Federal-Mogul Reports Second Quarter Financials

Federal-Mogul Corp. (USA; operating under Chapter 11 bankruptcy protection since October 2001) earlier released second quarter financial results. Sales for the quarter were USD $1.63 billion, down from $1.67 billion in 2005. While COGS remained relatively steady at 82%, the cost of debt service rose to $44 million from 2005's $34 million. In the end, Federal-Mogul recorded a net loss for the quarter of $16.8 million, worse than the $11.6 million loss for second quarter 2005. Even though sales declined substantially, Federal-Mogul's receivables exposure is now more than $120 million higher than just six months ago, at the beginning of the fiscal year. Inventory has also grown, by $100 million since January 1. The current portion of its liabilities -- short term debt and accounts payable, for example -- has also ballooned since January 1, by nearly $160 million, to $1.82 billion. Long-term debt is up by $74 million since January 1, to $82 million. By the end of the quarter, Federal-Mogul's accumulated shareholder defecit had broken through the $2.5 billion level to end at $2.501 billion, from $2.4 billion six months earlier. In April, Federal-Mogul announced the closing of its St. Johns, Michigan engine bearing manufacturing facility. The plant will be entirely shuttered by the end of 2006; the St. Johns closure triggered asset writedowns this quarter totaling $3.4 million as F-M adjusted for the realizable value of St. Johns' plant and equipment. Also during 2006, F-M said it has taken impairment charges of $7.1 million related to its Powertrain bearing and pistons businesses to reflect declining sales and projected future cash flows. In a statement, Federal-Mogul blamed softness in the North American aftermarket for the drop in overall sales. For the $20 million decline in six-month sales results, the company largely blamed unfavorable exchange rates. Jose Maria Alapont, who holds all three offices of Chairman, President, and CEO, said: "The company remains committed to its global profitable growth strategy. Our recent acquisition [boosting its ownership of Goetze India Ltd. from 25.47% to 50.11%] and our successful restructuring efforts are important activities supporting this strategy and expanding our capability to provide innovative and quality products at the most competitive cost."