Federal-Mogul Reports Fourth Quarter and Full Year 2005 Results
SOUTHFIELD, Mich.--Feb. 1, 20060, 2006--Federal-Mogul Corporation (OTCBB:FDMLQ) today reported its financial results for the three and twelve-month periods ended December 31, 2005.
Financial Summary (in millions)
Three Months Ended Twelve Months Ended
------------------ -------------------
December 31 December 31
----------- -----------
2005 2004 2005 2004
---- ---- ---- ----
Net sales $1,487 $1,548 $6,286 $6,174
Gross margin 240 277 1,041 1,177
Selling, general and
administrative expenses 192 239 884 950
Loss from continuing operations,
before income taxes (146) (209) (203) (189)
Adjustment of assets to
fair value (108) (240) (122) (276)
Gain on involuntary
conversion - 46 - 46
Federal-Mogul reported net sales of $1,487 million for the quarter ended December 31, 2005. Compared to the fourth quarter 2004, sales decreased $61 million, of which $48 million is due to unfavorable foreign currency. For the year ended December 31, 2005, net sales increased by $112 million to $6,286 million when compared to the same period of 2004, of which $33 million is due to favorable foreign currency.
Gross margin for the three and twelve-month periods ended December 31, 2005, when compared to the same periods of 2004, decreased by $37 million and $136 million, respectively. Increased pension costs adversely affected gross margin for the three and twelve-month periods ended December 31, 2005 by $14 million and $57 million, respectively. Although remaining high, raw material costs for the three months ended December 31, 2005 were comparable with those of the same period in 2004, but $41 million higher for the full year. Gross margins for both the three and twelve-month periods ended December 31, 2005 were further impacted by unfavorable movements in foreign currencies of $12 million and $13 million, respectively. Both the three and twelve-month periods ended December 31, 2005 were affected by other factors, primarily volume and product mix. Management continues to identify and implement cost reduction and pricing strategies to mitigate the impact of these adverse factors.
Selling, general and administrative expenses for the three and twelve-month periods ended December 31, 2005, when compared to the same periods of 2004, decreased by $47 million and $66 million, respectively.
Federal-Mogul reported a loss from continuing operations before income taxes for the three-month period ended December 31, 2005 of $146 million, an improvement of $63 million from the same period of 2004. For the twelve-month period ended December 31, 2005, the Company reported a loss from continuing operations before income taxes of $203 million compared with $189 million for the same period of 2004. In addition to those same factors affecting gross margin, results from continuing operations for the fourth quarter and full year were impacted by reduced selling, general and administrative expenses, reduced charges related to asset impairments, increased costs associated with the Company's Chapter 11 proceedings, the non-recurrence of an insurance gain recorded during 2004, and higher average interest rates.
Management believes that Operational EBITDA most closely approximates the cash flow associated with the operational earnings of the Company and uses Operational EBITDA to measure the performance of its operations. Operational EBITDA is defined to include discontinued operations and exclude impairment charges, Chapter 11 and Administration expenses, restructuring costs, income tax expense, interest expense, depreciation and amortization.
The Company reported Operational EBITDA of $153 million and $554 million for the three and twelve-month periods ended December 31, 2005, respectively. When compared to the same period of 2004, Operational EBITDA decreased by $33 million and $79 million, respectively. The non recurrence of an insurance gain recorded in the fourth quarter of 2004, combined with increased pension expense, reduced Operational EBITDA compared to 2004 by $61 million and $114 million for the quarter and year ended December 31, 2005, respectively. These adverse factors and the impact of increased raw materials costs were partially offset by improvements of $28 million and $76 million for the quarter and full-year, respectively. A reconciliation of Operational EBITDA to the Company's loss from continuing operations before income taxes for the three and twelve-months ended December 31, 2005 has been provided.
Combining cash provided from operating activities with cash used by investing activities, the Company has generated positive cash inflows of $158 million for the year ended December 31, 2005, compared with $239 million for the comparable period of 2004.
