Attached files
| file | filename |
|---|---|
| 8-K - Federal-Mogul Holdings LLC | v191752_8k.htm |
Federal-Mogul
Reports Strong Sales
and Profit Improvement in Q2 2010
All
Operating Segments Achieve Year-over-Year
Sales Increases in
all
Regions with
Significant EBITDA
Improvement in all Units
Southfield,
Michigan, July 29, 2010 . . . Federal-Mogul Corporation (NASDAQ: FDML) today
reported its second quarter 2010 financial results, with sales of $1.6 billion,
23 percent higher versus Q2 2009, strong gross margin of $274 million or 17.1
percent and net income of $49 million or $0.49 per diluted
share. Analysts’ consensus earnings expectation was $0.32 per share
for Q2 2010.
|
Financial Summary
($ millions, except per
share)
|
2010
Q2
|
2009
Q2
|
B/(W) | |||||||||
|
Net
Sales
|
$ | 1,598 | $ | 1,304 | $ | 294 | ||||||
|
Gross
Margin
|
274 | 198 | 76 | |||||||||
|
pct.
of sales
|
17.1 | % | 15.2 | % |
1.9
|
pts. | ||||||
|
SG&A
|
(165 | ) | (170 | ) | 5 | |||||||
|
pct.
of sales
|
10.3 | % | 13.0 | % |
2.7
|
pts. | ||||||
|
Net
Income
|
49 | 3 | 46 | |||||||||
|
attributable
to Federal-Mogul
|
||||||||||||
|
Earnings
Per Share
|
0.49 | 0.03 | 0.46 | |||||||||
|
in
dollars, diluted EPS
|
||||||||||||
|
Operational EBITDA1
|
203 | 133 | 70 | |||||||||
|
pct.
of sales
|
12.7 | % | 10.2 | % |
2.5
|
pts. | ||||||
|
Cash Flow2 Before Acquisition
|
47 | 6 | 41 | |||||||||
|
Cash
Flow2
|
8 | 6 | 2 | |||||||||
“Federal-Mogul’s
results in the second quarter of 2010 show our ability to deliver strong
financial performance by converting incremental revenue to profitability due to
our continued focus on efficiently managing our cost base established during
2009,” said José Maria Alapont, president and chief executive
officer. “Federal-Mogul‘s margins, both in absolute terms and as a
percentage of sales, are significantly higher than a year ago and we have
strongly improved year-over-year cash flow.”
For the
first half of 2010, compared to the same period one year ago, Federal-Mogul
converted additional sales of $545 million into additional net income of $161
million, a conversion rate of 30 percent.
The
company’s stronger sales performance is the result of market share gains in all
regions and markets, on top of a significant improvement in global automotive
original equipment light vehicle and commercial vehicle market
demand. Federal-Mogul’s sales in Q2 2010 of $1,598 million improved
23 percent, versus $1,304 million recorded during the same period one year
ago. The company’s original equipment sales increased in North
America by 81 percent, Asia Pacific by 46 percent
and Europe by 31 percent. Federal-Mogul’s growth in key developing
markets continued strong with year-over-year growth of 63 percent in China and
20 percent in India.
Gross
margin in Q2 2010 was $274 million or 17.1 percent of sales versus $198 million
or 15.2 percent in Q2 2009, a two percentage point
improvement. Federal-Mogul recorded SG&A expense of $165 million
or 10.3 percent of sales during Q2 2010, versus $170 million or 13.0 percent of
sales in Q2 2009. “SG&A expense control remains a key focus as we
strive to enhance profitability while supporting the sales increase of 23
percent,” Alapont said.
The
company earned net income of $49 million or $0.49 per diluted share in Q2 2010
versus net income of $3 million or $0.03 per diluted share in Q2
2009. The company has reported positive net income for the last four
quarters, reflecting the benefit of its revenue diversification, cost management
focus, leading technology and innovative products.
-2-
Operational
EBITDA in Q2 2010 was $203 million or 12.7 percent of sales, 53 percent higher
than operational EBITDA of $133 million or 10.2 percent of sales in Q2
2009. EBITDA, in absolute terms and as a percent of sales, improved
in every reporting segment of the company, demonstrating Federal-Mogul’s ability
to increase efficiency, offset the impact of weaker currencies and commodity
price increases and compensate for regional markets where light vehicle
production remains low.
