ANN ARBOR, Mich. – Affinia Group has reported its financial results for the second quarter ended June 30.
 
Net sales for the second quarter were $373 million, a 3.9 percent decrease compared to $388 million of net sales in the second quarter of 2011. Affinia said the $15 million decrease in net sales was the result of unfavorable foreign currency translation of $32 million. Excluding the effect of currency, net sales improved in the second quarter of 2012 by $17 million, or 4.4 percent, compared with the same period in 2011.
 
Filtration product sales increased in the second quarter by $17 million, excluding foreign currency translation, equating to an 8.2 percent increase as compared with the second quarter of 2011. The increase in filtration product sales was largely attributable to $13 million of higher sales in Poland, Venezuela, Russia, Mexico and China with an additional $4 million improvement in the U.S. and Canada. This increase in net sales was offset by $10 million of unfavorable foreign currency translation, primarily due to a weakening in the Polish zloty.
 
Excluding the impact of foreign currency translation, sales in commercial distribution South America products increased by $6 million in the second quarter of 2012, a 5.1 percent improvement over the same period in 2011. The increase in sales was mainly a result of increased sales in Brazilian distribution and shock absorber manufacturing operations. A significantly weaker Brazilian real offset the increase in net sales by $22 million, resulting in a period over period reduction in net sales of $16 million.
 
Chassis product sales decreased by $6 million in the second quarter of 2012 compared to the same period in 2011. Affinia said the decrease in net sales was attributable to a rise in net sales in the second quarter of 2011 due to a significant level of initial orders to fulfill customer requirements associated with a new business win in the company’s premium chassis product line. Net sales in the second quarter of 2012 represent a more stable run rate for the new business.
 
Gross profit for the second quarter was $89 million, remaining comparable to the same period in 2011. Gross margin in the second quarter was 24 percent, increasing from 23 percent in the same period in 2011. The improved gross margin was due to higher volumes, net of foreign currency effects.
 
Selling, general and administrative expenses were $52 million for the second quarter, a decrease of $1 million compared with the same period in 2011. The decrease was mainly due to a decrease in marketing, legal and professional expenses.
 
Affinia posted a net loss attributable to the company of $32 million in the second quarter of 2012 compared to net income attributable to the company of $10 million in the same period in 2011. The $42 million deterioration in net income was almost entirely due to a $62 million impairment charge from discontinued operations to reduce the carrying value of the company’s brake North America and Asia group to expected realizable value, offset by $23 million related to a tax benefit for the impairment.
 
For the first six months of 2012, net sales were $737 million, a decrease of $17 million, or 2.2 percent, as compared to the same period in 2011. The decrease in net sales was due to unfavorable foreign currency translation, which resulted in $43 million of lower net sales period-over-period. Excluding the effects of foreign currency, net sales were $26 million higher, or 3.4 percent, in the first six months of 2012 compared to the first six months of 2011.
 
Filtration product sales increased in the first six months of 2012 by $16 million as compared with the same period in 2011. The increase in filtration product sales was largely attributable to $22 million of higher sales in Poland, Venezuela, Russia, Mexico and China with an additional $8 million improvement in the U.S. and Canada. The increase in net sales was offset by $14 million of unfavorable foreign currency translation effects, primarily in the Polish zloty.
 
Excluding the impact of foreign currency translation, sales in commercial distribution South America products increased by $10 million in the first six months of 2012 compared to the same period in 2011. According to Affinia, the increase in sales was driven by strong operating results in the company’s Brazilian distribution company. The significant weakening in the Brazilian real offset the improvement in sales by $29 million resulting in net sales declining period over period by $19 million.
 
Chassis product sales deceased by $17 million in the first six months of 2012 compared to the same period in 2011. The decrease in net sales was mainly a result of a rise in net sales in the first half of 2011 due to a significant level of initial orders to fulfill customer requirements associated with a new business win in the company’s premium chassis product line. Net sales in the first half of 2012 represent a more stable run rate for the new business.
 
Gross profit for the first six months of 2012 was $166 million, equating to a 23 percent gross margin, compared with $173 million, or a 23 percent gross margin, for the same period in 2011. The decrease in gross profit was attributable to a reduction in gross profit in chassis products, negative currency impacts and higher material costs on certain product lines. The reduction in gross profit in chassis products was primarily attributable to costs incurred in changing over a customer in conjunction with a new business win and a temporary increase in procurement costs related to a change in sourcing for certain products.
 
The company posted a net loss attributable to the company for the first six months of 2012 of $26 million compared to net income attributable to the company of $12 million in the same period in the prior year. The company said the $38 million period-over-period reduction in net income was almost entirely due to a $62 million impairment charge from discontinued operations to reduce the carrying value of the company’s brake North America and Asia group to expected realizable value, offset by $23 million related to a tax benefit for the impairment.
 
Cash from operations for the first six months of 2012 resulted in a source of cash of $79 million compared to a use of cash of $52 million in the same period in 2011. The stronger generation of cash from operations was attributable to lower trade working capital requirements. As a result of stronger operating cash flow during the first six months of 2012, the company redeemed $22.5 million aggregate principal amount of senior secured notes and also reduced the level of borrowing under its ABL revolver by $35 million in the period.
 
Total debt outstanding as of June 30 was $654 million, a $64 million decrease as compared to Dec. 31, 2011. The company had $63 million of cash and cash equivalents at June 30, and remained in compliance with all debt covenants at June 30, 2012.