Net income of $90 million in Q2 2008 up from $4 million in Q2 2007
Record net sales of $2 billion and eighth consecutive quarter of year-over-
year growth
SOUTHFIELD, Mich., July 25 /PRNewswire-FirstCall/ -- Federal-Mogul
Corporation (Nasdaq: FDML) today reported record second quarter sales of $2
billion and an eighth consecutive quarter of year-over-year increased sales
combined with a sharp rise in quarterly net income to $90 million.
Sales for the three-month period ending June 30, 2008, were a record
$1,995 million, an increase of 13 percent, compared to $1,763 million for
the same period a year ago. Federal-Mogul reported a gross margin of $396
million or 19.8 percent of sales, compared to $322 million or 18.3 percent
of sales, representing an increase of $74 million, or 23 percent over the
prior year. Federal-Mogul's Operational EBITDA(1) was $257 million or 12.9
percent of sales, compared to $212 million or 12.0 percent of sales during
the same period in 2007, representing an increase of $45 million or 21
percent. The company recorded net income of $90 million or earnings per
share of $0.90, up from $4 million in second quarter 2007.
"We experienced another record sales quarter with strong earnings
performance. We have anticipated and reacted to changing market conditions
including a market downturn in mature automotive markets. We implemented
numerous successful actions to offset macro-economic factors and benefited
from our strong market, customer and product diversification," said Jose
Maria Alapont, Federal-Mogul President and Chief Executive Officer.
"Federal-Mogul's global market presence and customer base is well
diversified. We serve over 250 vehicle platforms and over 700 vehicle
powertrain programs. No single customer represents more than six percent of
our global revenue and over 60 percent of our revenue is generated from
sales outside the United States and Canada. Further, we have a significant
global aftermarket business with well-recognized leading brands and we
generate over 10 percent of our revenue from a global commercial and
industrial customer base. This diversification strengthens our performance
and compensates for market and customer volatility," Alapont continued.
Financial Summary (in $millions) Three Months Ended Six Months Ended
-------------------------------- ------------------ ----------------
June 30 June 30
--------- ---------
2008 2007 2008 2007
----- ------ ------ -----
Net sales $1,995 $1,763 $3,854 $3,480
Gross margin 396 322 662 630
Adjusted gross margin (2) 396 322 730 630
Selling, general and (212) (213) (421) (420)
administrative expenses
Net income 90 4 58 9
Adjusted net income (3) 90 4 121 9
Operational EBITDA (1) 257 212 462 412
Federal-Mogul reported sales of $1,995 million for the three-month
period ending June 30, 2008, up from $1,763 million in the same period of
2007. Sales increased by $232 million or 13 percent and were positively
impacted by favorable foreign exchange of $125 million. The company has
reported year-over-year quarterly sales increases for eight consecutive
quarters as a result of expanding sales to customers in Europe, Asia and
South America.
Gross margin for the quarter was $396 million or 19.8 percent of sales,
as compared to $322 million or 18.3 percent of sales during the same period
a year ago, an increase of 23 percent or $74 million. The automotive market
has faced decreasing regional production volumes, rising energy prices,
inflationary raw material costs and other economic challenges. The company
effectively offset the impact of these and other macro-economic factors
through profitable incremental revenue from new business contracts and
improved productivity from operations. Gross margin was also favorably
impacted by reduced depreciation and foreign exchange.
Selling, General and Administrative (SG&A) expenses were reduced to
10.6 percent of sales during the quarter, compared to 12.1 percent of sales
in the same period of 2007. The company realized a reduction in SG&A
expense despite an adverse foreign exchange impact of $11 million.
Federal-Mogul's Operational EBITDA(1) for the second quarter was $257
million, a 21 percent or $45 million increase, compared to $212 million
during the same period in 2007.
Net income was $90 million in the second quarter 2008, with earnings
per share of $0.90, compared to $4 million of net income in second quarter
2007.
Federal-Mogul continued to make progress executing its sustainable
global profitable growth strategy by growing in emerging markets and
strengthening its presence in mature markets. The company achieved 50
percent growth in sales to customers in BRIC (Brazil, Russia, India and
China) markets during the quarter. The company recently completed the
successful launch of a new powertrain component plant in Araras, Brazil and
launched its new portfolio of wipers and brake pads in the Russian market.
Federal-Mogul reported sales of $3,854 million for the six-month period
ending June 30, 2008, an increase of $374 million or 11 percent versus
$3,480 million for the same period in 2007.
