Federal-Mogul Announces Third Quarter Results
22 October 1999
Federal-Mogul Announces Third Quarter Results
SOUTHFIELD, Mich., Oct. 21 -- Federal-Mogul Corporation
today announced record third quarter sales of $1,584 million.
Earnings per share from operations increased 53 percent to $1.01 up from $.66
in 1998.
"Through three quarters, our earnings per share from operations are up 68
percent over last year," said Dick Snell, chairman and chief executive
officer. "I'm very pleased that we continue to have the best earnings growth
in the industry."
Federal-Mogul's third quarter revenues increased to $1,584 million
compared to $1,121 million in 1998. On a pro forma basis, sales for the third
quarter were even with 1998 as adjusted for the effects of acquisitions,
divestitures and foreign exchange. Third quarter sales compared to 1998 by
operating group had Powertrain Systems reporting sales of $617 million
compared to $600 million; Sealing Systems / Visibility / Systems Protection
Products reporting sales of $461 million, were equal to last year; and Brake /
Chassis / Ignition / Fuel reporting sales of $506 million compared to $555
million.
For the third quarter, the company earned $78 million or $1.01 per share
from operations. Earnings per share from operations exclude $13 million
pre-tax of integration costs. Including these costs, the company reported net
earnings of $70 million or $.91 per share compared to $35 million or $.58 per
share in 1998.
Federal-Mogul's nine-month consolidated sales reached $4,913 million, up
64 percent compared to the same period last year. Earnings per share from
operations hit a new nine-month record of $3.18 per share, up from $1.89 for
the same period in 1998.
Fourth Quarter Dividend Declared
The Federal-Mogul Board of Directors has declared a regular quarterly
dividend of $.0025 a share on the common stock of the company. Fourth quarter
dividends are payable December 10, 1999 to shareowners of record at the close
of business November 30, 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
under the private Securities Litigation Reform Act of 1995. Actual results,
events and performance may differ materially from those expressed or implied
in these statements, such as the cost of implementing restructuring actions,
conditions in the automotive components industry and other factors discussed
in the company's 1998 Annual Report on Form 10-K and other filings with the
Securities and Exchange Commission.
F E D E R A L - M O G U L C O R P O R A T I O N
N E T E A R N I N G S R E C O N C I L I A T I O N
(Millions of Dollars, Except Per Share Data)
(Unaudited)
Three Months Ended September 30, 1999
Adjustments
As Integration Sale of From
Reported Costs Bertolotti Operations
Net sales $1,583.9 $- $- $1,583.9
Cost of products sold 1,142.7 - - 1,142.7
Gross margin 441.2 - - 441.2
Selling, general and administrative
expenses 201.1 - - 201.1
Amortization of goodwill and
other intangible assets 30.5 - - 30.5
Adjustment of assets held for
sale and other long-lived assets
to fair value 7.9 - (7.9) -
Integration costs 13.2 (13.2) - -
Interest expense 68.0 - - 68.0
Interest income (0.8) - - (0.8)
International currency
exchange losses 0.8 - - 0.8
Other expense, net 7.4 - - 7.4
Earnings Before Income Taxes 113.1 13.2 7.9 134.2
Income tax expense 43.0 4.9 7.9 55.8
Net Earnings $70.1 $8.3 $- $78.4
Diluted Earnings Per Common
Share $.91 $.10 $- $1.01*
* Compares to First Call consensus for third quarter of $1.00.
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 Nine Months Ended
September 30 September 30
1999 1998 1999 1998
Net sales $1,583.9 $1,121.2 $4,913.2 $2,993.2
Cost of products sold 1,142.7 828.3 3,539.9 2,221.6
Gross margin 441.2 292.9 1,373.3 771.6
Selling, general and
administrative expenses 201.1 152.2 638.3 431.1
Amortization of goodwill and
other intangible assets 30.5 23.7 94.4 53.9
Purchased in-process research
and development charge - - - 18.6
Restructuring charge - (6.6) - 3.9
Adjustment of assets held for sale
and other long-lived assets to
fair value 7.9 - 7.9 19.0
Integration costs 13.2 9.0 36.6 13.7
Interest expense 68.0 42.8 207.4 115.6
Interest income (0.8) (0.8) (2.8) (9.6)
International currency
exchange losses 0.8 3.0 3.5 5.3
Net gain on British pound
currency option and
forward contract - - - (13.3)
Other expense, net 7.4 6.1 17.5 15.0
Earnings Before Income
Taxes, Extraordinary Items and
Cumulative Effect of Change
in Accounting Principle 113.1 63.5 370.5 118.4
Income tax expense 43.0 28.9 151.7 62.6
Net Earnings Before Extraordinary
Items and Cumulative
Effect of Change in
Accounting Principle 70.1 34.6 218.8 55.8
Extraordinary items - loss on
early retirement of debt,
net of applicable income
tax benefits - - 23.1 31.3
Cumulative effect of change
