Federal-Mogul Announces First Quarter 2002 Results
SOUTHFIELD, Mich., May 2 Federal-Mogul Corporation today reported first quarter sales of $1,346 million, down seven percent compared to $1,451 million in 2001. Excluding the effects of foreign currency exchange and businesses divested in the prior year, first quarter sales were down two percent from 2001. First quarter earnings from operations were $(0.06) per share, compared to $(0.22) per share in 2001. First quarter 2001 earnings per share from operations exclude previously announced restructuring and impairment charges and have been adjusted on a pro forma basis for the adoption of SFAS 142. After these charges, reported first quarter 2002 earnings were $(0.31) per share compared to $(0.89) per share in 2001.
First quarter 2002 cash flow from operations, net of capital expenditures, was $(32) million compared to $(146) million for first quarter 2001.
"We are on schedule with the implementation of our operational improvement plan, with disciplined productivity improvement actions including investing strategically in plants and equipment. I'm very encouraged by the results we are beginning to see in our operations, especially in this difficult business environment," said Frank Macher, chairman and chief executive officer.
Sales by Customer Channel
Sales of replacement parts to aftermarket customers totaled 45 percent of the company's first quarter 2002 sales or $611.6 million. By geographic region, first quarter 2002 aftermarket sales were 77 percent in North America, 21 percent in Europe and two percent in the rest of the world.
Sales of original equipment parts totaled 55 percent of the company's first quarter 2002 sales or $734.5 million. By geographic region, first quarter 2002 sales were 50 percent in North America, 49 percent in Europe and one percent in the rest of the world.
Sales by Global Product Line Bearings
First quarter 2002 sales for the global Bearings product line were $128 million for 9.5 percent of Federal-Mogul's total sales compared to $153 million in 2001, reflecting a decline in original equipment sales. By customer, total Bearings sales were 77 percent for original equipment and 23 percent for the aftermarket. By geographic region, Bearings original equipment sales were 40 percent in North America, 55 percent in Europe and five percent in the rest of the world.
Friction
First quarter 2002 sales for the global Friction product line were $166 million for 18.5 percent of Federal-Mogul's total sales compared to $162 million in 2001, reflecting strong sales of Wagner® ThermoQuiet(TM) premium brake pads to aftermarket customers. By customer, total Friction sales were 53 percent for original equipment and 47 percent for the aftermarket. By geographic region, Friction original equipment sales were 34 percent in North America, 64 percent in Europe and two percent in the rest of the world.
Lighting
First quarter 2002 sales for the Lighting product line were $85 million for six percent of Federal-Mogul's total sales compared to $82 million in 2001, reflecting the start of new original equipment programs. By customer, total Lighting sales were 72 percent for original equipment and 28 percent for the aftermarket. By geographic region, Lighting original equipment sales were 94 percent in North America and six percent in the rest of the world.
Pistons
First quarter 2002 sales for the global Pistons product line were $181 million for 13 percent of Federal-Mogul's total sales compared to $180 million in 2001. By customer, total Pistons sales were 89 percent for original equipment and 11 percent for the aftermarket. By geographic region, Pistons original equipment sales were 40 percent in North America and 60 percent in Europe, where Federal-Mogul's strong position in diesel engine technology contributes significantly. Federal-Mogul was awarded a contract to supply its patented Monosteel(TM) piston to a global heavy-truck engine manufacturer; the initial five-year agreement is expected to generate nearly $100 million in sales for the company over the life of the contract.
Piston Rings and Liners
First quarter 2002 sales for the global Piston Rings and Liners product line were $110 million for eight percent of Federal-Mogul's total sales compared to $120 million in 2001, a decrease caused by lower demand in both original equipment and aftermarket sales. By customer, total Piston Rings and Liners sales were 86 percent for original equipment and 14 percent for the aftermarket. By geographic region, Piston Rings and Liners original equipment sales were 42 percent in North America and 58 percent in Europe.
