SOUTHFIELD , MI -- Federal-Mogul today reported its financial results for the three and nine month periods, which ended Sept. 30.

Federal-Mogul reported net sales of $1,549 million for the quarter. Compared with the quarter ended Sept. 30, 2005 , sales increased $49 million. Lower sales volumes were more than offset by the impact of the second quarter acquisition of Federal-Mogul Goetze India Limited and favorable foreign currency of $30 million and $29 million, respectively. For the nine month period, net sales decreased by $18 million to $4,781 million due to unfavorable foreign currency. The impact on sales of the second quarter acquisition was more than offset by reduced net sales volumes, according to the company.

Gross margin for the three and nine month periods, when compared to the same periods of 2005, increased by $28 million and $51 million, respectively. Gross margin as a percent of sales improved to 17.8 percent for the nine month period compared to 16.7 percent for the comparable period of 2005. Productivity improvements, net of labor and benefits inflation, more than offset the impact of reduced sales volumes.

Selling, general and administrative (SG&A) expenses for the three and nine month periods, when compared to the same periods of 2005, improved by $3 million and $33 million, respectively.

Federal-Mogul reported a loss before income taxes of $24 million for the three month period, compared to a loss of $48 million for the same period of 2005. For the nine month period ended, the company reported a loss before income taxes of $51 million compared to a loss of $56 million for the same period of 2005. For the nine month period, the $84 million of improvements in gross margin and selling, general and administrative expenses were mostly offset by $79 million for higher average interest rates, restructuring charges and adjustments of assets to fair value.

During September 2006, the company recognized an income tax benefit of $32 million associated with a change to certain foreign income tax regulations. This change clarifies the deductibility for local income tax purposes of certain interest expenses previously considered non-deductible tax items and resulted in a net tax benefit of $27 million for the quarter. This tax benefit reduced total income tax expense to $32 million for the nine months.

The company reported net income of $3 million for the three months ended Sept. 30, compared with a net loss of $70 million for the comparable period of the prior year. For the nine months ended Sept. 30, the company reported a net loss of $83 million, compared to a net loss of $130 million for the comparable period of 2005. The improvement in bottom-line results when compared to 2005 reflects the company's improved gross margins, reduced SG&A expenses and reduced income tax expense related to the significant income tax benefit recorded in the third quarter.

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 $134 million and $455 million for the three and nine month periods, respectively. When compared to the same period of 2005, Operational EBITDA increased by $19 million and $54 million, respectively. A reconciliation of Operational EBITDA to the company's loss before income taxes for the three and nine has been included.

Combining cash provided from operating activities with cash expenditures for property, plants and equipment, the company generated positive cash inflows of $46 million for the nine months ended Sept. 30, compared with $33 million for the comparable period of 2005. For the nine months ended Sept. 30, 2006 and 2005, the company paid $67 million and $86 million, respectively, for Chapter 11 and U.K. Administration costs.

"We are pleased with the progress of our operating restructuring efforts and the strength of our global lean manufacturing," said Chairman, President and Chief Executive Officer Jose Maria Alapont. "The company has completed significant milestones toward emergence from bankruptcy, including resolution of the Company Voluntary Arrangements for emergence of the United Kingdom administrated companies with activities in Europe , the Americas and Asia Pacific. We remain focused on the implementation of our global profitable growth strategy and providing quality excellence in our products, services and technologies at a competitive cost to satisfy customers, employees and stakeholders."

For more information about Federal-Mogul, go to: http://www.federalmogul.com.