The
company generated strong positive cash flow of $47 million during Q2 2010 and
internally funded the recent $39 million strategic acquisition of the Daros
Group, a well-recognized manufacturer of large bore piston rings. Net
of the acquisition price, cash flow for Q2 2010 was $8
million. Consistent, strong cash management and operating performance
generated cash flow of $97 million, before the acquisition, for the first six
months of 2010 and over $400 million for the last 12 months.
The
company maintains solid liquidity with over $1 billion cash and an undrawn $500
million revolver. “This ability to generate significant cash flow,
contain costs in the face of a significant volume increase and deliver strong
earnings is indicative of the strength of the company's sustainable global
profitable growth strategy,” Alapont said.
“Our
strong second quarter earnings and cash flow performance demonstrates once again
that we are on the right track,” Alapont said. “The company’s
commitment to leading technology and innovation to drive growth in developing
markets was recently confirmed with the official grand opening of our Asia
Pacific Headquarters and Technical Center. Federal-Mogul’s 100,000
square foot facility in Shanghai contains some of the most sophisticated
development, testing and analysis equipment in our global engineering
network. We already manufacture
in Asia Pacific the main
products in our portfolio within our 21 manufacturing sites located in the
region, supporting leading light vehicle, heavy-duty and aftermarket customers.
We remain committed to enhancing and developing our presence in the Asia Pacific
region.”
-3-
“The
company’s recent acquisition of the Daros Group will expand Federal-Mogul’s
global presence and portfolio of energy, industrial and transport
products. Both of these initiatives demonstrate our growth and focus
on developing innovative solutions to meet the increasing requirements of our
customers and solve the industry’s most pressing challenges for fuel efficiency,
emissions reduction and improved vehicle safety. Through strong
financial performance, customer satisfaction and leading technology, we are
demonstrating our capability to generate sustainable global profitable growth,”
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 or losses on the sales of
businesses, 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 approximately 43,000 people in 34 countries. Visit the
company’s website at www.federalmogul.com.
-4-
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.
|
CONTACTS:
|
Jim
Burke (248) 354-4530 for media
questions
|
David Pouliot (248) 354-7967 for
investor questions
-5-
FEDERAL-MOGUL
CORPORATION
Consolidated
Statements of Operations (Unaudited)
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30
|
June
30
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
(Millions
of Dollars, Except Per Share Amounts)
|
||||||||||||||||
|
Net
sales
|
$ | 1,598 | $ | 1,304 | $ | 3,087 | $ | 2,542 | ||||||||
|
Cost
of products sold
|
(1,324 | ) | (1,106 | ) | (2,559 | ) | (2,186 | ) | ||||||||
|
Gross
margin
|
274 | 198 | 528 | 356 | ||||||||||||
|
Selling,
general and administrative expenses
|
(165 | ) | (170 | ) | (349 | ) | (355 | ) | ||||||||
|
Interest
expense, net
|
(32 | ) | (34 | ) | (65 | ) | (68 | ) | ||||||||
|
Amortization
expense
|
(12 | ) | (12 | ) | (24 | ) | (24 | ) | ||||||||
|
Equity
earnings of non-consolidated affiliates
|
10 | 3 | 17 | 4 | ||||||||||||
|
Restructuring
expense, net
