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| 8-K - MODINE MANUFACTURING 8-K 10-27-2011 - MODINE MANUFACTURING CO | form8k.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Contact: Bob Kampstra 262-636-2919 r.r.kampstra@na.modine.com
Modine Reports Second Quarter Fiscal 2012 Operating Income of
$11.9 million; Reaffirms Full Year Guidance
RACINE, WI, October 27, 2011 – 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, 2011. Highlights versus the same period last year include:
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Sales were $397 million, up 15 percent;
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Gross profit increased 11 percent to $62.0 million;
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Operating income of $11.9 million represented a 32 percent improvement;
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Other expense included $5.7 million of losses due to changes in foreign currency rates; and
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Diluted earnings per share was $0.03 versus diluted loss per share of $0.36.
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“Modine’s performance has been solid,” said Modine President and Chief Executive Officer Thomas A. Burke. “We continue to see a slow and steady recovery of our end markets and, despite the continued concerns being expressed in the business media, our order backlog remains strong. In addition, recent program wins, particularly within our global truck and off-highway markets, demonstrate the strength of our competitive position in these target markets.”
“Our business segments are performing in line with our expectations, and our results demonstrate that fact, with the exception of foreign currency impacts,” said Michael B. Lucareli, Vice President, Finance and Chief Financial Officer. “The strengthening U.S. dollar drove significant non-cash foreign currency losses during the quarter. These foreign currency losses and an environmental remediation charge had a negative impact of approximately $0.12 on diluted earnings per share for the quarter. As anticipated, sequentially our second quarter results were also lower due to normal seasonality in Europe and the planned acceleration of launch costs in Asia. Despite these factors, we remain confident in the full year guidance previously provided for fiscal 2012.”
Second Quarter Financial Results
Net sales in the second quarter of fiscal 2012 improved $51.4 million, or 15 percent, from the second quarter of fiscal 2011, with increases across all of our segments. The most significant improvements were within the commercial vehicle markets in Europe, North America and South America, as well as the off-highway market in Asia. Gross profit increased 11 percent, or $6.3 million, on the increased sales volumes, resulting in a gross margin of 15.6 percent. Selling, general and administrative (SG&A) expense increased $3.4 million year over year, primarily due to the support of growth in Asia and Commercial Products and an environmental remediation charge within South America. Operating income increased 32 percent from the second quarter of fiscal 2011 to $11.9 million, mainly as a result of improved sales volumes. Interest expense decreased $20.2 million from the prior year period due to costs associated with the debt refinancing completed during the second quarter of fiscal 2011. Other expense of $5.5 million represents an $11.1 million decrease from other income of $5.6 million during the same period last year due to unfavorable foreign currency losses on intercompany loans and other transactions denominated in foreign currencies. Net earnings of $1.4 million represented an $18.1 million improvement, or 108 percent, from the net loss of $16.7 million for the same period last year.
Second Quarter Fiscal 2012 Results – Page 2
Net debt was $141.1 million at the end of the quarter, an increase of $2.0 million from the end of the first quarter of fiscal 2012, including $30.2 million of cash at the end of the quarter. Free cash outflow of $2.1 million for the quarter includes a planned increase in capital spending and higher working capital balances.
Second Quarter Segment Results
Original Equipment – Europe segment sales were up 22 percent to $152.0 million, from $124.9 million reported last year. Operating income increased $5.0 million from the prior year to $8.1 million. Gross margin improved 50 basis points from the same period last year, primarily due to improved operating leverage on the higher sales.
Original Equipment – North America segment sales increased 7 percent to $148.8 million, compared to $139.7 million one year ago. The increase was driven primarily by continued recovery in the commercial vehicle market. Operating income increased $3.2 million to $10.9 million compared to the prior year. Gross margin improved 20 basis points driven by plant performance efficiencies partially offset by higher material costs year over year.
South America segment sales increased 17 percent to $48.1 million, compared to $41.2 million one year ago, primarily in the commercial vehicle and off-highway markets. Gross margin of 18.4 percent was lower compared to the prior year due to the strong local currency impact on export and aftermarket sales and higher material costs year-over-year. Operating income decreased $2.3 million due to the lower gross margin, an environmental remediation charge of $0.8 million, higher air freight costs and personnel-related matters.
Commercial Products segment sales increased 10 percent to $35.1 million, compared to $32.0 million one year ago, primarily from North America cooling products. Operating income decreased $1.3 million from the prior year to $2.9 million. This decrease is primarily due to a lower gross margin of 29.3 percent compared to the prior year, largely related to higher materials costs impacted by a blend of product mix and commodity costs. SG&A increased to support future growth and higher commissions resulting from increased sales.
