Federal-Mogul Reports Fourth Quarter and Full Year 2002 Results
SOUTHFIELD, Mich., Feb. 13 -- Federal-Mogul Corporation (BULLETIN BOARD: FDMLQ) today reported its financial results for the fourth quarter and full year of 2002. Fourth quarter 2002 sales were $1,289 million, compared to $1,292 million for the same period last year. For the fourth quarter 2002, Federal-Mogul reported a net loss of $113 million, compared to a net loss of $112 million in 2001. Excluding charges for restructuring activities, asset impairments, losses from divestitures of businesses and Chapter 11 and Administration-related expenses, Federal-Mogul reported a net loss from operations of $17 million in the fourth quarter 2002 compared with a net loss from operations of $23 million for the same period last year. Fourth quarter 2002 net cash provided from operating activities was $68 million.
For the full year, Federal-Mogul posted sales of $5,422 million, compared to full year 2001 sales of $5,457 million. The full year net loss was $1,629 million for 2002, compared to a net loss in 2001 of $1,002 million. The full year net loss reported for 2002 included a $1,418 million charge for a cumulative effect of change in accounting from the adoption of Statement of Financial Accounting Standard No. 142 (FAS 142). Full year 2002 net cash provided from operating activities was $257 million.
Excluding charges for restructuring, impairment, gains and losses on sales of businesses, and Chapter 11 and Administration-related expenses, Federal- Mogul reported full-year 2002 earnings before income taxes and cumulative effect of change in accounting principle of $100 million compared to a loss of $178 million in 2001. The loss reported in 2002 excludes amortization of goodwill and certain other intangible assets as a result of the adoption of FAS 142. Also excluded is a portion of interest expense on pre-petition debt as a result of the restructuring proceedings. Excluding the aforementioned items, operating results in 2002 showed gains over the prior year due to productivity improvements. These improvements were offset by significant increases in pension costs.
Due to the market performance of the company's pension plans' investments over the past several years, Federal-Mogul contributed $26 million to its United States pension plan. Federal-Mogul has a schedule of contributions to pay approximately one million British pounds per month in 2003 in the United Kingdom. Funding strategies are currently under review for its U.S. plan.
As part of the company's ongoing efforts to reduce its cost structure, Federal-Mogul's global employment decreased four percent in 2002 to 47,000 employees.
"From an operations standpoint, our efforts in 2002 have resulted in profitability improvements and productivity increases. We are using all of our resources, both human and capital, to improve and grow our operations for the future. In addition, our announced plan to acquire Honeywell's global Bendix friction-materials business to grow one of our core product lines further signifies the exciting future we have ahead of us," said Frank Macher, chairman and chief executive officer. "Our recently announced agreement in principle with our major U.S. creditors on a consensual Plan of Reorganization is evidence we are on-track to successfully emerge from Chapter 11 this year with a viable capital structure and operations free from asbestos liability. We will emerge as a stronger Federal-Mogul ready to capitalize on our sustainable competitive advantage in both product and process technologies."
Aftermarket Sales
Sales of replacement parts to aftermarket customers totaled 45 percent of the company's 2002 sales. Full year 2002 aftermarket sales were $2,423 million compared to $2,542 million in 2001. Excluding divestitures and the effects of movement in foreign exchange, sales decreased by two percent. By geographic region, 2002 sales were 77 percent in the Americas and 23 percent in Europe and Africa. Fourth quarter 2002 aftermarket sales were $563 million, compared to $602 million for fourth quarter 2001. Excluding divestitures and the effects of movement in foreign exchange, sales decreased by seven percent.
"We are pleased with our performance in this difficult market as we have been able to increase share through the strength of our brands and new product introductions," said Macher. "Our revolutionary one-piece Wagner(R) ThermoQuiet(TM) premium disc brake pads have exceeded customer expectations, and we are very proud of this product's recognition as a PACE Award finalist for significant innovation."
Federal-Mogul earned several notable honors from customers for its 2002 performance, being named Supplier of the Year for the second consecutive year by Aftermarket Auto Parts Alliance, and Sales and Service Vendor of the Year by O'Reilly Auto Parts. In addition, Federal-Mogul was recognized with brand marketing awards including 18 Global Design Awards, the most ever won in a single year, from Aftermarket Business magazine.
