SOUTHFIELD, Mich. -- Federal-Mogul Corp. has announced record third quarter sales and strong financial results versus the same period of 2010.
Total sales were $1.7 billion, up 12 percent, on market share gains, higher volumes and favorable currency, versus the third quarter 2010. Gross margin was $263 million or 15.2 percent of sales, a $25 million increase over the third quarter of 2010. Selling, general and administrative expenses were $172 million or 9.9 percent of sales in the quarter. Net income was $34 million or 34 cents per diluted share compared to $53 million or 53 cents per diluted share in the third quarter 2010. Net income of $34 million compares favorably to an adjusted net income of $29 million in third quarter 2010, when excluding the non-cash OPEB curtailment gain recorded in the third quarter of last year.
Federal-Mogul's operational EBITDA was $166 million in the third quarter 2011, or 9.6 percent of sales. This result reflects continued strong operating performance combined with additional investment in R&D and new program start-up costs to support market share growth in the original equipment business. Increases in capital investments and working capital were required to support volume and market share growth resulting in a cash outflow of $(71) million.
"Federal-Mogul's leading technology and innovation in the original equipment markets continues to be in high demand and we achieved all-time record third quarter sales while maintaining world-class quality and delivery performance and strong operating margins," said Jose Maria Alapont, Federal-Mogul president and CEO. "Federal-Mogul, during the quarter, attained higher volumes with newly launched innovative powertrain technologies that help automakers to improve fuel economy and reduce emissions. The DuraBowl, Elastoval II and Monosteel pistons, LKZ oil control rings and IROX engine bearings added significantly to revenue growth in mature markets and helped conquest new business opportunities in strategic growth markets such as China, India and Russia."
Net sales increased $188 million, an increase of 12 percent, or 7 percent on a constant dollar basis, versus the third quarter 2010. Original equipment (OE) sales were up 19 percent, or 13 percent on a constant dollar basis. The 19 percent OE sales growth features increases in BRIC markets of 28 percent, with a 29 percent OE sales increase in China and a 35 percent increase in India. In the U.S. sales were up 10 percent and in Europe up 20 percent, driven by strong powertrain sales and favorable currency versus the same period of 2010. The global aftermarket business segment reported 1 percent higher sales, which includes three points of positive currency exchange impact, versus the same period of 2010. Aftermarket sales in the third quarter included strong revenue increases in BRIC markets with China up 14 percent and India up 18 percent.
Federal-Mogul had a gross margin of $263 million or 15.2 percent, an increase of 11 percent versus $238 million recorded in the third quarter 2010. The company says it continues to operate efficiently and at higher utilization rates by delivering on higher sales demand in the original equipment markets. In addition, the company continues to gain incremental revenue for additional technological content and has been effective at recovering, through pricing, the changes associated with fluctuations in raw material costs.
The company's selling, general and administrative costs were $172 million or 9.9 percent of sales in the third quarter 2011, down from 10.6 percent of sales in the third quarter 2010. The company continues to place a strong emphasis on operating performance in order to effectively allocate resources to advanced technology development and fast-growth-market expansion. SG&A expenses have improved by more than 5 percentage points since 2005 as a result of the company's actions to improve global efficiency.
Federal-Mogul reported operational EBITDA of $166 million, or 9.6 percent of sales in the third quarter of 2011, another strong quarter of profitable performance. The EBITDA result in the third quarter reflects the company's solid operating profitability, which enabled further investments in market share growth, expanded aftermarket distribution and sales capability in growth markets and intensified R&D on leading innovations to improve fuel economy, reduce emissions and enhance vehicle safety.
Federal-Mogul continues to implement initiatives to strengthen EBITDA, including reducing raw material costs through competitive supply agreements, sourcing a higher proportion of mid-range aftermarket products, increasing existing site manufacturing capacity and investing in additional best cost locations.
Federal-Mogul had net income of $34 million or 34 cents earnings per diluted share in the third quarter of 2011, which compares favorably to an adjusted net income of $29 million in the third quarter of 2010, when excluding $24 million of non-cash income from OPEB curtailment gains.
The company continues to invest in new program launches and other business development actions to support OE sales growth and new mid-range and private label product lines for the global aftermarket. In support of current and future OE, OES and aftermarket programs, the company invested $105 million in capital expenditures in the quarter. These combined actions resulted in a cash outflow of $(71) million in Q3 2011. Federal-Mogul maintained its $1.5 billion liquidity including a $0.5 billion undrawn revolver and $1.0 billion in cash at the end of Q3 2011.
"Federal-Mogul delivered again on its commitment to develop sustainable global profitable growth through leading technology, innovation and strong financial performance. Our record Q3 sales, strong EBITDA and net income results show our ability to efficiently utilize existing global capacity to satisfy increasing demand. We simultaneously invested in the development of the business to increase market share and position the company to capitalize on growth in developing markets," said Alapont.
