Federal-Mogul Announces First Quarter 2003 Results
SOUTHFIELD, Mich., April 22 -- Federal-Mogul Corporation (BULLETIN BOARD: FDMLQ) today reported a first- quarter net loss of $34 million, compared to a net loss of $1.4 billion in the first quarter of 2002. Excluding charges for restructuring activities, asset impairments, losses from divestitures, Chapter 11 and Administration-related expenses and the cumulative effect of a change in accounting, Federal-Mogul reported earnings from operations of $7 million in the first quarter 2003, compared to breakeven results from operations in the first quarter 2002.
First quarter 2003 sales were $1,410 million, up 5 percent compared to $1,346 million in 2002. Excluding the impact of foreign exchange and divestitures, first quarter 2003 sales were down two percent. Operating cash flows for the first quarter of 2003 were $33 million, compared to $32 million in 2002.
"We are very pleased with our operating earnings improvement, especially in this challenging business environment," said Frank Macher, chairman and chief executive officer. "Our productivity gains continue to outpace the combined effects of inflation and customer pricing pressures. In addition, we were able to offset pension and health care expenses."
Macher added, "We continued to deliver on our commitment to focus resources on core growth businesses by completing the divestiture of our U.S. camshaft operations and our original equipment molded lighting assembly operations."
Aftermarket Sales
Sales of replacement parts to aftermarket customers totaled 43 percent of the Company's first quarter 2003 sales. First quarter 2003 aftermarket sales were $613 million, compared to $600 million for first quarter 2002. Excluding the effects of foreign exchange, aftermarket sales were down two percent compared to 2002. By geographic region, first quarter 2003 aftermarket sales were 75 percent in the Americas and 25 percent in Europe.
"Our ability to bolster market leadership in a period of industry uncertainty is related to our strong brands, new product technology, and continued improvement in delivery performance to industry-leading levels," said Chip McClure, president and chief operating officer. "Through innovative products such as ANCO(R) HydroClear(TM) premium wiper blades -- introduced in North America this month -- we are building on the success of our PACE Award- winning Wagner(R) ThermoQuiet(TM) brake pads to help our customers grow their business. "
Original Equipment Sales
Sales of parts to original equipment (OE) customers totaled 57 percent of the company's first quarter 2003 sales. First quarter 2003 OE sales were $797 million, compared to $746 million in 2002. Excluding the effects of foreign exchange, sales were essentially flat compared with 2002. By geographic region, first quarter 2003 OE sales were 42 percent in the Americas, 56 percent in Europe and 2 percent in the rest of the world.
First quarter OE sales for the global Friction product line improved to $105 million, from $87 million in 2002. Excluding the effect of foreign exchange, Friction sales increased by 8 percent. By geographic region, first quarter 2003 OE Friction product sales were 32 percent in the Americas and 68 percent in Europe.
First quarter OE sales for the global powertrain product lines of Bearings, Pistons, Piston Rings and Liners, and Sintered Valve Train and Transmission Products were $484 million, compared to $431 million in 2002. Excluding divestitures and the effects of foreign exchange, sales increased slightly. By geographic region, first quarter 2003 OE powertrain product sales were 32 percent in the Americas, 67 percent in Europe and 1 percent in the rest of the world.
First quarter OE sales for the global product lines of Sealing Systems and Systems Protection were $164 million, compared with $160 million in 2002. Excluding the effects of movement in foreign exchange, sales were down 2 percent. By geographic region, first quarter 2003 OE Sealing Systems and Systems Protection sales were 71 percent in the Americas, 27 percent in Europe and Africa, and 2 percent in the rest of the world.
First quarter OE sales in all other product lines (which consists primarily of OE Lighting and Asia Pacific) were $44 million compared with $68 million in 2002. The decrease in sales was primarily attributable to the divestiture of the Signal-Stat lighting business in 2002. By geographic region, sales were 61 percent in the Americas and 39 percent in the rest of the world.
