Federal-Mogul Reports First Quarter 2006 Results
SOUTHFIELD, Mich.--April 19, 2006--Federal-Mogul Corporation (OTCBB:FDMLQ) today reported its financial results for the three months ended March 31, 2006.
Financial Summary (in millions)
-------------------------------
Three Months Ended
-------------------
March 31
-------------------
2006 2005
--------- ---------
Net sales $1,600 $1,633
Gross margin 285 275
Selling, general and administrative expenses 228 250
Loss from continuing operations, before income taxes (39) (22)
Adjustment of assets to fair value (20) (3)
Restructuring expense, net (26) (3)
Operational EBITDA(a) 146 127
(a) Operational EBITDA is a non-GAAP measure defined to include
discontinued operations and exclude impairment charges, Chapter 11 and
U.K. Administration expenses, restructuring costs, income tax expense,
interest expense, depreciation and amortization
Federal-Mogul reported net sales of $1,600 million for the quarter ended March 31, 2006, a decrease of $33 million compared to the first quarter of 2005. The most significant factors impacting sales were increased volumes of $13 million and unfavorable foreign currency of $51 million.
Gross margin for the quarter increased by $10 million over the first quarter of 2005 despite unfavorable foreign currency effects of $9 million. Productivity improvements, net of labor and benefits inflation, contributed $15 million and improvements generated on raw material costs contributed $8 million.
Selling, general and administrative expenses for the three months ended March 31, 2006, when compared to the same periods of 2005, decreased by $22 million.
Federal-Mogul reported a net loss from continuing operations before income taxes for the three months ended March 31, 2006 of $39 million compared to $22 million for the same period of 2005. The combined impact of improved gross margin and reduced selling, general and administrative expenses of $32 million was more than offset by increases in asset impairment and restructuring charges of $40 million and higher interest expense of $10 million.
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 a non-GAAP measure defined to include discontinued operations and exclude impairment charges, Chapter 11 and U.K. Administration expenses, restructuring costs, income tax expense, interest expense, depreciation and amortization.
The Company reported Operational EBITDA of $146 million, an improvement of $19 million compared to 2005, largely due to the productivity improvements reported within gross margin and reduced selling, general and administrative expenses. A reconciliation of Operational EBITDA to the Company's loss from continuing operations before income taxes for the three months ended March 31, 2006 has been provided.
Combining cash provided from or used by operating activities with cash used by investing activities, the Company has generated positive cash inflows of $31 million for the quarter ended March 31, 2006, representing an improvement of $76 million when compared with net cash outflows of $45 million for the comparable period of 2005.
"Federal-Mogul continues to progress toward emergence from U.K. Administration and Chapter 11 in the U.S. Despite challenging market conditions, for the quarter ended March 31, 2006, the Company increased net sales, excluding foreign exchange, improved EBITDA to $146 million and generated positive cash inflows of $31 million, $76 million better than the comparable period of 2005," said Chairman, President and CEO Jose Maria Alapont.
"We remain focused on the implementation of our global profitable growth strategy, providing world-class customer service and leading products and technology at competitive cost."