Original Equipment Sales
Sales of original equipment (OE) parts totaled 55 percent of the company's full year sales. Full year 2002 original equipment sales were $2,999 million, compared to $2,915 million in 2001. Excluding divestitures and the effects of movement in foreign exchange, sales increased by three percent. By geographic region, 2002 sales were 48 percent in the Americas, 49 percent in Europe and Africa, and three percent in the rest of the world. Fourth quarter 2002 sales were $726 million, compared to $690 million in 2001. Excluding divestitures and the effects of movement in foreign exchange, sales were essentially flat.
Full year original equipment sales for the global Friction product line were $374 million, compared to $339 million in 2001. Excluding the effects of movement in foreign exchange, sales increased by eight percent. By geographic region, 2002 Friction OE sales were 36 percent in the Americas and 64 percent in Europe and Africa and the rest of the world. In the fourth quarter, Friction OE sales were $96 million, up 16 percent compared to fourth quarter 2001 sales excluding the effects of movement in foreign exchange.
Full year original equipment sales for the global powertrain product lines of Bearings, Pistons, Piston Rings and Liners, and Sintered Valve Train and Transmission Products were $1,747 million, compared to $1,712 million in 2001. Excluding divestitures and the effects of movement in foreign exchange, sales increased by three percent. By geographic region, 2002 sales of the powertrain OE products were 37 percent in North America, 62 percent in Europe and one percent in the rest of the world. In the fourth quarter, powertrain OE sales were $425 million, compared to $406 million in 2001. Excluding divestitures and the effects of movement in foreign exchange, sales were flat.
Full year original equipment sales for the global product lines of Sealing Systems and Systems Protection were $639 million, compared to $630 million in 2001. Excluding the effects of movement in foreign exchange, sales were flat. By geographic region, 2002 Sealing Systems and Systems Protection OE sales were 74 percent in North America, 25 percent in Europe and Africa, and one percent in the rest of the world. In the fourth quarter, Sealing Systems and Systems Protection OE sales were $150 million, compared to $146 million in 2001. Excluding the effects of movement in foreign exchange, sales increased one percent.
Federal-Mogul is a global supplier of automotive components, sub-systems, modules and 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 47,000 people in 24 countries. On October 1, 2001, Federal-Mogul decided to separate its asbestos liabilities from its true operating potential by voluntarily filing for financial restructuring under Chapter 11 of the Bankruptcy Code in the United States and Administration in the United Kingdom. For more information on Federal-Mogul, visit the company's web site at http://www.federal-mogul.com/ .
Statements contained in this press release, which are not historical fact, constitute "Forward-Looking Statements." Actual results may differ materially due to numerous important factors that are described in Federal-Mogul's most recent report to the SEC on Form 10-K, which may be revised or supplemented in subsequent reports to the SEC on Forms 10-Q and 8-K. Such factors include, among others, the cost and timing of implementing restructuring actions, the results of the Chapter 11 and Administration proceedings, the Company's ability to generate cost savings or manufacturing efficiencies to offset or exceed contractually or competitively required price reductions or price reductions to obtain new business, conditions in the automotive industry, and certain global and regional economic conditions. Federal-Mogul does not intend or assume any 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
