 210.5 648.4 629.4
Amortization of goodwill and other
intangible assets 29.2 31.2 89.4 93.7
Restructuring charge 6.1 8.6 38.0 77.3
Adjustment of assets held for sale
and other long-lived
assets to fair value 496.6 4.6 497.3 14.6
Interest expense 72.5 74.2 238.5 216.6
Interest income (1.1) (0.8) (3.3) (3.1)
International currency exchange
losses 1.9 3.3 5.0 1.3
Chapter 11 and Administration
related reorganization expenses 13.7 - 14.4 -
Other expense, net 84.7 8.6 60.3 25.4
Earnings (Loss) Before Income
Taxes, and Extraordinary items (678.9) (1.5) (743.1) 127.2
Income tax expense 178.3 6.1 218.9 71.0
Earnings (Loss) Before
Extraordinary Items (857.2) (7.6) (962.0) 56.2
Extraordinary items - Gain on
early retirement of debt (47.1) - (72.2) -
Net Earnings (Loss) $(810.1) $(7.6) $(889.8) $56.2
Earnings (Loss) Per Common Share
Basic
Earnings (loss) before
extraordinary items $(10.91) $(0.12) $(13.11) $0.78
Extraordinary items - gain on
early retirement of debt (0.60) - (0.98) -
Net Earnings (Loss) Available
for Common Shareholders $(10.31) $(0.12) $(12.13) $0.78
Diluted
Earnings (loss) before
extraordinary items $(10.91) $(0.12) $(13.11) $0.70
Extraordinary items - gain on
early retirement of debt (0.60) - (0.98) -
Net Earnings (Loss) Available
for Common Shareholders $(10.31) $(0.12) $(12.13) $0.70
Weighted Average Shares (Thousands)
Basic 78,652 70,302 73,502 70,278
Diluted 78,652 70,302 73,502 77,820
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)
September 30, December 31,
2001 2000
Assets
Cash and equivalents $263.2 $107.2
Accounts receivable 528.8 512.8
Investment in accounts receivable
securitization 219.9 229.1
Inventories 744.7 808.6
Deferred taxes 166.2 235.5
Prepaid expenses and income tax
benefits 200.7 195.1
Total current assets 2,123.5 2,088.3
Property, plant and equipment, net 2,174.1 2,388.8
Goodwill 2,784.0 3,303.1
Other intangible assets 613.0 746.4
Asbestos-related insurance recoverable 749.2 771.1
Other noncurrent assets 1,050.0 1,155.7
Total Assets $9,493.8 $10,453.4
Liabilities and Shareholders' Equity
Short-term debt, including current
portion of long-term debt $4,039.1 $147.8
Accounts payable 386.3 431.9
Accrued compensation 221.8 157.8
Restructuring and rationalization
reserves 95.0 107.9
Current portion of asbestos liability - 350.0
Interest payable 54.6 94.4
Other accrued liabilities 396.0 410.9
Total current liabilities 5,192.8 1,700.7
Long-term debt 15.2 3,559.7
Long-term portion of asbestos liability 1,575.3 1,461.9
Postemployment benefits 635.6 637.6
Other accrued liabilities 851.9 910.8
Minority interest in consolidated
subsidiaries 55.1 57.5
Company-obligated mandatorily
redeemable preferred securities
of subsidiary trust holding solely
convertible subordinated
debentures of the Company 571.4 575.0
Shareholders' equity:
Series C ESOP preferred stock 28.0 38.1
Common stock 401.2 352.5
Additional paid-in capital 1,750.3 1,778.6
Accumulated deficit (1,005.3) (113.5)
Accumulated other comprehensive loss (577.2) (504.7)
Other (0.5) (0.8)
Total Shareholders' Equity 596.5 1,550.2
Total Liabilities and Shareholders'
Equity $9,493.8 $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 Nine Months Ended
September 30 September 30
2001 2000 2001 2000
Cash Provided From (Used By) Operating
Activities
Net earnings (loss) $(810.1) $(7.6) $(889.8) $56.2
Adjustments to reconcile net earnings
(loss) to net cash provided from
(used by) operating activities:
Depreciation and amortization 94.8 94.7 285.9 287.3
