Federal-Mogul Reports Record Second Quarter Sales, Earnings, Cash Flow and EVA
22 July 1999
Federal-Mogul Reports Record Second Quarter Sales, Earnings, Cash Flow and EVA
-- $22 Million of economic value added.
-- Earnings per share from operations up 102% to $1.21, excluding
integration costs.
-- Second quarter sales reach new record of $1,687 million, up 39%.
-- Cash flow from operations, net of capital expenditures, totals
$202 million.
-- $70 million additional net new business announced.
-- Acquisition of Alcan Nural completed.
-- Automotive cylinder liner joint venture with Teikoku established.
-- Divestiture of Italian auto parts distributor announced.
SOUTHFIELD, Mich., July 22 -- Federal-Mogul Corporation
today announced record second quarter sales, earnings, cash and
EVA, posting solid financial results for the tenth consecutive quarter.
"Our ability to add economic value through excellent cash generation and
by doubling our earnings per share from operations shows that the integration
plan is right on track," said Dick Snell, chairman and chief executive
officer. "Our focus on defect reduction continues to strengthen customer
partnerships."
Federal-Mogul announced an additional $70 million in net new business
awards covering the 1999 to 2003 timeframe for both original equipment and
aftermarket customers. This is an 11% increase over the first quarter
announcement bringing net new business to $730 million. The $70 million net
new sales by Federal-Mogul's operating groups include Powertrain Systems with
$40 million, Sealing Systems with $27 million and General Products with
$3 million.
In line with its growth strategy, Federal-Mogul completed its announced
acquisition of Alcan Nural, a German piston company. Federal-Mogul also
established a joint venture with Teikoku Piston Rings for the manufacture of
automotive cylinder liners at Federal-Mogul's current Lake City, Minnesota,
manufacturing facility.
Federal-Mogul's second quarter revenues increased to $1,687 million
compared to $1,214 million in 1998. For the second quarter, the company
earned $96 million or $1.21 per share from operations, compared to $31 million
or $.60 per share from operations in 1998. Earnings per share from operations
exclude integration costs in 1999, and integration costs as well as
extraordinary items in 1998. Including these items, the company reported
second quarter earnings of $87 million or $1.11 per share in 1999, and a loss
of $3 million or ($.07) per share in 1998.
The company generated $202 million of cash from operations. Cash from
operations is net of capital expenditures and excludes integration and
restructuring payments. EVA increased from $2 million in the second quarter
of 1998 to $22 million the second quarter of 1999.
Federal-Mogul's second quarter sales were 63% in North America, 32% in
Europe and 5% in the rest of the world. The original equipment market
represented 53% of the company's global sales.
Federal-Mogul's six-month consolidated sales reached $3,329 million, up
78% compared to the same period last year. Earnings from operations for the
first two quarters of 1999 were $170 million, an increase of 181% over the
first six months of 1998. Sales and earnings results were records for any
six-month period in the company's 100-year history.
In the second quarter, Federal-Mogul was honored by Auto Value with
Outstanding Installer Promotion and Outstanding Manpower Support awards.
Advance Auto Parts recognized Federal-Mogul as its 1998 Hard Parts Vendor of
the Year. Federal-Mogul also received Toyota's Excellent Delivery Performance
Award.
Powertrain Systems
Powertrain Systems reported second quarter sales of $755 million compared
to $639 million in 1998.
In new business awards, Federal-Mogul received the piston, rings and liner
business for Navistar's inline 6-cylinder engine. Harley-Davidson selected
Federal-Mogul to supply engine bearings and Briggs and Stratton's M23 engine
program will feature Federal-Mogul's piston and ring assembly. In Japan,
Federal-Mogul Ignition Products was awarded the spark plug business for
Mazda's OES division. North America Sintered Products was awarded a contract
by Means Industries for the manufacture of key powder metal components that
make up their one-way clutch system to be used in the Ford 4R100 transmission
on the 2001 model year.
Federal-Mogul's piston and ring manufacturing operations in Bradford and
Sunderland, England, received the 1998 Best Supplier Award by Nissan UK.
