SOUTHFIELD, Mich., Feb. 24 /PRNewswire-FirstCall/ -- Federal-Mogul
Corporation (Nasdaq: FDML) today reported full year 2008 sales of $6.9
billion, in line with 2007, despite a drop in sales of $430 million in the
fourth quarter of 2008 versus the prior year due to an unprecedented decline
in the automotive market. The company implemented aggressive global
restructuring and cost reductions which helped offset the impact of the sales
decline in the fourth quarter.
(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 Jose Maria Alapont**, President and CEO.
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 $6.9 billion, as in 2007.
The company's diverse customer and geographic base resulted in over 60 percent
of sales from outside the United States, with no single customer accounting
for more than 6 percent of total sales. Federal-Mogul recorded sales in Q4
2008 of $1.3 billion, a 25 percent reduction versus $1.7 billion for the same
quarter of 2007.
"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 July 31, 2008 level.
Gross margin for 2008 was $1.12 billion, or 16.4 percent of sales, as
compared to $1.18 billion, or 17.1 percent of sales, for 2007. Adjusting for
the first quarter fresh start reporting inventory adjustment of $68 million,
gross margin rose slightly. The rapidly implemented cost reduction
initiatives in the fourth quarter allowed Federal-Mogul to report a gross
margin of $183 million or 13.9 percent of sales, compared to $275 million or
15.7 percent of sales in 2007.
SG&A expenses were reduced to 11.3 percent of sales, or $774 million, for
2008, compared to 12 percent of sales, or $828 million in 2007, demonstrating
the company's ongoing efforts to streamline global support activities. The
company realized a reduction in SG&A expense of $40 million in the fourth
quarter due to its global restructuring plan and other cost reduction
initiatives.
Operational EBITDA* was $754 million or 11.0 percent of sales in 2008,
compared to $763 million, also 11.0 percent of sales in 2007. Operational
EBITDA* in Q4 2008 was $114 million, or 8.7 percent of sales, compared to $186
million, or 10.5 percent of sales during the same period in 2007.
The company reported for the full year a net loss of $468 million compared
to net income of $1.4 billion in 2007. However net income during both periods
contains significant one-time items that are not indicative of the ongoing
results of the company. During 2008, the company recorded a restructuring
charge of $132 million relating to severance payments and other restructuring
actions as part of previously announced global restructuring plans. The
company recorded impairment charges during the fourth quarter of $451 million,
primarily on intangible assets, associated with the market downturn. These
non-cash impairment charges negatively impact 2008 net income, but does not
impact the ongoing operating results of the business. The $1.7 billion
bankruptcy emergence gains* recognized in 2007 are due to a favorable one-time
gain on settlement of liabilities and fresh start reporting adjustments
required as a result of the company's emergence from Chapter 11.
When adjusting net income for the items described above, the company
realized an adjusted net income of $113 million in 2008 versus an adjusted net
income of $75 million in 2007 on consistent sales levels. The company in Q4,
2008 realized an adjusted net loss of $24 million, compared to an adjusted net
income of $11 million in 2007.
The company reported positive cash flow* of $321 million for 2008, which
compares favorably to negative cash flow* of $228 million for 2007. The
company recorded positive cash flow* of $180 million in the fourth quarter of
2008, which compares favorably to a negative cash flow* of $193 million during
the same period in 2007.
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 $1.3 billion of
available liquidity and the flexible terms of our long-term debt will provide
the resources to make acquisitions to enhance our original equipment and
aftermarket businesses," said Alapont.
"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 $68 million recorded in the first quarter of 2008
that resulted from the fresh-start reporting valuation of inventory on
emergence from Chapter 11. Management believes that excluding this charge
from gross margin provides information most comparable to the prior year.
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 the
United States.
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 Detroit in 1899. The company is
headquartered in Southfield, Michigan, and employs nearly 43,000 people in 35
countries. Visit the company's Web site at 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 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.