Restructuring charge 6.1 8.6 38.0 77.3
Adjustment of assets held for
sale and other long-lived assets
to fair value 496.6 4.6 497.3 14.6
Gain on early retirement of debt (47.1) - (72.2) -
Postemployment benefits 0.2 (9.1) (0.2) (13.4)
Decrease (increase) in accounts
receivable 60.0 38.5 71.4 (42.9)
Decrease (increase) in inventories (1.6) (2.0) 33.1 (41.8)
Decrease in accounts payable (53.1) (21.3) (35.3) (112.0)
Change in other assets and other
liabilities 159.1 (40.3) 169.9 (26.4)
Payments against restructuring
and rationalization reserves (12.6) (15.7) (50.1) (42.8)
Payments against asbestos
liability (48.5) (75.2) (219.2) (234.7)
Net Cash Provided From Operating
Activities (156.2) (24.8) (171.2) (78.6)
Cash Provided From (Used By) Investing
Activities
Expenditures for property, plant and
equipment and other long-term
assets (75.1) (86.2) (221.1) (231.6)
Proceeds from the sale of property,
plant and equipment - - 19.0 2.2
Proceeds from sale of businesses 86.6 46.8 241.8 60.9
Business acquisitions, net of cash
acquired (18.8) (3.4) (18.8) (3.4)
Net Cash Provided From (Used By) (7.3) (42.8) 20.9 (171.9)
Investing Activities
Cash Provided From (Used By) Financing
Activities
Proceeds from the issuance of
long-term debt 319.6 200.0 666.4 485.0
Principal payments on long-term
debt (36.3) (61.1) (171.8) (168.1)
Decrease in short-term debt (46.1) (28.1) (71.4) (26.9)
Fees paid for debt issuance and other
securities - - (18.5) -
Sale (repurchase) of accounts
receivable under securitization 40.0 (45.4) (89.6) (46.9)
Dividends (0.4) (1.1) (1.9) (3.1)
Other (3.5) 2.4 (6.9) 1.8
Net Cash Provided From Financing
Activities 273.3 66.7 306.3 241.8
Increase (Decrease) in Cash and
Equivalents 109.8 (0.9) 156.0 (8.7)
Cash and equivalents at beginning of
period 153.4 56.7 107.2 64.5
Cash and Equivalents at End of
Period $263.2 $55.8 $263.2 $55.8
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 September 30, 2001
Adjustments
Restructuring/
As Impairment
Reported Charge
Net sales $1,288.8 $ -
Cost of products sold 1,050.4 -
Gross margin 238.4 -
Selling, general and administrative
expenses 213.7 -
Amortization of goodwill and other
intangible assets 29.2 -
Restructuring charge 6.1 (6.1)
Adjustment of assets held for sale
and other long-lived assets to fair value 496.6 (496.6)
Interest expense 72.5 -
Interest income (1.1) -
International currency exchange losses 1.9 -
Chapter 11 and Administration related
reorganization expenses 13.7 -
Other expense, net 84.7 -
Earnings (Loss) Before Income
Taxes, and Extraordinary Items (678.9) 502.7
Income tax expense 178.3 32.7
Loss Before Extraordinary Items (857.2) 470.0
Extraordinary items - Gain on early
retirement of debt (47.1) -
Net Loss $(810.1) $470.0
Diluted Loss Per Common Share $(10.31) $5.98
Chapter 11
Related
Items Divestitures
Net sales $ - $ -
Cost of products sold - -
Gross margin - -
Selling, general and administrative
expenses - -
Amortization of goodwill and other
intangible assets - -
Restructuring charge - -
Adjustment of assets held for sale
and other long-lived assets to fair value - -
Interest expense - -
Interest income - -
International currency exchange losses - -
Chapter 11 and Administration related
reorganization expenses (13.7) -
Other expense, net - (75.1)
Earnings (Loss) Before Income
Taxes, and Extraordinary Items 13.7 75.1
Income tax expense - (6.9)
Loss Before Extraordinary Items 13.7 82.0
Extraordinary items - Gain on early
retirement of debt - -