Sealing Systems
First quarter 2002 sales for the global Sealing Systems product line were $250 million for 18.5 percent of Federal-Mogul's total sales compared to $254 million in 2001. Original equipment sales declines were offset partially by increases in aftermarket sales of Federal-Mogul's Fel-Pro® gaskets. By customer, total Sealing Systems sales were 47 percent for original equipment and 53 percent for the aftermarket. By geographic region, Sealing Systems original equipment sales were 74 percent in North America and 26 percent in Europe.
Sintered Valve Train and Transmission Products
First quarter 2002 sales for the global Sintered Valve Train and Transmission Products line were $85 million for six percent of Federal-Mogul's total sales compared to $92 million in 2001. By customer, total Sintered Valve Train and Transmission Products sales were 98 percent for original equipment and two percent for the aftermarket. By geographic region, Sintered Valve Train and Transmission Products original equipment sales were 31 percent in North America, 67 percent in Europe and two percent in the rest of the world.
Systems Protection
First quarter 2002 sales for the global Systems Protection product line were $31 million for two percent of Federal-Mogul's total sales compared to $30 million in 2001. Original equipment customers account for 100 percent of Systems Protection sales. By geographic region, Systems Protection sales were for 68 percent in North America, 29 percent in Europe and three percent in the rest of the world.
On April 24, 2002, Federal-Mogul common stock began trading on the NASD over-the-counter bulletin board under the ticker symbol FDMLQ. 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.
Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142") was adopted on January 1, 2002, and requires companies to no longer amortize goodwill and other indefinite-lived intangible assets. The company continues to evaluate the impairment provisions of SFAS 142 and expects to record a non-cash charge in its second quarter 2002 results.
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
March 31
2002 2001
Net sales $1,346.1 $1,450.7
Cost of products sold 1,084.8 1,147.4
Gross margin 261.3 303.3
Selling, general and administrative
expenses 213.4 227.6
Amortization of goodwill and other
intangible assets 3.6 30.4
Restructuring charge 9.5 29.8
Adjustment of assets held for sale
and other long-lived
assets to fair value - 0.6
Interest expense, net 30.3 82.6
Chapter 11 and Administration
related reorganization expenses 14.9 -
Other expense, net 1.0 6.5
Loss Before Income Taxes (11.4) (74.2)
Income tax expense (benefit) 14.2 (12.0)
Net Loss $(25.6) $(62.2)
Loss Per Common Share:
Basic and Diluted $(0.31) $(0.89)
Weighted Average Shares (Thousands)
Basic and Diluted 82,361 70,583
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)
March 31 December 31
2002 2001
Assets
Cash and equivalents $315.8 $346.9
Accounts receivable 1,023.4 944.8
Inventories 746.5 721.9
Deferred taxes 55.4 55.4
Prepaid expenses and income tax benefits 165.4 177.6
Total current assets 2,306.5 2,246.6
Property, plant and equipment 2,121.3 2,163.7
Goodwill 2,713.5 2,738.9
Other intangible assets 607.1 624.7
Asbestos-related insurance recoverable 712.6 723.2
Other noncurrent assets 532.8 556.1
Total Assets $8,993.8 $9,053.2
Liabilities and Shareholders' Equity
Short-term debt, including current
portion of long-term debt $15.0 $24.9
Accounts payable 328.5 299.5
Accrued compensation 211.6 193.9
Restructuring and rationalization reserves 81.4 81.1
Other accrued liabilities 428.5 382.9
Total current liabilities 1,065.0 982.3
Long-term debt 258.7 266.7
Postemployment benefits 817.4 819.8
Other accrued liabilities 242.3 258.5
