Federal-Mogul Reports Fourth Quarter and Full Year 2001 Results
SOUTHFIELD, Mich., Feb. 22 Federal-Mogul Corporation today reported its financial results for the fourth quarter and full year of 2001. Fourth quarter 2001 sales were $1,292 million, down four percent from the same period last year, for a loss of $0.36 per share from operations, compared to a loss from operations of $0.99 per share in 2000. Including charges for impairment, divestitures of businesses and Chapter 11 and Administration related expenses, Federal-Mogul reported a loss of $1.37 per share in the fourth quarter 2001 compared with a reported loss of $4.80 per share for the same period last year. Excluding acquisitions and divestitures and the effects of foreign exchange, fourth quarter 2001 sales decreased one percent.
Fourth quarter 2001 cash flow from operations, net of capital expenditures, was positive $114 million. This is an improvement of $274 million compared with a year ago when reported net cash flow from operations was a negative $160 million.
For the full year, Federal-Mogul posted sales of $5,457 million, down nine percent from 2000, for a loss of $2.88 per share from operations. Excluding acquisitions and divestitures and the effects of foreign exchange, full year sales decreased six percent.
Including charges for restructuring, impairment, losses on divestitures of businesses, gains on debt-to-equity swaps, tax valuation allowances and Chapter 11 and Administration related expenses, Federal-Mogul reported a full year loss of $13.27 per share. In 2000, Federal-Mogul reported full year earnings of $0.53 per share from operations with a reported loss of $4.02 per share. Full year 2001 cash flow from operations, net of capital expenditures, was a usage of $259 million, compared to a usage of $468 million in 2000.
``It was a difficult year for the automotive industry and a particularly challenging one for Federal-Mogul,'' said Frank Macher, chairman and chief executive officer. ``While we continue to focus on serving our customers, we are taking steps to adjust our operations to reflect current market conditions.''
As part of the company's ongoing efforts to reduce its cost structure, Federal-Mogul's global employment decreased four percent in 2001 to 49,000 employees. Excluding the addition of 2,500 employees with the March 2001 acquisition of WSK Gorzyce in Poland, Federal-Mogul's global employment decreased nine percent.
In 2001, Federal-Mogul organized its operations into nine global product lines in order to accelerate the globalization of products, materials and processes. Each product line has designated a center of excellence to lead the product line's strategy in terms of advanced technology, manufacturing strategy, facilities utilization and the implementation of best practices across the group.
``We will provide our customers, both original equipment and aftermarket, with valued products and services of the highest quality at competitive prices,'' said Macher. ``By utilizing our core competencies for sustainable competitive advantage through technology or lowest cost, we will be our customers' supplier of choice.''
Federal-Mogul's nine global product groups are Aftermarket, Bearings, Friction, Lighting, Pistons, Piston Rings and Liners, Sealing systems, Sintered Valve Train and Transmission Products, and Systems Protection.
Aftermarket Sales
Sales of replacement parts to aftermarket customers totaled 45 percent of the company's full year sales. By geographic region, 2001 sales were 81 percent in North America and 19 percent in Europe. Fourth quarter 2001 sales were $585 million, flat compared to fourth quarter 2000 sales excluding divestitures and foreign exchange.
For year 2001 performance, Federal-Mogul earned several high honors including Supplier of the Year by Aftermarket Auto Parts Alliance, Vendor of the Year for Product Excellence by Parts Plus, Vendor of the Year by Ozark/O'Reilly, Brand of the Year for Wagner Brake Products from Packerland Automotive Group, Vendor of the Year - Marketing by Pronto, and 2001 Preferred Partner, for the 14th consecutive year, by Jasper Engines and Transmissions.
Original Equipment Sales
Sales of original equipment parts totaled 55 percent of the company's full year sales. By geographic region, 2001 sales were 49 percent in North America, 48 percent in Europe and three percent in the rest of the world. Fourth quarter 2001 sales were $707 million, down three percent compared to fourth quarter 2000 sales excluding divestitures and foreign exchange.
Full year original equipment sales for the global Friction product line were $336 million, compared to $375 million in 2000 excluding foreign exchange. By geographic region, 2001 Friction OE sales were 38 percent in North America and 62 percent in Europe and the rest of the world. In the fourth quarter, Friction OE sales were $78 million, down eight percent compared to fourth quarter 2000 sales excluding foreign exchange.
Full year original equipment sales for the global product lines of Bearings, Pistons, Piston Rings and Liners, and Sintered Valve Train and Transmission Products were $1,691 million, compared to $1,748 million in 2000 excluding divestitures and foreign exchange. By geographic region, 2001 sales of the powertrain products were 41 percent in North America and 59 percent in Europe. In the fourth quarter, powertrain OE sales were $402 million, compared to $396 million in 2000 excluding divestitures and foreign exchange.