Net Loss $13.7 $82.0
Diluted Loss Per Common Share $0.17 $1.04
Tax
Gain on Debt Valuation From
Exchanges Allowance Operations
Net sales $ - $ - $1,288.8
Cost of products sold - - 1,050.4
Gross margin - - 238.4
Selling, general and administrative
expenses - - 213.7
Amortization of goodwill and other
intangible assets - - 29.2
Restructuring charge - - -
Adjustment of assets held for sale and
other long-lived assets to fair value - - -
Interest expense - - 72.5
Interest income - - (1.1)
International currency exchange losses - - 1.9
Chapter 11 and Administration related
reorganization expenses - - -
Other expense, net - - 9.6
Earnings (Loss) Before Income Taxes,
and Extraordinary Items - - (87.4)
Income tax expense - (177.0) 27.1
Loss Before Extraordinary Items - 177.0 (114.5)
Extraordinary items - Gain on early
retirement of debt 47.1 - -
Net Loss $(47.1) $177.0 $(114.5)
Diluted Loss Per Common Share $(0.60) $2.26 $(1.46)
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)
Nine Months Ended September 30, 2001
Adjustments
Restructuring/
As Impairment
Reported Charge
Net sales $4,164.9 $ -
Cost of products sold 3,320.0 -
Gross margin 844.9 -
Selling, general and administrative
expenses 648.4 -
Amortization of goodwill and other
intangible assets 89.4 -
Restructuring charge 38.0 (38.0)
Adjustment of assets held for sale
and other long-lived assets to fair value 497.3 (497.3)
Interest expense 238.5 -
Interest income (3.3) -
International currency exchange losses 5.0 -
Chapter 11 and Administration related
reorganization expenses 14.4 -
Other expense, net 60.3 -
Loss Before Income Taxes, and
Extraordinary Items (743.1) 535.3
Income tax expense 218.9 43.8
Loss Before Extraordinary Items (962.0) 491.5
Extraordinary items - Gain on early
retirement of debt (72.2) -
Net Loss $(889.8) $491.5
Diluted Loss Per Common Share $(12.13) $6.69
Chapter 11
Related
Items Divestitures
Net sales $ - $ -
Cost of products sold - -
Gross margin - -
Selling, general and administrative
expenses - -
Amortization of goodwill and other
intangible assets - -
Restructuring charge - -
Adjustment of assets held for sale
and other long-lived assets to fair value - -
Interest expense - -
Interest income - -
International currency exchange losses - -
Chapter 11 and Administration related
reorganization expenses (14.4) -
Other expense, net - (37.5)
Loss Before Income Taxes, and
Extraordinary Items 14.4 37.5
Income tax expense - (46.2)
Loss Before Extraordinary Items 14.4 83.7
Extraordinary items - Gain on early
retirement of debt - -
Net Loss $14.4 $83.7
Diluted Loss Per Common Share $0.20 $1.14
Tax
Gain on Debt Valuation From
Exchanges Allowance Operations
Net sales $ - $ - $4,164.9
Cost of products sold - - 3,320.0
Gross margin - - 844.9
Selling, general and administrative
expenses - - 648.4
Amortization of goodwill and other
intangible assets - - 89.4
Restructuring charge - - -
Adjustment of assets held for sale and
other long-lived assets to fair value - - -
Interest expense - - 238.5
Interest income - - (3.3)
International currency exchange losses - - 5.0
Chapter 11 and Administration related
reorganization expenses - - -
Other expense, net - - 22.8
Loss Before Income Taxes, and
Extraordinary Items - - (155.9)
Income tax expense (8.8) (177.0) 30.7
Loss Before Extraordinary Items 8.8 177.0 (186.6)
Extraordinary items - Gain on early
retirement of debt 72.2 - -
Net Loss $(63.4) $177.0 $(186.6)
Diluted Loss Per Common Share $(0.86) $2.40 $(2.56)