Federal-Mogul Reports Second Quarter 2004 Results
SOUTHFIELD, Mich.--July 22, 2004--Federal-Mogul Corporation (OTCBB:FDMLQ) today reported its financial results for the three and six months ended June 30, 2004.
Financial Summary (in millions)
Three Months Six Months
Ended Ended
-------------- --------------
June 30 June 30
-------- -------
2004 2003 2004 2003
------ ------- ------ -------
Net sales $1,577 $1,428 $3,130 $2,796
Gross margin 319 294 615 567
Income from continuing operations, before
income taxes 11 19 10 1
Adjustment of long-lived assets to
fair value (20) (2) (23) (4)
Cash flow from operating activities 162 168 281 194
Federal-Mogul reported net sales of $1,577 million for the three-month period ended June 30, 2004 for an increase of 10% over the comparable three-month period of 2003. Income from continuing operations before income taxes totaled $11 million after recognition of an asset impairment of $20 million. Cash flow from operations remained strong during the second quarter of 2004, providing $162 million.
"We are pleased with our continued sales growth during the second quarter, despite a challenging pricing environment," said Robert S. (Steve) Miller, Chairman of the Board and interim Chief Executive Officer. "This is a reflection of our consistent efforts to create value for our customers through quality and innovation."
Financial Results for the Three Months Ended June 30, 2004
Federal-Mogul reported 2004 second quarter net sales of $1,577 million, an increase of $149 million or 10% when compared to net sales of $1,428 million for the same period in 2003. Second quarter 2004 sales benefited from $44 million of foreign currency, higher volumes in both the Original Equipment (OE) and Aftermarket and new business growth in both markets. Customer price reductions partially offset these positive factors.
Gross margin increased $25 million or 9% during the second quarter of 2004 as compared with the second quarter of 2003. Favorable foreign currency of $7 million, increased sales volumes and continued productivity resulting from the Company's cost reduction and restructuring activities were partially offset by customer price reductions and increased costs of certain raw materials.
The Company reported income from continuing operations before income taxes of $11 million during the second quarter of 2004, compared with $19 million for the same period in 2003. The Company's 2004 second quarter results were adversely impacted by an asset impairment of $20 million related to one of the Company's European Powertrain operations. This asset impairment reflects the reduction of the carrying value of certain tangible assets, principally machinery and equipment, to their estimated fair values based on projected future asset recoverability. Selling, general and administrative costs decreased as a percentage of sales from 16.0% to 14.9%, despite unfavorable foreign currency of $6 million.
The Company continued to generate positive cash from operating activities during the second quarter of 2004, providing $162 million for the period. Included in this amount is $20 million of insurance proceeds that helped offset the impact of a fire that occurred on March 5, 2004 at the Company's Smithville, TN Aftermarket distribution center.
"We are encouraged by our ability to consistently generate positive cash flows from our operating activities and continue to focus our efforts on sustaining this trend as the Company progresses its cost reduction and restructuring activities," said G. Michael Lynch, Executive Vice President and Chief Financial Officer.
Financial Results for the Six Months Ended June 30, 2004
Net sales increased by $334 million to $3,130 for the six months ended June 30, 2004 as compared to $2,796 million for the same period in 2003. Net sales were favorably impacted by $144 million of foreign currency and increased OE and Aftermarket volumes, partially offset by customer price reductions. Increased volumes reflect vehicle production in both North America and Europe, higher demand in the North American Aftermarket, and new business growth in all markets.
Gross margin for the six-month period ended June 30, 2004 increased by $48 million or 8% as compared to the same period in 2003. Favorable foreign currency of $24 million, increased OE and Aftermarket volumes and productivity were partially offset by customer price reductions and increased costs of certain raw materials.
Income from continuing operations before income taxes increased by approximately $10 million during the six-month period ended June 30, 2004 as compared with the same period in 2003. The Company's income from continuing operations before income taxes for the six months ended June 30, 2004 was adversely impacted by $23 million of asset impairments as compared to $4 million in 2003. Selling, general and administrative costs decreased as a percentage of sales from 16.2% to 15.3%.
The Company continued to generate positive cash from operating activities during the six months ended June 30, 2004, providing $281 million for the period compared to $194 million during the same period in 2003.
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 and conducts operations in 31 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.
