Attached files
file | filename |
---|---|
8-K - Federal-Mogul Holdings LLC | v175145_8k.htm |
DRAFT -
DO NOT DISTRIBUTE – FEBRUARY 22, 2010
Federal-Mogul Reports Strong
Q4 2009 Net Income and Record Cash Flow
Third
Consecutive Quarter of Increased Earnings and Significant Cash Flow
Southfield,
Michigan, February 23, 2010. . . .Federal-Mogul Corporation (NASDAQ: FDML) today
reported strong Q4 2009 profitability, with higher gross margin, improved net
income of $43 million, or $0.43 per diluted share, and $251 million record cash
flow2 with
increased sales versus Q4 2008. The company improved financial
performance in each consecutive quarter of 2009 as restructuring and cost
reduction initiatives enhanced Federal-Mogul’s operating
leverage. Stronger demand in Q4 2009, coupled with savings from prior
restructuring initiatives lifted gross margin and Operational EBITDA1 percent
of sales back to levels approaching those attained prior to the automotive
market downturn.
2009
|
2008
|
|||||||||||||||||||||||||||
Financial Summary
|
Q4 | Q3 | Q2 | Q1 |
FY
|
Q4 |
FY
|
|||||||||||||||||||||
($
millions)
|
||||||||||||||||||||||||||||
Net
Sales
|
$ | 1,408 | $ | 1,380 | $ | 1,304 | $ | 1,238 | $ | 5,330 | $ | 1,319 | $ | 6,866 | ||||||||||||||
Gross
Margin
|
225 | 212 | 198 | 158 | 792 | 183 | 1,124 | |||||||||||||||||||||
pct. of
sales
|
16.0 | % | 15.4 | % | 15.2 | % | 12.8 | % | 14.9 | % | 13.9 | % | 16.4 | % | ||||||||||||||
SG&A
|
(164 | ) | (173 | ) | (170 | ) | (184 | ) | (690 | ) | (162 | ) | (774 | ) | ||||||||||||||
pct. of
sales
|
11.6 | % | 12.5 | % | 13.0 | % | 14.9 | % | 12.9 | % | 12.3 | % | 11.3 | % | ||||||||||||||
Net
Income (loss)
|
43 | 10 | 3 | (101 | ) | (45 | ) | (530 | ) | (468 | ) | |||||||||||||||||
attributable
to Federal-Mogul
|
||||||||||||||||||||||||||||
Earnings
(loss) Per Share
|
.43 | .10 | .03 | (1.02 | ) | (.46 | ) | (5.36 | ) | (4.69 | ) | |||||||||||||||||
in
dollars, diluted EPS
|
||||||||||||||||||||||||||||
Operational EBITDA1
|
170 | 134 | 129 | 70 | 503 | 113 | 762 | |||||||||||||||||||||
pct. of
sales
|
12.1 | % | 9.7 | % | 9.9 | % | 5.7 | % | 9.4 | % | 8.6 | % | 11.0 | % | ||||||||||||||
Cash
Flow 2
|
$ | 251 | $ | 112 | $ | 6 | $ | (196 | ) | $ | 173 | $ | 181 | $ | 119 |
DRAFT -
DO NOT DISTRIBUTE – FEBRUARY 22, 2010
“The
strong and profitable fourth quarter shows the benefits of higher sales combined
with significant operational improvements throughout the
year. Federal-Mogul’s improved margins demonstrate that we have
successfully converted incremental fourth quarter revenue at a higher level of
profitability than in prior quarters. Our record $251 million cash
flow is the result of increased profitability combined with effective working
capital management and efficient capital investments,” said José Maria Alapont,
Federal-Mogul President and CEO.
Federal-Mogul,
on a year-over-year basis, reported Q4 2009 sales of $1.4 billion versus $1.3
billion in Q4 2008. The company reported that 17 percent of total
revenue was generated outside the United States, Canada and Europe in Q4 2009,
representing a 24 percent increase over the fourth quarter of
2008. Federal-Mogul continues to expand its market share positions,
manufacturing capacity and engineering presence in China, India, Brazil and
other growth markets which have performed better during the global automotive
downturn. Federal-Mogul benefits from strong customer, market and
product diversity, with no single customer accounting for more than 5 percent of
global revenue in 2009.