Gross margin increased to $662 million in the first half of 2008 versus
$630 million in 2007, despite a non-cash charge of $68 million recorded in
the first quarter of 2008 relating to re-valuation of inventory, as
required by fresh-start reporting.
Operational EBITDA(1) increased 12 percent, or $50 million, to $462
million in the first half of 2008, as compared to $412 million in the same
period the prior year.
Adjusted net income(3) rose $112 million to $121 million or 3.1 percent
of sales during the first half of 2008, versus $9 million in the first half
of 2007.
The company recorded strong operating cash flow(4) of $116 million in
the first half of 2008, which compares to $79 million in the same period of
2007.
"Federal-Mogul's results demonstrate the solid foundation we have put
in place through our sustainable global profitable growth strategy. Global
customer, regional and product portfolio diversification, together with
leading product technologies and brands, development in best cost locations
and strong commitment to customer service differentiate Federal-Mogul and
contribute to our strong performance in this challenging market
environment," Alapont said.
(1) 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, 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.
(2) Adjusted gross margin is equal to reported gross margin excluding
the $68 million impact on gross margin of the fresh-start reporting
valuation of inventory recorded in the first quarter 2008 as described in
the attached reconciliation of non-GAAP financial measures.
(3) Adjusted net income is equal to reported net income excluding the
$68 million impact on gross margin on the fresh-start reporting of
inventory adjusted for the tax benefit on the inventory adjustment of $5
million recorded in the first quarter 2008 as described in the attached
reconciliation of non-GAAP financial measures.
(4) Cash flow is equal to net cash provided by operating activities
less net cash used by investing activities as displayed 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 Detroit in 1899. The company is headquartered in Southfield,
Michigan, and employs 50,000 people in 35 countries. Visit the company's
Web site at http://www.federalmogul.com.
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
Jennifer Rass - 248-354-7502
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 Share and Per Share Data)
(Unaudited)
Successor Predecessor Successor Predecessor
Company Company Company Company
---------- ---------- --------- -----------
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
2008 2007 2008 2007
---------- --------- --------- ----------
Net sales $1,995.2 $1,763.4 $3,854.4 $3,479.9
Cost of products sold (1,599.6) (1,441.0) (3,192.4) (2,849.7)
---------- --------- --------- ----------
Gross margin 395.6 322.4 662.0 630.2
Selling, general and
administrative expenses (212.4) (212.7) (421.1) (419.6)
Interest expense, net (42.4) (51.9) (90.6) (101.9)
Amortization expense (19.2) (4.8) (35.3) (9.3)
Chapter 11 and U.K. Administration
related reorganization expenses (3.2) (27.6) (13.0) (41.2)
Equity earnings of unconsolidated
affiliates 7.8 10.1 16.5 18.0
Restructuring expense, net (1.0) (13.5) (2.7) (29.6)
Other income (expense), net (1.8) 3.1 (4.3) 14.1
---------- --------- --------- ----------
Income before income taxes 123.4 25.1 111.5 60.7
Income tax expense, net (33.8) (21.2) (53.4) (52.2)
---------- --------- --------- ----------
Net income $89.6 $3.9 $58.1 $8.5
========== ========= ========= ==========
Income per common share:
Basic $0.90 $0.04 $0.58 $0.10
========== ========== ========== ==========
Diluted $0.89 $0.04 $0.58 $0.09
========== ========== ========== ==========
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
(Unaudited)
June 30 December 31
2008 2007
------------- -------------
Current assets:
Cash and equivalents $843.9 $425.4
Accounts receivable, net 1,382.6 1,095.9
Inventories, net 1,052.6 1,074.3
Prepaid expenses and other current
assets 357.6 526.4
------------- -------------
Total current assets 3,636.7 3,122.0
Property, plant and equipment, net 2,094.7 2,061.8
Goodwill and indefinite-lived intangible
assets 1,636.7 1,852.0
Definite-lived intangible assets, net 577.9 310.0
Other noncurrent assets 486.4 520.5
------------- -------------
$8,432.4 $7,866.3
============= =============
Current liabilities:
Short-term debt, including current
portion of long-term debt $128.2 $117.8
Accounts payable 707.3 726.6
Accrued liabilities 505.5 496.0
