Federal-Mogul Drives Strong Sales And Earnings Growth in Q1 2011

Federal-Mogul sales increased 16%, net income more than tripled and EBITDA was 30% higher versus Q1 2010.

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Federal-Mogul Corporation reported strong first quarter 2011 financial performance, with sales of $1.7 billion, a $235 million or 16% increase versus $1.5 billion in Q1 2010. The company had a gross margin of $279 million or 16.2% of sales up from $254 million in Q1 2010. Sales, general and administrative expenses improved to 10.3% of sales, a more than two percentage point improvement versus the same period of 2010. Net income was $51 million or $0.51 per diluted share, more than triple the $15 million or $0.15 per diluted share in the same period of 2010. Operational EBITDA was $179 million, an increase of $41 million or 30% over Q1 2010. Cash flow was an outflow of $109 million during the quarter due to a growth-driven increase in capital requirements and normal first quarter seasonality.

"Federal-Mogul had another strong financial performance in the first quarter of 2011," says President and Chief Executive Officer Jose Maria Alapont. "We increased our EBITDA by $41 million or 30% and more than tripled our net income, on a sales increase of 16%, demonstrating our strength at converting increased revenue to greater profitability. This is our eighth consecutive quarter of profitable results and our performance again compares favorably to analysts' expectations."

The company's stronger sales performance reflected an improvement in market share position for all business units on top of the impact of higher global original equipment market demand. Federal-Mogul's OE sales were $1.1 billion in Q1 2011, an increase of $211 million or 23% from $936 million in Q1 2010. The company's original equipment sales were higher in all regions on a constant dollar basis, with exchange accounting for about one percentage point of the reported year-over-year sales growth. The company had, as well, strong global aftermarket sales in all regions, totaling $577 million in Q1 2011, up 4% or $24 million.

Federal-Mogul's gross margin in Q1 2011 was $279 million, an increase of $25 million versus $254 million in Q1 2010. SG&A expenses in Q1 2011 were reduced to $177 million, improving more than two full percentage points to 10.3% of sales from 12.4% of sales in Q1 2010. The company reported, in Q1 2011, net income of $51 million or $0.51 per diluted share, more than triple the reported net income of $15 million or $0.15 earnings per diluted share in Q1 2010. Operational EBITDA in Q1 2011 was $179 million or 10.4% of sales, an increase of $41 million, or 30%, versus $138 million or 9.3% of sales reported in Q1 2010.

Federal-Mogul's liquidity remains very strong at $1.5 billion with $1.0 billion of cash and an unused revolver of $0.5 billion. The company's capital investment strategy is to develop sustained revenue growth through capital investments for customer, product portfolio and footprint expansion. The $109 million cash outflow in Q1 2011 reflects this strategic growth investment along with other normal Q1 seasonality.

"The company's Q1 2011 OE and aftermarket growth, in both market share position and overall revenue, is due to the strong demand for our leading technology and innovation," says Alapont.

"Federal-Mogul's products help customers meet regulatory requirements and vehicle differentiation demands to increase fuel economy, reduce emissions and improve vehicle safety.

Our global leading brands bring premium and high-value repair solutions to installers and technicians in the aftermarket," he says.

Customer and industry awards provide strong evidence of the company's technological leadership. During the quarter, Federal-Mogul was recognized as powertrain technology supplier of the year by Daimler's commercial vehicles division. In addition, four industry-leading Federal-Mogul technological innovations for fuel efficiency, reduced emissions and enhanced powertrain performance were recently honored at the 2011 Automotive News PACE Awards. The Automotive News PACE Award is globally recognized as the industry symbol of innovation and is presented annually by Automotive News, Ernst & Young Global Automotive Center and The Transportation Research Center Inc. Federal-Mogul won two PACE awards -- more than any other company -- in the 2011 competition. The company's low-friction LKZ(R) piston ring and EcoTough(R)-coated piston received awards in the product technology category. Federal-Mogul has received a total of eight PACE Awards since 2005, more than any other automotive supplier.

"Federal-Mogul's strong first quarter earnings and operating performance shows our ability to efficiently drive performance improvement while increasing overall sales in the original equipment and aftermarket business segments of the company," says Alapont. "We believe our market leading global brands and growing portfolio of technology and innovation in powertrain fuel efficiency, emissions reduction and overall vehicle safety will continue to exceed customer requirements for regulatory compliance and market differentiation, thereby enabling Federal-Mogul to generate sustainable global profitable growth."