Powertrain Systems' Waupun, Wisconsin valve guide and seat manufacturing
facility received its second Gold Pentastar Award from Chrysler.
Sealing Systems
Sealing Systems reported second quarter sales of $319 million compared to
$303 million in 1998.
In new business awards, in Europe Federal-Mogul was awarded the exhaust
gaskets and elastomeric seals business for various BMW models.
General Products
General Products reported second quarter sales of $613 million compared to
$272 million in 1998.
In new original equipment business, Federal-Mogul Friction Products was
awarded by Ford the rear lining business for the C170. Friction Products was
also awarded the front pads for a Mazda sport utility vehicle.
DaimlerChrysler awarded Federal-Mogul the fog lamp business for the Jeep
Cherokee. Internationally, Federal-Mogul won front and rear fog lamp business
from General Motors and Isuzu in Thailand and Brazil. Federal-Mogul also was
awarded from General Motors in China the siderail lamp business for the W van.
Federal-Mogul's Lighting Products facility in Hampton, Virginia, received
the Shingo prize for manufacturing excellence awarded by the National
Association of Manufacturers and the Utah State University College of
Business. The Lighting Products facility in Avilla, Indiana, received the
State of Indiana Quality Improvement Award.
Third Quarter Dividend on Common Stock
Federal-Mogul's Board of Directors today declared the regular quarterly
dividend of $.0025 cents a share on the common stock of the company. Third
quarter common stock dividends are payable September 10, 1999 to shareowners
of record at the close of the business August 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, Cooper 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 Six Months Ended
June 30 June 30
1999 1998 1999 1998
Net sales $1,687.1 $1,214.0 $3,329.3 $1,872.0
Cost of products sold 1,204.5 896.6 2,397.2 1,393.3
Gross margin 482.6 317.4 932.1 478.7
Selling, general and
administrative expenses 214.7 180.8 437.2 278.9
Amortization 31.1 21.3 63.9 30.2
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 -- (1.0) -- 19.0
Integration costs 13.3 4.7 23.4 4.7
Interest expense 68.5 56.3 139.4 72.8
Interest income (1.0) (2.1) (2.0) (8.8)
International currency
exchange losses 0.4 1.2 2.7 2.3
Net gain on British pound currency
option and forward contract -- -- -- (13.3)
Other expense, net 4.8 2.9 10.1 8.9
Earnings Before Income Taxes
and Extraordinary Item 150.8 53.3 257.4 54.9
Income tax expense 63.5 24.9 108.7 33.7
Net Earnings Before
Extraordinary Item 87.3 28.4 148.7 21.2
Extraordinary item - loss on
early retirement of debt, net
of applicable income tax
benefit -- 31.3 23.1 31.3
Cumulative effect of change in
accounting for costs of
start up activities, net
of applicable income
tax benefits -- -- 12.7 --
Net Earnings (Loss) $ 87.3 $(2.9) $112.9 $(10.1)
Earnings (Loss) Per Common Share
Basic
Earnings before extraordinary
item $1.24 $ .63 $ 2.13 $ .47
Extraordinary item - loss on
early retirement of debt, net
of applicable income tax
benefit -- (.72) (.34) (.75)
Cumulative effect of change in
accounting for costs of
start up activities, net of
applicable income tax benefit -- -- (.18) --
Net Earnings (Loss) $1.24 $(.09) $1.61 $(.28)
Diluted
Earnings before
extraordinary item $1.11 $ .55 $1.91 $ .42
Extraordinary item - loss on
early retirement of debt, net
of applicable income tax
benefit -- (.62) (.27) (.65)
Cumulative effect of change in
accounting for costs of
start up activities, net of
applicable income tax benefit -- -- (.15) --
Net Earnings (Loss) $1.11 $(.07) $1.49 $(.23)
Weighted Average Shares (Thousands)
