SOUTHFIELD, MI -- Federal-Mogul Corp. has reported its financial results for the three months ended March 31.
Federal-Mogul reported net income of $5 million for the quarter ended March 31, compared to a net loss of $68 million for the first quarter of 2006. This result reflects a 7 percent increase in sales, improved gross margin, reduced selling, general and administrative expenses and reduced impairment and restructuring charges.
Federal-Mogul reported net sales of $1,717 million for the quarter, an increase of $117 million, or 7 percent, compared to the first quarter of 2006. The most significant factors impacting sales were increased volumes of $39 million, the May 2006 acquisition of Federal-Mogul Goetze India (FMG) which increased sales by $32 million and favorable foreign currency of $60 million.
Gross margin for the quarter increased by $23 million over the first quarter of 2006. Improvements in gross margin resulted from a combination of the October 2006 settlement of the U.K. pension plans, increased volumes, favorable foreign currency and productivity in excess of labor and benefits inflation. These favorable impacts were partially offset by customer pricing and increased raw materials costs.
Selling, general and administrative (SG&A) expense for the quarter improved by $21 million over the first quarter of 2006. Reductions in SG&A resulted from a combination of the settlement of the U.K. pension plans and cost reduction actions in excess of labor and benefits inflation. These favorable impacts were partially offset by increased SG&A from the acquisition of FMG and adverse foreign currency.
Federal-Mogul reported net earnings before income taxes for the three months ended March 31 of $36 million, compared to a net loss before income taxes of $39 million for the same period of 2006. The impact of improved gross margin and reduced selling, general and administrative expenses contributed a combined $44 million to the improved results, with reduced restructuring and impairment charges contributing an additional $30 million to net earnings.
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, restructuring costs, income tax expense, interest expense, depreciation and amortization.
The company reported Operational EBITDA of $199 million, an improvement of $53 million compared to 2006, largely due to the improvements reported within gross margin and reduced SG&A expenses. A reconciliation of Operational EBITDA to the company's earnings before income taxes for the three months ended March 31 has been provided.
Combining cash provided from operating activities with cash used by investing activities, the company generated positive cash inflows of $12 million for the quarter compared to $31 million for the comparable period of 2006, reflecting the impact of increased capital expenditures of $24 million.
"We are focused on the implementation of our strategy to achieve sustainable global profitable growth, providing our valued customers worldwide leading products, services and technologies at competitive cost," said Chairman, President and Chief Executive Officer Jose Maria Alapont. "Our improved operational performance during the first quarter is the result of our drive toward those strategic goals and the dedication of our employees."
For more information about Federal-Mogul, go to: http://www.federal-mogul.com.