Current portion of postemployment
benefit liability 62.3 61.2
Other accrued liabilities 194.9 167.3
------------- -------------
Total current liabilities 1,598.2 1,568.9
Long-term debt 2,806.2 2,517.6
Postemployment benefits 965.7 936.9
Long-term portion of deferred income
taxes 350.7 331.4
Other accrued liabilities 289.7 300.3
Minority interest in consolidated
affiliates 98.2 87.5
Shareholders' equity:
Common stock 1.0 1.0
Additional paid-in capital, including
warrants 2,122.7 2,122.7
Retained earnings 58.1 -
Accumulated other comprehensive
income 141.9 -
------------- -------------
Total shareholders' equity 2,323.7 2,123.7
------------- -------------
$8,432.4 $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)
(Unaudited)
Successor Predecessor
Company Company
----------- ------------
Six Months Ended
June 30
------------------------------
2008 2007
------------ ------------
Cash Provided From (Used By)
Operating Activities
Net income $58.1 $8.5
Adjustments to reconcile net
earnings to net cash provided from
(used by) operating activities:
Depreciation and amortization 171.1 172.1
Cash received from 524(g) Trust 225.0 -
Change in postemployment benefits,
including pensions 4.1 (27.1)
Changes in deferred taxes 3.9 3.8
Changes in operating assets and liabilities:
Accounts receivable (249.8) (157.8)
Inventories 55.0 0.9
Accounts payable (49.1) 106.5
Other assets and liabilities 39.3 79.0
------------ ------------
Net Cash Provided From Operating
Activities 257.6 185.9
Cash Provided From (Used By)
Investing Activities
Expenditures for property, plant and
equipment (148.0) (132.0)
Net proceeds from the sale of property,
plant and equipment 10.9 18.1
Proceeds from sale of investment - 13.8
Payments to acquire minority interests - (6.8)
Payments to acquire business (4.7) -
------------ ------------
Net Cash Used By Investing
Activities (141.8) (106.9)
Cash Provided From (Used By)
Financing Activities
Proceeds from borrowings on exit
facility 2,082.0 -
Repayment of Tranche A, Revolver and
PIK Notes (1,790.8) -
Proceeds from borrowings on DIP credit
facility - 550.0
Principal payments on DIP credit
facility - (228.1)
Repayment of pre-petition Tranche C debt - (330.4)
Increase in short-term debt 2.4 8.7
Decrease in other long-term debt (7.9) (5.8)
Increase (decrease) in factoring
arrangements 6.3 (58.9)
Debt refinance fees (0.4) (0.3)
------------ ------------
Net Cash Provided From (Used By)
Financing Activities 291.6 (64.8)
Effect of foreign currency exchange
rate fluctuations on cash 11.1 4.6
------------ ------------
Increase in cash and equivalents 418.5 18.8
Cash and equivalents at beginning of
period 425.4 359.3
------------ ------------
Cash and equivalents at end of
period $843.9 $378.1
============ ============
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 Six Months Ended
June 30 June 30
---------------------- ---------------------
2008 2007 2008 2007
------- ------- ------- -------
Gross margin as reported $395.6 $322.4 $662.0 $630.2
Adjustment to exclude impact of
fresh-start valuation of
inventory - - 68.2 -
-------- -------- -------- --------
Adjusted gross margin $395.6 $322.4 $730.2 $630.2
======== ======== ======== ========
Net Income $89.6 $3.9 $58.1 $8.5
Adjustment to exclude impact of
fresh-start valuation of inventory - - 68.2 -
Income tax benefit of inventory
adjustment - - (4.9) -
-------- -------- -------- --------
Adjusted Net Income $89.6 $3.9 $121.4 $8.5
======== ======== ======== ========
Income before income taxes $123.4 $25.1 $111.5 $60.7
Depreciation and amortization 82.7 88.2 171.1 172.1
Chapter 11 and U.K. Administration
related reorganization expenses 3.2 27.6 13.0 41.2
Interest expense, net 42.4 51.9 90.6 101.9
Restructuring expense, net 1.0 13.5 2.7 29.6
Fresh-start inventory adjustment - - 68.2 -
Other 3.9 6.0 5.2 6.2
-------- -------- -------- --------
Operational EBITDA $256.6 $212.3 $462.3 $411.7
======== ======== ======== ========
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, gains or losses on the sales of businesses, and the impact on
gross margin of the fresh-start reporting valuation of inventory.
* Please note accent over 'e' in Jose Maria Alapont
SOURCE Federal-Mogul Corporation
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Related links:
http://www.federalmogul.com
http://www.prnewswire.com/comp/306225.html /
CONTACT:
Paula Silver, +1-248-354-4530, or Jennifer
Rass, +1-248-354-7502, both of Federal-Mogul Corporation
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