ANN ARBOR, Mich. — Affinia Group has reported its financial results for the fourth quarter and full year ended Dec. 31, 2011.
As announced last week, the company is evaluating strategic options for its brake related businesses, including the sale of all or a portion of these businesses. As a result, the Brake North America and Asia group is now reflected as a discontinued operation for financial reporting purposes.
Consolidated net sales for the full year 2011 were $1.478 billion, as compared to $1.359 billion for 2010, resulting in a 9 percent improvement. The $119 million growth in net sales was primarily a result of new business wins with new and existing customers, along with increased sales at the company’s South American and European locations. Currency translation had a $31 million favorable impact on sales as compared with full year 2010.
Filtration products net sales were $801 million in 2011, a $42 million increase compared to 2010. The 6 percent increase in sales was attributable to $35 million of additional sales in the Polish, Russian and Venezuelan operations and an $8 million increase due to currency translation, primarily resulting from a stronger Polish Zloty in 2011.
Commercial Distribution South America products experienced an increase in net sales of 7 percent. Net sales were $459 million in 2011 compared to $430 million in 2010. The growth in net sales was a result of higher sales in the company’s Brazilian distribution company, Pellegrino. Favorable currency translation effects contributed $21 million of the $29 million increase in year-over-year sales.
Chassis product net sales were $213 million in 2011, a $44 million increase compared to 2010. The increase in sales was largely driven by new business gains in premium chassis products. The increased premium chassis sales accounted for $34 million of the year-over-year increase. The company said it also experienced additional sales growth due to its ownership of North American Parts Distributors (NAPD), which was acquired in the fourth quarter of 2010.
Gross profit for 2011 increased by $26 million, or 8 percent, as compared to 2010, while gross margin remained at 23 percent. The improvement in gross profit was mainly attributable to, and consistent with, the increase in net sales. Affinia said it experienced increases in freight and operating costs early in 2011 and responded with increased pricing and productivity improvements.
Selling, general and administrative expenses for fiscal year 2011 were $200 million compared with $193 million in 2010. As a percent of sales, selling, general and administrative expense remained unchanged at 14 percent. The $7 million year-over-year increase was a result of higher advertising, legal and professional costs, along with higher amounts spent on information technology. These costs were partially offset by lower restructuring expense.
Operating profit in 2011 was $142 million, an improvement of $19 million, or 15 percent, over 2010. The improvement in operating profit was attributable to $7 million of lower restructuring costs, primarily in South America, and $12 million of lower corporate related costs.
Net income from continuing operations, net of tax, was $41 million in 2011 compared with $29 million in 2010. The $12 million improvement was largely due to the $19 million increase in operating profit, offset by $8 million of higher income tax provision.
The company reported a $113 million loss from discontinued operations, net of tax, in 2011 compared to a $1 million profit in 2010. The loss from discontinued operations, net of tax, was largely a result of a $165 million impairment charge taken to reduce the carrying value of this business to expected realizable value. Operating losses of the discontinued operations accounted for an additional $5 million of loss. Offsetting these losses was a $57 million tax benefit from the impairment charge.
Primarily as a result of the loss from discontinued operations, Affinia posted a net loss attributable to the company of $73 million in 2011, versus net income of $24 million in 2010.
Total debt outstanding as of Dec. 31, 2011, was $718 million compared with $696 million at year-end Dec. 31, 2010. On Dec. 31, 2011 the company had $54 million of cash and cash equivalents compared to $55 million at year-end 2010. No financial maintenance covenants exist under the company’s capital structure and the company remained in compliance with all debt covenants at Dec. 31, 2011. The year-over-year change in indebtedness is outlined in the table below.
Terry McCormack, the company’s president and CEO, said, “Despite headwinds such as escalated commodity and freight costs early in the year, and lower U.S. miles driven in 2011, we are pleased with the fact that we were able to offset these factors and grow both top line revenues and earnings in our continued operations. Our transformation into a low-cost manufacturer and distributor, along with our ability to react to cost increases, allows us to mitigate the bottom line impact to our business. Given the continuing fragile nature of the global economy, we continue to focus on our cost structure and are taking certain strategic actions to ensure the company remains competitive on a global scale, so that we can continue to serve our customers by providing world-class quality products and services at competitive prices in all of the markets we serve.”
Net sales for the fourth quarter of 2011 were $344 million, a $2 million improvement over 2010.
Gross profit for the fourth quarter 2011 was $78 million, compared with $81 million for the same period in 2010. Gross margin decreased in the fourth quarter of 2011 to 23 percent from 24 percent in the prior year. The decrease in gross margin was mainly due to an increase in the level of rebates provided by the company to its customers and one-time costs associated with gaining new business.
Selling, general and administrative expenses for the fourth quarter of 2011 were $48 million compared with $46 million for the same period in 2010. As a percentage of sales, selling, general and administrative expenses for 2011 remained comparatively unchanged at 14 percent.
Net income for the fourth quarter of 2011 was a loss of $104 million compared with a loss of $1 million in the same period in 2010. The 2011 loss was principally attributable to an impairment charge of $165 million, offset by $57 million of tax benefit, taken to reduce the carrying value of discontinued operations to expected realizable value.
