Modine Reports Third Quarter Fiscal 2013 Results; Continues European Restructuring; Affirms Guidance Business Wire RACINE, Wis. -- February 1, 2013 Modine Manufacturing Company (NYSE: MOD), a diversified global leader in thermal management technology and solutions, today reported its financial results for the third quarter ended December 31, 2012. Highlights include: *Sales of $326.1 million; *GAAP basis loss per share of $0.19; *Impairment and restructuring charges of $9.7 million; and *Earnings per share excluding impairment and restructuring charges of $0.02. “Most of our end markets remain below prior year levels,” said Modine President and Chief Executive Officer, Thomas A. Burke. “Although our revenues are down, we aggressively managed our costs resulting in positive free cash flow during the quarter. We are on track with our critically important restructuring program in Europe, and expect to see benefits from this program in the new fiscal year.” Third Quarter Financial Results Net sales in the third quarter of fiscal 2013 decreased $47.2 million, or 12.6 percent, from the third quarter of fiscal 2012. On a constant currency basis, net sales decreased 10.2 percent from the prior year. Sales in Europe continue to be impacted by the planned wind down of the non-strategic automotive module business, while sales in all regions were affected by weak end market demand. Gross profit decreased $11.9 million or 19.8 percent, resulting in a gross margin of 14.8 percent, down 130 basis points from the prior year. The margin decrease was largely due to lower sales volume. Selling, general and administrative (SG&A) expense increased $1.6 million, or 3.9 percent, primarily due to the impact of the reversal of a trade compliance-related reserve in the prior year. The company recorded $8.3 million of impairment charges and $1.4 million of restructuring expenses primarily related to the ongoing restructuring in Europe. Operating income decreased $21.0 million to a loss of $3.8 million as a result of lower gross profit and the $9.7 million of impairment and restructuring charges. The net loss attributable to Modine of $8.7 million compares to net earnings attributable to Modine of $9.0 million for the same period last year, and represents a loss per share of $0.19 on a GAAP basis. Earnings per share excluding impairment and restructuring charges was $0.02, compared to $0.24 in the third quarter of last year. Net debt was $131.8 million at December 31, 2012, a decrease of $1.1 million from the end of fiscal 2012. Cash on hand at the end of the quarter was $32.9 million. Third Quarter Segment Results North America segment sales decreased 7.9 percent to $128.2 million compared to $139.2 million one year ago. The decrease was driven primarily by lower sales to off-highway customers as orders slowed during the quarter. Operating income decreased $2.4 million, or 22.6 percent, to $8.2 million compared to the prior year due to lower gross profit on the lower sales and higher SG&A expense. SG&A was lower in the prior year due to the reversal of a $2.3 million trade compliance-related liability. Europe segment sales decreased 17.3 percent to $115.7 million compared to $139.9 million in the prior year. On a constant currency basis, sales decreased 13.8 percent from the prior year primarily due to the planned wind down of the automotive module business and lower sales to commercial vehicle and off-highway customers. Market demand in Europe continued to be impacted by weak economic conditions, affecting both mature programs and launch volumes. The segment operating loss was $5.7 million during the quarter compared to $6.8 million of operating income in the prior year. The decrease was primarily due to $9.7 million of restructuring and impairment charges, including $8.3 million of non-cash asset impairment charges and $1.4 million of restructuring costs. South America segment sales decreased 24.9 percent to $31.7 million compared to $42.2 million one year ago. On a constant currency basis, sales decreased 14.0 percent from the prior year. The decrease in sales was