Basic 70,230 43,299 69,307 41,746
Diluted 83,622 50,514 83,749 47,561
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)
June 30 December 31
1999 1998
Assets
Cash and equivalents $ 86.5 $ 77.2
Accounts receivable 912.0 1,025.0
Investment in accounts receivable securitization 236.4 91.1
Inventories 1,006.3 1,068.6
Prepaid expenses and income tax benefits 283.2 337.7
Total current assets 2,524.4 2,599.6
Property, plant and equipment 2,422.3 2,477.5
Goodwill 3,577.1 3,398.4
Other intangible assets 832.3 886.4
Other noncurrent assets 564.2 578.2
Total Assets $9,920.3 $9,940.1
Liabilities and Shareholders' Equity
Short-term debt, including current portion
of long-term debt $ 193.6 $ 211.0
Accounts payable 516.9 498.4
Accrued compensation 195.8 200.3
Restructuring and rationalization reserves 116.8 178.9
Current portion of asbestos liability 188.0 125.0
Income taxes payable 131.5 142.2
Other accrued liabilities 590.2 673.7
Total current liabilities 1,932.8 2,029.5
Long-term debt 3,314.3 3,130.7
Long-term portion of asbestos liability 1,084.3 1,176.7
Postemployment benefits 663.5 677.0
Other accrued liabilities 352.8 327.0
Minority interest in consolidated subsidiaries 40.1 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 42.8 44.4
Series E preferred stock -- 132.7
Common stock 352.0 336.8
Additional paid-in capital 1,781.3 1,665.8
Retained earnings (accumulated deficit) 42.0 (69.9)
Unearned ESOP compensation (11.6) (15.1)
Accumulated other comprehensive income (247.2) (106.0)
Other (1.8) (2.5)
Total Shareholders' Equity 1,957.5 1,986.2
Total Liabilities and Shareholders' Equity $9,920.3 $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 Six Months Ended
June 30 June 30
1999 1998 1999 1998
Cash Provided From (Used By)
Operating Activities
Net earnings (loss) $ 87.3 $ (2.9) $ 112.9 $ (10.1)
Adjustments to reconcile
net earnings (loss) to net
cash provided from operating
activities:
Depreciation and amortization 94.0 56.3 182.8 84.9
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 -- (1.0) -- 19.0
Loss on early retirement
of debt -- 47.1 23.1 47.1
Cumulative effect of change
in accounting principle -- -- 12.7 --
(Increase) decrease in
accounts receivable 22.1 27.1 (124.0) (30.0)
Decrease in inventories 22.0 7.0 36.1 43.8
Increase (decrease) in
accounts payable 33.8 (23.3) 32.0 (1.3)
Increase in current
liabilities and other 62.8 36.1 77.8 56.5
Payments against restructuring
and rationalization
reserves (31.1) (16.2) (62.1) (20.7)
Payments against asbestos
liability (33.5) (27.3) (65.8) (32.7)
Net Cash Provided From
Operating Activities 257.4 102.9 225.5 185.6
Cash Provided From (Used By) Investing Activities
Expenditures for property, plant
and equipment and other
long-term assets (99.7) (61.6) (174.9) (81.1)
Proceeds from sale of
business investments 22.7 4.6 28.6 53.9
Proceeds from sale of options -- (0.4) -- 39.1
Business acquisitions, net of
cash acquired (126.5) (130.7) (239.4) (2,786.5)
Net Cash Used By
Investing Activities (203.5) (188.1) (385.7) (2,774.6)
Cash Provided From (Used By) Financing Activities
Issuance of common stock 0.6 594.0 0.7 601.4
Net increase (decrease) in debt (82.2) (444.2) 156.8 1,667.5
Fees paid for debt issuance and
other securities -- (43.5) (25.5) (76.8)
Investment in accounts
receivable securitization 31.7 19.9 44.1 10.3
Dividends (0.7) (0.5) (2.3) (5.9)
Other (2.5) 0.1 (4.3) (6.8)
Net Cash Provided From (Used By)
Financing Activities (53.1) 125.8 169.5 2,189.7
Increase (Decrease) in Cash
and Equivalents 0.8 40.6 9.3 (399.3)
Cash and equivalents at beginning
of period 85.7 101.5 77.2 541.4
Cash and Equivalents at
End of Period $86.5 $142.1 $86.5 $142.1