Full year original equipment sales for the global product lines of Sealing Systems and Systems Protection were $588 million, compared to $675 million in 2000 excluding foreign exchange. By geographic region, 2001 OE sales were 73 percent in North America and 27 percent in Europe. In the fourth quarter, Sealing Systems and Systems Protection OE sales were $136 million, compared to $153 million in 2000 excluding foreign exchange.
Financial Restructuring Update
On October 1, 2001, Federal-Mogul decided to separate its asbestos liabilities from its true operating potential by voluntarily filing for financial restructuring in Bankruptcy Court in the United States and Administration in the United Kingdom.
``This was a very difficult but necessary decision in order to develop and facilitate a way to pay our asbestos liabilities and establish a viable capital structure for the long-term growth and profitability of Federal- Mogul's operations,'' said Frank Macher, chairman and chief executive officer. ``We are working diligently to provide a fair and reasonable solution for all.''
The Bankruptcy Court has approved up to $675 million of debtor-in- possession financing. The Court has also appointed a Creditors Committee (representing trade creditors and bondholders) and an Asbestos Committee to work with Federal-Mogul on the development of a Plan of Reorganization. The Court extended the company's exclusive period for presenting its Plan of Reorganization until August 1, 2002. In addition to the committees, a Futures Representative for asbestos claims has also been appointed along with a Mediator, consistent with Federal-Mogul's efforts to create a consensual environment that would not prolong the restructuring process.
``Given our recent filing date and the complexities we are dealing with, I feel we are advancing quite rapidly,'' said Macher. ``We continue to work very hard to address the needs of the committees and the needs of the business. We are grateful for the ongoing employee, customer and supplier support through a very challenging time.''
The number of asbestos related bankruptcies in the Delaware Bankruptcy Court prompted the U.S. Third Circuit Court of Appeals to assign a Federal District Court judge to oversee an asbestos resolution for the Delaware group. This centralized management of asbestos issues will work to move the bankruptcy process along consistent with Federal-Mogul's objectives.
In the United Kingdom, Joint Administrators were appointed and accepted by the U.K. Court. The U.K. process has its own creditor committee, which is separate from the U.S. committees. The Administrators have completed all of the creditor's meetings in the U.K. and continue to work with management in order to arrive at a reorganized structure capable of handling the U.K. asbestos issues and ongoing U.K. operations.
``We are working with the U.K. Administrators to ensure that the restructuring efforts in the two countries progress in a parallel and complementary fashion,'' said Macher.
Many automotive customers filed a motion in Federal District Court requesting transfer of their asbestos friction cases to the Federal-Mogul bankruptcy thereby removing them from the various state courts. The motion to transfer was rejected in February 2002 by the Federal District Court and is currently on appeal by the automakers to the Third Circuit Court of Appeals.
Federal-Mogul is a global supplier of automotive components and sub- systems serving the world's original equipment manufacturers and the aftermarket. The company utilizes its engineering and materials expertise, proprietary technology, manufacturing skill, distribution flexibility and marketing power to deliver products, brands and services of value to its customers. Federal-Mogul is focused on the globalization of its teams, products and processes to bring greater opportunities for its customers and employees, and value to its constituents. Headquartered in Southfield, Michigan, Federal-Mogul was founded in Detroit in 1899 and today employs 49,000 people in 24 countries. For more information on Federal-Mogul, visit the company's web site at http://www.federal-mogul.com .
