Modine Manufacturing Company
|
(Exact name of registrant as specified in its charter)
|
Wisconsin
|
1-1373
|
39-0482000
|
(State or other jurisdiction of incorporation)
|
(Commission File Number)
|
(I.R.S. Employer Identification
Number)
|
1500 DeKoven Avenue, Racine, Wisconsin
|
53403
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant's telephone number, including area code: |
(262) 636-1200
|
(Former name or former address, if changed since last report.) |
N/A
|
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Item 2.02 |
Results of Operations and Financial Condition
|
Item 9.01 |
Financial Statements and Exhibits
|
(d) |
Exhibits
|
99.1 |
Press Release dated November 1, 2016 announcing the results of operations and financial condition for the second quarter ended September 30, 2016.
|
Modine Manufacturing Company
|
|
By: /s/ Thomas A. Burke
|
|
Thomas A. Burke
|
|
President and Chief Executive Officer
|
Exhibit No. |
Exhibit Description
|
99.1 |
Press Release dated November 1, 2016 announcing the results of operations and financial condition for the second quarter ended September 30, 2016.
|
· |
Sales of $317.7 million, down 4.9 percent from the prior year
|
· |
Operating loss of $1.9 million compared with an operating loss of $32.1 million in the prior year; adjusted operating income of $3.6 million, down $4.5 million from the prior year
|
· |
Loss per share of $0.09 and adjusted loss per share of $0.01
|
· |
Full-year guidance confirmed
|
· |
Recently announced acquisition of Luvata HTS on track to close by the end of calendar 2016
|
· |
Americas segment sales were $126.0 million compared with $144.2 million one year ago, a decrease of 12.6 percent. On a constant-currency basis, sales decreased 13.4 percent year-over-year, primarily due to ongoing weakness in the commercial vehicle and off-highway markets, partially offset by higher sales to automotive customers. The segment reported an operating loss of $1.4 million compared with operating income of $7.8 million in the prior year, primarily due to the lower sales volume, temporary operating inefficiencies largely caused by production transfers and product launches and a $1.6 million increase in a legal reserve in Brazil. This was partially offset by favorable material costs and cost savings related to procurement initiatives. The segment recorded $1.6 million of restructuring charges during the quarter, primarily due to equipment transfer, plant consolidation and employee severance costs.
|
· |
Europe segment sales were $123.9 million compared with $127.7 million one year ago, a decrease of 2.9 percent. On a constant-currency basis, sales decreased 3.2 percent compared with the prior year, driven primarily by lower sales to off-highway customers and the impact of the wind-down of certain automotive programs. The second quarter operating income of $6.7 million was $1.7 million higher than the prior year, primarily due to a $1.2 million gain on the sale of a facility and positive sales mix, as production continues to wind down on lower-margin commercial vehicle programs.
|
· |
Asia segment sales were $24.7 million compared with $18.1 million one year ago, an increase of 37.0 percent. On a constant-currency basis, sales increased 41.2 percent compared with the prior year. The increase was primarily related to higher sales to automotive and off-highway customers in China, and incremental sales related to a recently-formed joint venture. Operating income of $0.8 million improved $2.0 million from the prior year, resulting from higher sales volumes and lower SG&A expenses.
|
· |
Building HVAC segment sales were $45.7 million compared with $48.8 million one year ago, a decrease of 6.3 percent. On a constant-currency basis, sales were up 0.7 percent as compared with the prior year. This increase was primarily due to higher sales of air conditioning and ventilation products in the U.K., partially offset by lower sales of ventilation products and weaker than expected preseason stocking sales of heating products in North America. Operating income of $2.7 million was down $1.2 million, primarily due to unfavorable sales mix and operating inefficiencies in the U.K., partially offset by lower SG&A expenses.
|
· |
Full fiscal year-over-year sales down 1 percent to up 3 percent;
|
· |
Adjusted operating income of $65 million to $71 million; and
|
· |
Adjusted earnings per share of $0.77 to $0.87.