Original Equipment – Asia segment sales increased 57 percent to $20.0 million, while gross margin improved to 9.1 percent compared to a gross margin of 5.6 percent one year ago. This performance reflects the continued growth driven by increased program launch activity and maturing volumes within the off-highway market in China and the commercial vehicle market in India. Operating results improved $0.4 million to a loss of $0.8 million compared to a loss of $1.2 million in the prior year as a result of the improved gross margin.
Outlook
“Our ability to remain on target with earnings, despite the foreign currency losses this quarter, shows the overall strength and improvement in our business,” Lucareli commented. “We anticipate a strong fiscal year as gross margin improves and earnings accelerate in the third and fourth quarters.”
The company reaffirms the following expectations for fiscal 2012:
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A 12 to 16 percent increase in sales year over year;
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Operating income margin in the range of 4.1 to 4.7 percent;
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Earnings per diluted share at $0.95 to $1.05; and
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Capital expenditures in a range of $70 to $75 million.
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Conference Call and Webcast
Modine will conduct a conference call and live webcast, with a slide presentation, on Thursday, October 27, 2011 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to discuss its fiscal 2012 second quarter. The webcast and accompanying slides will be available on the Investor Relations section of the Modine website at www.modine.com. The dial-in phone number for the audio portion of the call is 866.831.6247 (international dial-in 617.213.8856); access code 90973826. 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 the slides will be available on the investor relations section of the Modine website at www.modine.com after October 29, 2011. A call-in replay will be available through November 3, 2011, at 888.286.8010 (international replay 617.801.6888); access code 48619167. The company will furnish a transcript of the call to the U.S. Securities Exchange Commission, and post it on to the company’s website, after October 29, 2011.
Second Quarter Fiscal 2012 Results – Page 3
About Modine
Modine, with fiscal 2011 revenues of $1.4 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, refrigeration systems, and fuel cells. The company employs approximately 6,800 people at 27 facilities worldwide in 14 countries. 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, including the information provided under “Outlook,” 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, 2011 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, 2011. Other risks and uncertainties include, but are not limited to, the following: operational inefficiencies as a result of program launches and product transfers; the impact of currency exchange rate fluctuations, particularly the value of the euro and Brazilian real relative to the U.S. dollar; the impact on Modine of increases in commodity prices, particularly aluminum and copper and its ability to pass these prices on to customers; Modine’s continued 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
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 judge liquidity. 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 GAAP measures. The presentations of the non-GAAP measures in this press release are made alongside the most directly comparable GAAP measures.
Definition – Net debt
The sum of short- and long-term debt, less cash on hand. This is an indicator of the company’s debt position after considering on hand cash balances.
Definition – Free cash flow
The sum of net cash provided by (used for) operating and investing activities adjusted to exclude prepayment penalties on senior notes. This is a liquidity measure of the cash available after funding ongoing operations and capital expenditures.
Financial tables follow –
Second Quarter Fiscal 2012 Results – Page 4
Modine Manufacturing Company
Consolidated statements of operations (unaudited)
(In thousands, except per share amounts)
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Three months ended September 30,
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Six months ended September 30,
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2011
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2010* | 2011 | 2010* | |||||||||||||
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Net sales
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$ | 397,290 | $ | 345,902 | $ | 815,153 | $ | 691,434 | ||||||||
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Cost of sales
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335,271 | 290,133 | 683,703 | 576,689 | ||||||||||||
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Gross profit
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62,019 | 55,769 | 131,450 | 114,745 | ||||||||||||
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Selling, general & administrative expenses
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50,075 | 46,718 | 99,513 | 88,918 | ||||||||||||
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Operating income
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11,944 | 9,051 | 31,937 | 25,827 | ||||||||||||
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Interest expense
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3,297 | 23,529 | 6,287 | 27,637 | ||||||||||||
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Other expense (income) - net
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5,497 | (5,610 | ) | 5,355 | (2,012 | ) | ||||||||||
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Earnings (loss) from continuing operations before income taxes
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3,150 | (8,868 | ) | 20,295 | 202 | |||||||||||
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Provision for income taxes
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2,112 | 4,822 | 6,141 | 8,866 | ||||||||||||
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Earnings (loss) from continuing operations
