Federal-Mogul Reports Third Quarter Results
19 October 2000
Federal-Mogul Reports Third Quarter Results
SOUTHFIELD, Mich., Oct. 19 Federal-Mogul Corporation
today announced third quarter sales of $1,428 million compared to
$1,584 million in 1999. In line with breakeven expectations announced by the
company on September 19, Federal-Mogul earned $1 million or $.01 per share
from operations for the quarter, compared to $78 million or $1.01 per share
from operations in 1999. Third quarter earnings per share from operations
exclude restructuring and impairment charges in 2000, and integration costs
and impairment charges in 1999. After these charges, the company reported a
loss of $.12 per share compared to earnings of $.91 per share in 1999.
As previously announced, Federal-Mogul's performance in the third quarter
was impacted by three factors: a weak North American aftermarket, significant
weakening of European currencies against the dollar, and original equipment
sales shortfall attributable to the deterioration of the heavy-duty truck
market.
By operating group, Powertrain Systems reported third quarter sales of
$548 million compared to $617 million in 1999. Sealing Systems / Visibility /
Systems Protection Products reported sales of $421 million compared to $461
million in 1999. Brake / Chassis / Ignition / Fuel reported sales of $459
million compared to $506 million in 1999.
Net of foreign exchange, Federal-Mogul's third quarter original equipment
business decreased by four percent from 1999 while aftermarket sales were down
by seven percent. The original equipment market represented 55% of the
company's global sales. By region, Federal-Mogul's third quarter sales were
67% in The Americas, 31% in Europe and 2% in the rest of the world.
Federal-Mogul's nine-month consolidated sales were $4,665 million,
compared to $4,913 million during the same period last year. Net earnings for
the first three-quarters were $56 million or $.70 per share compared to $183
million or $2.39 per share in 1999.
Cash flow from operations which includes capital expenditures,
restructuring, and asbestos payments was a usage of $111 million.
In response to the challenges of today's marketplace and future
expectations, Federal-Mogul is focusing on six initiatives to significantly
improve performance over the long term. The six initiatives are aftermarket
strategy, supply chain management, constraint management, facilities
rationalization, shared services, and investment strategies.
Federal-Mogul Hosts Third Quarter Conference Call
Federal-Mogul will be hosting a conference call at 1 p.m. EDT today,
October 19, 2000 featuring Steve Miller, chairman and chief executive officer,
and Mike Lynch, executive vice president and chief financial officer. To
receive the dial in number call 800-289-0579 for domestic callers and
719-457-2550 for international callers and give 933334 as the Federal-Mogul
RSVP confirmation code when requested. Please dial into the conference 10-15
minutes prior to 1:00 p.m.
A recording of this call will be available from 3 p.m. EDT on October 19
through October 23, 2000. To access this recording, dial 719-457-0820 and
then enter 933334 for the confirmation code.