|
Modine Manufacturing Company
|
||||||||||||||||
Consolidated statements of operations (unaudited)
|
||||||||||||||||
(In millions, except per share amounts)
|
||||||||||||||||
|
||||||||||||||||
Three months ended September 30,
|
Six months ended September 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Net sales
|
$
|
317.7
|
$
|
334.0
|
$
|
664.9
|
$
|
680.1
|
||||||||
Cost of sales (a)
|
270.0
|
288.3
|
555.2
|
577.4
|
||||||||||||
Gross profit
|
47.7
|
45.7
|
109.7
|
102.7
|
||||||||||||
Selling, general & administrative expenses (a)
|
48.7
|
76.8
|
93.3
|
119.6
|
||||||||||||
Restructuring expenses
|
2.1
|
1.0
|
4.4
|
3.6
|
||||||||||||
Gain on sale of facility
|
(1.2
|
)
|
-
|
(1.2
|
)
|
-
|
||||||||||
Operating (loss) income (a)
|
(1.9
|
)
|
(32.1
|
)
|
13.2
|
(20.5
|
)
|
|||||||||
Interest expense
|
(3.0
|
)
|
(2.7
|
)
|
(6.0
|
)
|
(5.5
|
)
|
||||||||
Other expense - net
|
(0.1
|
)
|
(0.1
|
)
|
(0.3
|
)
|
(0.1
|
)
|
||||||||
(Loss) earnings before income taxes
|
(5.0
|
)
|
(34.9
|
)
|
6.9
|
(26.1
|
)
|
|||||||||
Benefit (provision) for income taxes
|
1.0
|
12.4
|
(2.0
|
)
|
9.1
|
|||||||||||
Net (loss) earnings
|
(4.0
|
)
|
(22.5
|
)
|
4.9
|
(17.0
|
)
|
|||||||||
Net earnings attributable to noncontrolling interest
|
(0.1
|
)
|
-
|
(0.4
|
)
|
(0.4
|
)
|
|||||||||
Net (loss) earnings attributable to Modine
|
$
|
(4.1
|
)
|
$
|
(22.5
|
)
|
$
|
4.5
|
$
|
(17.4
|
)
|
|||||
Net (loss) earnings per share attributable to Modine shareholders - diluted:
|
$
|
(0.09
|
)
|
$
|
(0.47
|
)
|
$
|
0.09
|
$
|
(0.37
|
)
|
|||||
Weighted-average shares outstanding - diluted:
|
47.1
|
47.4
|
47.3
|
47.4
|
(a)
|
During the quarter ended September 30, 2015, the Company recorded a pension settlement loss of $39.2 million within selling, general & administrative expenses ($30.9 million) and cost of sales ($8.3 million).
|
Condensed consolidated balance sheets (unaudited)
|
||||||||
(In millions)
|
||||||||
|
September 30, 2016
|
March 31, 2016
|
||||||
Assets
|
||||||||
Cash and cash equivalents
|
$
|
63.0
|
$
|
68.9
|
||||
Trade receivables
|
183.3
|
189.1
|
||||||
Inventories
|
112.8
|
111.0
|
||||||
Other current assets
|
43.0
|
43.5
|
||||||
Total current assets
|
402.1
|
412.5
|
||||||
Property, plant and equipment - net
|
340.8
|
338.6
|
||||||
Deferred income taxes
|
127.3
|
123.1
|
||||||
Other noncurrent assets
|
41.8
|
46.7
|
||||||
Total assets
|
$
|
912.0
|
$
|
920.9
|
||||
Liabilities and shareholders' equity
|
||||||||
Debt due within one year
|
$
|
53.8
|
$
|
37.1
|
||||
Accounts payable
|
129.1
|
142.4
|
||||||
Other current liabilities
|
89.2
|
94.1
|
||||||
Total current liabilities
|
272.1
|
273.6
|
||||||
Long-term debt
|
117.2
|
125.5
|
||||||
Other noncurrent liabilities
|
133.8
|
139.1
|
||||||
Total liabilities
|
523.1
|
538.2
|
||||||
Total equity
|
388.9
|
382.7
|
||||||
Total liabilities & equity
|
$
|
912.0
|
$
|
920.9
|
Modine Manufacturing Company
|
||||||||
Condensed consolidated statements of cash flows (unaudited)
|
||||||||
|
(In millions)
|
|||||||
Six months ended September 30,
|
||||||||
2016
|
2015
|
|||||||
Cash flows from operating activities:
|
||||||||
Net earnings (loss)
|
$
|
4.9
|
$
|
(17.0
|
)
|
|||
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
25.4
|
24.7
|
||||||
Insurance proceeds from Airedale fire
|
-
|
1.9
|
||||||
Gain on sale of facility
|
(1.2
|
)
|
-
|
|||||
Pension and postretirement expense
|
1.7
|
40.4
|
||||||
Deferred income taxes
|
(5.6
|
)
|
(14.7
|
)
|
||||
Other - net
|
3.1
|
3.3
|
||||||
Net changes in operating assets and liabilities
|
(14.7
|
)
|
(8.8
|
)
|
||||
Net cash provided by operating activities
