9th March 2009 - Affinia Group Announces Higher Sales and Gross Profit for Fiscal Year 2008

Affinia Group Inc., a global leader in the on- and off-highway replacement products and service industry, has reported its financial results for the fourth quarter and full year ended December 31, 2008.

2008 Year End

For the fiscal year 2008, net sales were $2.178 billion, as compared to $2.138 billion for 2007.  The $40 million increase in net sales was primarily a result of currency translation gains of $54 million, largely attributable to a stronger Brazilian Real and Polish Zloty.

Commercial Distribution South America products, comprised primarily of Brazilian operations, experienced a $67 million increase in net sales, of which $29 million was due to currency translation.  Brake North America and Asia, Filtration and Chassis products combined net sales were $12 million lower in 2008 compared with 2007.  2008 net sales in the Commercial Distribution European and Brake South America segments were $18 million and $4 million lower respectively, compared with the same period in 2007.  Eliminations and other resulted in a net sales increase of $7 million for the full year 2008 as compared with 2007.

Gross profit for 2008 increased to $401 million, as compared to $379 million for the same period in 2007.  Gross profit margin remained constant year over year at 18 percent. Although benefits continued to be realized as a result of the company’s on-going comprehensive restructuring program, these savings were offset by higher freight and commodity costs.

Thomas Madden, Affinia’s Senior Vice President and Chief Financial Officer, stated, “Despite soft market conditions and the economic headwinds facing not only the aftermarket, but the economy in general,  we are pleased to report an improvement in net sales and margin stability.  Our year over year results continue to reflect the benefits we are realizing as a result of the comprehensive restructuring program and our relentless focus on all aspects of our cost structure.”

Selling, general and administrative expenses for fiscal year 2008 remained unchanged year over year at $325 million.  As a percentage of sales, selling, general and administrative expenses decreased to 14.9 percent from 15.2 percent in 2007.  Reductions in advertising and selling expenses were offset in part by an increase in restructuring expenses resulting from the company’s ongoing comprehensive restructuring program.

Net loss for the year ended December 31, 2008 was $3 million, a decrease of $9 million over the same time period in 2007.  The lower net income was a result of a one time monetization of a general unsecured nonpriority claim against Dana Corporation, which resulted in a reduction to operating expense of approximately $15 million in 2007, along with an $11 million increase in tax provision and an $8 million reduction in other income due to translation losses.  These factors were largely offset by a $22 million improvement in gross profit.

Total debt outstanding as of December 31, 2008 was $622 million, compared with $597 million at year ended December 31, 2007.  The increase in debt outstanding was entirely a result of the acquisition of Longkou Haimeng Machinery Co., Ltd. which had $25 million of total debt outstanding at December 31, 2008.  No amounts were outstanding under the Company’s receivables securitization program at December 31, 2008 and the Company had no borrowings outstanding on its $125 million revolving credit facility.  As of December 31, 2008 Affinia had $77 million of cash and the company 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 stated, “Although the economic climate and credit markets are currently filled with uncertainty, we have continued to transform our company into a world class global manufacturer and distributor. Our successes in 2008 include the acquisition of Haimeng, one of the world’s largest manufacturers of brake drums and rotors.  Additionally, the launch of our joint venture in India will continue to keep us competitive in brake friction products.  We believe that these actions, along with the numerous restructuring initiatives we have taken since we launched our transformation in December 2005, have enabled us to remain competitive through this difficult economic environment.  We continue to closely monitor the potential impact of macro economic factors on our company and, in direct response to the deepening global recession, we made operational changes in the fourth quarter including implementing layoffs and wage freezes, along with postponing, for all US employees, 401K basic and matching contributions.  These are unprecedented times across all sectors of the economy; however, our aftermarket industry and our company are well positioned to weather this economic storm.”

Fourth Quarter

For the fourth quarter 2008, net sales were $465 million, as compared to $521 million for the fourth quarter of 2007.  As a result of the recessionary global economic climate and the strengthening of the US Dollar in the fourth quarter, sales decreased throughout the company.

Gross profit for the fourth quarter of 2008 was $88 million or 18.9 percent of sales compared to $87 million, or 16.7 percent of sales, for the fourth quarter of 2007.  The improvement in the gross profit margin was attributable to the ongoing cost benefits realized from the company’s comprehensive restructuring program.

Selling, general and administrative expenses for the fourth quarter of 2008 were $64 million, or 13.8 percent of sales, as compared to $85 million, or 16.3 percent of sales, for the same period in 2007.  The reduction was primarily a result of reduced payroll, advertising and other selling and administrative costs, necessitated by the reduced revenue in the period.

Net income for the fourth quarter of 2008 was $2 million, compared to net income of $1 million for the fourth quarter of 2007.  The $1 million increase in net income was mainly attributable to a $6 million reduction in other income, due to translation losses, and a one- time monetization of a general unsecured non-priority claim against Dana Corporation, which resulted in a reduction to operating expense of approximately $15 million in the fourth quarter of 2007.  These factors were mostly offset by a $21 million reduction in selling, general and administrative expenses as compared with the same period in 2007.

Affinia Group Inc. is a global leader in the on- and off-highway replacement products and service industries. In North America the Affinia family of brands includes WIX® filters, Raybestos®, AIMCO® and BrakePro® brake products, and McQuay-Norris® and Raybestos™ Chassis parts. South American and European brands include Nakata®, Filtron®, Urba® and Quinton Hazell®.

Source: Affinia Group Press Release