Company Website:
http://www.modine.com
RACINE, Wis. -- (Business Wire)
Modine Manufacturing Company (NYSE: MOD), a diversified global leader in
thermal management technology and solutions, today reported its
financial results for the second quarter ended September 30, 2014.
Highlights and year-over-year comparisons include:
-
Sales of $377.3 million, up 4 percent;
-
Operating income of $7.9 million, down $2.7 million;
-
GAAP earnings per share of $0.04, down $0.06;
-
Adjusted earnings per share of $0.05, down $0.11.
“Sales continue to show year-over-year increases despite mixed market
conditions,” said Modine President and Chief Executive Officer, Thomas
A. Burke. “However, our earnings during the quarter were negatively
impacted by sales mix and inefficiencies related to plant consolidations
and volume shifts.”
Second Quarter Financial Results
Sales in the second quarter of fiscal 2015 grew $13.1 million, or 4
percent, from the second quarter of fiscal 2014, driven by increases in
our Europe, Asia, and Building HVAC segments. Gross profit decreased
$0.5 million, or 1 percent, and gross margin decreased 70 basis points
to 15.0 percent, largely due to mix of lower margin product and plant
inefficiencies, including overtime, scrap and expedited freight.
Selling, general and administrative (SG&A) expenses increased $1.8
million, due primarily to higher compensation-related expenses,
including the additional SG&A of the Barkell business acquired last
year. The company recorded $1.0 million of restructuring expenses, of
which $0.8 million related to the ongoing restructuring in Europe and
$0.2 million related to the closure of the McHenry manufacturing
facility in North America. Net earnings attributable to Modine of $1.7
million decreased $2.9 million from the prior year, and represents GAAP
earnings per share of $0.04 compared to $0.10 last year. Excluding
restructuring and accelerated depreciation expenses, the company
reported adjusted earnings per share of $0.05 in the second quarter of
fiscal 2015, compared with $0.16 in the second quarter of last year.
Free cash flow in the quarter was $5.7 million. Expenditures for
property, plant and equipment were up $5.6 million to $16.8 million
compared to the prior year. Net debt was $88.5 million at September 30,
2014, an increase of $11.3 million from the end of fiscal 2014. Cash and
cash equivalents at the end of the second quarter were $71.3 million.
Second Quarter Segment Results
North America segment sales decreased 2 percent to $143.8 million
compared with $146.0 million one year ago. The decrease was driven
primarily by lower sales to off-highway customers and lower tooling
sales, partially offset by higher sales to commercial vehicle customers.
Operating income decreased $3.8 million to $7.9 million compared with
the prior year, due to unfavorable sales mix, higher warranty costs,
production inefficiencies and expenses related to the McHenry plant
closure.
Europe segment sales increased 5 percent to $146.4 million compared with
$138.9 million in the prior year. This growth was primarily due to
higher sales to commercial vehicle and automotive customers. Operating
income for the quarter of $4.6 million included $0.8 million of
restructuring charges related to the plant consolidation in Germany.
Operating income improved $1.3 million, compared with the second quarter
of the prior year, primarily due to $2.1 million of
restructuring-related accelerated depreciation expense in the prior year
partially offset by unfavorable sales mix and production inefficiencies.
South America segment sales decreased 14 percent to $27.2 million
compared with $31.8 million one year ago due primarily to lower sales to
commercial vehicle, off-highway and automotive customers as economic
conditions in Brazil continue to be weak. The segment reported $0.3
million of operating income, $2.2 million less than the prior year, due
primarily to lower sales volume.
Asia segment sales increased 17 percent to $19.0 million compared with
$16.2 million one year ago as higher sales in India were partially
offset by lower off-highway export sales from our Korean joint venture.
The segment reported an operating loss of $0.7 million, a $0.4 million
improvement from the prior year. This improvement was primarily the
result of the higher sales volume.
