EX-99.1 2 a5448882ex991.txt EXHIBIT 99.1 Exhibit 99.1 Federal-Mogul Reports Second Quarter 2007 Results SOUTHFIELD, Mich.--(BUSINESS WIRE)--July 16, 2007--Federal-Mogul Corporation (OTCBB:FDMLQ) today reported its financial results for the three and six month periods ended June 30, 2007. Financial Summary (in millions) ---------------------------------- Three Months Ended Six Months Ended June 30 June 30 ------------------ ----------------- 2007 2006 2007 2006 --------- -------- -------- -------- Net sales $1,763 $1,632 $3,480 $3,232 Gross margin 322 304 630 589 Selling, general and administrative expenses 213 218 420 446 Income (loss) before income taxes 25 12 61 (27) Income tax expense 21 29 52 58 Net earnings (loss) 4 (17) 9 (85) Operational EBITDA(a) 212 175 412 320 (a) Operational EBITDA is a non-GAAP measure defined to include discontinued operations and exclude impairment charges, Chapter 11 and U.K. Administration expenses, restructuring costs, income tax expense, interest expense, depreciation and amortization Federal-Mogul reported net income of $4 million for the quarter ended June 30, 2007, compared to a net loss of $17 million for the second quarter of 2006. For the six months ended June 30, 2007, the company reported net income of $9 million, compared to a net loss of $85 million for the comparable period of 2006. These results reflect an 8% increase in sales, improved gross margin and reduced selling, general and administrative expenses. Federal-Mogul reported net sales of $1,763 million for the quarter ended June 30, 2007, an increase of $131 million, or 8%, compared to the second quarter of 2006. The most significant factors impacting sales were increased volumes of $77 million and favorable foreign currency of $56 million. For the six-month period ended June 30, 2007, net sales increased by $248 million to $3,480 million, of which $119 million is due to increased volumes, $51 million is due to the May 2006 acquisition of Federal-Mogul Goetze India ("FMG") and $116 million is due to favorable foreign currency. These favorable impacts were partially offset by customer pricing. Gross margin for the three and six months ended June 30, 2007 increased by $18 million and $41 million, respectively, over the comparable periods of 2006. Improvements in gross margin resulted from a combination of the October 2006 settlement of the U.K. pension plans, productivity in excess of labor and benefits inflation, increased volumes, and favorable foreign currency. These favorable impacts were partially offset by increased raw materials costs and customer pricing. Selling, general and administrative ("SG&A") expense for the three and six months ended June 30, 2007 improved by $5 million and $26 million, respectively, when compared to the comparable periods of 2006. Reductions in SG&A resulted from a combination of cost reduction actions in excess of labor and benefits inflation, and the settlement of the U.K. pension plans. These favorable impacts were partially offset by increased SG&A from the acquisition of FMG and adverse foreign currency. Federal-Mogul reported income before income taxes for the three-month period ended June 30, 2007 of $25 million, an improvement of $13 million over the comparable period of 2006. For the six month period ended June 30, 2007, the Company's income before income taxes improved by $88 million compared to the same period of 2006, largely derived from the $67 million of improvements in gross margin and selling, general and administrative expenses, and $30 million in reduced impairment and restructuring charges. 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 to include discontinued operations and exclude impairment charges, Chapter 11 and U.K. Administration expenses, restructuring costs, income tax expense, interest expense, depreciation and amortization. The Company reported Operational EBITDA for the three and six months ended June 30, 2007 of $212 million and $412 million, respectively, representing improvements of $37 million and $92 million, respectively, over the comparable periods of 2006. This improvement is largely due to the improvements reported within gross margin and reduced SG&A expenses. A reconciliation of Operational EBITDA to the Company's earnings before income taxes for the three months ended June 30, 2007 has been provided. Combining cash provided from operating activities with cash used by investing activities, the Company generated positive cash inflows of $79 million for the six months ended June 30, 2007, compared with $30 million for the comparable period of 2006. "Federal-Mogul remains fully committed to exiting from Chapter 11, while wholly dedicated to our strategy for sustainable global profitable growth, providing our valued customers with service excellence, quality products, leading technology and innovation at competitive cost," said Chairman, President and Chief Executive Officer Jose Maria Alapont. "The results achieved during the first half of 2007 reflect the Company's commitment to consistently improve our operational performance." About Federal-Mogul Federal-Mogul Corporation is a leading global supplier, serving the world's foremost original equipment manufacturers of automotive, light commercial, heavy-duty, agricultural, marine, rail, aerospace, 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 global profitable growth strategy, creating value and satisfaction for its customers, employees and stakeholders. Federal-Mogul was founded in Detroit in 1899. The Company is headquartered in Southfield, Michigan, and employs 45,000 people in 35 countries. Visit the company's Web site at www.federal-mogul.