Federal-Mogul Reports Record $.96 First Quarter Earnings Per Share
28 April 1999
Federal-Mogul Reports Record $.96 First Quarter Earnings Per Share from Operations
* Earnings per share from operations at $.96, excluding special charges.
* $7 Million of economic value added.
* First quarter sales hit new record high of $1,642 million.
* Seasonal accounts receivable increase of $146 million contributed to
cash usage from operations after capital expenditures of $66 million.
* Gordon Ulsh appointed President and Chief Operating Officer.
* Announced acquisition plan for Alcan Nural.
SOUTHFIELD, Mich., April 28 -- Federal-Mogul Corporation
today announced solid financial results for the ninth consecutive
quarter.
"I'm very proud of the total team effort behind these results," said Dick
Snell, chairman and chief executive officer. "We are successfully
consolidating our acquisitions because we have a very good, robust integration
process. With this disciplined process, we will continue to grow the company
through acquisitions to expand our systems and global capabilities as required
by our customers."
In response to the company's expanded operations, Federal-Mogul appointed
Gordon A. Ulsh, president and chief operating officer on February 24. On the
acquisition front, the company announced the acquisition agreement of Alcan
Nural, a German piston company, and completed the acquisition of Tri-Way
Machine and Camshaft Machine in January.
"Federal-Mogul is on schedule to deliver in the short term without
compromising our long-term growth objectives," said Snell. "We are
successfully operating at an accelerated pace to remain the industry leader in
our sectors."
First Quarter Results
Federal-Mogul's first quarter revenues increased 250% to $1,642 million
compared to $658 million in 1998. For the first quarter, the company's
earnings increased 259% to $75 million or $.96 per share from operations,
compared to $29 million or $.63 per share in 1998. Earnings per share from
operations exclude integration costs and special charges. Including these
items, the company reported earnings of $26 million or $.38 per share.
As previously disclosed, the non-operating charges include $13 million for
an accounting change related to start-up activities, $23 million related to
the early extinguishment of debt incurred for acquisitions, and $11 million
for inventory charges related to the Cooper acquisition. In addition, the
company incurred $10 million in integration costs.
The company used $66 million of cash for operations primarily due to an
expected first quarter seasonal increase in customer accounts receivable of
$146 million. Cash from operations is after capital expenditures and before
integration and restructuring payments.
Federal-Mogul was awarded the 1998 Hard Parts Vendor of the Year Award
from Advance Auto Parts for all products, including Fel-Pro(R) gaskets and
Ferodo(R) brakes. Federal-Mogul was also awarded the 1998 Performance Vendor
of the Year Award from O'Reilly Auto Parts. O'Reilly's carries 90 percent of
all Federal-Mogul product lines including bearings, seals, fuel pumps, Fel-
Pro(R) gaskets, Moog(R)chassis products, Precision(R) universal joints,
Champion(R) spark plugs and Signal-Stat(R) lighting products.
Powertrain Systems
Powertrain Systems reported first quarter sales of $643 million compared
to $272 million in 1998. In new business awards, Federal-Mogul received the
engine bearing business for General Motors' 2.2L and 2.4L engines.
Federal-Mogul's Powertrain Systems' facilities in Bradford and Sunderland,
England, have been awarded the 1998 Best Supplier Award from Nissan UK.
Powertrain's Blacksburg, Virginia, facility was awarded the Master Quality
Award from General Motors. Blacksburg supplies GM with steel-backed (bi-
metallic) engine bearings.
Powertrain Systems has also received the 1998 Outstanding Installer
Promotion Award from Auto Value, for superior marketing support for
Champion(R) spark plugs. In addition, Powertrain's Greenville and Manitowoc
facilities received Excellent Delivery Performance and Certificate of
Achievement-Quality awards from Toyota Motor Manufacturing, North America.
The Lake City, Minnesota, facility received Partner Supplier status from John
Deere.
Sealing Systems
Sealing Systems reported first quarter sales of $356 million compared to
$163 million in 1998.
Federal-Mogul's Sealing Systems' Skokie, Illinois, facility has also been
awarded the Excellent Delivery Performance Award and the Certificate of
Achievement - Quality Award from Toyota Motor Manufacturing, North America.
Sealing Systems' Frankfort, Indiana, facility received a Gold Pentastar Award
from DaimlerChrysler for excellence in quality and delivery.
General Products
General Products reported first quarter sales of $643 million compared to
$209 million in 1998.
In new business, Federal-Mogul Friction Products was awarded from
DaimlerChrysler the front disk and rear drums for the Chrysler BR 1500 pick-up
truck. Friction Products was also awarded front and rear disks for Ford Motor
Company's Excursion vehicle.
