It was good news and bad news for Federal-Mogul’s 2004 results, with yearly sales up 12%, but a yearly loss that widened over 2003 due to other factors.
First the good news. Federal-Mogul reported net sales of $1,548 million and $6,174 million for the three and twelve month periods ended December 31, 2004, representing an increase of 10% and 12%, respectively, over comparable periods of 2003. New business, increased OE and Aftermarket volumes, as well as favorable foreign currency drove these increases.
All figures in U.S. dollars.
Gross margin increased by $7 million, or 3%, and $90 million, or 8%, during the three and twelve-month periods ended December 31, 2004, respectively, as compared to the same periods in 2003. Gross margin as a percentage of sales decreased due to the adverse impact of raw material cost inflation, particularly ferrous metals and hydrocarbon-based materials.
However, the company reported a loss from continuing operations before income taxes of $209 million and $189 million for the three and twelve-month periods ended December 31, 2004.
Losses in both of these periods were driven by asset impairment charges totaling $240 million and $276 million, respectively.
During December 2004, the company recorded a $194 million impairment charge against goodwill relating to the company’s global Sealing Systems business pursuant to the company’s annual valuation of goodwill.
Additionally, the company recorded tangible asset impairments of $46 million, which are primarily related to the company’s European Powertrain operations. The goodwill and other asset impairments were recorded to adjust the related asset carrying values to their estimated fair values based on current projections of future asset recoverability.
"We are pleased with our new business growth and increased sales volumes in both the OE and Aftermarket segments," said chairman of the board and interim chief executive officer Steve Miller. "Despite the success we have had in meeting our operational challenges, we continue to suffer from our industry’s inability to adequately price for the extraordinary material cost increases incurred in 2004."
Have your say: