ANN ARBOR, MI — Affinia Group has announced improved gross profit and increased net income for the fourth quarter and fiscal year ended Dec. 31, 2007.
For the fiscal year 2007, net sales were $2,138 million, as compared to $2,160 million for 2006, reflecting soft market conditions for brake products in some retail and traditional channels along with the planned termination of certain low margin OEM and co-manufacturing contracts. The soft market conditions and termination of certain contracts contributed approximately $44 million and $71 million, respectively, to the year over year decline in brake product sales. Offsetting these declines were higher sales of filtration products domestically, in Europe, and in South America.
Gross profit for 2007 increased to $379 million, as compared to $376 million for the same period in 2006. The company said this improvement is primarily a result of the comprehensive restructuring program along with ongoing cost savings programs.
Thomas Madden, Affinia’s senior vice president and chief financial officer, stated, "Despite soft market conditions, and the economic uncertainties facing not only the aftermarket, but the economy in general, we are pleased to report yet another quarter of improved profitability. Our restructuring efforts are reflected in our year over year improvement in gross profit from 17 percent in 2006 to 18 percent in 2007, despite lower sales."
Selling, general and administrative expenses for fiscal year 2007 were $325 million, as compared to $332 million for 2006. The decrease was attributable to lower restructuring, advertising, professional and compensation expenses, offset by an increase in selling expenses related to converting certain customers to Affinia products.
Net income for the year was $6 million, an improvement of $11 million over the same time period in 2006. The improvement was a result of increased gross margin; the reduction in selling, general and administrative expenses; and the monetization of a general unsecured nonpriority claim against Dana Corp., which resulted in a reduction to operating expense of approximately $15 million. These factors were partially offset by higher income tax provision in 2007. Interest expense for 2007 was $59 million, unchanged as compared with 2006.
As of Dec. 31, 2007, Affinia had $59 million of cash a reduction of $11 million from Dec. 31, 2006. Total long-term debt outstanding as of Dec. 31, 2007, was $597 million, unchanged from the year ended Dec. 31, 2006. No amounts were outstanding under the company’s receivables securitization program at Dec. 31, 2007, and the company had no borrowings on its $125 million revolving credit facility.
At Dec. 31, 2007, Affinia continued to be in compliance with all covenants in its senior credit agreement, including financial covenants in relation to a leverage ratio, cash interest expense ratio and a maximum annual capital expenditure.
Terry McCormack, Affinia Group’s president and chief executive officer added, "We have had numerous successes throughout Affinia in 2007, including the launch of greenfield filtration manufacturing operations in Mexico and Ukraine, a growing demand for our products in South America, the formation of a joint venture for brake product manufacturing in India, and a transformation of our distribution business in Europe. Although we experienced a slight reduction in sales in 2007, we are pleased to see continued improvement in our margins as a result of our on-going comprehensive restructuring program along with continued focus on cost reduction efforts across all areas of our business."
For the fourth quarter 2007, net sales were $521 million, as compared to $502 million for the fourth quarter of 2006. The increase in sales was partially due to higher filtration product sales in Poland and Ukraine. The launch of a greenfield filtration manufacturing operation in Mexico in the fourth quarter also contributed to the increase in filtration product sales. Additionally, Brazilian operation sales increased due to increased prices and increased customer demand.
Gross profit for the fourth quarter of 2007 was $87 million, unchanged as compared with the fourth quarter of 2006.
Selling, general and administrative expenses for the fourth quarter of 2007 were $85 million as compared to $87 million for the same period in 2006. The reduction was primarily due to a slight decrease in restructuring expense and compensation costs in the fourth quarter of 2007 in comparison to 2006.
Net income for the fourth quarter of 2007 was $1 million, compared to a net loss of $9 million for the fourth quarter of 2006. The increase in income was mainly attributable to the monetization of a general unsecured nonpriority claim against Dana Corp., which resulted in a reduction to operating expenses of approximately $15 million.
For more information about Affinia, visit: www.affiniagroup.com.
