Federal-Mogul Reports Fourth Quarter and Full Year 2003 Results - "Pleased with progress - F-M lost only $186 million compared to last years Loss of $202 million" - Huh?
SOUTHFIELD, Mich., Feb. 18, 2004 -- Federal-Mogul Corporation (BULLETIN BOARD: FDMLQ) today reported its financial results for the three and twelve months ended December 31, 2003.
Financial Summary (in millions)
Three Months Ended Twelve Months Ended
December 31 December 31
2003 2002 2003 2002
Net sales $1,413 $1,239 $5,546 $5,184
Gross margin 269 235 1,087 1,021
Net loss from continuing
operations (121) (89) (186) (201)
Asset impairments (102) (32) (106) (63)
Asbestos charge (39) - (39) -
Cash flow from operating
activities 50 68 319 257
Financial Results for the Three Months Ended December 31, 2003
Federal-Mogul reported fourth quarter 2003 sales from continuing operations of $1,413 million, an increase of $174 million when compared to sales from continuing operations of $1,239 million for the same period in 2002. Sales from continuing operations were favorably impacted by $93 million of foreign currency translation. The remaining increase was driven by higher OEM and Aftermarket volumes reflecting vehicle production in both North America and Europe and favorable market share performance in the North America Aftermarket, offset by customer price reductions. During this same period, gross margin increased $34 million or 14.5 percent. Gross margin was favorably impacted by $15 million of foreign currency translation. The remaining increase in gross margin was due to increased sales volumes and productivity resulting from the Company's cost reduction and restructuring activities, which offset price reductions and increased pension costs.
The Company reported a net loss from continuing operations of $121 million during the fourth quarter of 2003, compared to a net loss from continuing operations of $89 million for the same period in 2002. The fourth quarter 2003 net loss from continuing operations was driven by asset impairments of $102 million and an asbestos charge of $39 million. Asset impairments were recorded to adjust the carrying value of certain intangible and tangible assets to their estimated fair values because of reductions in projected future asset recoverability. The asbestos charge was recorded to adjust the Company's asbestos-related insurance recoverable pursuant to the terms of a settlement.
The Company continued to generate positive cash from operating activities during the fourth quarter of 2003, providing $50 million for the period.
Financial Results for the Twelve Months Ended December 31, 2003
Federal-Mogul reported sales from continuing operations for the 12 months ended December 31, 2003 of $5,546 million, an increase of $362 million when compared to sales from continuing operations of $5,184 million for the same period in 2002. Sales from continuing operations were favorably impacted by $352 million of foreign currency translation and by favorable sales volumes, which more than offset customer price reductions. Gross margin increased by $66 million or 6.5 percent during 2003. Gross margin was favorably impacted by $63 million of foreign currency translation. Productivity generated by the Company's cost reduction and restructuring activities more than offset price reductions and increased pension costs.
The Company reported a net loss from continuing operations of $186 million during 2003, compared to a net loss from continuing operations of $201 million in 2002. Included in the Company's net loss from continuing operations for 2003 are asset impairments of $106 million, which were recorded to adjust the carrying value of certain intangible and tangible assets to their estimated fair values because of reductions in projected future asset recoverability. The Company's 2003 net loss from continuing operations was further impacted by an asbestos charge of $39 million, which was recorded to adjust the Company's asbestos-related insurance recoverable pursuant to the terms of a settlement.
Cash flow from operating activities for 2003 of $319 million represents an increase of $62 million over 2002 results. The increase is attributable to improved gross margin and reductions in working capital.
"We are pleased with the improvements we made in 2003, particularly the growth in cash flow from operating activities. We continue to improve our operating performance in a challenging environment and remain focused on the delivery of superior quality and customer satisfaction," said Chip McClure, chief executive officer and president.
About Federal-Mogul
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 more than 45,000 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/ .
