today reported positive net income and cash flow on improved sales
versus the first quarter 2009, as the company’s restructuring and
cost-reduction initiatives brought improved profits to the bottom line,
countering the impact of the global market downturn.
"We are pleased to report a profitable quarter, including stronger
gross margin, reduced selling, general and administrative expenses,
positive net income, higher operational EBITDA and significantly
improved cash flow in second quarter 2009 versus first quarter 2009. We
have implemented numerous measures to reduce costs and more closely
align our global structure and capacity with current market
requirements," said Jose Maria Alapont, Federal-Mogul president and
"These Q2 2009 results highlight our substantial progress versus Q1
2009, as we strengthen the company to operate more efficiently in the
current market environment, while preparing to capitalize on an
eventual rebound in vehicle production. The company’s performance
during the quarter demonstrates the effectiveness of Federal-Mogul’s
variable cost company strategy to generate sustainable global
profitable growth," he said.
Federal-Mogul reported $1.3 billion in sales during the second quarter,
a $66 million increase over first quarter 2009, yet the global
automotive markets remained challenging in all but a few growth
countries. The company’s improved sales along with global restructuring
measures and strict cost controls resulted in a gross margin of $198
million or 15.2 percent of sales in the second quarter 2009, which is
up $40 million and 2.4 percentage points. Net income in the second
quarter 2009 was $3 million versus a net loss of $101 million during
first quarter 2009. The stronger net income is attributable to
operational improvements across all business activities. Operational
EBITDA for the second quarter 2009 was $129 million or 9.9 percent, an
increase of $59 million over first quarter 2009, when the company
reported operational EBITDA of $70 million or 5.7 percent.
Federal-Mogul generated positive cash flow of $7 million in the second
quarter compared with negative cash flow of $196 million in first
quarter 2009, representing a $203 million improvement in cash flow
performance during the quarter. This strong improvement was due to
enhanced profitability and improved working capital management. The
company maintained its strong cash position of about $700 million with
an unused revolver of more than $500 million, providing more than $1.2
billion of liquidity.
On a year-over-year basis, Federal-Mogul reported second quarter sales
of $1.3 billion versus $2 billion in the second quarter 2008, which was
the last full quarterly reporting period before the global automotive
market downturn began, and when the company reported its all-time
quarterly sales record. Federal-Mogul’s total revenue declined 29
percent in the second quarter 2009 on a constant dollar basis or 35
percent including currency exchange versus the second quarter 2008.
Gross margin was $198 million or 15.2 percent in the second quarter
2009 versus $396 million or 19.8 percent in the same period of 2008.
Sales, general and administrative (SG&A) expenses were improved by
20 percent to $170 million during the second quarter 2009, versus $212
million during the same period one year ago. Net income was $3 million
in the second quarter 2009 versus $90 million in the second quarter
2008. Federal-Mogul’s operational EBITDA for the second quarter 2009
was $129 million, compared to $258 million, reported a year ago. The
company reported positive cash flow of $7 million for the second
quarter 2009 versus $70 million during the second quarter 2008.
For the six-month period ending June 30, Federal-Mogul reported sales
of $2.5 billion, compared to $3.9 billion for the same period in 2008.
Gross margin was $356 million in the first half of 2009, versus $662
million for the same period in 2008. SG&A costs were improved by
$67 million, to $354 million in the first six months of this year from
$421 million in the first half of 2008. The company reported a net loss
of $98 million for the first half of 2009, compared to $58 million of
net income for the first two quarters of 2008. Operational EBITDA was
$199 million, or 7.8 percent of sales for the first six months of 2009,
compared to $465 million or 12.1 percent of sales during the first half
of 2008. The company recorded negative cash flow of $189 million for
the six months ending June 30, compared to negative $92 million in the
first half of 2008.
The company in the second quarter continued to adjust its global
headcount in order to realign its manufacturing capacity to market
requirements. As a result of the company’s global restructuring plan,
Federal-Mogul has reduced its headcount by nearly 11,000 employees, or
22 percent from one year ago.
Federal-Mogul during the three months ending June 30, continued to
achieve new business bookings with a high percentage of conquest
contracts, evidence of continued demand for Federal-Mogul’s leading
technology and innovation to increase fuel economy, reduce emissions
and improve vehicle safety.
"Federal-Mogul’s results demonstrate that our sustainable global
profitable growth strategy has been effective in establishing a solid
foundation which helps the company withstand extremely difficult market
conditions," Alapont said. "We continue to focus on strengthening as
well as diversifying our customer base to grow our revenue stream with
new technologies, innovations and strong brands that bring value to our
customers, especially given the increasingly challenging regulatory
requirements for fuel economy, alternative fuels, reduced emissions and
improved safety. We are working efficiently in order to continue to
improve our global performance," he concluded.