Gross
margin was $225 million or 16 percent of sales in Q4 2009 a $42 million or 2.1
percentage point margin improvement versus $183 million or 13.9 percent in the
same period of 2008. The company’s ability to attain significantly
higher gross margin than in Q4 2008 reflects the increasing benefit of
Federal-Mogul’s variable cost company strategy including the restructuring and
cost reduction initiatives largely completed during 2009.
“We have
reduced the run-rate of the company’s global cost base by approximately $460
million annually, while simultaneously making strategic investments in leading
technology and innovation, best cost global manufacturing and better processes
and systems for world class quality, cost competitiveness and customer support,”
Alapont explained.
Net
income was $43 million in Q4 2009 versus a net loss of $(530) million in Q4
2008. Federal-Mogul’s Operational EBITDA1 for Q4
2009 was $170 million or 12.1 percent of sales, a $57 million or 3.5 percentage
point increase, compared to $113 million or 8.6 percent of sales reported during
the fourth quarter a year ago.
The
company achieved an all-time record quarterly cash flow2 of $251
million in Q4 2009, a $70 million increase over Q4 2008. As a result,
Federal-Mogul has $1.5 billion of liquidity with over $1.0 billion of cash and
an unused revolver of $0.5 billion.
-2-
DRAFT -
DO NOT DISTRIBUTE – FEBRUARY 22, 2010
“Federal-Mogul
continued to improve sequential quarterly operating performance as a result of
the increasingly positive effect of our cost reduction and restructuring
initiatives combined with the ongoing financial market and automotive industry
stabilization.”
“Through
our global efforts, the company improved sales, raised operating margins,
reduced SG&A, improved Operational EBITDA and significantly increased cash
flow in each successive quarter,” Alapont said.
Federal-Mogul,
for full year 2009, reported sales of $5.3 billion or a decline of about $1.5
billion versus full year 2008. The global automotive and financial market
downturn depressed industry volumes throughout most of 2009. On a
constant dollar basis, when compared to 2008, Federal-Mogul’s 2009 sales were
down 19 percent or $1.2 billion.
The
company reported a net loss of $(45) million in full year 2009, versus a net
loss of $(468) million in 2008. When adjusting net income for
impairments and restructuring charges relating to the company’s capacity
rationalization, Federal-Mogul achieved break-even results in 2009, which
demonstrates the effectiveness of the company’s variable cost strategy to
maximize earnings and cash flow performance.
“Together
with our 2009 financial performance, our product and market strategy was
well-aligned with global customer needs. We are well positioned to
meet market demands for improved fuel economy, reduced emissions and greater
vehicle safety. Our strong cash flow and significantly improved
liquidity provides the necessary flexibility to pursue portfolio enhancements or
footprint realignment to accelerate our progress in spite of changing market
conditions,” said Alapont.
“Further,
we are implementing strategies to increase our sales to customers in the Energy,
Industrial and Transport (EIT) market segments, where we generate about 9
percent of our total revenue today. We believe business segments like
the expanding wind energy market, improving industrial markets and growth in the
global supply chain will increasingly benefit Federal-Mogul, due to our
specialized products to serve these segments.
-3-
DRAFT -
DO NOT DISTRIBUTE – FEBRUARY 22, 2010
“Our performance throughout 2009 is
indicative of the proactive and effective steps taken by Federal-Mogul to
counter the impact of the financial markets downturn in 2009. We
believe our progressively improving performance in 2009 establishes a strong
indication of our ability to generate sustainable global profitable
growth. We remain optimistic that the global markets will strengthen
in 2010 and we expect to continue to drive further earnings efficiency within
our existing infrastructure, while capitalizing on increasing sales in mature
and new growth markets,” Alapont concluded.
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 and losses
on the sales of businesses, the impact on gross margin of the fresh-start
reporting valuation of inventory, and the expense relating to U.S. based funded
pension plans.
2 Cash
flow is equal to net cash provided by operating activities less net cash used by
investing activities as set forth on the attached statement of cash flows,
excluding cash received from the 524g trust and impacts of the Chapter 11 plan
of reorganization.
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, agricultural, marine, rail, off-road and industrial
vehicles, as well as 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 about 39,000 people in 36 countries. Visit the company’s
Web site at www.federalmogul.com.