2002 2001 2002 2001
Net sales $1,288.8 $1,292.1 $5,422.4 $5,457.0
Cost of products sold 1,049.0 1,055.8 4,380.3 4,381.7
Gross margin 239.8 236.3 1,042.1 1,075.3
Selling, general and
administrative expenses 202.7 197.5 826.3 840.0
Amortization of goodwill and
other intangible assets 4.3 25.9 14.1 115.3
Restructuring charge 15.3 - 43.3 38.0
Adjustment of assets held for
sale and other long-lived
assets to fair value 43.0 47.8 70.2 545.1
Interest expense, net 32.8 39.6 122.8 274.8
Chapter 11 and Administration
related reorganization expenses 31.0 42.9 107.4 57.3
Gain on early extinguishment
of debt - - - (72.2)
Other (income) expense, net (7.8) (6.3) (21.8) 59.0
Loss Before Income Taxes and
Cumulative Effect
of Change in Accounting
Principle (81.5) (111.1) (120.2) (782.0)
Income tax expense 31.0 0.6 90.8 219.5
Loss Before Cumulative Effect
of Change in Accounting
Principle (112.5) (111.7) (211.0) (1,001.5)
Cumulative effect of change in
accounting for goodwill
and other intangible assets,
net of applicable
income tax benefit - - 1,417.9 -
Net Loss $(112.5) $(111.7) $(1,628.9) $(1,001.5)
Loss Per Common Share:
Basic and Diluted
Loss before cumulative effect
of change
in accounting principle $(1.33) $(1.37) $(2.54) $(13.27)
Cumulative effect of change
in accounting for
goodwill and other
intangible assets, net of
applicable income tax benefit - - 17.08 -
Loss Available for Common
Shareholders $(1.33) $(1.37) $(19.62) $(13.27)
Weighted Average Shares (Thousands)
Basic and Diluted 84,886 81,803 83,022 75,598
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
2002 2001
Assets
Cash and equivalents $395.1 $346.9
Accounts receivable 954.0 944.8
Inventories 800.1 721.9
Deferred taxes 35.4 55.4
Prepaid expenses and income tax benefits 174.5 177.6
Total current assets 2,359.1 2,246.6
Property, plant and equipment 2,273.0 2,163.7
Goodwill 1,401.0 2,738.9
Other intangible assets 515.8 624.7
Asbestos-related insurance recoverable 780.6 723.2
Prepaid pension costs 361.5 354.5
Other noncurrent assets 222.3 201.6
Total Assets $7,913.3 $9,053.2
Liabilities and Shareholders' Equity (Deficit)
Short-term debt, including current
portion of long-term debt $346.1 $24.9
Accounts payable 318.9 299.5
Accrued compensation 242.1 193.9
Restructuring and rationalization
reserves 90.8 81.1
Accrued taxes 93.6 47.2
Other accrued liabilities 332.3 335.7
Total current liabilities 1,423.8 982.3
Liabilities subject to compromise 6,057.3 6,256.6
Long-term debt 14.3 266.7
Postemployment benefits 1,541.2 819.8
Long-term portion of deferred income taxes 52.4 96.5
Other accrued liabilities 186.3 162.0
Minority interest in consolidated subsidiaries 45.7 50.3
Shareholders' equity (deficit):
Series C ESOP preferred stock 28.0 28.0
Common stock 435.6 411.9
Additional paid-in capital 2,060.5 1,844.6
Accumulated deficit (2,743.9) (1,115.0)
Accumulated other comprehensive loss (1,187.8) (750.1)
Other (0.1) (0.4)
Total Shareholders' Equity (Deficit) (1,407.7) 419.0
Total Liabilities and
Shareholders' Equity (Deficit) $7,913.3 $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 Year Ended
December 31 December 31
2002 2001 2002 2001
Cash Provided From (Used By)
Operating Activities
Net loss $(112.5) $(111.7) $(1,628.9) $(1,001.5)
Adjustments to reconcile net
loss to net cash
provided from (used by)
operating activities:
Depreciation and
amortization 70.2 87.8 277.1 373.7
Gain on early
extinguishment of debt - - - (72.2)
Restructuring charge 15.3 - 43.3 38.0
Chapter 11 and
Administration related
reorganization expenses 31.0 42.9 107.4 57.3
Adjustment of assets held
for sale and other
long-lived assets to fair
value 43.0 47.8 70.2 545.1
(Gain) loss on sale of