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 results of the Chapter 11 and U.K. Administration proceedings, 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. Note to Editors: There should be an accent symbol over the "e" in "Jose" above. FEDERAL-MOGUL CORPORATION STATEMENTS OF OPERATIONS (Millions of Dollars, Except Share and Per Share Data) Three Months Ended Six Months Ended June 30 June 30 ------------------- ------------------- 2007 2006 2007 2006 -------- --------- -------- --------- Net sales $1,763.4 $1,631.6 $3,479.9 $3,231.9 Cost of products sold 1,441.0 1,327.4 2,849.7 2,642.7 -------- --------- -------- --------- Gross margin 322.4 304.2 630.2 589.2 Selling, general and administrative expenses 212.7 218.4 419.6 445.9 Adjustment of long-lived assets to fair value 3.2 1.1 3.5 21.2 Interest expense, net 51.9 44.3 101.9 83.3 Chapter 11 and Administration related reorganization expenses 27.6 20.8 41.2 41.9 Equity earnings of unconsolidated affiliates (10.1) (7.7) (18.0) (17.1) Restructuring expense, net 13.5 16.5 29.6 42.3 Other income, net (1.5) (1.0) (8.3) (1.3) -------- --------- -------- --------- Income (loss) before income taxes 25.1 11.8 60.7 (27.0) Income tax expense 21.2 28.6 52.2 58.2 -------- --------- -------- --------- Net income (loss) $ 3.9 $ (16.8) $ 8.5 $ (85.2) ======== ========= ======== ========= Net income (loss) per common share $ 0.04 $ (0.19) $ 0.10 $ (0.96) ======== ========= ======== ========= Weighted average shares outstanding (in millions) 89.7 89.1 89.4 89.1 FEDERAL-MOGUL CORPORATION BALANCE SHEETS (Millions of Dollars) (Unaudited) June 30 December 31 2007 2006 ----------- ----------- Current assets: Cash and equivalents $ 378.1 $ 359.3 Accounts receivable, net 1,167.7 992.6 Inventories, net 905.8 892.6 Prepaid expenses and other current assets 291.4 248.2 --------- --------- Total current assets 2,743.0 2,492.7 Property, plant and equipment, net 2,055.5 2,078.6 Goodwill and indefinite-lived intangible assets 1,219.7 1,205.3 Definite-lived intangible assets, net 254.1 254.3 Asbestos-related insurance recoverable 873.7 859.0 Other noncurrent assets 262.5 289.2 --------- --------- $ 7,408.5 $ 7,179.1 ========= ========= Current liabilities: Short-term debt, including current portion of long-term debt $ 820.2 $ 482.1 Accounts payable 618.4 488.0 Accrued liabilities 514.2 435.0 Current portion of postemployment benefit liability 67.0 67.9 Other accrued liabilities 147.1 181.7 --------- --------- Total current liabilities 2,166.9 1,654.7 Liabilities subject to compromise 5,455.5 5,813.4 Long-term debt 22.8 26.7 Postemployment benefits 1,094.6 1,111.1 Deferred income taxes 84.2 81.8 Other accrued liabilities 159.6 185.1 Minority interest in consolidated affiliates 40.1 54.2 Shareholders' deficit: Series C ESOP preferred stock 28.0 28.0 Common stock 449.3 445.3 Additional paid-in capital 2,199.4 2,160.2 Accumulated deficit (4,129.4) (4,151.7) Accumulated other comprehensive loss (162.5) (229.7) --------- --------- Total shareholders' deficit (1,615.2) (1,747.9) --------- --------- $ 7,408.5 $ 7,179.1 ========= ========= FEDERAL-MOGUL CORPORATION STATEMENTS OF CASH FLOWS (Millions of Dollars) (Unaudited) Six Months Ended June 30 ---------------- 2007 2006 ------- ------- Cash provided from (used by) operating activities Net income (loss) $ 8.5 $ (85.2) Adjustments to reconcile net income (loss) to net cash provided from (used by) operating activities: Depreciation and amortization 172.1 159.4 Adjustment of long-lived assets to fair value 3.5 21.2 Change in postemployment benefits, including pensions (27.1) 67.4 Changes in deferred taxes 3.8 (7.4) Changes in operating assets and liabilities: Accounts receivable (157.8) (80.7) Inventories 0.9 (58.6) Accounts payable 106.5 72.3 Other assets and liabilities 75.1 46.3 ------- ------- Net cash provided from operating activities 185.5 134.7 Cash provided from (used by) investing activities Expenditures for property, plant and equipment (132.0) (80.6) Proceeds from the sale of property, plant and equipment 18.1 2.7 Proceeds from sale of business - 4.0 Proceeds from sale of investment 13.8 - Payments to acquire minority interests (6.8) - Payments to acquire business - (30.5) ------- ------- Net cash used by investing activities (106.9) (104.4) Cash provided from (used by) financing activities Proceeds from borrowings on DIP credit facility 550.0 164.3 Principal payments on DIP credit facility (228.1) (198.0) Net change in short-term debt 8.7 0.3 Net change in restricted cash - (26.9) Principal payment on other long-term debt (5.8) (1.0) Payments on factoring arrangements (58.9) - Repayment of pre-petition Tranche C debt (330.0) - Debt refinance fees (0.3) - ------- ------- Net cash used by financing activities (64.4) (61.3) Effect of foreign currency exchange rate fluctuations on cash 4.6 47.9 ------- ------- Increase in cash and equivalents 18.8 16.9 Cash and equivalents at beginning of period 359.3 387.2 ------- ------- Cash and equivalents at end of period $ 378.1 $ 404.1 ======= ======= FEDERAL-MOGUL CORPORATION RECONCILIATION OF NON-GAAP FINANCIAL MEASURE (Millions of Dollars) (Unaudited) Three Months Ended Six Months Ended June 30 June 30 ------------------ ---------------- 2007 2006 2007 2006 --------- ------- ------- ------- Income (loss) before income taxes $ 25.1 $ 11.8 $ 60.7 $ (27.0) Depreciation and amortization 88.2 80.6 172.1 159.4 Chapter 11 and Administration related reorganization expenses 27.6 20.8 41.2 41.9 Interest expense, net 51.9 44.3 101.9 83.3 Adjustment of assets to fair value 3.2 1.1 3.5 21.2 Restructuring expense, net 13.5 16.5 29.6 42.3 Other 2.8 (0.4) 2.7 (0.9) --------- ------- ------- ------- Operational EBITDA $ 212.3 $ 174.7 $ 411.7 $ 320.2 ========= ======= ======= ======= CONTACT: Federal-Mogul Corporation Marie Remboulis, 248-354-9809