-4-
DRAFT -
DO NOT DISTRIBUTE – FEBRUARY 22, 2010
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.
# #
#
Fourth Quarter Conference
Call Details
Representatives
of Federal-Mogul Corporation will hold a fourth quarter and full-year 2009
financial results conference call and audio webcast on Tuesday, February 23 at
10:00 a.m., EST. To participate in the call:
Domestic
calls: 888-713-4216
International
calls: 617-213-4868
Pass code
I.D. # 72445960
The live
audio webcast will be accessible in the Investor Relations section of the
corporate website at www.federalmogul.com on February 23, 2010 at 10:00 a.m.
EST. An audio replay of the call will be available two hours following the call
and will be accessible until March 23, 2010 at:
Domestic
calls: 888-286-8010
International
calls: 617-801-6888
Pass code
I.D. # 95300342
CONTACT:
|
Steve
Gaut (248) 354-7826 for media
|
David
Pouliot (248) 354-7967 for investor questions
-5-
DRAFT -
DO NOT DISTRIBUTE – FEBRUARY 22, 2010
FEDERAL-MOGUL
CORPORATION
Consolidated
Statements of Operations
Three Months Ended
|
Twelve Months Ended
|
|||||||||||||||
December 31
|
December 31
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(Millions of Dollars, Except Per Share Amounts)
|
||||||||||||||||
Net
sales
|
$ | 1,408 | $ | 1,319 | $ | 5,330 | $ | 6,866 | ||||||||
Cost
of products sold
|
(1,183 | ) | (1,136 | ) | (4,538 | ) | (5,742 | ) | ||||||||
Gross
margin
|
225 | 183 | 792 | 1,124 | ||||||||||||
Selling,
general and administrative expenses
|
(164 | ) | (162 | ) | (690 | ) | (774 | ) | ||||||||
Adjustment
of assets to fair value
|
(16 | ) | (451 | ) | (17 | ) | (451 | ) | ||||||||
Interest
expense, net
|
(32 | ) | (43 | ) | (132 | ) | (180 | ) | ||||||||
Amortization
expense
|
(12 | ) | (19 | ) | (49 | ) | (76 | ) | ||||||||
Chapter
11 and U.K. Administration related
reorganization
expenses
|
- | (2 | ) | (3 | ) | (17 | ) | |||||||||
Equity
earnings of non-consolidated affiliates
|
7 | 3 | 16 | 23 | ||||||||||||
Restructuring
expense, net
|
7 | (118 | ) | (32 | ) | (132 | ) | |||||||||
Other
income, net
|
3 | 24 | 43 | 37 | ||||||||||||
Income
(loss) before income taxes
|
18 | (585 | ) | (72 | ) | (446 | ) | |||||||||
Income
tax benefit (expense)
|
28 | 53 | 39 | (19 | ) | |||||||||||
Net
income (loss)
|
46 | (532 | ) | (33 | ) | (465 | ) | |||||||||
Less
net (income) loss attributable to
|
||||||||||||||||
noncontrolling
interests
|
(3 | ) | 2 | (12 | ) | (3 | ) | |||||||||
Net
income (loss) attributable to Federal-Mogul
|
$ | 43 | $ | (530 | ) | $ | (45 | ) | $ | (468 | ) | |||||
Income (loss) per common
share:
|
||||||||||||||||
Basic
|
$ | 0.43 | $ | (5.36 | ) | $ | (0.46 | ) | $ | (4.69 | ) | |||||
Diluted
|
$ | 0.43 | $ | (5.36 | ) | $ | (0.46 | ) | $ | (4.69 | ) | |||||
Basic
shares outstanding (in millions)
|
98.9 | 98.9 | 98.9 | 99.7 | ||||||||||||
Diluted
shares outstanding (in millions)
|
99.4 | 99.3 | 99.3 | 100.0 |
-6-
DRAFT -
DO NOT DISTRIBUTE – FEBRUARY 22, 2010
Consolidated
Balance Sheets
December 31
|
December 31
|
|||||||
2009
|
2008
|
|||||||
(Millions of Dollars)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and equivalents
|
$ | 1,034 | $ | 888 | ||||
Accounts
receivable, net
|
950 | 939 | ||||||
Inventories,
net
|
823 | 894 | ||||||
Prepaid
