Federal-Mogul Reports Another Strong Quarter of Improved Earnings and Cash Flow in Q1 2010
Company Converts Higher Revenue to Greater Profitability
SOUTHFIELD, Mich., April 28 -- Federal-Mogul Corporation today reported its first quarter 2010 financial performance, with sales of $1.5 billion, 20 percent higher versus Q1 2009, strong gross margin of $254 million or 17.1 percent and net income of $15 million or $0.15 per diluted share. Excluding a charge resulting from the Venezuelan currency devaluation, the company realized adjusted net income of $35 million or $0.35 per share for Q1 2010. Analysts' consensus earnings expectation for Q1 2010 was $0.22 per share.(1) The company's operational EBITDA(2) nearly doubled versus the prior year to $138 million and cash flow(3) strongly improved to $50 million during the quarter.
2010 2009
Financial Summary Q1 Q1
($ millions, except
per share) --- ---
Net Sales $1,489 $1,238
Gross Margin 254 158
pct. of sales 17.1% 12.8%
SG&A (184) (184)
pct. of sales 12.4% 14.9%
Net Income (loss) 15 (101)
attributable to
Federal-Mogul
Earnings (loss) Per
Share 0.15 (1.02)
in dollars, diluted
EPS
Operational
EBITDA(2) 138 70
pct. of sales 9.3% 5.7%
Cash Flow(3) $50 $(196)
"Federal-Mogul's strong financial results in the first quarter of 2010 demonstrate the benefit of an improving industry and the positive impact of our customer, market and product diversification, combined with the company's ability to leverage its lower operating cost resulting from restructuring initiatives in 2009," said Jose Maria Alapont, President and Chief Executive Officer. "We nearly doubled our EBITDA during Q1 2010 on a sales increase of 20 percent, demonstrating our capability to convert incremental revenue to greater profitability."
The company's stronger sales performance reflected an overall improvement in global automotive original equipment market demand. Federal-Mogul's sales in Q1 2010 of $1,489 million improved 20 percent, versus $1,238 million recorded during the same period one year ago. Federal-Mogul realized market share gains in all three of its business units serving the original equipment automakers. The company's sales were higher in all regions, with Asia-Pacific original equipment sales up 98 percent in the quarter versus the prior year, as compared to original equipment market expansion in the region of 46 percent during Q1 2010 versus Q1 2009.
Gross margin in Q1 2010 was $254 million or 17.1 percent of sales versus $158 million or 12.8 percent in Q1 2009. Federal-Mogul recorded SG&A expenses of $184 million or 12.4 percent of sales during Q1 2010, versus $184 million or 14.9 percent of sales in the same period of 2009. The company has a strong track record of SG&A improvement and continues to develop plans to further leverage existing staff support costs as the traditional automotive markets strengthen and the company implements plans to grow in Energy, Industrial and Transport market segments, where its core products can be applied to new product categories.
The company reported, in Q1 2010, net income of $15 million or $0.15 per diluted share or $35 million or $0.35 per share excluding the impact of the charge to recognize the Venezuelan currency devaluation. Federal-Mogul recorded, in Q1 2009, a net loss of $(101) million.
Operational EBITDA in Q1 2010 was $138 million or 9.3 percent of sales, nearly double the $70 million or 5.7 percent of sales reported in Q1 2009. Operational EBITDA for the first quarter 2010, excluding the impact of the currency devaluation in Venezuela, was $158 million or 10.6 percent of sales.
Cash flow in Q1 2010 was positive at $50 million, a strong improvement versus cash usage of $(196) million in Q1 2009. This quarter's performance, when coupled with strong cash management in previous quarters, brings cash flow for the last 12 months to over $400 million. This ability to generate significant cash and deliver earnings during a distressed economic period is indicative of the strength of the company's sustainable global profitable growth strategy.
Federal-Mogul received, in Q1 2010, seven recognition awards from global customers including Caterpillar, Cummins, Ford, General Motors, Honda, John Deere and Toyota. The company continues to operate at world-class quality and delivery performance levels.
Federal-Mogul's leading product portfolio includes numerous technologies capable of increasing fuel efficiency, reducing emissions, and improving vehicle comfort and safety. Five industry-leading Federal-Mogul innovations were recently recognized at the 2010 Automotive News PACE(TM) Awards. PACE is an industry award given by a panel of independent judges that review leading innovations submitted by automotive industry suppliers. Federal-Mogul won PACE Awards in three separate product technology and process innovation categories, more than any other company in the 2010 competition. The company's DuraBowl® piston, windshield wiper connection system and High Precision Electro-Erosion Machining Process (HPEEM) were each honored with a PACE Award for industry-leading innovation and successful commercial application. Federal-Mogul has received a total of seven PACE awards in recent years.