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, 2000 September 30, 2000
2000 1999 2000 1999
Net sales $1,427.9 $1,583.9 $4,664.8 $4,913.2
Cost of products sold 1,089.2 1,142.7 3,482.4 3,539.9
Gross margin 338.7 441.2 1,182.4 1,373.3
Selling, general and
administrative expenses 210.5 201.1 629.4 638.3
Amortization of goodwill and
other intangible assets 31.2 30.5 93.7 94.4
Restructuring charge 8.6 - 77.3 -
Adjustment of assets held for
sale and other long-lived
assets to fair value 4.6 7.9 14.6 7.9
Integration costs - 13.2 - 36.6
Interest expense 74.2 68.0 216.6 207.4
Interest income (0.8) (0.8) (3.1) (2.8)
International currency exchange
losses 3.3 0.8 1.3 3.5
Other expense, net 8.6 7.4 25.4 17.5
Earnings (Loss) Before Income
Taxes, Extraordinary Item
and Cumulative Effect of Change
in Accounting Principle (1.5) 113.1 127.2 370.5
Income tax expense 6.1 43.0 71.0 151.7
Earnings (Loss) Before Extraordinary
Item and Cumulative Effect of
Change in Accounting
Principle (7.6) 70.1 56.2 218.8
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) $(7.6) $70.1 $56.2 $183.0
Earnings (Loss) Per Common Share
Basic
Earnings (loss) before
extraordinary item and
cumulative effect of
change in accounting
principle $(0.12) $0.99 $0.78 $3.12
Extraordinary item - loss
on early retirement of
debt net of applicable
income tax benefit - - - (0.34)
Cumulative effect of change
in accounting for costs of
start-up activities, net of
applicable income tax
benefit - - - (0.18)
Net Earnings (Loss) $(0.12) $0.99 $0.78 $2.60
Diluted
Earnings (loss) before
extraordinary item and
cumulative effect of
change in accounting
principle $(0.12) $0.91 $0.70 $2.82
Extraordinary item - loss
on early retirement of
debt net of applicable
income tax benefit - - - (0.28)
Cumulative effect of change
in accounting for costs of
start-up activities, net of
applicable income tax
benefit - - - (0.15)
Net Earnings (Loss) $(0.12) $0.91 $0.70 $2.39
Weighted Average Shares (Thousands)
Basic 70,302 70,254 70,278 69,626
Diluted 70,302 83,718 77,820 83,806
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 A T I O N
(Millions of Dollars, Except Per Share Data)
(Unaudited)
Three Months Ended September 30, 2000
Adjustments
As Restructuring Impairment From
Reported Charge Costs Operations
Net sales $1,427.9 $- $- $1,427.9
Cost of products sold 1,089.2 - - 1,089.2
Gross margin 338.7 - - 338.7
Selling, general and
administrative expenses 210.5 - - 210.5
Amortization of goodwill and
other intangible assets 31.2 - - 31.2
Restructuring charge 8.6 (8.6) - -
Adjustment of assets held for
sale and other long-lived
assets to fair value 4.6 - (4.6) -
Interest expense 74.2 - - 74.2
Interest income (0.8) - - (0.8)
International currency
exchange losses 3.3 - - 3.3
Other expense, net 8.6 - - 8.6
Earnings (Loss) Before
Income Taxes (1.5) 8.6 4.6 11.7
Income tax expense 6.1 3.1 1.5 10.7
Net Earnings (Loss) $(7.6) $5.5 $3.1 $1.0
Diluted Earnings (Loss)
Per Common Share $(0.12) $0.08 $0.05 $0.01
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 A T I O N
(Millions of Dollars, Except Per Share Data)
(Unaudited)
Nine Months Ended September 30, 2000
Adjustments
As Restructuring Impairment From
Reported Charge Costs Operations
Net sales $4,664.8 $- $- $4,664.8
Cost of products sold 3,482.4 - - 3,482.4
Gross margin 1,182.4 - - 1,182.4
Selling, general and
administrative expenses 629.4 - - 629.4
Amortization of goodwill and
other intangible assets 93.7 - - 93.7
Restructuring charge 77.3 (77.3) - -
Adjustment of assets held for
sale and other long-lived
assets to fair value 14.6 - (14.6) -
Interest expense 216.6 - - 216.6
Interest income (3.1) - - (3.1)
International currency
exchange losses 1.3 - - 1.3
Other expense, net 25.4 - - 25.4
Earnings Before Income
Taxes 127.2 77.3 14.6 219.1
Income tax expense 71.0 25.9 5.1 102.0
Net Earnings $56.2 $51.4 $9.5 $117.1