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
2003 2002 2003 2002
Net sales $1,412.9 $1,238.9 $5,546.0 $5,184.3
Cost of products sold 1,143.6 1,003.8 4,459.1 4,162.9
Gross margin 269.3 235.1 1,086.9 1,021.4
Selling, general and
administrative expenses 207.2 200.1 872.1 816.7
Restructuring charges, net 7.7 15.2 34.2 40.5
Adjustment of assets held for
sale and other long-lived
assets to fair value 101.5 32.4 106.0 62.9
Asbestos charge 38.9 - 38.9 -
Interest expense, net 23.6 33.1 98.2 123.4
Chapter 11 and Administration
related reorganization expenses 11.7 31.0 97.1 107.4
Equity in earnings of
unconsolidated subsidiaries (6.6) (3.8) (27.3) (19.8)
Other expense (income), net 4.7 (3.1) 0.7 13.3
Loss from Continuing Operations
Before Income Taxes and
Cumulative Effect of Change in
Accounting Principle (119.4) (69.8) (133.0) (123.0)
Income tax expense 1.3 19.2 52.5 77.9
Loss From Continuing Operations
Before Cumulative Effect
of Change in Accounting
Principle (120.7) (89.0) (185.5) (200.9)
Loss from discontinued
operations, net of income taxes - (23.5) (4.0) (10.1)
Cumulative effect of change in
accounting principle,
net of applicable income tax
benefit - - - 1,417.9
Net Loss $(120.7) $(112.5) $(189.5) $(1,628.9)
Loss Per Common Share:
Basic and Diluted
Loss from continuing operations
before cumulative effect
of change in accounting
principle $(1.39) $(1.05) $(2.13) $(2.42)
Loss from discontinued
operations - (0.28) (0.04) (0.12)
Cumulative effect of change in
accounting principle, net of
applicable income tax benefit - - - 17.08
Loss Available for Common
Shareholders $(1.39) $(1.33) $(2.17) $(19.62)
Weighted Average Shares (Thousands)
Basic and Diluted 87,129 84,886 87,129 83,022
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 December 31
2003 2002
Assets
Cash and equivalents $472.4 $395.1
Accounts receivable 976.5 946.6
Inventories 834.4 800.1
Prepaid expenses and other current assets 257.5 217.3
Total current assets 2,540.8 2,359.1
Property, plant and equipment, net 2,404.8 2,273.0
Goodwill and indefinite-lived intangible
assets 1,517.1 1,565.2
Definite-lived intangible assets, net 348.0 351.6
Asbestos-related insurance recoverable 806.1 780.6
Prepaid pension costs 309.2 361.5
Other noncurrent assets 190.7 222.3
Total Assets $8,116.7 $7,913.3
Liabilities and Shareholders' Deficit
Short-term debt, including current
portion of long-term debt $14.8 $346.1
Accounts payable 332.3 318.9
Accrued liabilities 513.3 535.0
Other current liabilities 158.4 204.4
Total current liabilities 1,018.8 1,404.4
Liabilities subject to compromise 6,087.8 6,053.2
Long-term debt 331.2 14.3
Postemployment benefits 1,716.6 1,541.2
Deferred income taxes 70.4 52.4
Other accrued liabilities 214.4 205.7
Minority interest in consolidated subsidiaries 54.4 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 (2,933.4) (2,743.9)
Accumulated other comprehensive loss (967.6) (1,183.7)
Other - (0.1)
Total Shareholders' Deficit (1,376.9) (1,403.6)
Total Liabilities and Shareholders'
Deficit $8,116.7 $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 Year Ended
December 31 December 31
2003 2002 2003 2002
Cash Provided From (Used By)
Operating Activities
Net loss $(120.7) $(112.5) $(189.5) $(1,628.9)
Adjustments to reconcile net
loss to net cash
provided from (used by)
operating activities:
Cumulative effect of change
in accounting principle - - - 1,464.5
Depreciation and
amortization 79.6 70.2 307.1 277.1
Restructuring charges, net 7.7 15.3 36.0 43.3
Chapter 11 and
Administration related
reorganization expenses 11.7 31.0 97.1 107.4
Adjustment of assets held
for sale and other
long-lived assets to fair
value 101.5 43.0 106.0 70.2
Asbestos charge 38.9 - 38.9 -
Loss (gain) on sale of
businesses - 3.6 7.9 (1.1)
Change in postemployment
benefits, including
pensions (2.4) (21.5) 84.6 19.7
Deferred taxes (10.5) (10.5) 15.5 (31.5)
Decrease in accounts
receivable 38.4 111.2 50.1 44.1
(Increase) decrease in
inventories (0.5) 14.1 18.5 (46.8)
(Decrease) increase in
accounts payable (25.6) (9.8) (27.6) 6.4
Change in other assets and
other liabilities (26.6) 6.1 (60.8) 89.2
Payments against
restructuring reserves (17.6) (26.1) (76.7) (53.1)
Payments of Chapter 11 and
Administration related
reorganization expenses (24.0) (46.4) (88.1) (104.0)
Net Cash Provided From
Operating Activities 49.9 67.7 319.0 256.5
Cash Provided From (Used By)
Investing Activities
Expenditures for property,
plant and equipment and
other long-term assets (86.1) (111.0) (300.9) (339.1)
Net proceeds from sale of
businesses - 9.1 23.6 34.6
Net Cash Used By Investing
Activities (86.1) (101.9) (277.3) (304.5)
Cash Provided From (Used By)
Financing Activities
Proceeds from the issuance of
long-term debt - 4.1 1.2 6.6
Principal payments on long-
term debt (0.6) (0.3) (4.3) (2.4)
Borrowings on DIP credit
facility 20.0 75.0 125.5 75.0
Principal payments on DIP
credit facility (10.0) (0.3) (120.2) (10.3)
Increase (decrease) in short-
term debt 0.5 3.2 (16.6) 6.5
Net Cash Provided From (Used
By) Financing Activities 9.9 81.7 (14.4) 75.4
Effect of Foreign Currency
Exchange Rate Fluctuations On
Cash 25.9 8.3 50.0 20.8
(Decrease) increase in Cash
and Equivalents (0.4) 55.8 77.3 48.2
Cash and equivalents at
beginning of period 472.8 339.3 395.1 346.9
Cash and Equivalents at End
of Period $472.4 $395.1 $472.4 $395.1