Building HVAC segment sales increased 31 percent to $45.5 million
compared with $34.8 million one year ago. Of this increase, Airedale
sales in the U.K. were up $6.4 million, including $3.8 million related
to the newly acquired Barkell business. North American heating and
school product sales also increased on a year-over-year basis. Operating
income of $3.2 million was up $2.0 million from the prior year on the
higher sales volume.
Outlook
“We expect market conditions in Brazil to remain weak, and are not yet
planning for significant improvement from the present levels in the
off-highway markets in China and North America,” Burke commented.
“However, the commercial vehicle market in North America and the
automotive market in Europe remain strong, and we expect the production
inefficiencies related to both increased volumes and plant
consolidations in these regions to improve through the balance of the
year.”
Based on the current market outlook and expectations, Modine provides
the following guidance for fiscal 2015:
-
Full fiscal year-over-year sales up 3 to 6 percent;
-
Adjusted operating income of $65 million to $73 million, up from $61.3
million in fiscal 2014; and
-
Adjusted earnings per share of $0.63 to $0.73, reflecting the impact
of higher income tax expense subsequent to the U.S. valuation
allowance reversal in the fourth quarter of fiscal 2014.
Conference Call and Webcast
Modine will conduct a conference call and live webcast, with a slide
presentation, on Thursday, October 30, 2014 at 8:00 a.m. Central Time
(9:00 a.m. Eastern Time) to discuss its fiscal 2015 second quarter
financial results. The webcast and accompanying slides will be available
on the Investor Relations section of the Modine website at www.modine.com.
Participants are encouraged to log on to the webcast and conference call
about ten minutes prior to the start of the event. A replay of the audio
and slides will be available on the Investor Relations section of the
Modine website at www.modine.com
after October 30, 2014. A call-in replay will be available through
midnight on November 4, 2014, at 855.859.2056, (international replay
404.537.3406); Conference ID# 17191902. The company will furnish a
transcript of the call to the U.S. Securities and Exchange Commission,
and post it on its website, after November 4, 2014.
About Modine
Modine, with fiscal 2014 revenues of $1.5 billion, specializes in
thermal management systems and components, bringing highly engineered
heating and cooling technology and solutions to diversified global
markets. Modine products are used in light, medium and heavy-duty
vehicles, heating, ventilation and air conditioning equipment,
off-highway and industrial equipment and refrigeration systems. Modine
is a global company headquartered in Racine, Wisconsin (USA), with
operations in North America, South America, Europe, Asia and Africa. For
more information about Modine, visit www.modine.com.
Forward-Looking Statements
This press release contains statements, including information about
future financial performance and market conditions, accompanied by
phrases such as “believes,” “estimates,” “expects,” “plans,”
“anticipates,” “intends,” and other similar “forward-looking”
statements, as defined in the Private Securities Litigation Reform Act
of 1995. Modine's actual results, performance or achievements may differ
materially from those expressed or implied in these statements because
of certain risks and uncertainties, including, but not limited to, those
described under “Risk Factors” in Item 1A of Part I of the company's
Annual Report on Form 10-K for the year ended March 31, 2014 and under
Forward-Looking Statements in Item 7 of Part II of that same report and
in the company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2014. Other risks and uncertainties include, but are not
limited to, the following: uncertainties regarding the costs and
benefits of Modine’s European restructuring program; the overall health
and price-down focus of Modine’s customers, particularly in light of
some remaining market challenges; the ability of the Company to execute
the closure of its McHenry, Illinois facility efficiently and in a
manner consistent with its expectations; operational inefficiencies as a
result of program launches, unexpected volume increases and product
transfers; the effects of the fire at Modine’s Airedale facility,
including inefficiencies associated with Airedale’s operations in
temporary sites and timely recovery of insurance proceeds; economic,
social and political conditions, changes and challenges in the markets
where Modine operates and competes, including currency exchange rate
fluctuations (particularly the value of the euro and Brazilian real
relative to the U.S. dollar), tariffs, inflation, changes in interest
rates, recession, restrictions associated with importing and exporting
and foreign ownership, and in particular the economic and market
conditions in Brazil and China and the remaining economic uncertainties
in certain markets in the European Union and North America; the impact
on Modine of any significant increases in commodity prices, particularly
aluminum and copper, and our ability to pass these prices on to
customers and/or successfully hedge the associated risk; Modine's
ability to successfully execute its strategic and operational plans; the
nature of the vehicular industry and the dependence of this industry on
the health of the economy; costs and other effects of environmental
remediation or litigation; and other risks and uncertainties identified
by the company in public filings with the U.S. Securities and Exchange
Commission. The company does not assume any obligation to update any
forward-looking statements.