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
March 31
2003 2002
Net sales $1,409.8 $1,346.1
Cost of products sold 1,132.0 1,084.8
Gross margin 277.8 261.3
Selling, general and administrative
expenses 226.0 208.5
Amortization of intangible assets 4.1 3.6
Restructuring charges, net 10.3 9.5
Adjustment of assets held for sale
and other long-lived
assets to fair value 1.6 -
Interest expense, net 29.5 30.3
Chapter 11 and Administration
related reorganization expenses 32.8 19.8
Other (income) expense, net (11.2) 1.0
Loss Before Income Taxes (15.3) (11.4)
Income tax expense 18.9 14.2
Loss Before Cumulative Effect of
Change in Accounting Principle (34.2) (25.6)
Cumulative effect of change in
accounting for goodwill
and other intangible assets, net
of applicable income tax benefit - 1,417.9
Net Loss $(34.2) $(1,443.5)
Loss Per Common Share:
Basic and Diluted
Loss before cumulative effect of
change in accounting principle $(0.39) $(0.31)
Cumulative effect of change in
accounting for goodwill and other
intangible assets, net of
applicable income tax benefit - 17.22
Loss Available for Common
Shareholders $(0.39) $(17.53)
Weighted Average Shares (Thousands)
Basic and Diluted 87,125 82,361
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
2003 2002
Assets
Cash and equivalents $410.4 $395.1
Accounts receivable 1,005.4 954.0
Inventories 807.4 800.1
Deferred taxes 17.8 35.4
Prepaid expenses and income tax benefits 186.3 174.5
Total current assets 2,427.3 2,359.1
Property, plant and equipment 2,274.2 2,273.0
Goodwill and indefinite-lived
intangible assets 1,565.9 1,565.2
Definite-lived intangible assets, net 345.2 351.6
Asbestos-related insurance recoverable 765.5 780.6
Prepaid pension costs 328.5 361.5
Other noncurrent assets 217.5 222.3
Total Assets $7,924.1 $7,913.3
Liabilities and Shareholders' Deficit
Short-term debt, including current
portion of long-term debt $394.2 $346.1
Accounts payable 347.1 318.9
Accrued compensation 214.1 242.1
Restructuring and rationalization reserves 84.2 90.8
Accrued income taxes 68.2 62.5
Other accrued liabilities 370.5 363.4
Total current liabilities 1,478.3 1,423.8
Liabilities subject to compromise 6,045.4 6,053.2
Long-term debt 11.8 14.3
Postemployment benefits 1,536.4 1,541.2
Long-term portion of deferred income taxes 48.9 52.4
Other accrued liabilities 183.8 186.3
Minority interest in consolidated subsidiaries 45.0 45.7
Shareholders' deficit:
Series C ESOP preferred stock 28.0 28.0
Common stock 435.6 435.6
Additional paid-in capital 2,060.5 2,060.5
Accumulated deficit (2,778.1) (2,743.9)
Accumulated other comprehensive loss (1,171.5) (1,183.7)
Other - (0.1)
Total Shareholders' Deficit (1,425.5) (1,403.6)
Total Liabilities and
Shareholders' Deficit $7,924.1 $7,913.3
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
2003 2002
Cash Provided From (Used By)
Operating Activities
Net loss $(34.2) $(1,443.5)
Adjustments to reconcile net loss to
net cash provided from (used by)
operating activities:
Depreciation and amortization 73.8 67.4
Restructuring charge 10.3 9.5
Chapter 11 and Administration
related reorganization expenses 32.8 19.8
Adjustment of assets held for
sale and other
long-lived assets to fair value 1.6 -
(Gain) loss on sale of businesses 0.9 (6.3)
Cumulative effect of change in
accounting principle - 1,464.5
Change in postemployment
benefits, including pensions 29.4 12.6
Change in deferred taxes 13.0 (4.5)
Increase in accounts receivable (46.6) (83.8)
Increase in inventories (2.0) (38.7)
Increase in accounts payable 20.3 25.7
Change in other assets and other
liabilities (32.4) 31.3
