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National Press Release
 | Federal-Mogul Reports Solid 2008 Sales and Financial Performance With Strong Cash Generation Despite Q4 Market DownturnPublished 2009-02-24 07:47By Federal-Mogul Corporation |
(Logo: http://www.newscom.com/cgi-bin/prnh/20081002/FEDERALMOGULLOGO )
"Federal-Mogul's sales and operating performance in the first three
quarters of the year, combined with actions to manage the impact of the global
market downturn resulted in solid sales, annual gross margin and operational
EBITDA, coupled with strong cash flow in the fourth quarter and for the full
year," said
Financial Summary
-----------------
(in $millions)
-------------- Three Months Ended 12 Months Ended
------------------- ---------------
December 31 December 31
----------- -----------
2008 2007 2008 2007
---- ---- ---- ----
Net sales $1,319 $1,749 $6,866 $6,914
Gross margin 183 275 1,124 1,185
Adjusted gross margin * 183 275 1,192 1,185
Selling, general and
administrative expenses 161 201 774 828
Impairment charges 451 54 451 61
Restructuring charges 118 9 132 48
Bankruptcy emergence gains * 0 1,717 0 1,717
Net (loss) / income (530) 1,390 (468) 1,413
Adjusted net (loss) /
income * (24) 11 113 75
Operational EBITDA * 114 186 754 763
Cash flow * 180 (193) 321 (228)
*Please see Explanation of non-GAAP measures for further information
The company recorded year-over-year cumulative sales growth of 7 percent
in the first three quarters of 2008 versus the same period in 2007.
Federal-Mogul experienced the impact of a significant drop in sales during the
fourth quarter and finished the year with sales of
"We have experienced an unprecedented global automotive market decline. Federal-Mogul is facing the challenge of crossing the desert of this downturn with efficient action plans, urgency, strength and relentless execution," said Alapont.
"Federal-Mogul implemented numerous measures to reduce both variable and fixed costs in order to offset the anticipated sales decline during the fourth quarter. We have implemented a variable cost company strategy where our global sites have eliminated premium shifts, modified shift patterns, established short workweek schedules and reduced headcount. These measures drove a 23 percent reduction in total operating costs during the quarter. This global effort to make Federal-Mogul's cost base vary in line with sales fluctuations limited the impact of this major downturn and helped the company to report solid sales, financial performance and cash generation in 2008. We are facing the challenge of the difficult market downturn and we expect to become leaner, stronger and more competitive after successfully crossing the desert," he continued.
Federal-Mogul during the second half of 2008 announced restructuring
actions designed to adjust global capacity and company infrastructure in line
with reductions in current market demand. The restructuring will include the
closure of manufacturing plants and distribution centers, flexing global
capacity, along with several actions to streamline support staffs and is
expected to reduce company headcount by approximately 26 percent in comparison
to the
Gross margin for 2008 was
SG&A expenses were reduced to 11.3 percent of sales, or
Operational EBITDA* was
The company reported for the full year a net loss of
When adjusting net income for the items described above, the company
realized an adjusted net income of
The company reported positive cash flow* of
Federal-Mogul is also consolidating the company's business unit segments in 2009. The move is designed to better align the company's business structure with customers and markets served and will further reduce overhead and balance the company's support staffs to current revenue expectations. The product lines in the Automotive Products unit will be integrated into the company's other business segments. Federal-Mogul will report in 2009 company operating results of four business segments: Powertrain Energy, Powertrain Sealing and Bearings, Vehicle Safety & Protection and Global Aftermarket.
"Federal-Mogul continues its drive for sustainable global profitable
growth. We are focused on the long-term and expect that the current downturn
will result in consolidation opportunities. Our more than
"We have a globally diverse, industry leading OE activity and a strong aftermarket business with widely recognized brands and a strong global distribution network. Current financial and automotive market dynamics are increasing the average age of vehicles on the road and increasing repair activity. We believe Federal-Mogul is well positioned to take advantage of these market trends.