Financial Disclosures
Adjusted operating income, adjusted earnings per share, net debt and
free cash flow (which are defined below) as used in this press release
are not measures that are defined in generally accepted accounting
principles (GAAP). These non-GAAP measures are used by management as
performance measures to evaluate the company’s overall financial
performance and liquidity. We believe these measures provide a more
consistent view of performance than the closest GAAP equivalent for
management and investors. Management compensates for this by using these
measures in combination with the GAAP measures. However, these measures
are not, and should not be, viewed as substitutes for the applicable
GAAP measures.
Definition – Adjusted operating income and earnings per share
Operating income or diluted earnings per share plus impairment charges
and restructuring related expenses and certain losses directly
attributable to the fire at our Airedale manufacturing facility. These
are measures of overall performance not including non-cash impairment
charges, costs associated with restructuring, and other unusual or
infrequently occurring charges.
Definition – Net debt
The sum of debt due within one year and long-term debt, less cash and
cash equivalents. This is an indicator of the company's debt position
after considering on-hand cash balances.
Definition – Free cash flow
Net cash provided by operating activities less expenditures for
property, plant and equipment, plus payments for restructuring expenses.
This is a measure of cash generated from operations, excluding payments
for restructuring expenses, during the period that is available for
strategic capital decisions.
- Financial tables follow -
|
Modine Manufacturing Company |
Consolidated statements of operations (unaudited) |
(In millions, except per share amounts)
|
|
|
| |
| |
| |
| |
| |
| | | | |
Three months ended September 30,
| |
Six months ended September 30,
|
| | | | | 2014 |
|
2013
| | 2014 |
|
2013
|
Net sales
| | $ | 377.3 | | |
$
|
364.2
| | | $ | 769.8 | | |
$
|
740.0
| |
Cost of sales
| |
| 320.6 |
| |
|
307.0
|
| |
| 645.4 |
| |
|
620.9
|
|
| Gross profit | | | 56.7 | | | |
57.2
| | | | 124.4 | | | |
119.1
| |
Selling, general & administrative expenses
| | | 47.8 | | | |
46.0
| | | | 90.6 | | | |
88.4
| |
Restructuring expenses
| |
| 1.0 |
| |
|
0.6
|
| |
| 1.8 |
| |
|
1.1
|
|
| Operating income | | | 7.9 | | | |
10.6
| | | | 32.0 | | | |
29.6
| |
Interest expense
| | | (3.0 | ) | | |
(3.2
|
)
| | | (6.1 | ) | | |
(6.2
|
)
|
Other income (expense) - net
| |
| 0.5 |
| |
|
-
|
| |
| 0.3 |
| |
|
(0.5
|