"Net sales for 2005 have increased year-over-year despite challenging market conditions," said Chairman, President and Chief Executive Officer Jose Maria Alapont. "Industry challenges, such as increased pension costs, raw material cost inflation and higher interest rates, have impacted our financial performance. We are continuing diligently to implement our global profitable growth strategy to better serve our customers with leading technology and world-class products, while restructuring our operations based upon best cost and lean principles."
About Federal-Mogul
Federal-Mogul is a global supplier of automotive components, systems and modules serving the world's original equipment manufacturers and the global 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 global profitable growth to create value for and bring greater satisfaction to its customers, employees, and stakeholders.
Headquartered in Southfield, Michigan, Federal-Mogul was founded in Detroit in 1899. 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 Share and Per Share Data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31 December 31
------------------ ------------------
2005 2004 2005 2004
-------- -------- -------- --------
Net sales $1,487.0 $1,548.4 $6,286.0 $6,174.1
Cost of products sold 1,247.4 1,271.0 5,245.3 4,996.8
-------- -------- -------- --------
Gross margin 239.6 277.4 1,040.7 1,177.3
Selling, general and
administrative expenses 192.0 238.7 883.9 949.7
Adjustment of long-lived
assets to fair value 108.4 240.4 121.5 276.4
Interest expense, net 34.5 28.3 131.6 101.5
Chapter 11 and Administration
related reorganization
expenses 59.1 33.2 138.2 99.7
Equity earnings of
unconsolidated affiliates (7.9) (7.6) (38.1) (36.0)
Gain on involuntary
conversion - (46.1) - (46.1)
Restructuring expense, net 18.4 11.8 30.2 17.5
Other (income) expense, net (18.5) (12.7) (23.9) 4.0
-------- -------- -------- --------
Loss from continuing
operations before income
taxes (146.4) (208.6) (202.7) (189.4)
Income tax expense 58.0 65.9 131.5 136.1
-------- -------- -------- --------
Loss from continuing
operations (204.4) (274.5) (334.2) (325.5)
Earnings (loss) from
discontinued operations, net
of income tax benefit - 4.1 - (8.5)
.
-------- -------- -------- --------
Net Loss $ (204.4) $ (270.4) $ (334.2) $ (334.0)
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Basic and diluted loss per
common share:
-----------------------------
Loss from continuing
operations $ (2.29) $ (3.12) $ (3.75) $ (3.73)
Earnings (loss) from
discontinued operations,
net of income tax benefit - 0.05 - (0.10)
-------- -------- -------- --------
Net loss per common
share $ (2.29) $ (3.07) $ (3.75) $ (3.83)
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Weighted average shares
outstanding (in millions) 89.1 87.8 89.1 87.3
FEDERAL-MOGUL CORPORATION
BALANCE SHEETS
(Millions of Dollars)
(Unaudited)
December 31 December 31
2005 2004
-------------- -------------
Current assets:
Cash and equivalents $ 387.2 $ 700.6
Restricted cash 700.9 -
Accounts receivable, net 1,011.1 1,049.5
Inventories, net 808.1 952.9
Prepaid expenses and other current assets 220.7 230.9
------------- ------------
Total current assets 3,128.0 2,933.9
Property, plant and equipment, net 2,003.1 2,363.9
Goodwill and indefinite-lived intangible
assets 1,189.5 1,283.7
Definite-lived intangible assets, net 289.6 335.3
Asbestos-related insurance recoverable 777.4 853.8
Prepaid pension costs 112.2 257.4
Other noncurrent assets 235.3 237.2
------------- ------------
$ 7,735.1 $ 8,265.2
============= ============
Current liabilities:
Short-term debt, including current
portion of long-term debt $ 606.7 $ 309.6
Accounts payable 405.0 435.9
Accrued liabilities 536.0 559.7
Other current liabilities 116.9 145.6
------------- ------------
Total current liabilities 1,664.6 1,450.8