Federal-Mogul will supply Outboard Marine Corporation with pulse-driven
fuel pumps for application as fuel injection lift pumps on their outboard
engines and fuel vapor separator/electric fuel pump modules for application on
their outboard engines, utilizing FICHT(R) fuel injection. DaimlerChrysler
awarded Federal-Mogul Camshafts a contract for the supply of assembled
camshafts for its new 3.7L V6 engine.
Federal-Mogul's General Products facility in Waupun, Wisconsin, received a
Gold Pentastar award from DaimlerChrysler in recognition for outstanding
achievement in quality, delivery and warranty. General Motors awarded
Federal-Mogul Sintered Products its Supplier of the Year award for its supply
of power metal valve seats and valve guides.
Second Quarter Dividend on Common Stock
Federal-Mogul's Board of Directors declared the regular quarterly dividend
of $.0025 cents a share on the common stock of the company. Second quarter
common stock dividends are payable June 10, 1999 to shareowners of record at
the close of the business May 31, 1999.
Headquartered in Southfield, Michigan, Federal-Mogul is an automotive
parts manufacturer providing innovative solutions and systems to global
customers in the automotive, light trucks, heavy duty, farm and industrial
markets. The company was founded in 1899. For more information on Federal-
Mogul, visit the company's web site at http://www.federal-mogul.com. Federal-
Mogul's press releases are available by fax through Company News On-Call, call
800-758-5804, ext. 306225.
Information in this press release contains forward-looking statements
which are not historical facts and involve risk and uncertainties. Actual
results, events and performance could differ materially from those
contemplated by these forward-looking statements including, without
limitations, the company's ability to effectively divest certain assets, the
cost and timing of implementing restructuring actions, the combination of the
businesses of Federal-Mogul, T & N, and Fel-Pro, conditions in the automotive
components industry, certain global and regional economic conditions and other
factors discussed in this press release and those detailed from time to time
in the company's filings with the Securities and Exchange Commission.
Federal-Mogul undertakes no obligation to update any forward looking statement
to reflect events or circumstances after the date of this press release.
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
1999 1998
Net sales $1,642.2 $658.0
Cost of products sold 1,192.7 496.7
Gross margin 449.5 161.3
Selling, general and administrative expenses 222.5 98.1
Amortization 32.8 8.9
Purchased in-process research and
development charge - 18.6
Restructuring charge - 10.5
Adjustment of assets held for sale and other
long-lived assets to fair value - 20.0
Integration costs 10.1 -
Interest expense 70.9 16.5
Interest income (1.0) (6.7)
International currency exchange losses 2.3 1.1
Net gain on British pound currency option
and forward contract - (13.3)
Other expense, net 5.3 6.0
Earnings Before Income Taxes, Extraordinary
Item and Cumulative Effect of Change in
Accounting Principle 106.6 1.6
Income tax expense 45.2 8.8
Net Earnings (Loss) Before Extraordinary
Item and Cumulative Effect of Change in
Accounting Principle 61.4 (7.2)
Extraordinary item - loss on early retirement
of debt, net of applicable income tax benefit 23.1 -
Cumulative effect of change in accounting for
costs of start-up activities, net of applicable
income tax benefit 12.7 -
Net Earnings (Loss) $25.6 $(7.2)
Earnings (Loss) Per Common Share
Basic
Earnings (loss) before extraordinary item
and cumulative effect of change in
accounting principle $ .89 $(.20)
Extraordinary item - loss on early retirement
of debt, net of applicable income tax benefit (.34) -
Cumulative effect of change in accounting
for costs of start-up activities, net of
applicable income tax benefit (.19) -
Net Earnings (Loss) $ .36 $(.20)
Diluted
Earnings (loss) before extraordinary item and
cumulative effect of change in
accounting principle $ .80 $(.20)
Extraordinary item - loss on early retirement
of debt, net of applicable income tax benefit (.27) -
Cumulative effect of change in accounting
for costs of start-up activities, net
of applicable income tax benefit (.15) -
Net Earnings (Loss) $ .38 $(.20)
Weighted Average Shares (Thousands)
Basic 68,375 40,114
Diluted 83,724 40,114
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
1999 1998
Assets