"Federal-Mogul is adapting to successfully compete in difficult market conditions. We believe our proactive restructuring and consistent implementation of our plans will allow us to prepare the company for growth as consumers regain confidence and vehicle demand increases.
"We are ready to support OE and aftermarket customer requirements; developing leading technology and innovation to facilitate improved fuel economy, reduced emissions, the migration to alternative energies and the requirement for safer vehicle performance. Finally, we continue to expand our presence with customers in the industrial, energy and transport markets which today account for about 10 percent of sales. We believe there is further opportunity to apply our technologies to capitalize on growth with these important customers.
"Federal-Mogul's 2008 results demonstrate our strong foundation and ability to respond to the difficult environment in the automotive industry. We remain committed to our Sustainable Global Profitable Growth strategy and have reinforced it with proactive restructuring to adapt to the current market downturn to gain market share through leading technology and innovation," said Alapont.
* Explanation of non-GAAP measures
Adjusted gross margin is equal to reported gross margin excluding the one-
time, non-cash charge of
Bankruptcy emergence gain is defined as the aggregate of the gain on
settlement of liabilities subject to compromise and fresh start reporting
adjustments resulting from the company's emergence from Chapter 11 in
Adjusted net income is equal to reported net income excluding the impact on gross margin of the fresh-start reporting inventory adjustment, restructuring charges, impairment charges, and the bankruptcy emergence gain, along with the associated tax impacts as shown in the attached reconciliation of non-GAAP financial measures. Management believes that excluding these items from net (loss)/income provides information useful in comparing operational earnings between the current and prior year.
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, Chapter 11 emergence activity, gains or losses on the sales of businesses, and the impact on gross margin of the fresh-start reporting valuation of inventory as described in the attached reconciliation of non-GAAP financial measures. 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.
Cash flow is equal to net cash provided by operating activities less net cash used by investing activities as described in the attached statement of cash flows.
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 and off-highway vehicles, as well as in power generation, aerospace, marine, rail, industrial, and 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
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.
CONTACT: Paula Silver - 248-354-4530 or Jennifer Rass - 248-354-7502
** Please note accent over 'e' in Jose Maria Alapont
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)
Successor Predecessor Successor Predecessor
Company Company Company Company
--------- ----------- --------- -----------
Three Months Ended Twelve Months Ended
December 31 December 31
--------------------- ---------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Net sales $1,319.2 $1,748.5 $6,865.6 $6,913.9
Cost of products sold (1,136.4) (1,473.6) (5,741.9) (5,729.3)
--------- --------- --------- ---------
Gross margin 182.8 274.9 1,123.7 1,184.6
Selling, general and
administrative expenses (161.3) (200.9) (774.1) (828.2)
Adjustment of assets to fair
value (451.3) (54.3) (451.3) (61.3)
Interest expense, net (43.0) (47.3) (180.2) (199.1)
Amortization expense (19.0) (4.8) (75.7) (18.9)
Chapter 11 and U.K.