expenses and other current assets
|
221 | 267 | ||||||
Total
current assets
|
3,028 | 2,988 | ||||||
Property,
plant and equipment, net
|
1,834 | 1,911 | ||||||
Goodwill
and other indefinite-lived intangible assets
|
1,427 | 1,430 | ||||||
Definite-lived
intangible assets, net
|
515 | 564 | ||||||
Other
noncurrent assets
|
323 | 343 | ||||||
$ | 7,127 | $ | 7,236 | |||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Short-term
debt, including current portion of long-term debt
|
$ | 97 | $ | 102 | ||||
Accounts
payable
|
537 | 622 | ||||||
Accrued
liabilities
|
410 | 483 | ||||||
Current
portion of postemployment benefit liability
|
61 | 61 | ||||||
Other
current liabilities
|
175 | 204 | ||||||
Total
current liabilities
|
1,280 | 1,472 | ||||||
Long-term
debt
|
2,760 | 2,768 | ||||||
Postemployment
benefits
|
1,298 | 1,240 | ||||||
Long-term
portion of deferred income taxes
|
498 | 554 | ||||||
Other
accrued liabilities
|
192 | 206 | ||||||
Shareholders’
equity:
|
||||||||
Preferred
stock ($.01 par value; 90,000,000 authorized shares; none
issued)
|
- | - | ||||||
Common
stock ($.01 par value; 450,100,000 authorized shares; 100,500,000 issued
shares; 98,904,500 outstanding shares as of December 31, 2009 and
2008)
|
1 | 1 | ||||||
Additional
paid-in capital, including warrants
|
2,123 | 2,123 | ||||||
Accumulated
deficit
|
(513 | ) | (468 | ) | ||||
Accumulated
other comprehensive loss
|
(571 | ) | (688 | ) | ||||
Treasury
stock, at cost
|
(17 | ) | (17 | ) | ||||
Total
Federal-Mogul shareholders’ equity
|
1,023 | 951 | ||||||
Noncontrolling
interests
|
76 | 45 | ||||||
Total
shareholders’ equity
|
1,099 | 996 | ||||||
$ | 7,127 | $ | 7,236 |
-7-
DRAFT -
DO NOT DISTRIBUTE – FEBRUARY 22, 2010
FEDERAL-MOGUL
CORPORATION
Consolidated
Statements of Cash Flows
Year Ended
|
||||||||
December 31
|
||||||||
2009
|
2008
|
|||||||
(Millions
of Dollars)
|
||||||||
Cash
Provided From (Used By) Operating Activities
|
||||||||
Net
loss
|
$ | (33 | ) | $ | (465 | ) | ||
Adjustments
to reconcile net loss to net cash provided from
|
||||||||
operating
activities:
|
||||||||
Depreciation
and amortization
|
327 | 349 | ||||||
Cash
received from 524(g) Trust
|
40 | 225 | ||||||
Payments
to settle non-debt liabilities subject to compromise, net
|
(51 | ) | (23 | ) | ||||
Chapter
11 and U.K. Administration related reorganization expenses
|
3 | 17 | ||||||
Payments
for Chapter 11 and U.K. Administration related reorganization
expenses
|
(6 | ) | (48 | ) | ||||
Adjustment
of assets to fair value
|
17 | 451 | ||||||
Restructuring
expense, net
|
32 | 132 | ||||||
Payments
against restructuring liabilities
|
(94 | ) | (40 | ) | ||||
Gain
on involuntary conversion
|
(7 | ) | (12 | ) | ||||
Insurance
proceeds from involuntary conversion, excluding capital
|
7 | 24 | ||||||
Gain
on sale of debt investment
|
(8 | ) | - | |||||
Change
in postemployment benefits, including pensions
|
48 | (11 | ) | |||||
Change
in deferred taxes
|
(34 | ) | 49 | |||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
14 | 89 | ||||||
Inventories
|
93 | 122 | ||||||
Accounts
payable
|
(82 | ) | (61 | ) | ||||
Other
assets and liabilities
|
62 | (171 | ) | |||||
Net
Cash Provided From Operating Activities
|
328 | 627 | ||||||
Cash
Provided From (Used By) Investing Activities