Cash and equivalents $85.7 $77.2
Accounts receivable 1,057.0 1,025.0
Investment in accounts receivable
securitization 140.2 91.1
Inventories 1,008.2 1,068.6
Prepaid expenses and income
tax benefits 262.8 337.7
Total current assets 2,553.9 2,599.6
Property, plant and equipment 2,395.7 2,477.5
Goodwill 3,503.2 3,398.4
Other intangible assets 862.1 886.4
Other noncurrent assets 549.6 578.2
Total Assets $9,864.5 $9,940.1
Liabilities and Shareholders' Equity
Short-term debt, including current
portion of long-term debt $196.1 $211.0
Accounts payable 478.0 498.4
Accrued compensation 193.3 200.3
Restructuring and rationalization
reserves 147.9 178.9
Current portion of asbestos liability 125.0 125.0
Income taxes payable 115.7 142.2
Other accrued liabilities 564.3 673.7
Total current liabilities 1,820.3 2,029.5
Long-term debt 3,396.7 3,130.7
Long-term portion of asbestos
liability 1,136.4 1,176.7
Postemployment benefits 664.5 677.0
Other accrued liabilities 346.7 327.0
Minority interest in consolidated
subsidiaries 36.5 38.0
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trust holding solely
convertible subordinated debentures
of the Company 575.0 575.0
Shareholders' equity:
Series C ESOP preferred stock 43.3 44.4
Series E preferred stock - 132.7
Common stock 352.0 336.8
Additional paid-in capital 1,780.3 1,665.8
Accumulated deficit (44.3) (69.9)
Unearned ESOP compensation (15.1) (15.1)
Accumulated other comprehensive
income (225.7) (106.0)
Other (2.1) (2.5)
Total Shareholders' Equity 1,888.4 1,986.2
Total Liabilities and
Shareholders' Equity $9,864.5 $9,940.1
F E D E R A L - M O G U L C O R P O R A T I O N
C A S H F L O W S
(Millions of Dollars)
(Unaudited)
Three Months Ended
March 31
1999 1998
Cash Provided From (Used By) Operating Activities
Net earnings (loss) $25.6 $(7.2)
Adjustments to reconcile net
earnings (loss) to net cash provided
from (used by) operating activities:
Depreciation and amortization 88.8 29.8
Purchased in-process research and
development charge - 18.6
Restructuring charge - 10.5
Adjustment of assets held for sale
and other long-lived assets
to fair value - 20.0
Loss on early retirement of debt 23.1 -
Cumulative effect of change in
accounting principle 12.7 -
Postemployment benefits 8.0 (0.1)
Increase in accounts receivable (146.1) (57.1)
Decrease in inventories 14.1 36.8
Increase (decrease) in
accounts payable (1.8) 22.0
Increase in current liabilities
and other 7.0 19.3
Payments against restructuring
and rationalization reserves (31.0) (4.5)
Payments against asbestos liability (32.3) (5.4)
Net Cash Provided From (Used By)
Operating Activities (31.9) 82.7
Cash Provided From (Used By) Investing Activities
Expenditures for property, plant and
equipment and other long-term assets (75.2) (19.5)
Proceeds from sale of business
investments 5.9 49.3
Proceeds from sale of options - 39.5
Business acquisitions, net of
cash acquired (112.9) (2,655.8)
Net Cash Used By Investing Activities (182.2) (2,586.5)
Cash Provided From (Used By) Financing Activities
Issuance of common stock 0.1 7.4
Net increase in debt 239.0 2,111.7
Fees paid for debt issuance and
other securities (25.5) (33.3)
Investment in accounts receivable
securitization 12.4 (9.6)
Dividends (1.6) (5.4)
Other (1.8) (6.9)
Net Cash Provided From Financing
Activities 222.6 2,063.9
Increase (Decrease) in Cash and
Equivalents 8.5 (439.9)
Cash and equivalents at beginning of
period 77.2 541.4
Cash and Equivalents at End of Period $85.7 $101.5
FEDERAL - MOGUL CORPORATION
OPERATIONS BY SEGMENT
QUARTER ENDED MARCH 31, 1999
($ Millions)
Net Sales:
Powertrain Systems $643
Sealing Systems 356
General Products 643
Divested Activities -
Total $1,642
% of
Sales
Operational EBIT: *
Powertrain Systems $78 12.2%
Sealing Systems 58 16.2%
General Products 72 11.2%
Divested Activities -
Total $208 12.7%
Reconciliation:
Total Segment Operational EBIT $208
Net interest, and other financing (80)
Acquisition Related Costs (21)
Earnings before income taxes,
extraordinary item and
accounting change $107
Capital Expenditures:
Powertrain Systems $33
Sealing Systems 13
General Products 29
Divested Activities -
Total $75
Depreciation and Amortization:
Powertrain Systems $42
Sealing Systems 16
General Products 31
Divested Activities -
Total $89
* Operational EBIT is defined as Operational Earnings before certain
nonrecurring items (such as certain purchase accounting adjustments and
integration costs associated with new acquisitions), interest and income
taxes.