Administration related
reorganization expenses, net (1.9) (24.2) (17.1) (80.7)
Equity earnings of unconsolidated
affiliates 3.1 10.3 23.7 37.9
Restructuring expense, net (118.1) (8.7) (132.1) (48.1)
Gain on settlement of
liabilities subject to
compromise - 760.7 - 760.7
Fresh-start reporting adjustments - 956.3 - 956.3
Other income, net 26.1 14.1 33.9 40.9
--------- --------- --------- ---------
(Loss) income before income tax
expense (582.6) 1,676.1 (449.2) 1,744.1
Income tax benefit (expense) 53.0 (285.9) (18.7) (331.8)
--------- --------- --------- ---------
Net (loss) income $(529.6) $1,390.2 $(467.9) $1,412.3
========= ========= ========= =========
(Loss) income per common share:
Basic $(5.35) $15.46 $(4.69) $15.74
========= ========= ========= =========
Diluted $(5.35) $15.23 $(4.69) $15.46
========= ========= ========= =========
Basic shares outstanding (in
millions) 98.9 89.9 99.7 89.7
Diluted shares outstanding (in
millions) 99.3 91.3 100.0 91.3
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)
Successor Company
December 31 December 31
2008 2007
----------- -----------
Current assets:
Cash and equivalents $888.2 $425.4
Accounts receivable, net 938.7 1,095.9
Inventories, net 893.7 1,074.3
Prepaid expenses and other current assets 267.4 526.4
----------- -----------
Total current assets 2,988.0 3,122.0
Property, plant and equipment, net 1,910.6 2,061.8
Goodwill and other indefinite-lived
intangible assets 1,430.4 1,852.0
Definite-lived intangible assets, net 563.9 310.0
Other noncurrent assets 342.7 520.5
----------- -----------
$7,235.6 $7,866.3
=========== ===========
Current liabilities:
Short-term debt, including current
portion of long-term debt $101.7 $117.8
Accounts payable 622.5 726.6
Accrued liabilities 483.1 496.0
Current portion of postemployment
benefit liability 61.0 61.2
Other current liabilities 173.8 167.3
----------- -----------
Total current liabilities 1,442.1 1,568.9
Long-term debt 2,768.0 2,517.6
Postemployment benefits 1,240.1 936.9
Long-term portion of deferred income
taxes 553.4 331.4
Other accrued liabilities 235.9 300.3
Minority interest in consolidated
subsidiaries 45.0 87.5
Shareholders' equity:
Common stock 1.0 1.0
Additional paid-in capital, including
warrants 2,122.7 2,122.7
Accumulated deficit (467.9) -
Accumulated other comprehensive loss (688.0) -
Treasury stock, at cost (16.7) -
----------- -----------
Total shareholders' equity 951.1 2,123.7
----------- -----------
$7,235.6 $7,866.3
----------- -----------
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 C A S H F L O W S
(Millions of Dollars)
Successor Predecessor
Company Company
--------- -----------
Year Ended
December 31
----------------------
2008 2007
--------- -----------
Cash provided from (used by) operating activities
Net (loss) income $ (467.9) $ 1,412.3
Adjustments to reconcile net (loss) income to
net cash provided from (used by) operating
activities:
Depreciation and amortization 349.5 353.7
Gain on settlement of liabilities subject to
compromise - (760.7)
Fresh-start reporting adjustments - (956.3)
Payments from (to) U.S. Asbestos Trust 225.0 (140.0)
Payments of interest on pre-petition debt and notes - (132.3)
Payments to settle non-debt liabilities subject to
compromise (22.9) (44.0)
Chapter 11 and U.K. Administration related
reorganization expenses 17.1 80.7
Payments for Chapter 11 and U.K. Administration
related reorganization expenses (47.9) (74.8)
Adjustment of assets to fair value 451.3 61.3
Restructuring charges, net 132.1 48.1
Payments against restructuring reserves (40.4) (66.7)
Gain on involuntary conversion (12.2) -
Insurance proceeds from involuntary conversion,
excluding capital 24.0 -
Gain on sale of assets and businesses - (8.2)
Change in postemployment benefits, including
pensions (10.8) 78.6
Changes in deferred taxes 48.8 260.0
Changes in operating assets and liabilities:
Accounts receivable 89.5 (46.6)
Inventories 121.6 14.8
Accounts payable (61.3) 123.6
Other assets and liabilities (168.1) (169.0)
--------- -----------
Net cash provided from operating activities 627.4 34.5