businesses 3.6 (1.2) (1.1) 36.3
Cumulative effect of change
in accounting principle - - 1,464.5 -
Change in postemployment
benefits, including pensions 27.9 9.9 111.7 39.5
Payments into pension plans (28.9) (6.6) (35.2) (20.9)
Change in deferred taxes (38.1) (44.9) (59.2) 219.2
Decrease in accounts
receivable 111.2 45.0 44.1 116.4
(Increase) decrease in
inventories 14.1 7.1 (46.8) 40.2
Increase (decrease) in
accounts payable (9.8) 117.9 6.4 82.6
Change in other assets and
other liabilities 13.2 24.5 60.1 (111.6)
Payments against
restructuring and
rationalization reserves (26.1) (11.9) (53.1) (62.0)
Payments of Chapter 11 and
Administration costs (46.4) (14.0) (104.0) (28.4)
Payments against asbestos
liability, net of
insurance receipts - 3.3 - (215.9)
Net Cash Provided From
Operating Activities 67.7 195.9 256.5 35.8
Cash Provided From (Used By)
Investing Activities
Expenditures for property,
plant and equipment and
other long-term assets (111.0) (81.6) (339.1) (313.8)
Proceeds from the sale of
property, plant and
equipment - - - 19.0
Proceeds from sale of
businesses 9.1 1.0 34.6 242.8
Business acquisitions, net of
cash acquired - - - (18.8)
Net Cash Used By Investing
Activities (101.9) (80.6) (304.5) (70.8)
Cash Provided From (Used By)
Financing Activities
Proceeds from the issuance of
long-term debt 4.1 0.8 6.6 667.2
Principal payments on long-
term debt (0.3) - (2.4) (171.8)
Borrowings from DIP credit
facility 75.0 250.0 75.0 250.0
Principal payments on DIP
credit facility (0.3) - (10.3) -
Increase (decrease) in short-
term debt 3.2 7.3 6.5 (64.1)
Fees paid for debt issuance
and other securities - (19.5) - (38.0)
Repurchase of accounts
receivable under securitization - (258.5) - (348.1)
Other - (8.8) - (26.2)
Net Cash Provided From
(Used By) Financing
Activities 81.7 (28.7) 75.4 269.0
Effect of Foreign Currency
Exchange Rate Fluctuations
On Cash 8.3 (2.9) 20.8 5.7
Increase in Cash and
Equivalents 55.8 83.7 48.2 239.7
Cash and equivalents at
beginning of period 339.3 263.2 346.9 107.2
Cash and Equivalents at End
of Period $395.1 $346.9 $395.1 $346.9
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, 2002
Adjustments
Restructuring/ Chapter 11
From Impairment Related
Operations Charge Items
Net sales $1,288.8 $ - $ -
Cost of products sold 1,049.0 - -
Gross margin 239.8 - -
Selling, general and administrative
expenses 202.7 - -
Amortization of goodwill and other
intangible assets 4.3 - -
Restructuring charge - 15.3 -
Adjustment of assets held for sale
and other long-lived assets to fair
value - 43.0 -
Interest expense, net 32.8 - -
Chapter 11 and Administration related
reorganization expenses - - 31.0
Other (income) expense, net (11.4) - -
Earnings (Loss) Before Income Taxes 11.4 (58.3) (31.0)
Income tax expense (benefit) 28.6 (13.2) (5.1)
Net Loss $(17.2) $(45.1) $(25.9)
Basic Loss Per Common Share $(0.20) $(0.53) $(0.31)
(Gain)/ Tax
Loss from Valuation As
Divestitures Allowance Reported
Net sales $ - $ - $1,288.8
Cost of products sold - - 1,049.0
Gross margin - - 239.8
Selling, general and administrative
expenses - - 202.7
Amortization of goodwill and other
intangible assets - - 4.3
Restructuring charge - - 15.3
Adjustment of assets held for sale
and other long-lived assets to fair
value - - 43.0
Interest expense, net - - 32.8
Chapter 11 and Administration
related reorganization expenses - - 31.0
Other (income) expense, net 3.6 - (7.8)
Earnings (Loss) Before Income Taxes (3.6) - (81.5)
Income tax expense (benefit) (0.3) 21.0 31.0
Net Loss $(3.3) $(21.0) $(112.5)
Basic Loss Per Common Share $(0.04) $(0.25) $(1.33)
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, 2002
Adjustments
Restructuring/ Chapter 11
From Impairment Related
Operations Charge Items
Net sales $5,422.4 $- $-
Cost of products sold 4,380.3 - -