)
|
| Earnings before income taxes | | | 5.4 | | | |
7.4
| | | | 26.2 | | | |
22.9
| |
Provision for income taxes
| |
| (3.4 | ) | |
|
(2.4
|
)
| |
| (10.1 | ) | |
|
(7.3
|
)
|
| Net earnings | | | 2.0 | | | |
5.0
| | | | 16.1 | | | |
15.6
| |
Net earnings attributable to noncontrolling interest
| |
| (0.3 | ) | |
|
(0.4
|
)
| |
| (0.7 | ) | |
|
(1.0
|
)
|
| Net earnings attributable to Modine | | $ | 1.7 |
| |
$
|
4.6
|
| | $ | 15.4 |
| |
$
|
14.6
|
|
| | | | | | | | | | |
|
Net earnings per share attributable to Modine shareholders - diluted:
| | $ | 0.04 | | |
$
|
0.10
| | | $ | 0.32 | | |
$
|
0.31
| |
| | | | | | | | | | |
|
Weighted average shares outstanding - diluted:
| | | 47.7 | | | |
47.6
| | | | 47.7 | | | |
47.4
| |
|
Condensed consolidated balance sheets (unaudited) |
(In millions)
|
|
|
|
|
| September 30, 2014 |
|
March 31, 2014
|
Assets |
| |
| |
Cash and cash equivalents
| | $ | 71.3 | |
$
|
87.2
|
Trade receivables
| | | 208.3 | | |
221.1
|
Inventories
| | | 126.5 | | |
116.8
|
Deferred income taxes
| | | 13.6 | | |
13.0
|
Other current assets
| |
| 82.6 | |
|
60.7
|
| Total current assets | |
| 502.3 | |
|
498.8
|
Property, plant and equipment - net
| | | 349.1 | | |
359.6
|
Deferred income taxes
| | | 94.4 | | |
98.6
|
Other noncurrent assets
| |
| 66.4 | |
|
75.3
|
| Total assets | | $ | 1,012.2 | |
$
|
1,032.3
|
|
|
| | | | | |
Liabilities and shareholders' equity | | | | |
Debt due within one year
| | $ | 29.3 | |
$
|
33.2
|
Accounts payable
| | | 158.5 | | |
171.1
|
Other current liabilities
| |
| 165.3 | |
|
152.9
|
| Total current liabilities | |
| 353.1 | |
|
357.2
|
Long-term debt
| | | 130.5 | | |
131.2
|
Other noncurrent liabilities
| |
| 101.9 | |
|
115.3
|
| Total liabilities | |
| 585.5 | |
|
603.7
|
Total equity
| |
| 426.7 | |
|
428.6
|
| Total liabilities & equity | | $ | 1,012.2 | |
$
|
1,032.3
|
| | | | | | |
|
Modine Manufacturing Company |
Condensed consolidated statements of cash flows (unaudited) |
(In millions)
|
|
|
| |
| |
| |
| | | | |
Six months ended September 30,
|
| | | | | 2014 |
|
2013
|
Cash flows from operating activities: | | | | |
Net earnings
| | $ | 16.1 | | |
$
|
15.6
| |
Adjustments to reconcile net earnings with net cash provided by
| | | | |
operating activities:
| | | | |
Depreciation and amortization
| | | 26.5 | | | |
31.7
| |
Insurance proceeds from Airedale fire
| | | 7.3 | | | |
6.5
| |
Other - net
| | | 7.8 | | | |
3.7
| |
Net changes in operating assets and liabilities
| |
| (34.1 | ) |
|
|
(8.5
|
)
|
Net cash provided by operating activities | |
| 23.6 |
|
|
|
49.0
|
|
| | | | | | |
|