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
March 31
------------------
2006 2005
-------- --------
Net sales $1,600.3 $1,633.2
Cost of products sold 1,315.3 1,358.3
-------- --------
Gross margin 285.0 274.9
Selling, general and administrative expenses 227.5 249.7
Adjustment of long-lived assets to fair value 20.1 3.0
Interest expense, net 39.0 28.8
Chapter 11 and Administration related
reorganization expenses 21.1 30.0
Equity earnings of unconsolidated affiliates (9.4) (9.3)
Restructuring expense, net 25.8 2.8
Other income, net (0.3) (8.4)
-------- --------
Loss from continuing operations before income taxes (38.8) (21.7)
Income tax expense 29.6 26.6
-------- --------
Net loss $ (68.4) $ (48.3)
======== ========
Basic and diluted loss per common share:
----------------------------------------
-------- --------
Net loss per common share $ (0.77) $ (0.54)
======== ========
Weighted average shares outstanding (in millions) 89.1 89.1
FEDERAL-MOGUL CORPORATION
BALANCE SHEETS
(Millions of Dollars)
(Unaudited)
March 31 December 31
2006 2005
----------- -----------
Current assets:
Cash and equivalents $ 395.6 $ 387.2
Restricted cash 699.9 700.9
Accounts receivable, net 1,095.4 1,011.1
Inventories, net 839.3 808.1
Prepaid expenses and other current assets 206.0 220.7
---------- ----------
Total current assets 3,236.2 3,128.0
Property, plant and equipment, net 1,940.7 2,003.1
Goodwill and indefinite-lived intangible
assets 1,189.3 1,189.5
Definite-lived intangible assets, net 286.6 289.6
Asbestos-related insurance recoverable 779.9 777.4
Prepaid pension costs 79.2 112.2
Other noncurrent assets 254.4 235.3
---------- ----------
$ 7,766.3 $ 7,735.1
========== ==========
Current liabilities:
Short-term debt, including current portion of
long-term debt $ 578.0 $ 606.7
Accounts payable 464.9 405.0
Accrued liabilities 563.4 536.0
Other current liabilities 124.3 116.9
---------- ----------
Total current liabilities 1,730.6 1,664.6
Liabilities subject to compromise 5,994.5 5,988.8
Long-term debt 7.6 8.1
Postemployment benefits 2,244.4 2,230.8
Deferred income taxes 65.6 62.4
Other accrued liabilities 186.0 181.4
Minority interest in consolidated affiliates 31.9 32.0
Shareholders' deficit:
Series C ESOP preferred stock 28.0 28.0
Common stock 445.3 445.3
Additional paid-in capital 2,156.1 2,154.6
Accumulated deficit (3,670.5) (3,602.1)
Accumulated other comprehensive loss (1,453.2) (1,458.8)
---------- ----------
Total shareholders' deficit (2,494.3) (2,433.0)
---------- ----------
$ 7,766.3 $ 7,735.1
========== ==========
FEDERAL-MOGUL CORPORATION
STATEMENTS OF CASH FLOWS
(Millions of Dollars)
(Unaudited)
Three Months Ended
March 31
------------------
2006 2005
-------- --------
Cash provided from (used by) operating activities
Net loss $ (68.4) $ (48.3)
Adjustments to reconcile net loss to net cash
provided from (used by) operating activities:
Depreciation and amortization 78.8 93.0
Adjustment of long-lived assets to fair value 20.1 3.0
Change in postemployment benefits, including
pensions 34.9 30.3
Change in deferred taxes (6.3) 8.9
Changes in operating assets and liabilities:
Increase in accounts receivable (81.0) (91.1)
Increase in inventories (29.5) (19.9)
Increase in accounts payable 57.4 17.6
Changes in other assets and liabilities 47.6 (4.5)
-------- --------
Net cash provided from (used by) operating
activities 53.6 (11.0)
Cash provided from (used by) investing activities
Expenditures for property, plant and equipment (29.6) (39.6)
Proceeds from the sale of property, plant and
equipment 2.7 5.3
Net proceeds from sale of business 4.0 -
-------- --------
Net cash used by investing activities (22.9) (34.3)
Cash provided from (used by) financing activities
Proceeds from borrowings on DIP credit facility 124.7 95.8
Principal payments on DIP credit facility (153.0) (20.0)
Increase in short-term debt (0.7) 3.9
Net change in restricted cash (1.0) -
Principal payment in other long-term debt (0.6) (0.9)
-------- --------
Net cash (used by) provided from financing
activities (30.6) 78.8
Effect of foreign currency exchange rate
fluctuations on cash 8.3 (13.7)
-------- --------
Increase in cash and equivalents 8.4 19.8
Cash and equivalents at beginning of period 387.2 700.6
-------- --------
Cash and equivalents at end of period $ 395.6 $ 720.4
======== ========
FEDERAL-MOGUL CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
(Millions of Dollars)
(Unaudited)
Three Months Ended
March 31
------------------
2006 2005
-------- --------
Loss from continuing operations before income
taxes $ (38.8) $ (21.7)
Depreciation and amortization 78.8 93.0
Chapter 11 and Administration related
reorganization expenses 21.1 30.0
Interest expense, net 39.0 28.8
Adjustment of assets to fair value 20.1 3.0
Restructuring expense, net 25.8 2.8
Finalization of 2004 Goodwill Impairment Charge - (7.7)
Discontinued operations and other (0.4) (0.9)
-------- --------
Operational EBITDA $ 145.6 $ 127.3
======== ========