Gross margin 1,042.1 - -
Selling, general and administrative
expenses 826.3 - -
Amortization of goodwill and other
intangible assets 14.1 - -
Restructuring charge - 43.3 -
Adjustment of assets held for sale
and other long-lived assets to
fair value - 70.2 -
Interest expense, net 122.8 - -
Chapter 11 and Administration related
reorganization expenses - - 107.4
Other income, net (20.7) - -
Earnings (Loss) Before Income Taxes
and Cumulative Effect of Change
in Accounting Principle 99.6 (113.5) (107.4)
Income tax expense (benefit) 79.9 (22.4) (10.9)
Earnings (Loss) Before Cumulative
Effect of Change in Accounting
Principle 19.7 (91.1) (96.5)
Cumulative effect of change in
accounting for goodwill and other
intangible assets, net of applicable
income tax benefit - - -
Net Earnings (Loss) $19.7 $(91.1) $(96.5)
Basic Earnings (Loss) Per Common
Share $0.24 $(1.10) $(1.16)
Cumulative
(Gain)/ Effect of Change Tax
Loss from in Accounting Valuation As
Divestitures Principle Allowance Reported
Net sales $- $- $- $5,422.4
Cost of products sold - - - 4,380.3
Gross margin - - - 1,042.1
Selling, general and
administrative
expenses - - - 826.3
Amortization of
goodwill and other
intangible assets - - - 14.1
Restructuring charge - - - 43.3
Adjustment of assets
held for sale and
other long-lived
assets to fair
value - - - 70.2
Interest expense, net - - - 122.8
Chapter 11 and
Administration related
reorganization
expenses - - - 107.4
Other income, net (1.1) - - (21.8)
Earnings (Loss)
Before Income
Taxes and
Cumulative Effect
of Change in
Accounting Principle 1.1 - - (120.2)
Income tax expense
(benefit) (0.3) - 44.5 90.8
Earnings (Loss) Before
Cumulative Effect
of Change in
Accounting
Principle 1.4 - (44.5) (211.0)
Cumulative effect of
change in accounting
for goodwill and other
intangible assets,
net of applicable
income tax benefit - 1,417.9 - 1,417.9
Net Earnings (Loss) $1.4 $(1,417.9) $(44.5) $(1,628.9)
Basic Earnings (Loss)
Per Common Share $0.02 $(17.08) $(0.54) $(19.62)
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 1,055.8 - - - 1,055.8
Gross margin 236.3 - - - 236.3
Selling, general and
administrative
expenses 197.5 - - - 197.5
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 - - 42.9 - 42.9
Other income, net (5.1) - - (1.2) (6.3)
Earnings (Loss) Before
Income Taxes (21.6) (47.8) (42.9) 1.2 (111.1)
Income tax expense
(benefit) 1.3 4.7 (1.8) (3.6) 0.6
Net Earnings
(Loss) $(22.9) $(52.5) $(41.1) $4.8 $(111.7)
Basic Earnings
(Loss)Per Common
Share $(0.28) $(0.64) $(0.50) $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/ Chapter 11
From Impairment Related
Operations Charge Items
Net sales $5,457.0 $- $-
Cost of products sold 4,381.7 - -
Gross margin 1,075.3 - -
Selling, general and administrative
expenses 840.0 - -
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 - - 57.3
Gain on early extinguishment of debt - - -
Other expense, net 22.7 - -
Loss Before Income Taxes and
Extraordinary Item (177.5) (583.1) (57.3)
Income tax expense (benefit) 32.0 (39.1) (1.8)
Net Earnings (Loss) $(209.5) $(544.0) $(55.5)
Basic Earnings (Loss) Per Common
Share $(2.80) $(7.20) $(0.73)
Tax
Gain on Debt Valuation As
Divestitures Exchanges Allowance Reported
Net sales $- $- $- $5,457.0
Cost of products sold - - - 4,381.7
Gross margin - - - 1,075.3
Selling, general and
administrative expenses - - - 840.0
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 - - - 57.3
Gain on early extinguishment
of debt - (72.2) - (72.2)
Other expense, net 36.3 - - 59.0
Loss Before Income Taxes
and Extraordinary Item (36.3) 72.2 - (782.0)
Income tax expense (benefit) 42.6 8.8 177.0 219.5
Net Earnings (Loss) $(78.9) $63.4 $(177.0) $(1,001.5)
Basic Earnings (Loss)
Per Common Share $(1.04) $0.84 $(2.34) $(13.27)
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