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 Year Ended
December 31 December 31
2001 2000 2001 2000
Net sales $1,292.1 $1,348.4 $5,457.0 $6,013.2
Cost of products sold 1,053.0 1,113.5 4,372.9 4,595.9
Gross margin 239.1 234.9 1,084.1 1,417.3
Selling, general and
administrative expenses 207.0 215.2 855.5 844.6
Amortization of goodwill and
other intangible assets 25.9 29.9 115.3 123.6
Restructuring charge - 58.4 38.0 135.7
Adjustment of assets held for
sale and other long-lived
assets to fair value 47.8 60.8 545.1 75.4
Asbestos charge - 184.4 - 184.4
Interest expense, net 39.6 71.5 274.8 285.0
Chapter 11 and Administration
related reorganization
expenses 36.2 - 50.6 -
Other (income) expense, net (6.3) 4.2 59.0 30.9
Loss Before Income Taxes and
Extraordinary Item (111.1) (389.5) (854.2) (262.3)
Income tax expense (benefit) 0.6 (51.8) 219.5 19.2
Loss Before Extraordinary Item (111.7) (337.7) (1,073.7) (281.5)
Extraordinary Item - Gain on
early retirement of debt - - (72.2) -
Net Loss $(111.7) $(337.7) $(1,001.5) $(281.5)
Loss Per Common Share
Basic and Diluted
Loss before Extraordinary Item $(1.37) $(4.80) $(14.23) $(4.02)
Extraordinary Item - gain on
early retirement of debt - - (0.96) -
Loss Available for Common
Shareholders $(1.37) $(4.80) $(13.27) $(4.02)
Weighted Average Shares
(Thousands)
Basic and Diluted 81,803 70,463 75,598 70,445
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)
December 31
2001 2000
Assets
Cash and equivalents $346.9 $107.2
Accounts receivable 944.8 512.8
Investment in accounts receivable
securitization - 229.1
Inventories 721.9 808.6
Deferred taxes 55.4 171.6
Prepaid expenses and income tax benefits 177.6 195.1
Total current assets 2,246.6 2,024.4
Property, plant and equipment 2,163.7 2,388.8
Goodwill 2,708.3 3,303.1
Other intangible assets 655.3 746.4
Asbestos-related insurance recoverable 723.2 771.1
Other noncurrent assets 556.1 597.2
Total Assets $9,053.2 $9,831.0
Liabilities and Shareholders' Equity
Short-term debt, including current
portion of long-term debt $24.9 $147.8
Accounts payable 299.5 431.9
Accrued compensation 193.9 157.8
Restructuring and rationalization
reserves 81.1 107.9
Current portion of asbestos liability - 350.0
Other accrued liabilities 382.9 503.7
Total current liabilities 982.3 1,699.1
Long-term debt 266.7 3,559.7
Long-term portion of asbestos liability - 1,461.9
Postemployment benefits 819.8 637.6
Other accrued liabilities 258.5 290.0
Minority interest in consolidated
subsidiaries 50.3 57.5
Liabilities subject to compromise 6,256.6 -
Company-obligated mandatorily
redeemable preferred securities
of subsidiary trust holding solely
convertible subordinated
debentures of the Company - 575.0
Shareholders' equity:
Series C ESOP preferred stock 28.0 38.1
Common stock 411.9 352.5
Additional paid-in capital 1,844.6 1,778.6
Accumulated deficit (1,108.9) (113.5)
Accumulated other comprehensive loss (756.2) (504.7)
Other (0.4) (0.8)
Total Shareholders' Equity 419.0 1,550.2
Total Liabilities and
Shareholders' Equity $9,053.2 $9,831.0
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 Year Ended
December 31 December 31
2001 2000 2001 2000
Cash Provided From (Used By)
Operating Activities
Net loss $(111.7) $(337.7) $(1,001.5) $(281.5)
Adjustments to reconcile net
loss to net cash
provided from (used by)
operating activities:
Depreciation and amortization 87.8 87.1 373.7 374.4
Restructuring charge - 58.4 38.0 135.7
Chapter 11 and
Administration related
reorganization expenses 36.2 - 50.6 -
Adjustment of assets held
for sale and other
long-lived assets to fair
value 47.8 60.8 545.1 75.4
Asbestos charge - 184.4 - 184.4
Gain on early retirement of
debt - - (72.2) -
Change in postemployment
benefits 9.0 4.3 8.8 (9.1)
Decrease in accounts
receivable 45.0 81.0 116.4 38.1
Decrease in inventories 7.1 82.5 40.2 40.7
Increase (decrease) in
accounts payable 117.9 (63.4) 82.6 (175.4)
Change in other assets and
other liabilities (20.6) (87.2) 160.4 (113.6)
Payments against
restructuring and
rationalization reserves (11.9) (29.4) (62.0) (72.2)
Payments of Chapter 11 and
Administration costs (14.0) - (28.4) -
Payments against asbestos
liability, net of insurance
receipts 3.3 (116.7) (215.9) (351.4)
Net Cash Provided From (Used
By) Operating Activities 195.9 (75.9) 35.8 (154.5)
