SOUTHFIELD, Mich. — Federal-Mogul Corp. today announced a 5 percent "constant dollar" fourth quarter sales increase and full-year sales up 11 percent and at record levels, with improved operating margin in the fourth quarter and full-year 2011. The company said stronger results were driven by record full year global original equipment revenue with growth significantly above market rates in all regions, additional progress on the company’s global aftermarket strategy and effective actions to offset costs from higher volumes and raw materials.
Sales in the fourth quarter of 2011 were $1.7 billion, an increase of 5 percent on a constant dollar basis when compared to the fourth quarter of 2010. Sales in 2011 matched record levels at $6.9 billion, up 11 percent, driven by an 18 percent increase in sales to original equipment customers, which exceeded the 5 percent global market growth rate during the same period. Federal-Mogul’s sales growth rate during 2011 exceeded the underlying market growth rate in all major regions.
The company in the fourth quarter of 2011 improved operating margin to 4.8 percent of sales from 4.5 percent in the fourth quarter of 2010 and for the full year increased operating margin by $76 million, or 24 percent, to 5.8 percent of sales, as SG&A expense improved by one full percentage point to 10 percent of sales.
Adjusted net income, excluding non-cash impairment charges, for the full-year was $203 million, or $2.04 per share, demonstrating the company’s strong performance throughout 2011. The company recorded adjusted net income of $51 million in the fourth quarter of 2011, up from $38 million in the fourth quarter of 2010. Federal-Mogul in the fourth quarter had operational EBITDA of $158 million or 9.5 percent of sales. Operational EBITDA for the full year was $702 million or 10.2 percent of sales, up from $671 million in 2010. The company recorded a net loss in the fourth quarter of 2011 of $(239) million and a $(90) million net loss for the full year, reflecting a fourth quarter 2011 impairment charge of $(304) million.
Federal-Mogul’s 2011 annual goodwill analysis indicated a decline in the fair value of selected product lines that have been impacted by factors in the U.S. aftermarket. The company believes, however, that increases in its other reporting units such as Powertrain would largely offset the decline; but United States Generally Accepted Accounting Principles (GAAP) do not permit the recognition of gains in the value of one reporting unit to offset impairment charges in another reporting unit.
Federal-Mogul said it continues to transform its business to include a broader global portfolio of innovative, leading products with higher technology content that improve fuel economy, reduce emissions and enhance vehicle safety. The company believes this transformation, a fundamental part of its sustainable global profitable growth strategy, has and will continue to improve operating performance, thereby increasing the company’s fair value and overall shareholder value.
Federal-Mogul in the fourth quarter had positive cash flow of $43 million while continuing to invest in capital equipment and technology development in support of profitable market share gains and global business growth. The company during 2011 invested $348 million in capital projects to launch new leading technology products, increase capacity, improve operational efficiency and establish greenfield sites in fast-growing BRIC and other best cost markets, with significant projects in China and India. Capital investments in 2011 were nearly $100 million more than in 2010 and double the 2009 level.
"Federal-Mogul’s strategy for sustainable global profitable growth is based on leading technology and innovation, competitive cost and best-in-class quality products and services," said Jose Maria Alapont, Federal-Mogul president and CEO. "Federal-Mogul achieved an 18 percent global OE revenue growth rate in 2011, exceeding the global market growth rate of 5 percent, with stable global aftermarket sales, including strong growth in Europe, up 6 percent, China, up 18 percent and India, up 12 percent," he said. "The company’s OE sales growth outpaced the underlying rate in all markets. Federal-Mogul in 2011 achieved record OE sales while simultaneously managing more than 100 new customer program launches with new Federal-Mogul technologies.
"Customers continue to recognize our leading technology and innovation by involving Federal-Mogul early in new powertrain and vehicle development programs, leading to substantial conquest OE business awards that also become global aftermarket business opportunities," Alapont said. "We believe the significant capital investment in our operations to support new global customer programs is a strong base for our future growth."
Federal-Mogul’s global original equipment sales in 2011 were $4.6 billion, a company record. Global OE sales were up 18 percent versus a market rate of 5 percent. The company’s rate of growth was higher than the market rates, with the U.S. up 14 percent, Europe up 18 percent, BRIC up 26 percent, including sales in China up 25 percent, India up 26 percent, Russia up 93 percent and Brazil up 8 percent. The company further diversified its global sales base in 2011 with total revenue coming from markets outside the U.S., Canada and Europe now representing 19 percent of total revenue.
The company in 2011 continued to grow its aftermarket sales with Europe up 6 percent, BRIC up 10 percent including an 18 percent increase in China and a 12 percent increase in India, while revenue in North America was stable and gained market momentum throughout the year. Federal-Mogul in 2011 began a restructuring plan to streamline its North American distribution footprint by leveraging improved supply chain management, resulting in the closure of two local distribution centers.
In addition, in early 2012 the company realigned its North American sales force, shifting to a new customer strategy that emphasizes additional web-based management tools, combined with enhanced consumer, market and merchandising program support.
"Federal-Mogul’s global operating margin improvement from 5.2 percent to 5.8 percent of sales in 2011 shows the effectiveness of Federal-Mogul’s initiatives to efficiently capitalize on market growth. The global vehicle market is forecast to grow from 78 million units in 2011 to 108 million units by 2016," said Alapont. "Customer and regulatory requirements will drive the global vehicle manufacturers to increase spending on technology to improve fuel economy, reduce emissions and improve vehicle safety, areas where Federal-Mogul is a global market leader," he said.
"The rise of mature market volumes, major growth in emerging markets and Federal-Mogul’s leading technology and innovation in strategic products to address customer and market needs will continue to provide Federal-Mogul with very favorable opportunities to generate sustainable global profitable growth," said Alapont.