due to the continued weakness in the commercial vehicle market following the pre-buy ahead of the January 1, 2012 change in emissions standards in Brazil. Operating income of $2.6 million was lower than the prior year by $1.4 million due to lower gross profit on lower sales volume. Asia segment sales decreased 36.8 percent to $13.2 million compared to $20.9 million one year ago due to lower sales to off-highway customers as production schedules have been reduced in response to low demand and high field inventory levels caused by weak economic conditions. The operating loss in the region increased by $1.0 million to $2.5 million compared to a loss of $1.5 million in the prior year, as a result of lower gross profit on the lower sales volume. Commercial Products segment sales increased 5.1 percent to $41.3 million compared to $39.3 million one year ago due to an increase in chiller sales in the UK, partially offset by a decrease in heating and cooling product sales in North America. Gross margin was down on a year-over-year basis due to unfavorable product mix changes. Operating income decreased $1.1 million from the prior year to $4.7 million due primarily to changes in sales mix and higher SG&A expense from the integration of the Geofinity business and other spending to support future growth. Outlook “Our primary markets remained weak during the quarter, resulting in lower volumes than we had originally expected,” Burke commented. “While we believe that the commercial vehicle market is stabilizing in most regions, end market demand and high inventory levels may keep production levels relatively low during the next several quarters. We are confirming our guidance for fiscal 2013, with a narrowed band for earnings per share.” The company has the following expectations for fiscal 2013, excluding impairment and restructuring charges: *Year-over-year sales down 10 to 12 percent, including approximately $80 million of planned program reductions; *Operating income margin in the range of 2.75 to 3.25 percent; and *Earnings per diluted share of $0.40 to $0.45. “We are encouraged by industry projections for market recoveries later in calendar 2013,” Burke commented. “With this in mind, we remain focused on cost control, including our restructuring program in Europe, while also identifying opportunities for profitable growth.” Conference Call and Webcast Modine will conduct a conference call and live webcast, with a slide presentation, on Friday, February 1, 2013 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to discuss its fiscal 2013 third quarter results. 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 800.901.5241 (international dial-in 617.786.2963); access code 98660400. 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 February 1, 2013. A call-in replay will be available through midnight on February 8, 2013, at 888.286.8010, (international replay 617.801.6888); access code 88114390. The company will furnish a transcript of the call to the U.S. Securities Exchange Commission, and post it on its website, after February 6, 2013. About Modine Modine, with fiscal 2012 revenues of $1.6 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. The company employs approximately 6,600 people at 30 facilities in 16 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, 2012 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 quarters ended June 30, 2012 and September 30, 2012. 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 of Modine’s customers, particularly in light of continued weak economic conditions; operational inefficiencies as a result of program launches and product transfers; 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 continuing slow recovery of certain markets in China and Brazil and the economic uncertainties in the European Union; the impact on Modine of increases in commodity prices, particularly aluminum and copper, and its ability to pass these prices on to customers and/or successfully hedge 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; the possibility that other or more significant issues may be identified in the ongoing assessment of errors in applying value added tax in the Europe segment; 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 Operating income excluding impairment and restructuring charges, earnings per share excluding impairment and restructuring charges, constant currency, 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 and the company’s overall performance. 