Cash flows from investing activities: | | | | |
Expenditures for property, plant and equipment
| | | (29.2 | ) | | |
(21.4
|
)
|
Costs to replace building and equipment damaged in Airedale fire
| | | (3.1 | ) | | |
-
| |
Insurance proceeds from Airedale fire
| | | - | | | |
1.4
| |
Other - net
| |
| (0.1 | ) |
|
|
2.8
|
|
Net cash used for investing activities | |
| (32.4 | ) |
|
|
(17.2
|
)
|
| | | | | | |
|
Cash flows from financing activities: | | | | |
Net (decrease) increase in debt
| | | (4.5 | ) | | |
5.1
| |
Other - net
| |
| 0.2 |
|
|
|
(2.0
|
)
|
Net cash (used for) provided by financing activities | |
| (4.3 | ) |
|
|
3.1
|
|
| | | | | | |
|
Effect of exchange rate changes on cash
| |
| (2.8 | ) |
|
|
1.2
|
|
| | | | | | |
|
Net (decrease) increase in cash and cash equivalents | | | (15.9 | ) | | |
36.1
| |
| | | | | | |
|
Cash and cash equivalents at beginning of the period
| | | 87.2 | | | |
23.8
| |
| | | | |
|
|
|
Cash and cash equivalents at end of the period | | $ | 71.3 |
|
|
$
|
59.9
|
|
|
|
Segment operating results (unaudited) |
(In millions)
|
| |
| |
| |
| |
| |
| | |
Three months ended September 30,
| |
Six months ended September 30,
|
| | | 2014 |
|
2013
| | 2014 |
|
2013
|
Net sales:
| | | | | | | | |
North America
| | $ | 143.8 | | |
$
|
146.0
| | | $ | 295.5 | | |
$
|
294.7
| |
Europe
| | | 146.4 | | | |
138.9
| | | | 305.0 | | | |
285.1
| |
South America
| | | 27.2 | | | |
31.8
| | | | 52.4 | | | |
66.2
| |
Asia
| | | 19.0 | | | |
16.2
| | | | 39.8 | | | |
34.5
| |
Building HVAC
| |
| 45.5 |
|
|
|
34.8
|
| |
| 86.2 |
|
|
|
67.2
|
|
Segment net sales | | | 381.9 | | | |
367.7
| | | | 778.9 | | | |
747.7
| |
Corporate and eliminations
| |
| (4.6 | ) |
|
|
(3.5
|
)
| |
| (9.1 | ) |
|
|
(7.7
|
)
|
Net sales | | $ | 377.3 |
|
|
$
|
364.2
|
| | $ | 769.8 |
|
|
$
|
740.0
|
|
| | | | | | | | |
|
Operating income (loss):
| | | | | | | | |
North America (a) | | $ | 7.9 | | |
$
|
11.7
| | | $ | 24.0 | | |
$
|
26.0
| |
Europe (a) | | | 4.6 | | | |
3.3
| | | | 15.0 | | | |
11.3
| |
South America (a) | | | 0.3 | | | |
2.5
| | | | 0.1 | | | |
5.1
| |
Asia
| | | (0.7 | ) | | |
(1.1
|
)
| | | 0.2 | | | |
(1.4
|
)
|
Building HVAC (a) | |
| 3.2 |
|
|
|
1.2
|
| |
| 6.4 |
|
|
|
2.2
|
|
Segment operating income | | | 15.3 | | | |
17.6
| | | | 45.7 | | | |
43.2
| |
Corporate and eliminations
| |
| (7.4 | ) |
|
|
(7.0
|
)
| |
| (13.7 | ) |
|
|
(13.6
|
)
|
Operating income | | $ | 7.9 |
|
|
$
|
10.6
|
| | $ | 32.0 |
|
|
$
|
29.6
|
|
(a) See the adjusted operating income reconciliation on
the next page for information on restructuring and other unusual
charges recorded within these segments.