|
(5 | ) | (1 | ) | (6 | ) | (40 | ) | ||||||||
|
Other
(expense) income, net
|
(2 | ) | 13 | (23 | ) | 27 | ||||||||||
|
Income
(loss) before income taxes
|
68 | (3 | ) | 78 | (100 | ) | ||||||||||
|
Income
tax (expense) benefit
|
(18 | ) | 10 | (11 | ) | 6 | ||||||||||
|
Net
income (loss)
|
50 | 7 | 67 | (94 | ) | |||||||||||
|
Less
net income attributable to noncontrolling interests
|
(1 | ) | (4 | ) | (4 | ) | (4 | ) | ||||||||
|
Net
income (loss) attributable to Federal-Mogul
|
$ | 49 | $ | 3 | $ | 63 | $ | (98 | ) | |||||||
|
Income
(loss) per common share:
|
||||||||||||||||
|
Basic
|
$ | 0.50 | $ | 0.03 | $ | 0.64 | $ | (0.99 | ) | |||||||
|
Diluted
|
$ | 0.49 | $ | 0.03 | $ | 0.63 | $ | (0.99 | ) | |||||||
|
Basic
shares outstanding (in millions)
|
98.9 | 98.9 | 98.9 | 98.9 | ||||||||||||
|
Diluted
shares outstanding (in millions)
|
99.4 | 99.3 | 99.4 | 99.3 | ||||||||||||
-6-
FEDERAL-MOGUL
CORPORATION
Consolidated
Balance Sheets
|
(Unaudited)
June
30
|
December
31
|
|||||||
|
2010
|
2009
|
|||||||
|
|
(Millions
of Dollars)
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and equivalents
|
$ | 1,020 | $ | 1,034 | ||||
|
Accounts
receivable, net
|
1,119 | 950 | ||||||
|
Inventories,
net
|
803 | 823 | ||||||
|
Prepaid
expenses and other current assets
|
211 | 221 | ||||||
|
Total
current assets
|
3,153 | 3,028 | ||||||
|
Property,
plant and equipment, net
|
1,685 | 1,834 | ||||||
|
Goodwill
and other indefinite-lived intangible assets
|
1,452 | 1,427 | ||||||
|
Definite-lived
intangible assets, net
|
491 | 515 | ||||||
|
Other
noncurrent assets
|
303 | 323 | ||||||
| $ | 7,084 | $ | 7,127 | |||||
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Short-term
debt, including current portion of long-term debt
|
$ | 97 | $ | 97 | ||||
|
Accounts
payable
|
611 | 537 | ||||||
|
Accrued
liabilities
|
416 | 410 | ||||||
|
Current
portion of postemployment benefit liability
|
59 | 61 | ||||||
|
Other
current liabilities
|
152 | 175 | ||||||
|
Total
current liabilities
|
1,335 | 1,280 | ||||||
|
Long-term
debt
|
2,757 | 2,760 | ||||||
|
Postemployment
benefits
|
1,105 | 1,298 | ||||||
|
Long-term
portion of deferred income taxes
|
494 | 498 | ||||||
|
Other
accrued liabilities
|
203 | 192 | ||||||
|
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 June 30, 2010 and December 31,
2009)
|
1 | 1 | ||||||
|
Additional
paid-in capital, including warrants
|
2,150 | 2,123 | ||||||
|
Accumulated
deficit
|
(450 | ) | (513 | ) | ||||
|
Accumulated
other comprehensive loss
|
(576 | ) | (571 | ) | ||||
|
Treasury
stock, at cost
|
(17 | ) | (17 | ) | ||||
|
Total
Federal-Mogul shareholders’ equity
|
1,108 | 1,023 | ||||||
|
Noncontrolling
interests
|
82 | 76 | ||||||
|
Total
shareholders’ equity
|
1,190 | 1,099 | ||||||
| $ | 7,084 | $ | 7,127 | |||||
-7-
FEDERAL-MOGUL
CORPORATION
Consolidated
Statements of Cash Flows (Unaudited)
|
Six
Months Ended
|
||||||||
|
June
30
|
||||||||
|
2010
|
2009
|
|||||||
|
(Millions
of Dollars)
|
||||||||
|
Cash
Provided From (Used By) Operating Activities
|
||||||||
|
Net
income (loss)
|
$ | 67 | $ | (94 | ) | |||
|
Adjustments
to reconcile net income (loss) to net cash provided from (used
by) operating activities:
|
||||||||
|
Depreciation
and amortization
|
162 | 158 | ||||||
|
Cash
received from 524(g) Trust
|
- | 40 | ||||||
|
Payments
to settle non-debt liabilities subject to compromise, net
|
(16 | ) | (50 | ) | ||||
|
Loss
on Venezuelan currency devaluation
|
20 | - | ||||||
|
Equity
