ANN ARBOR, Mich. — Affinia Group has reported its financial results for the second quarter ended June 30.
Net sales for the second quarter were $562 million, a 6.4 percent increase over the $528 million of net sales in the same period in 2010. The $34 million increase in net sales was primarily attributable to improved sales of chassis products, along with $22 million of favorable currency translation effects, predominately in South America and in Poland.
Gross profit for the second quarter was $108 million, equating to a gross margin of 19.2 percent, as compared to $109 million, or a gross margin of 20.6 percent, for the same period in 2010. The reduction in gross margin was due in part to higher freight costs and costs associated with the purchase of brake caliper cores in order to fulfill a significant amount of new brake caliper orders.
Selling, general and administrative expenses were $78 million for the quarter, a decrease of $1 million compared with the same period in 2010. The decrease was mainly due to a $2 million decrease in restructuring expense offset by increased advertising expense.
Affinia’s net income attributable to the company in the second quarter of 2011 was $10 million, a $2 million improvement over the second quarter of 2010.
"Although we are pleased with the revenue growth we experienced in the second quarter, our results continued to be adversely impacted by higher material and freight costs. We have announced price increases which, along with continued productivity improvements, mitigate the margin deterioration associated with these cost increases. However, our experience has been that it takes several months before the benefits of pricing and productivity gains are realized, versus the immediate impact of increased input costs," said Tom Madden, Affinia’s senior vice president and CFO.
Net sales were $1.067 billion for the first six months of 2011, an increase of $96 million, or 9.9 percent, compared to the same period in 2010. The increase in sales was driven by increased sales to new and existing customers along with $35 million of favorable currency translation gains.
Of the $61 million of improved sales in the first six months of 2011 not attributable to currency gains, chassis product sales contributed $36 million, primarily due to $29 million of incremental business with an existing customer along with the acquisition of NAPD, a chassis distributor, in the fourth quarter of 2010. Filtration product sales accounted for $8 million of the non currency related increase, mainly as a result of improved sales at the company’s Polish, Russian and Venezuelan operations. Non-currency-related sales increased in Brake North America and Asia products by $12 million, driven largely by higher sales at the company’s Chinese operations.
Commercial Distribution South America products also saw improved sales of which $4 million were not related to currency translation gains.
Gross profit for the first six months of 2011 was $201 million, equating to an 18.8 percent gross margin, compared with $199 million, or 20.5 percent gross margin, for the same period in 2010. The decrease in gross margin was attributable to higher freight costs, costs to acquire brake caliper cores, and higher operating costs in the first six months of 2011 as compared to 2010.
Selling, general and administrative expenses were $149 million for the first six months of 2011, an increase of $3 million compared with the same period in 2010. The increase was primarily a result of higher advertising expenditures.
Affinia’s net income attributable to the company for the first six months of 2011 was $12 million, a $2 million reduction from the same period in the prior year. The year over year reduction was mainly attributable to the reduction in the company’s gross margin. A reduction in other income of $5 million and increased interest expense of $2 million, due to higher debt levels, offset by a lower tax provision of $5 million, were also contributing factors to the year over year reduction.
Total debt outstanding as of June 30, 2011 was $766 million, a $70 million increase as compared to December 31, 2010. The increase in debt is primarily attributable to the seasonal nature of the company’s sales which typically result in higher working capital requirements in the first half of the year. The company had $54 million of cash and cash equivalents at June 30, 2011. Cash from operations for the first six months of 2011 resulted in a use of cash of $52 million compared to a use of cash of $46 million in the same period in 2010. No financial maintenance covenants exist under the company’s capital structure and the company remained in compliance with all debt covenants at June 30, 2011.
