Federal-Mogul Reports Third Quarter 2006 Results

Federal-Mogul Corp. (USA; Pink Sheets: FDMLQ) marked its fifth year operating under Chapter 11 bankruptcy protection by turning in poor third quarter 2006 results, despite a recent investment which allowed it to claim additional sales. Sales hit USD $1.55 billion, from $1.5 billion in 2005. Benefiting from a $29 million swing in income tax ($22 million expense becoming $27 million gain), net income tipped to a small $3 million positive from 2005's $70 million loss. Other non-operating benefits also helped push Federal-Mogul results above 2005's, including $29 million in foreign exchange currency effects. Despite these gains, Federal-Mogul reported a pretax loss in the quarter of $24 million, improved over 2005's pretax loss of $48 million. Third quarter sales and income received a boost from F-M's recent decision to push its Goetze India holdings to 50.2%, just enough to allow Goetze's $30 million sales to show up on F-M's third quarter sales chart. Key operating measures continued to indicate trouble for Federal-Mogul, however. Total current liabilities increased to $1.75 billion from $1.66 billion, paced by accounts payable rising 17% since January 1, from $405 million to $472 million. Accrued short-term liabilities in the same period have risen to $561 million from $536 million. Interest expense in the quarter jumped to $45 million from 2005's $35 million, and has reached $128 million for the first nine months of 2006, from $97 million for the same period in 2005. Despite sales declining from 2005, A/R continued to climb, reaching $1.08 billion at the end of third quarter from $1.01 billion at the beginning of 2006 -- at the current run rate, receivables are 62 days. Inventory has also grown since January 1, now standing at $914 million at the end of third quarter from $808 million a the beginning of 2006. Prepaid pension costs dipped sharply from the beginning of 2006, now at $43 million from $112 million. Long-term debt is now $89.1 million, from $8.1 million at the beginning of 2006. Postemployment benefits payable have risen $140 million, to $2.37 billion from $2.23 billion at the beginning of 2006. Deferred income taxes are up $11 million, to $73 million. In sum, total shareholder negative net worth at the end of third quarter stands at $2.46 billion, worsening from January 1 when it stood at a negative $2.43 billion. President, Chairman and Chief Executive Officer, Jose Maria Alapont, said: "We are pleased with the progress of our operating restructuring efforts and the strength of our global lean manufacturing. The company has completed significant milestones toward the emergence from bankruptcy, including resolution of the Company Voluntary Arrangements for emergence of the United Kingdom administered companies with activities in Europe, the Americas and Asia Pacific."