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. Definition – Operating income and earnings per share excluding impairment and restructuring charges Operating income (loss) or earnings per share plus impairment charges and restructuring and repositioning expenses within the Europe segment. These are measures of overall performance not including non-cash impairment charges and costs associated with our restructuring program in Europe. Definition – Constant currency Constant currency translates financial data from foreign operations for a period into U.S. Dollars using the same foreign currency exchange rates as those used to translate financial data for the prior period. This measure provides a more consistent indication of our performance, without the effects of currency exchange rate fluctuations. Definition - Net debt The sum of debt due within one year 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 Net cash provided by operating activities less expenditures for property, plant and equipment. This is a measure of cash generated from operations 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 December Nine months ended December 31, 31, 2012 2011* 2012 2011* Net sales $ 326.1 $ 373.3 $ 1,016.4 $ 1,188.4 Cost of sales 277.9 313.2 863.9 996.1 Gross profit 48.2 60.1 152.5 192.3 Selling, general & administrative 42.3 40.7 126.8 140.4 expenses Impairment 8.3 2.2 25.1 2.2 charges Restructuring and repositioning 1.4 - 7.3 - expenses Operating (3.8 ) 17.2 (6.7 ) 49.7 (loss) income Interest expense (2.8 ) (2.9 ) (9.2 ) (9.2 ) Other expense - (0.3 ) (1.6 ) - (7.6 ) net (Loss) earnings from continuing (6.9 ) 12.7 (15.9 ) 32.9 operations before income taxes Provision for (1.5 ) (3.9 ) (5.3 ) (10.6 ) income taxes (Loss) earnings from (8.4 ) 8.8 (21.2 ) 22.3 continuing operations Earnings from discontinued - 0.3 - 0.7 operations (net of income taxes) Net (loss) (8.4 ) 9.1 (21.2 ) 23.0 earnings Less: Net earnings attributable to (0.3 ) (0.1 ) (0.9 ) (0.1 ) noncontrolling interest Net (loss) earnings $ (8.7 ) $ 9.0 $ (22.1 ) $ 22.9 attributable to Modine (Loss) earnings per share from continuing operations attributable to Modine shareholders: Basic $ (0.19 ) $ 0.18 $ (0.47 ) $ 0.47 Diluted $ (0.19 ) $ 0.18 $ (0.47 ) $ 0.47 Net (loss) earnings per share attributable to Modine shareholders: Basic $ (0.19 ) $ 0.19 $ (0.47 ) $ 0.49 Diluted $ (0.19 ) $ 0.19 $ (0.47 ) $ 0.49 Weighted average shares outstanding: Basic 46.7 46.5 46.6 46.5 Diluted 46.7 46.8 46.6 46.9 Condensed consolidated balance sheets (unaudited) (In millions) December 31, March 31, 2012 2012 Assets Cash and cash $ 32.9 $ 31.4 equivalents Trade receivables 161.8 216.1 Inventories 121.4 120.8 Other current 59.3 59.2 assets Total current 375.4 427.5 assets Property, plant and equipment - 359.4 412.1 net Other noncurrent 64.8 53.9 assets Total assets $ 799.6 $ 893.5 Liabilities and shareholders' equity Debt due within $ 27.1 $ 22.4 one year Accounts payable 123.7 156.9 Other current 90.7 118.3 liabilities Total current 241.5 297.6 liabilities Long-term debt 137.6 141.9 Other noncurrent 117.7 127.9 liabilities Total 496.8 567.4 liabilities Total equity 302.8 326.1 Total liabilities & $ 799.6 $ 893.5 equity * Prior period results have been revised to reflect the correction of errors identified in fiscal 2012 (quarter ended March 31, 2012). Modine Manufacturing Company Condensed consolidated statements of cash flows (unaudited) (In millions) Nine months ended 2012 2011* December 31, Cash flows from operating activities: Net (loss) $ (21.2 ) $ 23.0 earnings Adjustments to reconcile net (loss) earnings with net cash provided by operating activities: Depreciation and 41.8 43.4 amortization Impairment 