in accounting for costs of
start up activities, net of
applicable income tax benefit - - 12.7 -
Net Earnings $70.1 $34.6 $183.0 $24.5
Earnings Per Common Share
Basic
Earnings before extraordinary
items and cumulative effect
of change in accounting
principle $.99 $.63 $3.12 $1.17
Extraordinary items - loss on
early retirement of debt, net
of applicable income
tax benefits - - (.34) (.69)
Cumulative effect of change
in accounting for costs of
start up activities, net of
applicable income tax benefit - - (.18) -
Net Earnings $.99 $.63 $2.60 $.48
Diluted
Earnings before extraordinary
items and cumulative effect of
change in accounting
principle $.91 $.58 $2.82 $1.06
Extraordinary items - loss on
early retirement of debt, net
of applicable income tax
benefits - - (.28) (.61)
Cumulative effect of change
in accounting for costs of
start up activities, net of
applicable income tax benefit - - (.15) -
Net Earnings $.91 $.58 $2.39 $.45
Weighted Average Shares (Thousands)
Basic 70,254 53,054 69,626 45,557
Diluted 83,718 58,590 83,806 51,272
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)
September 30 December 31
1999 1998
Assets
Cash and equivalents $64.9 $77.2
Accounts receivable 629.9 1,025.0
Investment in accounts receivable
securitization 301.3 91.1
Inventories 973.8 1,068.6
Prepaid expenses and income tax benefits 355.9 337.7
Total current assets 2,325.8 2,599.6
Property, plant and equipment 2,463.1 2,477.5
Goodwill 3,615.8 3,398.4
Other intangible assets 821.6 886.4
Asbestos-related insurance recoverable 326.5 -
Other noncurrent assets 586.3 578.2
Total Assets $10,139.1 $9,940.1
Liabilities and Shareholders' Equity
Short-term debt, including current
portion of long-term debt $179.9 $211.0
Accounts payable 541.6 498.4
Accrued compensation 196.7 200.3
Restructuring and rationalization reserves 90.5 178.9
Current portion of asbestos liability 166.0 125.0
Income taxes payable 128.6 142.2
Other accrued liabilities 468.0 673.7
Total current liabilities 1,771.3 2,029.5
Long-term debt 3,250.9 3,130.7
Long-term portion of asbestos liability 1,377.3 1,176.7
Postemployment benefits 663.1 677.0
Other accrued liabilities 366.4 327.0
Minority interest in consolidated
subsidiaries 39.7 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 41.9 44.4
Series E preferred stock - 132.7
Common stock 352.1 336.8
Additional paid-in capital 1,782.2 1,665.8
Retained earnings (accumulated deficit) 111.3 (69.9)
Unearned ESOP compensation (11.6) (15.1)
Accumulated other comprehensive income (179.1) (106.0)
Other (1.4) (2.5)
Total Shareholders' Equity 2,095.4 1,986.2
Total Liabilities and Shareholders'
Equity $10,139.1 $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 Nine Months Ended
September 30 September 30
1999 1998 1999 1998
Cash Provided From (Used By)
Operating Activities
Net earnings $70.1 $34.6 $183.0 $24.5
Adjustments to reconcile net
earnings to net cash provided
from operating activities:
Depreciation and
amortization 89.0 57.8 271.8 142.7
Purchased in-process
research and
development charge - - - 18.6
Restructuring charge - (6.6) - 3.9
Adjustment of assets held
for sale and other long-lived
assets to fair value 7.9 - 7.9 19.0
Loss on early retirement
of debt - - 23.1 47.1
Cumulative effect of change
in accounting principle - - 12.7 -
(Increase) decrease in accounts
receivable 2.6 4.3 (121.5) (25.7)
Decrease in inventories 9.1 3.2 45.2 47.0
Increase (decrease) in
accounts payable 19.3 (6.1) 51.3 (7.4)
(Decrease) increase in
current liabilities and
other (60.5) (3.6) 17.4 52.9
Payments against restructuring
and rationalization
reserves (11.8) (15.0) (73.9) (35.7)
Payments against asbestos
liability (56.6) (26.1) (122.4) (58.8)
Net Cash Provided From
Operating Activities 69.1 42.5 294.6 228.1
Cash Provided From (Used By) Investing Activities
Expenditures for property, plant
and equipment and other long-term
assets (115.2) (48.0) (290.1) (129.1)
Proceeds from sale of
business investments 8.8 (0.5) 37.4 53.4
Proceeds from sale of options - - - 39.1
Business acquisitions, net of
cash acquired (131.3) 56.3 (370.7) (2,730.2)
Net Cash Provided From (Used By)
Investing Activities (237.7) 7.8 (623.4) (2,766.8)
Cash Provided From (Used By) Financing Activities
Issuance of common stock 0.5 0.1 1.2 601.5
Net increase (decrease)
in debt (70.4) (100.5) 86.4 1,567.0
Fees paid for debt issuance
and other securities - (5.9) (25.5) (82.7)
Investment in accounts receivable
securitization 217.0 20.1 261.1 30.4
Dividends (1.1) (1.9) (3.4) (7.8)
Other 1.0 (2.0) (3.3) (8.8)
Net Cash Provided From (Used By)
Financing Activities 147.0 (90.1) 316.5 2,099.6
Decrease in Cash and
Equivalents (21.6) (39.8) (12.3) (439.1)
Cash and equivalents at
beginning of period 86.5 142.1 77.2 541.4
Cash and Equivalents at
End of Period $64.9 $102.3 $64.9 $102.3