"Our strong first quarter earnings and cash flow performance shows that we are on the right track. The company's commitment to leading technology and innovation to drive this growth was recently recognized through the PACE Awards. Our customers and now independent industry judges have recognized Federal-Mogul for developing innovative solutions to solve the industry's most pressing challenges for fuel efficiency, emissions reduction and improved vehicle safety. Through strong financial performance, customer recognition and leading technology accomplishments we are demonstrating our capability to generate sustainable global profitable growth," Alapont said.
1. Analysts' expectations according to Thomson Reuters I/B/E/S dated April
27, 2010.
2. Operational EBITDA is defined as earnings before interest, income
taxes, depreciation and amortization, and certain items such as
restructuring and impairment charges, Chapter 11-related reorganization
expenses, gains and losses on the sales of businesses, and the expense
relating to U.S.-based funded pension plans.
3. Cash flow is equal to net cash provided from (used by) operating
activities less net cash used by investing as set forth on the attached
statement of cash flows, excluding cash received from the 524(g) Trust
and impacts of the Chapter 11 plan of reorganization.
About Federal-Mogul
Federal-Mogul Corporation is a leading global supplier of powertrain and safety technologies, serving the world's foremost original equipment manufacturers of automotive, light commercial, heavy-duty, agricultural, marine, rail, off-road and industrial vehicles, as well as the worldwide aftermarket. The company's leading technology and innovation, lean manufacturing expertise, as well as marketing and distribution deliver world-class products, brands and services with quality excellence at a competitive cost. Federal-Mogul is focused on its sustainable global profitable growth strategy, creating value and satisfaction for its customers, shareholders and employees. Federal-Mogul was founded in Detroit in 1899. The company is headquartered in Southfield, Michigan, and employs nearly 41,000 people in 33 countries. Visit the company's Web site at www.federalmogul.com.
Forward-Looking Statements
Statements contained in this press release, which are not historical fact, constitute "Forward-Looking Statements." Actual results may differ materially due to numerous important factors that are described in Federal-Mogul's most recent report to the SEC on Form 10-K, which may be revised or supplemented in subsequent reports to the SEC on Forms 10-Q and 8-K. Such factors include, among others, the cost and timing of implementing restructuring actions, the Company's ability to generate cost savings or manufacturing efficiencies to offset or exceed contractually or competitively required price reductions or price reductions to obtain new business, conditions in the automotive industry, and certain global and regional economic conditions. Federal-Mogul does not intend or assume any obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release.
* Please note accent over 'e' in Jose Maria Alapont
FEDERAL-MOGUL CORPORATION
Consolidated Statements of Operations (Unaudited)
Three Months Ended
March 31
2010 2009
---- ----
(Millions of Dollars, Except Per
Share Amounts)
Net sales $1,489 $1,238
Cost of products sold (1,235) (1,080)
------ ------
Gross margin 254 158
Selling, general and
administrative expenses (184) (184)
Interest expense, net (33) (34)
Amortization expense (12) (12)
Equity earnings of non-
consolidated affiliates 7 -
Restructuring expense, net (1) (38)
Other (expense) income, net (21) 13
--- ---
Income (loss) before income taxes 10 (97)
Income tax benefit (expense) 7 (4)
--- ---
Net income (loss) 17 (101)
Less net income attributable to
noncontrolling interests (2) -
---
Net income (loss) attributable to
Federal-Mogul $15 $(101)
=== =====
Income (loss) per common share:
-------------------------------
Basic $0.15 $(1.02)
===== ======
Diluted $0.15 $(1.02)
===== ======
FEDERAL-MOGUL CORPORATION
Consolidated Balance Sheets (Unaudited)
March 31 December 31
2010 2009
---- ----
ASSETS (Millions of Dollars)
Current assets:
Cash and equivalents $1,028 $1,034
Accounts receivable, net 1,018 950
Inventories, net 842 823
Prepaid expenses and other current
assets 231 221
--- ---
Total current assets 3,119 3,028