|
||||||||
Expenditures
for property, plant and equipment
|
(176 | ) | (320 | ) | ||||
Net
settlement from sale of debt investment
|
8 | - | ||||||
Net
proceeds from the sale of property, plant and equipment
|
2 | 13 | ||||||
Insurance
proceeds from involuntary conversion of capital
|
- | 6 | ||||||
Payments
to acquire business
|
- | (5 | ) | |||||
Net
Cash Used By Investing Activities
|
(166 | ) | (306 | ) | ||||
Cash
Provided From (Used By) Financing Activities
|
||||||||
Proceeds
from borrowings on exit facilities
|
- | 2,082 | ||||||
Repayment
of Tranche A, Revolver and PIK Notes
|
- | (1,791 | ) | |||||
Principal
payments on exit facilities
|
(30 | ) | (22 | ) | ||||
Decrease
in other long-term debt
|
- | (18 | ) | |||||
Decrease
in short-term debt
|
(8 | ) | (29 | ) | ||||
Purchase
of treasury stock
|
- | (17 | ) | |||||
Net
proceeds (payments) from factoring arrangements
|
4 | (7 | ) | |||||
Debt
amendment/issuance fees
|
(1 | ) | (1 | ) | ||||
Net
Cash (Used By) Provided From Financing Activities
|
(35 | ) | 197 | |||||
Effect
of foreign currency exchange rate fluctuations on cash
|
19 | (55 | ) | |||||
Increase
in cash and equivalents
|
146 | 463 | ||||||
Cash
and equivalents at beginning of period
|
888 | 425 | ||||||
Cash
and equivalents at end of period
|
$ | 1,034 | $ | 888 |
-8-
DRAFT -
DO NOT DISTRIBUTE – FEBRUARY 22, 2010
Reconciliation
of Non-GAAP Financial Measures (Unaudited)
(Millions
of Dollars)
Three Months Ended
|
Twelve Months Ended
|
|||||||||||||||
December 31
|
December 31
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net
income (loss)
|
$ | 46 | $ | (532 | ) | $ | (33 | ) | $ | (465 | ) | |||||
Depreciation
and amortization
|
86 | 83 | 327 | 349 | ||||||||||||
Chapter
11 and U.K. Administration related
|
||||||||||||||||
reorganization
expense
|
- | 2 | 3 | 17 | ||||||||||||
Interest
expense, net
|
32 | 43 | 132 | 180 | ||||||||||||
Income
tax (benefit) expense
|
(28 | ) | (53 | ) | (39 | ) | 19 | |||||||||
Restructuring,
net
|
(7 | ) | 118 | 32 | 132 | |||||||||||
Adjustment
of assets to fair value
|
16 | 451 | 17 | 451 | ||||||||||||
Expense
associated with U.S. based funded pension plans
|
17 | 1 | 66 | 5 | ||||||||||||
Fresh-start
inventory adjustment
|
- | - | - | 68 | ||||||||||||
Other
|
8 | - | (2 | ) | 6 | |||||||||||
Operational
EBITDA
|
$ | 170 | $ | 113 | $ | 503 | $ | 762 | ||||||||
Net
cash provided from operating activities:
|
$ | 280 | $ | 252 | 328 | $ | 627 | |||||||||
Adjustments:
|
||||||||||||||||
Cash
received from 524(g) Trust
|
- | - | (40 | ) | (225 | ) | ||||||||||
Net
payments for implementation of the Plan, including
|
||||||||||||||||
settlement
of non-debt liabilities subject to compromise
|
- | 1 | 51 | 23 | ||||||||||||
Cash
provided from operations, excluding the impacts
|
||||||||||||||||
of
the Plan
|
$ | 280 | $ | 253 | $ | 339 | $ | 425 | ||||||||
Cash
used by investing activities
|
(29 | ) | (72 | ) | (166 | ) | (306 | ) | ||||||||
Cash
flow
|
$ | 251 | $ | 181 | $ | 173 | $ | 119 |
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 and losses on the sales of
businesses, the impact on gross margin of the fresh-start reporting valuation of
inventory, and the expense relating to U.S.based funded pension
plans.
# # #