Diluted Earnings Per Common
Share $0.70 $0.67 $0.12 $1.49
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
2000 1999
Assets
Cash and equivalents $55.8 $64.5
Accounts receivable 526.0 514.6
Investment in accounts receivable
securitization 258.2 232.2
Inventories 873.1 883.6
Prepaid expenses and income tax benefits 317.0 331.6
Total current assets 2,030.1 2,026.5
Property, plant and equipment, net 2,391.2 2,503.7
Goodwill 3,279.4 3,547.8
Other intangible assets 735.1 796.3
Asbestos-related insurance recoverable 332.0 325.9
Other noncurrent assets 653.0 745.0
Total Assets $9,420.8 $9,945.2
Liabilities and Shareholders' Equity
Short-term debt, including current portion
of long-term debt $148.9 $190.8
Accounts payable 487.0 621.9
Accrued compensation 163.2 182.9
Restructuring and rationalization reserves 77.8 46.0
Current portion of asbestos liability 330.0 180.0
Income taxes payable 69.1 72.3
Other accrued liabilities 373.4 488.7
Total current liabilities 1,649.4 1,782.6
Long-term debt 3,329.8 3,020.0
Long-term portion of asbestos liability 929.8 1,335.3
Postemployment benefits 623.3 661.9
Other accrued liabilities 473.8 454.9
Minority interest in consolidated
subsidiaries 58.8 40.3
Company-obligated mandatorily redeemable
preferred of subsidiary trust holding
solely convertible subordinated
debentures of the Company 575.0 575.0
Shareholders' equity:
Series C ESOP preferred stock 41.3 41.5
Common stock 352.3 352.1
Additional paid-in capital 1,780.9 1,782.4
Retained earnings 223.5 170.3
Unearned ESOP compensation (4.0) (7.9)
Accumulated other comprehensive income (612.2) (262.1)
Other (0.9) (1.1)
Total Shareholders' Equity 1,780.9 2,075.2
Total Liabilities and Shareholders'
Equity $9,420.8 $9,945.2
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 O F C A S H F L O W S
(Millions of Dollars)
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999
Cash Provided From (Used By) Operating
Activities
Net earnings (loss) $(7.6) $70.1 $56.2 $183.0
Adjustments to reconcile net
earnings (loss) to net cash
provided from (used by)
operating activities:
Depreciation and amortization 94.7 89.0 287.3 271.8
Restructuring charge 8.6 - 77.3 -
Adjustment of assets held for
sale and other long-lived assets
to fair value 4.6 7.9 14.6 7.9
Loss on early retirement of
debt - - - 36.6
Cumulative effect of change in
accounting principle - - - 19.5
Postemployment benefits (9.1) 8.0 (13.4) (0.7)
Decrease (increase) in accounts
receivable 38.5 2.6 (42.9) (121.5)
Decrease (increase) in
inventories (2.0) 9.1 (41.8) 45.2
Increase (decrease) in accounts
payable (21.3) 19.3 (112.0) 51.3
Decrease in current liabilities
and other (40.3) (68.5) (26.4) (2.2)
Payments against restructuring
and rationalization reserves (15.7) (11.8) (42.8) (73.9)
Payments against asbestos
liability (75.2) (56.6) (234.7) (122.4)
Net Cash Provided From (Used By)
Operating Activities (24.8) 69.1 (78.6) 294.6
Cash Provided From (Used By) Investing Activities
Expenditures for property, plant
and equipment and other long-term
assets, net (86.2) (115.2) (229.4) (290.1)
Business acquisitions, net of
cash acquired - (131.3) - (370.7)
Proceeds from sales of
businesses 46.8 8.8 60.9 37.4
Other (3.4) - (3.4) -
Net Cash Used By Investing
Activities (42.8) (237.7) (171.9) (623.4)
Cash Provided From (Used By)
Financing Activities
Issuance of common stock - 0.5 - 1.2
Net increase (decrease) in
debt 110.8 (70.4) 290.0 86.4
Fees paid for debt issuance
and other securities - - - (25.5)
Sale (repurchase) of accounts
receivable under
securitization (45.4) 217.0 (46.9) 261.1
Dividends (1.1) (1.1) (3.1) (3.4)
Other 2.4 1.0 1.8 (3.3)
Net Cash Provided From Financing
Activities 66.7 147.0 241.8 316.5
Decrease in Cash and
Equivalents (0.9) (21.6) (8.7) (12.3)
Cash and equivalents at beginning
of period 56.7 86.5 64.5 77.2
Cash and Equivalents at End of
Period $55.8 $64.9 $55.8 $64.9