Payments against restructuring
and rationalization reserves (17.4) (8.6)
Payments of Chapter 11 and
Administration costs (16.2) (13.9)
Net Cash Provided From Operating
Activities 33.3 31.5
Cash Provided From (Used By) Investing
Activities
Expenditures for property, plant and
equipment and other long-term assets (65.1) (63.5)
Proceeds from sale of businesses - 21.8
Net Cash Used By Investing Activities (65.1) (41.7)
Cash Provided From (Used By) Financing
Activities
Principal payments on long-term debt (2.5) (1.9)
Borrowings from DIP credit facility 75.0 -
Principal payments on DIP credit facility (10.2) (6.1)
Decrease in short-term debt (16.7) (9.9)
Net Cash Provided From (Used By)
Financing Activities 45.6 (17.9)
Effect of Foreign Currency Exchange
Rate Fluctuations On Cash 1.5 (3.0)
Increase (Decrease) in Cash and
Equivalents 15.3 (31.1)
Cash and equivalents at beginning of
period 395.1 346.9
Cash and Equivalents at End of Period $410.4 $315.8
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 March 31, 2003
Adjustments
Chapter (Gain)/
Restructuring/ 11 Loss As
From Impairment Related from Reported
Operations Charge Items Divestitures
Net sales $1,409.8 $ - $ - $ - $1,409.8
Cost of products sold 1,132.0 - - - 1,132.0
Gross margin 277.8 - - - 277.8
Selling, general and
administrative expenses 226.0 - - - 226.0
Amortization of intangible
assets 4.1 - - - 4.1
Restructuring charge - 10.3 - - 10.3
Adjustment of assets held
for sale and other
long-lived assets
to fair value - 1.6 - - 1.6
Interest expense, net 29.5 - - - 29.5
Chapter 11 and
Administration related
reorganization expenses - - 32.8 - 32.8
Other (income)
expense, net (12.1) - - 0.9 (11.2)
Earnings (Loss) Before
Income Taxes 30.3 (11.9) (32.8) (0.9) (15.3)
Income tax expense
(benefit) 23.2 (1.8) (2.3) (0.2) 18.9
Net Income (Loss) $7.1 $(10.1) $(30.5) $(0.7) $(34.2)
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 March 31, 2002
Adjustments
Chapter 11
From Restructuring Related
Operations Charge Items
Net sales $1,346.1 $ - $ -
Cost of products sold 1,084.8 - -
Gross margin 261.3 - -
Selling, general and
administrative expenses 208.5 - -
Amortization of intangible
assets 3.6 - -
Restructuring charge - 9.5 -
Interest expense, net 30.3 - -
Chapter 11 and Administration
related reorganization expenses - - 19.8
Other (income) expense, net 7.3 - -
Earnings (Loss) Before Income Taxes
and Cumulative Effect of Change
in Accounting Principle 11.6 (9.5) (19.8)
Income tax expense (benefit) 11.5 (3.8) (1.1)
Earnings (Loss) before Cumulative
Effect of Change in
Accounting Principle 0.1 (5.7) (18.7)
Cumulative effect of change in
accounting for goodwill and
other intangible assets, net of
applicable income tax benefit - - -
Net Earnings (Loss) $0.1 $(5.7) $(18.7)
Cumulative
Effect of
(Gain)/ Change Tax As
Loss in Valuation Reported
from Accounting Allowance
Divestitures Principle
Net sales $ - $ - $ - $1,346.1
Cost of products sold - - - 1,084.8
Gross margin - - - 261.3
Selling, general and
administrative expenses - - - 208.5
Amortization of intangible
assets - - - 3.6
Restructuring charge - - - 9.5
Interest expense, net - - - 30.3
Chapter 11 and Administration
related reorganization expenses - - - 19.8
Other (income) expense, net (6.3) - - 1.0
Earnings (Loss) Before Income
Taxes and Cumulative Effect
of Change
in Accounting Principle 6.3 - - (11.4)
Income tax expense (benefit) - - 7.6 14.2
Earnings (Loss) before
Cumulative Effect of
Change in
Accounting Principle 6.3 - (7.6) (25.6)
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) $6.3 $(1,417.9) $(7.6) $(1,443.5)