Cash provided from (used by) investing activities
Expenditures for property, plant and equipment (319.8) (309.5)
Net proceeds from the sale of property, plant and
equipment 12.5 25.8
Insurance proceeds from involuntary conversion of
capital 6.0 -
Net proceeds from sale of business - 14.0
Proceeds from sale of investments - 13.8
Payments to acquire business (4.7) (6.8)
--------- -----------
Net cash used by investing activities (306.0) (262.7)
Cash provided from (used by) financing activities
Proceeds from issuance of emergence debt 2,082.0 2,668.8
Repayment of Tranche A, Revolver and PIK Notes (1,790.8) -
Payments to Predecessor Company lenders - (2,700.7)
Proceeds from borrowings on DIP credit facility - 669.4
Principal payments on DIP credit facility - (360.4)
Increase (decrease) in short-term debt (29.5) 65.7
Decrease in long-term debt (40.6) (15.0)
Treasury stock purchase (16.7) -
Net payments from factoring arrangements (7.1) (43.0)
Debt refinance fees (0.8) -
Debt issuance fees - (19.8)
--------- -----------
Net cash provided from financing activities 196.5 265.0
Effect of foreign currency exchange rate
fluctuations on cash (55.1) 29.3
--------- -----------
Increase in cash and equivalents 462.8 66.1
Cash and equivalents at beginning of year 425.4 359.3
--------- -----------
Cash and equivalents at end of year $ 888.2 $ 425.4
--------- -----------
F E D E R A L - M O G U L C O R P O R A T I O N
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Millions of Dollars)
(Unaudited)
Successor Predecessor Successor Predecessor
Company Company Company Company
Three Months Ended Twelve Months Ended
December 31 December 31
--------------------- ----------------------
2008 2007 2008 2007
--------- --------- --------- ----------
Gross margin as reported $ 182.8 $ 274.9 $ 1,123.7 $ 1,184.6
Adjustment to exclude impact
of fresh-start valuation of
inventory - - 68.2 -
--------- --------- --------- ----------
Adjusted gross margin $ 182.8 $ 274.9 $ 1,191.9 $ 1,184.6
========= ========= ========= ==========
Net (loss) income $ (529.6) $ 1,390.2 $ (467.9) $ 1,412.3
Adjustment to exclude impact
of fresh-start valuation of
inventory - - 68.2 -
Gain on emergence from
Chapter 11 - (1,717.0)* - (1,717.0)*
Adjustment of assets
to fair value 451.3 54.3 451.3 61.3
Restructuring expense, net 118.1 8.7 132.1 48.1
Income tax (benefit)
expense on adjustments (64.0) 275.1 (71.0) 270.1
--------- --------- --------- ----------
Adjusted net (loss) income $ (24.2) $ 11.3 $ 112.7 $ 74.8
========= ========= ========= ==========
(Loss) income before
income taxes $ (582.6) $ 1,676.1 $ (449.2) $ 1,744.1
Depreciation and amortization 83.7 89.3 349.5 353.7
Chapter 11 and U.K.
Administration related
reorganization expenses 1.9 24.2 17.1 80.7
Gain on emergence from
Chapter 11 - (1,717.0) * - (1,717.0)*
Interest expense, net 43.0 47.3 180.2 199.1
Adjustment of assets to
fair value 451.3 54.3 451.3 61.3
Restructuring expense, net 118.1 8.7 132.1 48.1
Gain on sale of
business / divestiture - 3.7 - (8.2)
Fresh-start inventory
adjustment - - 68.2 -
Other (1.6) (0.9) 4.5 1.4
--------- --------- --------- ----------
Operational EBITDA $ 113.8 $ 185.7 $ 753.7 $ 763.2
========= ========= ========= ==========
Cash provided from (used by)
operating activities $ 252.1 $ (103.5) $ 627.4 $ 34.5
Cash used by investing
activities (72.0) (89.4) (306.0) (262.7)
--------- --------- --------- ----------
Cash flow $ 180.1 $ (192.9) $ 321.4 $ (228.2)
========= ========= ========= ==========
* Combination of "Gain on liabilities subject to compromise" and "Fresh-
Start reporting adjustments" as reflected on the Statements of
Operations.
Management believes that excluding the non-recurring, non-cash impact of
fresh-start valuation of inventory from gross margin and net income
provides information most comparable to that of the prior year.
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, Chapter 11 emergence activity, gains or losses on the sales of
businesses, and the impact on gross margin of the fresh-start reporting
valuation of inventory.
SOURCE Federal-Mogul Corporation
