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March 24, 2008 |
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FEDERAL-MOGUL CORP: Earns US$1.4 Billion in Fiscal Year 2007 Federal-Mogul Corp. reported its financial results for the 12- month period ended Dec. 31, 2007. Financial Summary (in millions) 12 Months Ended Dec. 31 ----------------------- 2007 2006 ---- ---- Net sales 6,914 6,326 Gross margin 1,185 1,105 Selling, general & administrative expenses (828) (848) Settlement of U.K. pension plans - (501) Gain on settlement of liabilities subject to compromise 761 - Fresh-start reporting adjustments 956 - Income (loss) before income taxes 1,744 (614) Income tax benefit/(expense) (332) 64 Net income (loss) 1,412 (550) Operational EBITDA 763 625 The company emerged from reorganization under Chapter 11 of the U.S. Bankruptcy Code on Dec. 27, 2007, and adopted fresh-start reporting in connection with its emergence. Net income for the 12-month period totaled US$1,412,000,000, compared with a net loss of US$550,000,000 for the same period of 2006. Federal-Mogul reported net sales of US$6,914,000,000 for the year ended Dec. 31, 2007. Net sales increased by US$588,000,000 when compared to the same period of 2006, of which US$310,000,000 is due to increased global demand and new program launches with both original equipment manufacturer and aftermarket customers, with the balance due mainly to favorable foreign currency movements. Gross margin for the 12-month period ended Dec. 31, 2007, increased by US$80,000,000, compared to the same period of 2006. The combination of productivity, increased volumes and favorable exchange improved gross margins by US$135,000,000. These favorable impacts were partially offset by US$75,000,000 of raw material commodity price inflation and US$56,000,000 in reduced customer pricing. Gross margin was further improved through reduced pension expense of US$76,000,000 associated with the settlement of the U.K. pension plans. Selling, general and administrative expenses for the year ended Dec. 31, 2007 decreased by US$20,000,000. The company's reduced pension expense of US$24,000,000 associated with the settlement of the U.K. pension plans combined with US$26,000,000 of productivity and other improvements more than offset adverse foreign exchange of approximately US$30,000,000. Income before taxes for the 12-month period totaled US$1,744,000,000, compared with a loss before taxes of US$614,000,000 for the same period of 2006. Included in Federal-Mogul's earnings before income taxes for the year ended Dec. 31, 2007, are a gain on the settlement of liabilities subject to compromise and fresh-start reporting adjustments of US$761,000,000 and US$956,000,000, 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 US$501,000,000 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 ended Dec. 31, 2007, was US$27,000,000, compared to a loss before income taxes of US$113,000,000 for 2006, an improvement of US$140,000,000. 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. Management believes that Operational EBITDA most closely approximates the cash flow associated with the operational earnings of the company and uses Operational EBITDA to measure the performance of its operations. Operational EBITDA is defined to include discontinued operations and exclude impairment charges, Chapter 11 and U.K. Administration expenses, settlement of the U.K. pension plans, gain on the settlement of liabilities subject to compromise, fresh-start reporting adjustments, restructuring costs, income tax expense, interest expense, depreciation and amortization. The company reported Operational EBITDA of US$763,000,000 for the 12-month period ended Dec. 31, 2007, an increase of US$138,000,000 when compared to the same period of 2006. A reconciliation of Operational EBITDA to the company's income before income taxes for the 12 months ended Dec. 31, 2007 has been provided. Capital expenditures were US$310,000,000 for the year ended Dec. 31, 2007, an increase of US$72,000,000 from 2006. Total cash flow, excluding cash flows associated with financing activities, payment to the U.S. Asbestos Trust, payment of prepetition interest, payments to settle LSC, and the settlement of the U.K. Administration proceedings, was US$88,000,000 and US$83,000,000 for the years ended Dec. 31, 2007, and 2006, respectively. "We are very pleased with the progress achieved in 2007, especially in regards 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." At Dec. 31, 2007, the successor company's balance sheet showed total assets of US$7.8 billion and total liabilities of US$5.7 billion, resulting in a US$2.1 billion stockholders' equity. Deficit, in 2006, was US$1.7 billion. About Federal-Mogul Federal-Mogul Corporation -- http://www.federal-mogul.com/ -- (OTCBB: FDMLQ) is a global supplier, serving the world's foremost original equipment manufacturers of automotive, light commercial, heavy-duty, agricultural, marine, rail, off-road and industrial vehicles, as well as the worldwide aftermarket. Founded in Detroit in 1899, the company is headquartered in Southfield, Michigan, and employs 45,000 people in 35 countries. Aside from the U.S., Federal-Mogul also has operations in other locations which includes, among others, Mexico, Malaysia, Australia, China, India, Japan, Korea, and Thailand. The Company filed for chapter 11 protection on Oct. 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan Esq., James F. Conlan Esq., and Kevin T. Lantry Esq., at Sidley Austin Brown & Wood, and Laura Davis Jones Esq., at Pachulski, Stang, Ziehl & Jones, P.C., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed US$10.15 billion in assets and US$8.86 billion in liabilities. Federal-Mogul Corp.'s U.K. affiliate, Turner & Newall, is based at Dudley Hill, Bradford. Peter D. Wolfson, Esq., at Sonnenschein Nath & Rosenthal; and Charlene D. Davis, Esq., Ashley B. Stitzer, Esq., and Eric M. Sutty, Esq., at The Bayard Firm, represent the Official Committee of Unsecured Creditors. On March 7, 2003, the Debtors filed their Joint Chapter 11 Plan. They submitted a Disclosure Statement explaining that plan on April 21, 2003. They submitted several amendments and on June 6, 2004, the Bankruptcy Court approved the Third Amended Disclosure Statement for their Third Amended Plan. On July 28, 2004, the District Court approved the Disclosure Statement. The estimation hearing began on June 14, 2005. The Debtors submitted a Fourth Amended Plan and Disclosure Statement on Nov. 21, 2006, and the Bankruptcy Court approved that Disclosure Statement on Feb. 6, 2007. The Fourth Amended Plan was confirmed by the Bankruptcy Court on Nov. 8, 2007, and affirmed by the District Court on Nov. 14. Federal-Mogul emerged from Chapter 11 on Dec. 27, 2007. * * * As reported in the Troubled Company Reporter-Latin America on Jan. 10, 2008, Moody's Investors Service confirmed the ratings of the reorganized Federal-Mogul Corporation -- Corporate Family Rating, Ba3; Probability of Default Rating, Ba3; and senior secured bank credit facilities, Ba2. The outlook is stable. The financing for the company's emergence from Chapter 11 bankruptcy protection has been funded in line with the structure originally rated by Moody's in a press release dated Nov. 28, 2007. As reported in the Troubled Company Reporter on Jan. 7, 2008, Standard & Poor's Ratings Services assigned its 'BB-' corporate credit rating to Southfield, Michigan-based Federal-Mogul Corp. following the company's emergence from Chapter 11 on Dec. 27, 2007. S&P said the outlook is stable. Tuesday's edition of the TCR-AP delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR-AP editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Tuesday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR-AP constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR-AP editor holds some position in the issuers' public debt and equity securities about which we report. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR-AP. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com Friday's edition of the TCR-AP features a list of companies with insolvent balance sheets obtained by our editors based on the latest balance sheets publicly available a day prior to publication. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. |
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