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1,038 | (13,690 | ) | 14,154 | (8,664 | ) | ||||||||||
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Earnings (loss) from discontinued operations (net of income taxes)
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389 | (2,900 | ) | 389 | (2,932 | ) | ||||||||||
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Loss on sale of discontinued operations (net of income taxes)
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(16 | ) | (70 | ) | (16 | ) | (76 | ) | ||||||||
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Net earnings (loss)
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1,411 | (16,660 | ) | 14,527 | (11,672 | ) | ||||||||||
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Less: Net earnings attrbutable to noncontrolling interest
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38 | - | 29 | - | ||||||||||||
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Net earnings (loss) attributable to Modine Manufacturing Company
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$ | 1,373 | $ | (16,660 | ) | $ | 14,498 | $ | (11,672 | ) | ||||||
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Earnings (loss) from continuing operations attributable to Modine common shareholders:
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Basic
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$ | 0.02 | $ | (0.30 | ) | $ | 0.30 | $ | (0.19 | ) | ||||||
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Diluted
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$ | 0.02 | $ | (0.30 | ) | $ | 0.30 | $ | (0.19 | ) | ||||||
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Net earnings (loss) attributable to Modine common shareholders:
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Basic
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$ | 0.03 | $ | (0.36 | ) | $ | 0.31 | $ | (0.25 | ) | ||||||
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Diluted
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$ | 0.03 | $ | (0.36 | ) | $ | 0.31 | $ | (0.25 | ) | ||||||
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Weighted average shares outstanding:
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Basic
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46,477 | 46,067 | 46,419 | 46,053 | ||||||||||||
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Diluted
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46,858 | 46,067 | 46,919 | 46,053 | ||||||||||||
Comprehensive earnings (loss), which represents net earnings (loss) adjusted by the post-tax change in foreign-currency translation, the effective portion of cash flow hedges and change in benefit plan adjustment recorded in shareholders' equity, for the three month periods ended September 30, 2011 and 2010 were ($32,861) and $13,258, respectively, and for the six month periods ended September 30, 2011 and 2010, were ($12,207) and ($4,748), respectively.
Condensed consolidated balance sheets (unaudited)
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(In thousands)
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September 30, 2011
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March 31, 2011
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Assets
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Cash and cash equivalents
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$ | 30,217 | $ | 32,930 | ||||
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Trade receivables - net
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210,350 | 219,189 | ||||||
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Inventories
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135,214 | 122,629 | ||||||
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Other current assets
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58,114 | 52,877 | ||||||
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Total current assets
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433,895 | 427,625 | ||||||
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Property, plant and equipment - net
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411,979 | 430,295 | ||||||
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Other noncurrent assets
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54,591 | 59,019 | ||||||
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Total assets
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$ | 900,465 | $ | 916,939 | ||||
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Liabilities and shareholders' equity
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Debt due within one year
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$ | 11,942 | $ | 9,087 | ||||
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Accounts payable
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167,324 | 177,549 | ||||||
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Other current liabilities
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121,302 | 129,905 | ||||||
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Total current liabilities
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300,568 | 316,541 | ||||||
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Long-term debt
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159,365 | 138,582 | ||||||
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Deferred income taxes
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9,719 | 9,988 | ||||||
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Other noncurrent liabilities
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76,634 | 88,876 | ||||||
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Total liabilities
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546,286 | 553,987 | ||||||
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Total equity
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354,179 | 362,952 | ||||||
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Total liabilities & equity
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$ | 900,465 | $ | 916,939 | ||||
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Prior period results have been revised to reflect the correction of errors identified in fiscal 2011 which were immaterial to prior periods, but too significant to correct in the fourth quarter of fiscal 2011.