25.1 2.2 charges Other - net 9.2 15.0 Net changes in operating (13.5 ) (65.3 ) assets and liabilities Net cash provided by 41.4 18.3 operating activities Cash flows from investing activities: Expenditures for property, (33.6 ) (45.3 ) plant and equipment Acquisition, net of cash (4.9 ) - received Other - net (1.3 ) 0.2 Net cash used for investing (39.8 ) (45.1 ) activities Cash flows from financing activities: Net increase 0.3 20.4 in debt Other - net (0.2 ) 0.9 Net cash provided by 0.1 21.3 financing activities Effect of exchange rate (0.2 ) (1.3 ) changes on cash Net increase (decrease) in 1.5 (6.8 ) cash and cash equivalents Cash and cash equivalents 31.4 32.9 at beginning of the period Cash and cash equivalents $ 32.9 $ 26.1 at end of the period Segment operating results (unaudited) (In millions) Three months ended Nine months ended December 31, December 31, 2012 2011* 2012 2011* Net sales: North America $ 128.2 $ 139.2 $ 425.2 $ 444.7 Europe 115.7 139.9 359.9 458.7 South America 31.7 42.2 97.1 138.2 Asia 13.2 20.9 42.8 62.1 Commercial 41.3 39.3 105.3 108.5 Products Segment net 330.1 381.5 1,030.3 1,212.2 sales Corporate and (4.0 ) (8.2 ) (13.9 ) (23.8 ) eliminations Net sales $ 326.1 $ 373.3 $ 1,016.4 $ 1,188.4 Operating income (loss): North America $ 8.2 $ 10.6 $ 28.9 $ 32.4 ^(a) Europe ^(b) (5.7 ) 6.8 (15.8 ) 26.8 South America 2.6 4.0 7.6 9.8 Asia (2.5 ) (1.5 ) (7.1 ) (1.4 ) Commercial 4.7 5.8 8.3 12.1 Products Segment operating 7.3 25.7 21.9 79.7 income Corporate and (11.1 ) (8.5 ) (28.6 ) (30.0 ) eliminations Operating $ (3.8 ) $ 17.2 $ (6.7 ) $ 49.7 (loss) income ^(a) The year-to-date fiscal 2013 operating income includes $1.0 million of impairment charges. ^(b) The third quarter fiscal 2013 operating loss includes $9.7 million of impairment, restructuring and repositioning charges. The year-to-date fiscal 2013 operating loss includes $31.4 million of impairment, restructuring and repositioning charges. * Prior period results have been revised to reflect the correction of errors identified in fiscal 2012 (quarter ended March 31, 2012). Modine Manufacturing Company Operating income and earnings per share excluding impairment and restructuring charges (unaudited) (In millions, except per share amounts) Three months ended December Nine months ended December 31, 31, 2012 2011 2012 2011 Operating $ (3.8 ) $ 17.2 $ (6.7 ) $ 49.7 (loss) income Impairment charges - 8.3 2.2 24.1 2.2 Europe Impairment charges - North - - 1.0 - America Restructuring and repositioning 1.4 - 7.3 - expenses ^ - Europe ^(a) Operating income excluding impairment and $ 5.9 $ 19.4 $ 25.7 $ 51.9 restructuring charges Net (loss) earnings per share attributable to $ (0.19 ) $ 0.19 $ (0.47 ) $ 0.49 Modine shareholders - diluted Impairment charges - 0.18 0.05 0.52 0.05 Europe Impairment charges - North - - 0.02 - America Restructuring and repositioning 0.03 - 0.15 - expenses ^ - Europe ^(a) Earnings per share excluding impairment and $ 0.02 $ 0.24 $ 0.22 $ 0.54 restructuring charges ^(a) Restructuring and repositioning expenses primarily relate to salaried headcount reductions at our regional headquarters in Germany. There is no income tax impact as a result of the impairment, restructuring and repositioning charges because of income tax valuation allowances in the U.S. and Germany. Net debt (unaudited) (In millions) December 31, March 31, 2012 2012 Debt due within $ 27.1 $ 22.4 one year Long-term debt 137.6 141.9 Total debt 164.7 164.3 Less: cash and cash 32.9 31.4 equivalents Net debt $ 131.8 $ 132.9 Free cash flow (unaudited) (In millions) Three months ended December Nine months ended December 31, 31, 2012 2011 2012 2011 Net cash provided by $ 14.6 $ 15.1 $ 41.4 $ 18.3 operating activities Expenditures for property, (12.9 ) (12.8 ) (33.6 ) (45.3 ) plant and equipment Free cash flow $ 1.7 $ 2.3 $ 7.8 $ (27.0 ) Contact: Modine Manufacturing Company Kathleen T. Powers, 262-636-1687 firstname.lastname@example.org
Modine Reports Third Quarter Fiscal 2013 Results; Continues European Restructuring; Affirms Guidance
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