Property, plant and equipment, net 1,762 1,834
Goodwill and other indefinite-
lived intangible assets 1,427 1,427
Definite-lived intangible assets,
net 503 515
Other noncurrent assets 320 323
--- ---
$7,131 $7,127
====== ======
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Short-term debt, including
current portion of long-term
debt $97 $97
Accounts payable 576 537
Accrued liabilities 408 410
Current portion of postemployment
benefit liability 60 61
Other current liabilities 159 175
--- ---
Total current liabilities 1,300 1,280
Long-term debt 2,758 2,760
Postemployment benefits 1,284 1,298
Long-term portion of deferred
income taxes 496 498
Other accrued liabilities 187 192
Shareholders' equity:
Preferred stock ($.01 par value;
90,000,000 authorized shares;
none issued) - -
Common stock ($.01 par value;
450,100,000 authorized shares;
100,500,000 issued shares;
98,904,500 outstanding shares
as of March 31, 2010 and December
31, 2009) 1 1
Additional paid-in capital,
including warrants 2,150 2,123
Accumulated deficit (498) (513)
Accumulated other comprehensive
loss (607) (571)
Treasury stock, at cost (17) (17)
--- ---
Total Federal-Mogul shareholders'
equity 1,029 1,023
----- -----
Noncontrolling interests 77 76
--- ---
Total shareholders' equity 1,106 1,099
----- -----
$7,131 $7,127
====== ======
FEDERAL-MOGUL CORPORATION
Consolidated Statements of Cash Flows (Unaudited)
Three Months
Ended
March 31
--------
2010 2009
---- ----
(Millions of
Dollars)
Cash Provided From (Used By) Operating
Activities
Net income (loss) $17 $(101)
Adjustments to reconcile net income (loss)
to net cash provided from
(used by) operating activities:
Depreciation and amortization 81 77
Cash received from 524(g) Trust - 40
Payments to settle non-debt liabilities
subject to compromise, net (14) (49)
Loss on Venezuelan currency devaluation 20 -
Equity earnings of non-consolidated
affiliates (7) -
Cash dividends received from non-
consolidated affiliates 20 -
Gain on sale of property, plant and
equipment (2) -
Change in postemployment benefits,
including pensions 7 14
Change in deferred taxes (27) (3)
Changes in operating assets and
liabilities:
Accounts receivable (83) (66)
Inventories (36) (22)
Accounts payable 56 (107)
Other assets and liabilities 48 57
--- ---
Net Cash Provided From (Used By) Operating
Activities 80 (160)
Cash Provided From (Used By) Investing
Activities
Expenditures for property, plant and
equipment (46) (45)
Net proceeds from the sale of property,
plant and equipment 2 -
--- ---
Net Cash Used By Investing Activities (44) (45)
Cash Provided From (Used By) Financing
Activities
Principal payments on term loans (7) (7)
Decrease in other long-term debt (1) (1)
Increase in short-term debt 1 2
Net payments from factoring arrangements (14) (9)
--- ---
Net Cash Used By Financing Activities (21) (15)
Effect of Venezuelan currency devaluation
on cash (16) -
Effect of foreign currency exchange rate
fluctuations on cash (5) (4)
--- ---
Effect of foreign currency fluctuations on
cash (21) (4)
Decrease in cash and equivalents (6) (224)
Cash and equivalents at beginning of
period 1,034 888
----- ---
Cash and equivalents at end of period $1,028 $664
====== ====
FEDERAL-MOGUL CORPORATION
Reconciliation of Non-GAAP Financial Measures (Unaudited)
(Millions of Dollars)
Three Months Ended
March 31
--------
2010 2009
---- ----
Net income (loss) $17 $(101)
Depreciation and amortization 81 77
Interest expense, net 33 34
Income tax (benefit) expense (7) 4
Restructuring, net 1 38
Adjustment of assets to fair value 4 (1)
Expense associated with U.S. based funded
pension plans 13 17
Other (4) 2
--- ---
Operational EBITDA $138 $70
==== ===
Net cash provided from (used by) operating
activities: $80 $(160)
Adjustments:
Cash received from 524(g) Trust - (40)
Net payments for implementation of the Plan,
including settlement of non-debt
liabilities subject to compromise 14 49
--- ---
Cash provided from operations, excluding the
impacts of the Plan $94 $(151)
Cash used by investing activities (44) (45)
--- ---
Cash flow $50 $(196)
=== =====
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 as earnings before
interest, income taxes, depreciation and amortization, and certain
items such as restructuring and impairment charges, Chapter 11
related reorganization expenses, gains and losses on the sales of
businesses, and the expense relating to U.S.based funded pension
plans.