Federal-Mogul Reports First Quarter 2004 Results - Sales Up Losses Down
SOUTHFIELD, Mich., April 20 -- Federal-Mogul Corporation (BULLETIN BOARD: FDMLQ) today reported its financial results for the three months ended March 31, 2004.
Financial Summary (in millions)
Three Months Ended
March 31
2004 2003
Net sales $1,553 $1,367
Gross margin 297 273
Net loss from continuing operations (20) (37)
Cash flow from operating activities 119 27
Financial Results for the Three Months Ended March 31, 2004
Federal-Mogul reported first quarter 2004 sales from continuing operations of $1,553 million, an increase of $186 million when compared to sales from continuing operations of $1,367 million for the same period in 2003. Sales from continuing operations were favorably impacted by $100 million of foreign currency translation, higher Original Equipment volumes reflecting vehicle production in both North America and Europe and market share performance in both the Original Equipment and Aftermarket channels. Customer price reductions and business interruption resulting from a fire at the Company's Smithville, TN aftermarket distribution facility partially offset favorable sales volumes.
During this same period, gross margin increased by $24 million or 9%. Gross margin was favorably impacted by $17 million of foreign currency translation, increased sales volumes and continued net productivity resulting from the Company's cost reduction and restructuring activities. Customer price reductions and the adverse impact of the business interruption resulting from a fire at the Company's Smithville, TN aftermarket distribution facility offset these positive factors.
The Company reported a net loss from continuing operations of $20 million during the first quarter of 2004, an improvement of $17 million when compared to a net loss from continuing operations of $37 million for the same period in 2003. Including the favorable impact of increased gross margin, this improvement reflects increased equity earnings performance of the Company's affiliates and lower Chapter 11 and interest expenses. Selling, general and administrative costs, while remaining consistent as a percentage of sales, increased by $18 million primarily due to foreign currency translation.
The Company continued to generate positive cash from operating activities during the first quarter of 2004, providing $119 million for the period. Included within this amount is $35 million of advance insurance proceeds related to the Smithville, TN fire.
"We continue to focus on improving our operating performance through achieving greater efficiencies in our manufacturing operations while providing our customers with industry leading service," said Chip McClure, chief executive officer and president. "We believe this focus, combined with our product leadership and technical capabilities, positions us well for the future."
Smithville, TN Distribution Center Fire
On March 5, 2004, a fire at the Company's Smithville, TN aftermarket distribution facility resulted in the loss of substantially all of the facility's equipment and inventory. In addition to other coverage, the Company's insurance policies provide for replacement of damaged property, sales value of destroyed inventory, reimbursement for losses due to interruption of business operations, and reimbursement of expenditures incurred to restore operations. The Company expects costs incurred as a result of this fire to be covered by such insurance policies. Accordingly, the results of operations have not and should not be adversely affected by this event.
The 244,000 square foot Smithville facility was the principal distribution center for Moog and TRW chassis aftermarket products in the United States. The distribution operations at the Smithville facility were temporarily suspended until operations commenced at an alternate facility in Smyrna, TN on March 12, 2004.
"We are thankful that no employees were injured as a result of the Smithville fire and are pleased with our efforts to restore operations and to continue delivery of superior quality and customer satisfaction despite these unfortunate circumstances," said Chip McClure.
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 approximately 45,000 people. 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
March 31
2004 2003
Net sales $1,553.0 $1,367.2
Cost of products sold 1,256.3 1,094.6
Gross margin 296.7 272.6
Selling, general and administrative expenses 243.0 224.7
Interest expense, net 25.6 29.5
Chapter 11 and Administration
related reorganization expenses 26.0 32.8
Equity in earnings of
unconsolidated subsidiaries (9.5) (5.8)
Other expense, net 12.1 9.7
Loss from continuing operations
before income taxes (0.5) (18.3)
Income tax expense 19.9 18.8
Loss from continuing operations (20.4) (37.1)
Income from discontinued
operations, net of income taxes - 2.9
Net loss $(20.4) $(34.2)
Basic and diluted per share data:
Loss per share from continuing operations $(0.23) $(0.42)
Income per share from discontinued operations - 0.03
Loss per share $(0.23) $(0.39)
Weighted average shares outstanding 87.1 87.1
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
2004 2003
Current assets:
Cash and equivalents $521.9 $472.4
Accounts receivable, net 1,050.4 976.5
Inventories, net 822.9 834.4
Prepaid expenses and other current assets 262.5 257.5
Total current assets 2,657.7 2,540.8
Property, plant and equipment, net 2,354.8 2,404.8
Goodwill and indefinite-lived
intangible assets 1,517.7 1,517.1
Definite-lived intangible assets, net 345.2 348.0
Asbestos-related insurance recoverable 820.8 806.1
Prepaid pension costs 288.3 309.2
Other noncurrent assets 190.2 190.7
$8,174.7 $8,116.7
Current liabilities:
Short-term debt, including current
portion of long-term debt $320.4 $14.8
Accounts payable 388.6 332.3
Accrued liabilities 527.9 513.3
Other current liabilities 160.4 158.4
Total current liabilities 1,397.3 1,018.8
Liabilities subject to compromise 6,095.5 6,087.8
Long-term debt 11.4 331.2
Postemployment benefits 1,731.4 1,716.6
Deferred income taxes 70.3 70.4
Other accrued liabilities 214.8 214.4
Minority interest in consolidated subsidiaries 55.9 54.4
Shareholders' deficit:
Series C ESOP preferred stock 28.0 28.0
Common stock 435.6 435.6
Additional paid-in capital 2,061.0 2,060.5
Accumulated deficit (2,953.8) (2,933.4)
Accumulated other comprehensive loss (972.7) (967.6)
Total shareholders' deficit (1,401.9) (1,376.9)
$8,174.7 $8,116.7
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
2004 2003
Cash provided from operating activities
Net loss $(20.4) $(34.2)
Adjustments to reconcile net loss to
net cash provided from operating activities:
Depreciation and amortization 84.7 73.8
Change in postemployment benefits,
including pensions 30.8 29.4
Deferred taxes 0.1 13.0
Changes in operating assets and liabilities:
Increase in accounts receivable (80.4) (46.6)
Increase in inventories, net of
involuntary conversion (38.2) (2.0)
Increase in accounts payable 58.7 20.3
Change in other assets and other liabilities 49.0 (26.9)
Insurance proceeds 35.0 -
Net cash provided from operating activities 119.3 26.8
Cash used by investing activities
Expenditures for property, plant and
equipment and other long-term assets (73.4) (65.1)
Proceeds from the sale of property,
plant and equipment 11.0 6.5
Net cash used by investing activities (62.4) (58.6)
Cash (used by) provided from financing activities
Borrowings on DIP credit facility - 75.0
Principal payments on DIP credit facility (10.0) (10.2)
Decrease in short-term debt (4.4) (16.7)
Increase / (decrease) in other long-term debt 0.2 (2.5)
Net cash (used by) provided from
financing activities (14.2) 45.6
Effect of foreign currency
exchange rate fluctuations on cash 6.8 1.5
Increase in cash and equivalents 49.5 15.3
Cash and equivalents at beginning of period 472.4 395.1
Cash and equivalents at end of period $521.9 $410.4