|
|
Modine Manufacturing Company |
Adjusted operating income and earnings per share (unaudited) |
(In millions, except per share amounts)
|
|
| |
| |
| |
| |
| |
Three months ended September 30,
| |
Six months ended September 30,
|
| | 2014 |
|
2013
| | 2014 |
|
2013
|
Operating income
| | $ | 7.9 | |
$
|
10.6
| | $ | 32.0 | |
$
|
29.6
|
Restructuring expenses- Europe (a) | | | 0.8 | | |
0.6
| | | 1.1 | | |
1.1
|
Accelerated depreciation- Europe (b) | | | - | | |
2.1
| | | - | | |
4.3
|
Restructuring expenses - South America (a) | | | - | | |
-
| | | 0.5 | | |
-
|
Restructuring expenses- North America (a) | | | 0.2 | | |
-
| | | 0.2 | | |
-
|
Loss from Airedale fire - Building HVAC (c) | |
| - | |
|
0.5
| |
| - | |
|
0.5
|
Adjusted operating income | | $ | 8.9 | |
$
|
13.8
| | $ | 33.8 | |
$
|
35.5
|
| | | | | | | |
|
Net earnings per share attributable to Modine
| | | | | | | | | | | | |
shareholders - diluted
| | $ | 0.04 | |
$
|
0.10
| | $ | 0.32 | |
$
|
0.31
|
Restructuring expenses- Europe (a) | | | 0.01 | | |
0.01
| | | 0.02 | | |
0.02
|
Accelerated depreciation- Europe (b) | | | - | | |
0.04
| | | - | | |
0.09
|
Restructuring expenses - South America (a) | | | - | | |
-
| | | 0.01 | | |
-
|
Restructuring expenses- North America (a) | | | - | | |
-
| | | - | | |
-
|
Loss from Airedale fire - Building HVAC (c) | |
| - | |
|
0.01
| |
| - | |
|
0.01
|
Adjusted earnings per share | | $ | 0.05 | |
$
|
0.16
| | $ | 0.35 | |
$
|
0.43
|
(a) Restructuring expenses primarily relate to equipment
transfer, plant consolidation and employee severance related costs.
|
(b) Accelerated depreciation, which is reported in cost
of sales, relates to production equipment that is no longer used
because of manufacturing process changes in Germany.
|
(c) Losses and costs incurred as a result of the Airedale
fire, which will not be reimbursed by the Company's insurance
provider, primarily relate to the write-off of certain assets
(leasehold improvements) destroyed by the fire.
|
|
There was no income tax impact related to the Europe restructuring
expenses or accelerated depreciation because of income tax valuation
allowances in Germany.
|
|
|
|
|
| |
|
| |
| | |
Net debt (unaudited) | |
(In millions)
|
|
| | | | |
|
| | | | |
|
| | September 30, 2014 | |
March 31, 2014
| |
Debt due within one year
| | $ | 29.3 | |
$
|
33.2
| |
Long-term debt
| |
| 130.5 | |
|
131.2
| |
Total debt
| |
| 159.8 | |
|
164.4
| |
| | | | |
|
Less: cash and cash equivalents (a) | |
| 71.3 | |
|
87.2
| |
Net debt | | $ | 88.5 | |
$
|
77.2
| |
(a) Cash and cash equivalents as of September 30, 2014
and March 31, 2014, included $14.6 million and $16.8 million,
respectively, of advances from the Company's insurance provider that
remain to be spent for recovery and reconstruction costs from the
Airedale fire.
|
|
|
Free cash flow (unaudited) |
(In millions)
|
|
| |
| |
| |
| |
| |
Three months ended September 30,
| |
Six months ended September 30,
|
| | 2014 |
|
2013
| | 2014 |
|
2013
|
Net cash provided by operating activities (a) | | $ | 21.1 | | |
$
|
33.1
| | | $ | 23.6 | | |
$
|
49.0
| |
Expenditures for property, plant and equipment
| | | (16.8 | ) | | |
(11.2
|
)
| | | (29.2 | ) | | |
(21.4
|
)
|
Payments for restructuring expenses
| |
| 1.4 |
| |
|
1.8
|
| |
| 3.8 |
| |
|
2.5
|
|
Free cash flow | | $ | 5.7 |
| |
$
|
23.7
|
| | $ | (1.8 | ) | |
$
|
30.1
|
|
(a) Net cash provided by operating activities for the
three and six months ended September 30, 2014 was positively
impacted by $2.2 million and $0.9 million, respectively, related to
the timing of insurance proceeds from the Airedale fire.
|
|
|
Contacts:
Modine Manufacturing Company
Kathleen T. Powers,262-636-1687
k.t.powers@na.modine.com
Source: Modine Manufacturing Company
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