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Second Quarter Fiscal 2012 Results – Page 5
Modine Manufacturing Company
Condensed consolidated statements of cash flows (unaudited)
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(In thousands)
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Six months ended September 30,
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2011
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2010* | ||||||
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Cash flows from operating activities:
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Net earnings (loss)
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$ | 14,527 | $ | (11,672 | ) | |||
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Adjustments to reconcile net earnings (loss) with net cash provided by (used for) operating activities:
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Depreciation and amortization
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29,154 | 28,095 | ||||||
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Other - net
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6,347 | 7,115 | ||||||
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Net changes in operating assets and liabilities
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(46,872 | ) | (39,402 | ) | ||||
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Net cash provided by (used for) operating activities
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3,156 | (15,864 | ) | |||||
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Cash flows from investing activities:
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Expenditures for plant, property and equipment
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(32,532 | ) | (20,199 | ) | ||||
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Proceeds from dispositions of assets
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1,273 | 4,647 | ||||||
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Settlement of derivative contracts
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142 | (183 | ) | |||||
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Other - net
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379 | 3,746 | ||||||
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Net cash used for investing activities
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(30,738 | ) | (11,989 | ) | ||||
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Cash flows from financing activities:
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Net increase in debt
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25,333 | 27,959 | ||||||
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Other - net
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921 | (392 | ) | |||||
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Net cash provided by financing activities
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26,254 | 27,567 | ||||||
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Effect of exchange rate changes on cash
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(1,385 | ) | 72 | |||||
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Net decrease in cash and cash equivalents
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(2,713 | ) | (214 | ) | ||||
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Cash and cash equivalents at beginning of the period
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32,930 | 43,657 | ||||||
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Cash and cash equivalents at end of the period
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$ | 30,217 | $ | 43,443 | ||||
Condensed segment operating results (unaudited)
(In thousands)
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Three months ended September 30,
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Six months ended September 30,
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2011
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2010* | 2011 | 2010* | |||||||||||||
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Sales:
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Original Equipment - Asia
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$ | 19,989 | $ | 12,732 | $ | 41,254 | $ | 24,764 | ||||||||
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Original Equipment - Europe
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151,988 | 124,870 | 318,830 | 257,044 | ||||||||||||
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Original Equipment - North America (a)
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148,848 | 139,733 | 305,483 | 281,444 | ||||||||||||
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South America
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48,095 | 41,241 | 96,016 | 78,084 | ||||||||||||
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Commercial Products (a)
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35,070 | 31,997 | 69,218 | 59,746 | ||||||||||||
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Segment sales
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403,990 | 350,573 | 830,801 | 701,082 | ||||||||||||
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Corporate and administrative
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211 | 369 | 314 | 778 | ||||||||||||
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Eliminations
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(6,911 | ) | (5,040 | ) | (15,962 | ) | (10,426 | ) | ||||||||
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Total net sales
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$ | 397,290 | $ | 345,902 | $ | 815,153 | $ | 691,434 | ||||||||
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Operating income/(loss):
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Original Equipment - Asia
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$ | (750 | ) | $ | (1,241 | ) | $ | 63 | $ | (1,647 | ) | |||||
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Original Equipment - Europe
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8,088 | 3,052 | 19,429 | 14,052 | ||||||||||||
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Original Equipment - North America (a)
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10,899 | 7,744 | 21,718 | 18,285 | ||||||||||||
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South America
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2,687 | 4,979 | 5,877 | 8,790 | ||||||||||||
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Commercial Products (a)
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2,897 | 4,207 | 6,268 | 5,736 | ||||||||||||
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Segment income from operations
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23,821 | 18,741 | 53,355 | 45,216 | ||||||||||||
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Corporate and administrative
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(11,725 | ) | (9,708 | ) | (21,317 | ) | (19,418 | ) | ||||||||
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Eliminations
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(152 | ) | 18 | (101 | ) | 29 | ||||||||||
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Income from operations
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$ | 11,944 | $ | 9,051 | $ | 31,937 | $ | 25,827 | ||||||||
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*
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Prior period results have been revised to reflect the correction of errors identified in fiscal 2011 which were immaterial to prior periods, but too significant to correct in the fourth quarter of fiscal 2011.
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(a)
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Segment operating results were retrospectively adjusted for comparative purposes to reflect the realignment of the Nuevo Laredo, Mexico facility into the Original Equipment - North America segment from the Commercial Products segment for the three and six months ended September 30, 2010.
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Second Quarter Fiscal 2012 Results – Page 6
Modine Manufacturing Company
Net debt (unaudited)
(In thousands)
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September 30, 2011
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March 31, 2011
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Debt due within one year
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$ | 11,942 | $ | 9,087 | ||||
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Long-term debt
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159,365 | 138,582 | ||||||
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Total debt
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171,307 | 147,669 | ||||||
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Less: cash and cash equivalents
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30,217 | 32,930 | ||||||
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Net debt
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$ | 141,090 | $ | 114,739 | ||||
Free cash flow (unaudited)
(In thousands)
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Three months ended September 30,
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Six months ended September 30,
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2011
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2010
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2011
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2010
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Net cash provided by (used for) operating activities
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$ | 17,155 | $ | 5,496 | $ | 3,156 | $ | (15,864 | ) | |||||||
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Net cash used for investing activities
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(19,296 | ) | (7,503 | ) | (30,738 | ) | (11,989 | ) | ||||||||
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Prepayment penalties on senior notes
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- | 16,570 | - | 16,570 | ||||||||||||
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Free cash flow
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$ | (2,141 | ) | $ | 14,563 | $ | (27,582 | ) | $ | (11,283 | ) | |||||