earnings of non-consolidated affiliates
|
(17 | ) | (4 | ) | ||||
|
Cash
dividends received from non-consolidated affiliates
|
24 | - | ||||||
|
Change
in postemployment benefits, including pensions
|
(4 | ) | 28 | |||||
|
Gain
on sale of debt investment
|
- | (8 | ) | |||||
|
Change
in deferred taxes
|
(22 | ) | (4 | ) | ||||
|
Gain
on sale of property, plant and equipment
|
(2 | ) | - | |||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Accounts
receivable
|
(212 | ) | (105 | ) | ||||
|
Inventories
|
(21 | ) | 29 | |||||
|
Accounts
payable
|
106 | (138 | ) | |||||
|
Other
assets and liabilities
|
92 | 29 | ||||||
|
Net
Cash Provided From (Used By) Operating Activities
|
177 | (119 | ) | |||||
|
Cash
Provided From (Used By) Investing Activities
|
||||||||
|
Expenditures
for property, plant and equipment
|
(98 | ) | (88 | ) | ||||
|
Payments
to acquire business
|
(39 | ) | - | |||||
|
Net
proceeds from the sale of property, plant and equipment
|
2 | - | ||||||
|
Net
settlement from sale of debt investment
|
- | 8 | ||||||
|
Net
Cash Used By Investing Activities
|
(135 | ) | (80 | ) | ||||
|
Cash
Provided From (Used By) Financing Activities
|
||||||||
|
Principal
payments on term loans
|
(15 | ) | (15 | ) | ||||
|
Decrease
in other long-term debt
|
(2 | ) | (2 | ) | ||||
|
Increase
(decrease) in short-term debt
|
5 | (3 | ) | |||||
|
Net
payments from factoring arrangements
|
(12 | ) | (4 | ) | ||||
|
Net
Cash Used By Financing Activities
|
(24 | ) | (24 | ) | ||||
|
Effect
of Venezuelan currency devaluation on cash
|
(16 | ) | - | |||||
|
Effect
of foreign currency exchange rate fluctuations on cash
|
(16 | ) | 22 | |||||
|
Effect
of foreign currency fluctuations on cash
|
(32 | ) | 22 | |||||
|
Decrease
in cash and equivalents
|
(14 | ) | (201 | ) | ||||
|
Cash
and equivalents at beginning of period
|
1,034 | 888 | ||||||
|
Cash
and equivalents at end of period
|
$ | 1,020 | $ | 687 | ||||
-8-
FEDERAL-MOGUL
CORPORATION
Reconciliation
of Non-GAAP Financial Measures (Unaudited)
(Millions
of Dollars)
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30
|
June
30
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Net
income (loss)
|
$ | 50 | $ | 7 | $ | 67 | $ | (94 | ) | |||||||
|
Depreciation
and amortization
|
81 | 81 | 162 | 158 | ||||||||||||
|
Interest
expense, net
|
32 | 34 | 65 | 68 | ||||||||||||
|
Income
tax expense (benefit)
|
18 | (10 | ) | 11 | (6 | ) | ||||||||||
|
Restructuring
expense, net
|
5 | 1 | 6 | 40 | ||||||||||||
|
Adjustment
of assets to fair value
|
4 | 1 | 8 | 1 | ||||||||||||
|
Expense
associated with U.S. based funded pension plans
|
13 | 17 | 26 | 33 | ||||||||||||
|
Other
|
- | 2 | (4 | ) | 3 | |||||||||||
|
Operational
EBITDA
|
$ | 203 | $ | 133 | $ | 341 | $ | 203 | ||||||||
|
Net
cash provided from (used by) operating activities:
|
$ | 97 | $ | 41 | $ | 177 | $ | (119 | ) | |||||||
|
Adjustments:
|
||||||||||||||||
|
Cash
received from 524(g) Trust
|
- | - | - | (40 | ) | |||||||||||
|
Net
payments for implementation of the Plan, including settlement of non-debt
liabilities subject to compromise
|
2 | 1 | 16 | 50 | ||||||||||||
|
Cash
provided from (used by) operations, excluding the impacts of
the Plan
|
$ | 99 | $ | 42 | $ | 193 | $ | (109 | ) | |||||||
|
Cash
used by investing activities
|
(91 | ) | (36 | ) | (135 | ) | (80 | ) | ||||||||
|
Cash
flow
|
$ | 8 | $ | 6 | $ | 58 | $ | (189 | ) | |||||||
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, and the expense relating to U.S.based funded pension
plans.
# #
#