Cash Provided From (Used By)
Investing Activities
Expenditures for property,
plant and equipment and
other long-term assets (81.6) (83.9) (313.8) (313.3)
Proceeds from the sale of
property, plant and equipment - - 19.0 -
Proceeds from sale of
businesses 1.0 5.7 242.8 66.6
Business acquisitions, net of
cash acquired - - (18.8) -
Other - 5.8 - 2.4
Net Cash Used By Investing
Activities (80.6) (72.4) (70.8) (244.3)
Cash Provided From (Used By)
Financing Activities
Proceeds from the issuance of
long-term debt 250.8 404.0 917.2 689.0
Principal payments on long-
term debt - (166.7) (171.8) (145.3)
Increase (decrease) in short-
term debt 7.3 (9.5) (64.1) (25.9)
Fees paid for debt issuance
and other securities (19.5) (4.6) (38.0) (4.6)
Repurchase of accounts
receivable under securitization (258.5) (15.2) (348.1) (62.1)
Dividends - (1.0) (1.9) (4.1)
Other (11.7) (7.3) (18.6) (5.5)
Net Cash Provided From (Used
By) Financing Activities (31.6) 199.7 274.7 441.5
Increase in Cash and
Equivalents 83.7 51.4 239.7 42.7
Cash and equivalents at
beginning of period 263.2 55.8 107.2 64.5
Cash and Equivalents at End
of Period $346.9 $107.2 $346.9 $107.2
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 December 31, 2001
Adjustments
Chapter 11
From Impairment Related As
Operations Charge Items Divestitures Reported
Net sales $1,292.1 $- $- $- $1,292.1
Cost of products
sold 1,053.0 - - - 1,053.0
Gross margin 239.1 - - - 239.1
Selling, general and
administrative
expenses 207.0 - - - 207.0
Amortization of goodwill
and other intangible
assets 25.9 - - - 25.9
Adjustment of assets
held for sale and
other long-lived
assets to fair
value - 47.8 - - 47.8
Interest expense, net 39.6 - - - 39.6
Chapter 11 and
Administration related
reorganization
expenses - - 36.2 - 36.2
Other income, net (5.1) - - (1.2) (6.3)
Earnings (Loss) Before
Income Taxes (28.3) (47.8) (36.2) 1.2 (111.1)
Income tax expense
(benefit) 1.3 4.7 (1.8) (3.6) 0.6
Net Earnings
(Loss) $(29.6) $(52.5) $(34.4) $4.8 $(111.7)
Diluted Earnings (Loss)
Per Common Share $(0.36) $(0.64) $(0.42) $0.05 $(1.37)
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)
Year Ended December 31, 2001
Adjustments
Restructuring/
From Impairment
Operations Charge
Net sales $5,457.0 $ -
Cost of products sold 4,372.9 -
Gross margin 1,084.1 -
Selling, general and administrative
expenses 855.5 -
Amortization of goodwill and other
intangible assets 115.3 -
Restructuring charge - 38.0
Adjustment of assets held for sale
and other long-lived assets to fair value - 545.1
Interest expense, net 274.8 -
Chapter 11 and Administration related
reorganization expenses - -
Other expense, net 22.7 -
Loss Before Income Taxes and
Extraordinary Item (184.2) (583.1)
Income tax expense (benefit) 32.0 (39.1)
Loss Before Extraordinary Item (216.2) (544.0)
Extraordinary item - Gain on early
retirement of debt - -
Net Earnings (Loss) $(216.2) $(544.0)
Diluted Earnings (Loss) Per Common
Share $(2.88) $(7.20)
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, net - -
Chapter 11 and Administration related
reorganization expenses 50.6 -
Other expense, net - 36.3
Loss Before Income Taxes and
Extraordinary Item (50.6) (36.3)
Income tax expense (benefit) (1.8) 42.6
Loss Before Extraordinary Item (48.8) (78.9)
Extraordinary item - Gain on early
retirement of debt - -
Net Earnings (Loss) $(48.8) $(78.9)
Diluted Earnings (Loss) Per Common
Share $(0.65) $(1.04)
Tax
Gain on Debt Valuation As
Exchanges Allowance Reported
Net sales $ - $ - $5,457.0
Cost of products sold - - 4,372.9
Gross margin - - 1,084.1
Selling, general and administrative
expenses - - 855.5
Amortization of goodwill and other
intangible assets - - 115.3
Restructuring charge - - 38.0
Adjustment of assets held for sale
and other long-lived assets to fair
value - - 545.1
Interest expense, net - - 274.8
Chapter 11 and Administration related
reorganization expenses - - 50.6
Other expense, net - - 59.0
Loss Before Income Taxes and
Extraordinary Item - - (854.2)
Income tax expense (benefit) 8.8 177.0 219.5
Loss Before Extraordinary Item (8.8) (177.0) (1,073.7)
Extraordinary item - Gain on early
retirement of debt (72.2) - (72.2)
Net Earnings (Loss) $63.4 $(177.0) $(1,001.5)
Diluted Earnings (Loss) Per Common
Share $0.84 $(2.34) $(13.27)