Liabilities subject to compromise 5,988.8 6,018.5
Long-term debt 8.1 10.1
Postemployment benefits 2,230.8 2,386.8
Deferred income taxes 62.4 102.0
Other accrued liabilities 181.4 190.3
Minority interest in consolidated
affiliates 32.0 32.4
Shareholders' deficit:
Series C ESOP preferred stock 28.0 28.0
Common stock 445.3 445.3
Additional paid-in capital 2,154.6 2,148.0
Accumulated deficit (3,602.1) (3,267.9)
Accumulated other comprehensive loss (1,458.8) (1,279.1)
------------- ------------
Total shareholders' deficit (2,433.0) (1,925.7)
------------- ------------
$ 7,735.1 $ 8,265.2
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FEDERAL-MOGUL CORPORATION
STATEMENTS OF CASH FLOWS
(Millions of Dollars)
(Unaudited)
Twelve Months Ended
December 31
--------------------
2005 2004
--------- ---------
Cash provided from (used by) operating activities
Net loss $ (334.2) $ (334.0)
Adjustments to reconcile net loss to net cash
(used by) provided from
operating activities:
Depreciation and amortization 344.2 335.7
Chapter 11 and Administration related
reorganization expenses 138.2 99.7
Payments of Chapter 11 and Administration
related reorganization expenses (141.4) (88.8)
Adjustment of long-lived assets to fair value 121.5 276.4
Change in postemployment benefits, including
pensions 167.7 83.4
Changes in deferred taxes (34.4) 15.8
Restructuring charges, net 30.2 17.7
Payments against restructuring reserves (22.3) (36.1)
(Gain) loss on sale of assets and businesses (24.0) 3.5
Gain on involuntary conversion - (46.1)
Insurance proceeds on involuntary conversion - 102.2
Changes in operating assets and liabilities:
Increase in accounts receivable (16.3) (29.1)
Decrease (increase) in inventories, net of
involuntary conversion in 2004 94.2 (122.7)
(Decrease) increase in accounts payable (1.1) 82.3
Changes in other assets and liabilities (3.9) 105.6
--------- ---------
Net cash provided from operating activities 318.4 465.5
Cash provided from (used by) investing activities
Expenditures for property, plant and equipment (190.3) (267.5)
Proceeds from the sale of property, plant and
equipment 30.1 29.9
Net proceeds from sale of business - 10.7
--------- ---------
Net cash used by investing activities (160.2) (226.9)
Cash provided from (used by) financing activities
Proceeds from borrowings on DIP credit facility 713.0 357.7
Principal payments on DIP credit facility (420.0) (400.0)
Increase in short-term debt 7.6 13.4
Net change in restricted cash (700.9) -
Principal payment in other long-term debt (1.0) (2.0)
Debt issuance fees (4.3) (6.5)
--------- ---------
Net cash provided from (used by) financing
activities (405.6) (37.4)
Effect of foreign currency exchange rate
fluctuations on cash (66.0) 27.0
--------- ---------
(Decrease) increase in cash and equivalents (313.4) 228.2
Cash and equivalents at beginning of period 700.6 472.4
--------- ---------
Cash and equivalents at end of period $ 387.2 $ 700.6
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FEDERAL-MOGUL CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
(Millions of Dollars)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31 December 31
------------------ -------------------
2005 2004 2005 2004
-------- -------- --------- ---------
Earnings (loss) from continuing
operations before income taxes $ (146.4) $(208.6) $ (202.7) $ (189.4)
Depreciation and amortization 80.6 84.7 344.2 335.7
Chapter 11 and Administration
related reorganization
expenses 59.1 33.2 138.2 99.7
Interest expense, net 34.5 28.3 131.6 101.5
Adjustment of assets to fair
value 108.4 240.4 121.5 276.4
Restructuring expense 18.4 11.8 30.2 17.5
Finalization of 2004 Goodwill
Impairment Charge - - (7.7) -
Discontinued operations and
other (1.4) (3.2) (1.4) (8.3)
-------- ------- -------- --------
Operational EBITDA $ 153.2 $ 186.6 $ 553.9 $ 633.1
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