Minority interest in consolidated subsidiaries 46.7 50.3
Liabilities subject to compromise 6,244.8 6,256.6
Shareholders' equity:
Series C ESOP preferred stock 28.0 28.0
Common stock 411.9 411.9
Additional paid-in capital 1,845.1 1,844.6
Accumulated deficit (1,140.6) (1,115.0)
Accumulated other comprehensive loss (825.2) (750.1)
Other (0.3) (0.4)
Total Shareholders' Equity 318.9 419.0
Total Liabilities and
Shareholders' Equity $8,993.8 $9,053.2
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
March 31
2002 2001
Cash Provided From (Used By) Operating
Activities
Net loss $(25.6) $(62.2)
Adjustments to reconcile net loss to
net cash provided from (used by) operating
activities:
Depreciation and amortization 67.4 97.8
Restructuring charge 9.5 29.8
Chapter 11 and Administration related
reorganization expenses 14.9 -
Adjustment of assets held for sale and
other long-lived assets to fair value - 0.6
Change in postemployment benefits 0.2 3.5
Increase in accounts receivable (83.8) (38.3)
(Increase) decrease in inventories (38.7) 9.1
Increase in accounts payable 25.7 21.9
Change in other assets and other liabilities 84.0 (38.8)
Payments against restructuring and
rationalization reserves (8.6) (16.0)
Payments of Chapter 11 and Administration
costs (13.9) -
Refunds (payments) against asbestos
liability 0.4 (88.3)
Net Cash Provided From (Used By) Operating
Activities 31.5 (80.9)
Cash Provided From (Used By) Investing Activities
Expenditures for property, plant and
equipment and other long-term assets (63.5) (65.0)
Proceeds from sale of businesses 21.8 -
Net Cash Used By Investing Activities (41.7) (65.0)
Cash Provided From (Used By) Financing
Activities
Proceeds from the issuance of long-
term debt - 236.0
Principal payments on long-term debt (8.0) (22.1)
Decrease in short-term debt (9.9) (32.1)
Fees paid for debt issuance and
other securities - (14.2)
Repurchase of accounts receivable
under securitization - (48.2)
Dividends - (0.7)
Other (3.0) 3.0
Net Cash Provided From (Used By)
Financing Activities (20.9) 121.7
Increase in Cash and Equivalents (31.1) (24.2)
Cash and equivalents at beginning of
period 346.9 107.2
Cash and Equivalents at End of Period $315.8 $83.0
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 March 31, 2002
Adjustments
From Restructuring
Operations Charge
Net sales $1,346.1 $-
Cost of products sold 1,084.8 -
Gross margin 261.3 -
Selling, general and administrative
expenses 213.4 -
Amortization of goodwill and other
intangible assets 3.6 -
Restructuring charge - 9.5
Interest expense, net 30.3 -
Chapter 11 and Administration related
reorganization expenses - -
Other (income) expense, net 7.3 -
Earnings (Loss) Before Income
Taxes 6.7 (9.5)
Income tax expense (benefit) 11.5 (3.8)
Net Earnings (Loss) $(4.8) $(5.7)
Diluted Earnings (Loss) Per Common Share $(0.06) $(0.07)
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 - -
Interest expense, net - -
Chapter 11 and Administration related
reorganization expenses 14.9 -
Other (income) expense, net - (6.3)
Earnings (Loss) Before Income
Taxes (14.9) 6.3
Income tax expense (benefit) (1.1) -
Net Earnings (Loss) $(13.8) $6.3
Diluted Earnings (Loss) Per Common
Share $(0.17) $0.08
Tax
Valuation As
Allowance Reported
Net sales - $1,346.1
Cost of products sold - 1,084.8
Gross margin - 261.3
Selling, general and administrative expenses - 213.4
Amortization of goodwill and other
intangible assets - 3.6
Restructuring charge - 9.5
Interest expense, net - 30.3
Chapter 11 and Administration related
reorganization expenses - 14.9
Other (income) expense, net - 1.0
Earnings (Loss) Before Income
Taxes - (11.4)
Income tax expense (benefit) 7.6 14.2
Net Earnings (Loss) (7.6) $(25.6)
Diluted Earnings (Loss) Per Common
Share (0.09) $(0.31)