FEDERAL-MOGUL CORPORATION
STATEMENTS OF OPERATIONS
(Millions of Dollars, Except Per Share Data)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
2004 2003 2004 2003
-------- -------- -------- --------
Net sales $1,576.5 $1,428.3 $3,129.5 $2,795.5
Cost of products sold 1,257.8 1,133.9 2,514.1 2,228.5
-------- -------- -------- --------
Gross margin 318.7 294.4 615.4 567.0
Selling, general and
administrative expenses 235.0 228.4 478.0 453.1
Adjustment of long-lived
assets to fair value 20.0 2.0 23.1 3.6
Interest expense, net 24.3 21.8 49.9 51.3
Chapter 11 and Administration
reorganization expenses 34.4 26.9 60.4 59.7
Equity earnings of
unconsolidated affiliates (10.7) (8.6) (20.2) (14.4)
Other expense, net 5.0 4.9 14.0 13.0
-------- -------- -------- --------
Income from continuing
operations before income taxes 10.7 19.0 10.2 0.7
Income tax expense 19.7 19.7 39.6 38.5
-------- -------- -------- --------
Loss from continuing
operations (9.0) (0.7) (29.4) (37.8)
Loss from discontinued
operations, net of income
taxes - (4.4) - (1.5)
-------- -------- -------- --------
Net loss $ (9.0) $ (5.1) $ (29.4) $ (39.3)
-------- -------- -------- --------
-------- -------- -------- --------
Basic and diluted loss per
common share:
-----------------------------
Loss from continuing
operations $ (0.10) $ (0.01) $ (0.34) $ (0.43)
Loss from discontinued
operations, net of income
taxes - (0.05) - (0.02)
-------- -------- -------- --------
Net loss per common share $ (0.10) $ (0.06) $ (0.34) $ (0.45)
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average shares
outstanding 87.1 87.1 87.1 87.1
FEDERAL-MOGUL CORPORATION
BALANCE SHEETS
(Millions of Dollars)
(Unaudited)
June 30 December 31
2004 2003
--------- ---------
Current assets:
Cash and equivalents $ 590.9 $ 472.4
Accounts receivable, net 1,060.6 976.5
Inventories, net 875.8 834.4
Prepaid expenses and other current
assets 221.6 257.5
--------- ---------
Total current assets 2,748.9 2,540.8
Property, plant and equipment, net 2,308.5 2,404.8
Goodwill and indefinite-lived
intangible assets 1,516.6 1,517.1
Definite-lived intangible assets, net 341.4 348.0
Asbestos-related insurance
recoverable 821.6 806.1
Prepaid pension costs 274.9 309.2
Other noncurrent assets 195.2 190.7
--------- ---------
$ 8,207.1 $ 8,116.7
--------- ---------
--------- ---------
Current liabilities
Short-term debt, including current
portion of long-term debt $ 289.5 $ 14.8
Accounts payable 417.5 332.3
Accrued liabilities 513.6 486.6
Other current liabilities 198.7 185.1
--------- ---------
Total current liabilities 1,419.3 1,018.8
Liabilities subject to compromise 6,097.5 6,087.8
Long-term debt 10.7 331.2
Postemployment benefits 1,734.7 1,716.6
Deferred income taxes 81.7 70.4
Other accrued liabilities 225.0 214.4
Minority interest in consolidated
affiliates 57.2 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 (2,962.8) (2,933.4)
Accumulated other comprehensive loss (980.8) (967.6)
--------- ---------
Total shareholders' deficit (1,419.0) (1,376.9)
--------- ---------
$ 8,207.1 $ 8,116.7
--------- ---------
--------- ---------
FEDERAL-MOGUL CORPORATION
STATEMENTS OF CASH FLOWS
(Millions of Dollars)
(Unaudited)
Three Months Six Months
Ended Ended
June 30 June 30
-------------- ----------------
2004 2003 2004 2003
------ ------ ------- -------
Cash provided from (used by)
operating activities
Net loss $ (9.0) $ (5.1) $ (29.4) $ (39.3)
Adjustments to reconcile net loss
to net cash provided from
operating activities:
Depreciation and amortization 82.0 75.8 166.7 149.6
Adjustment of long-lived assets to
fair value 20.0 2.0 23.1 3.6
Postemployment benefits, including
pensions 15.0 28.2 45.8 57.6
Deferred taxes 11.8 1.8 11.9 14.8
Changes in operating assets and
liabilities:
(Increase)/decrease in accounts
receivable (11.3) 51.3 (91.7) 4.7
(Increase)/decrease in inventories (53.1) 20.0 (91.3) 18.0
Increase/(decrease) in accounts
payable 29.5 (6.1) 88.2 14.2
Changes in other assets and
liabilities 56.6 (0.3) 102.5 (28.8)
Insurance proceeds 20.0 - 55.0 -
------ ------ ------- -------
Net cash provided from operating
activities 161.5 167.6 280.8 194.4
Cash provided from (used by)
investing activities
Expenditures for property, plant
and equipment and other
long-term assets (58.7) (75.6) (132.1) (140.7)
Proceeds from the sale of property,
plant and equipment 2.0 - 13.0 6.5
Net proceeds from sale of businesses - 21.5 - 21.5
------ ------ ------- -------
Net cash used by investing
activities (56.7) (54.1) (119.1) (112.7)
Cash provided from (used by)
financing activities
Proceeds from borrowings on DIP
credit facility - - - 75.0
Principal payments on DIP credit
facility (31.7) (90.0) (41.7) (100.2)
Increase/ (decrease) in
short-term debt 0.9 (2.6) (3.5) (19.3)
Increase/ (decrease) in other
long-term debt (1.9) (0.9) (1.7) (3.4)
------ ------ ------- -------
Net cash used by financing
activities (32.7) (93.5) (46.9) (47.9)
Effect of foreign currency
exchange rate fluctuations
on cash (3.1) 21.0 3.7 22.5
------ ------ ------- -------
Increase in cash and equivalents 69.0 41.0 118.5 56.3
Cash and equivalents at
beginning of period 521.9 410.4 472.4 395.1
------ ------ ------- -------
Cash and equivalents at
end of period $590.9 $451.4 $ 590.9 $ 451.4
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