Federal-Mogul Reports Full Year 2007 Results - Engine Builder Magazine
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Federal-Mogul Reports Full Year 2007 Results

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Federal-Mogul has reported its financial results for the twelve-month period ended Dec. 31, 2007. The company recently emerged from reorganization under Chapter 11 of the United States Bankruptcy Code and adopted fresh-start reporting in connection with its emergence.

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Federal-Mogul reported net sales of $6,914 million for the year ended Dec. 31, 2007. Net sales increased by $588 million when compared to the same period of 2006, of which $310 million is due to increased global demand and new program launches with both OEM and aftermarket customers, with the balance due mainly to favorable foreign currency movements. Gross margin for the 12 month period increased by $80 million, compared to the same period of 2006.

The combination of productivity, increased volumes and favorable exchange improved gross margins by $135 million. These favorable impacts were partially offset by $75 million of raw material commodity price inflation and $56 million in reduced customer pricing. Gross margin was further improved through reduced pension expense of $76 million associated with the settlement of the U.K. pension plans.

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Included in Federal-Mogul’s earnings before income taxes for the year are a gain on the settlement of liabilities subject to compromise (LSC) and fresh-start reporting adjustments of $761 million and $956 million, respectively, associated with the company’s emergence from Chapter 11. Included in Federal-Mogul’s loss before income taxes for the year ended Dec. 31, 2006, is a charge of $501 million as a result of the company’s U.K. subsidiaries’ emergence from Administration in November 2006.

Excluding these impacts, the company’s earnings before income taxes for the year was $27 million, compared to a loss before income taxes of $113 million for 2006, an improvement of $140 million. In addition to those same factors affecting gross margin, results for the full year were impacted by reduced SG&A expenses, reduced costs associated with the company’s Chapter 11 proceedings and increased charges related to asset impairments.

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The company reported Operational EBITDA of $763 million for the 12 month period, an increase of $138 million when compared to the same period of 2006. Capital expenditures were $310 million for the year, an increase of $72 million from 2006. Total cash flow, excluding cash flows associated with financing activities, payment to the U.S. Asbestos Trust, payment of pre-petition interest, payments to settle LSC and the settlement of the U.K. Administration proceedings, was $88 million and $83 million for the years ended Dec. 31, 2007, and 2006, respectively.

“We are very pleased with the progress achieved in 2007, especially in regard to our emergence from Chapter 11, a significant milestone in Federal-Mogul’s 108-year history of serving the global automotive industry. We again would like to acknowledge our customers, shareholders, suppliers and employees worldwide for their loyalty and support,” said Federal-Mogul President and Chief Executive Officer Jose Maria Alapont. “The new business awards and our progress on operational performance in 2007 reflect the achievement of the entire team in executing our global sustainable profitable growth strategy and developing Federal-Mogul as a world-class, diversified global supplier.”

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For more information about Federal-Mogul, visit: http://www.federal-mogul.com/.

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