|
13.6
|
29.8
|
||||||
Cash flows from investing activities:
|
||||||||
Expenditures for property, plant and equipment
|
(32.0
|
)
|
(30.2
|
)
|
||||
Insurance proceeds from Airedale fire
|
3.0
|
21.0
|
||||||
Costs to replace building and equipment damaged in Airedale fire
|
(1.0
|
)
|
(28.1
|
)
|
||||
Proceeds from dispositions of assets
|
4.3
|
0.1
|
||||||
Other - net
|
(1.2
|
)
|
0.2
|
|||||
Net cash used for investing activities
|
(26.9
|
)
|
(37.0
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Net increase in debt
|
9.2
|
2.3
|
||||||
Other - net
|
(1.1
|
)
|
(1.5
|
)
|
||||
Net cash provided by financing activities
|
8.1
|
0.8
|
||||||
Effect of exchange rate changes on cash
|
(0.7
|
)
|
0.8
|
|||||
Net decrease in cash and cash equivalents
|
(5.9
|
)
|
(5.6
|
)
|
||||
Cash and cash equivalents - beginning of period
|
68.9
|
70.5
|
||||||
Cash and cash equivalents - end of period
|
$
|
63.0
|
$
|
64.9
|
Segment operating results (unaudited)
|
||||||||||||||||
|
(In millions)
|
|||||||||||||||
Three months ended September 30,
|
Six months ended September 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Net sales:
|
||||||||||||||||
Americas
|
$
|
126.0
|
$
|
144.2
|
$
|
266.0
|
$
|
303.3
|
||||||||
Europe
|
123.9
|
127.7
|
269.9
|
258.9
|
||||||||||||
Asia
|
24.7
|
18.1
|
49.6
|
37.4
|
||||||||||||
Building HVAC
|
45.7
|
48.8
|
85.6
|
90.1
|
||||||||||||
Segment total
|
320.3
|
338.8
|
671.1
|
689.7
|
||||||||||||
Corporate and eliminations
|
(2.6
|
)
|
(4.8
|
)
|
(6.2
|
)
|
(9.6
|
)
|
||||||||
Net sales
|
$
|
317.7
|
$
|
334.0
|
$
|
664.9
|
$
|
680.1
|
||||||||
Operating income:
|
||||||||||||||||
Americas
|
$
|
(1.4
|
)
|
$
|
7.8
|
$
|
7.9
|
$
|
17.1
|
|||||||
Europe
|
6.7
|
5.0
|
21.7
|
10.7
|
||||||||||||
Asia
|
0.8
|
(1.2
|
)
|
2.3
|
(0.8
|
)
|
||||||||||
Building HVAC
|
2.7
|
3.9
|
3.6
|
6.0
|
||||||||||||
Segment total
|
8.8
|
15.5
|
35.5
|
33.0
|
||||||||||||
Corporate and eliminations
|
(10.7
|
)
|
(47.6
|
)
|
(22.3
|
)
|
(53.5
|
)
|
||||||||
Operating (loss) income (a)
|
$
|
(1.9
|
)
|
$
|
(32.1
|
)
|
$
|
13.2
|
$
|
(20.5
|
)
|
(a)
|
See the adjusted operating income reconciliation on the next page for information on restructuring expenses and other adjustments.
|
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,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Operating (loss) income
|
$
|
(1.9
|
)
|
$
|
(32.1
|
)
|
$
|
13.2
|
$
|
(20.5
|
)
|
|||||
Restructuring expenses - Americas (a)
|
1.6
|
0.9
|
3.8
|
3.6
|
||||||||||||
Restructuring expenses - other (a)
|
0.5
|
0.1
|
0.6
|
-
|
||||||||||||
Gain on sale of facility (b)
|
(1.2
|
)
|
-
|
(1.2
|
)
|
-
|
||||||||||
Acquisition-related costs (c)
|
3.0
|
-
|
4.4
|
-
|
||||||||||||
Brazil legal reserve (d)
|
1.6
|
-
|
1.6
|
-
|
||||||||||||
Pension settlement loss (e)
|
-
|
39.2
|
-
|
39.2
|
||||||||||||
Adjusted operating income
|
$
|
3.6
|
$
|
8.1
|
$
|
22.4
|
$
|
22.3
|
||||||||
Net (loss) earnings per share attributable to Modine shareholders - diluted
|
$
|
(0.09
|
)
|
$
|
(0.47
|
)
|
$
|
0.09
|
$
|
(0.37
|
)
|
|||||
Restructuring expenses (a)
|
0.03
|
0.01
|
0.06
|
0.05
|
||||||||||||
Gain on sale of facility (b)
|
(0.03
|
)
|
-
|
(0.03
|
)
|
-
|
||||||||||
Acquisition-related costs (c)
|
0.04
|
-
|
0.06
|
-
|
||||||||||||
Brazil legal reserve (d)
|
0.04
|
-
|
0.04
|
-
|
||||||||||||
Pension settlement loss (e)
|
-
|
0.50
|
-
|
0.50
|
||||||||||||
Adjusted (loss) earnings per share
|
$
|
(0.01
|
)
|
$
|
0.04
|
$
|
0.22
|
$
|
0.18
|
Gross profit and SG&A expenses (unaudited)
|
||||||||||||||||
|
(In millions)
|
|||||||||||||||
Three months ended September 30,
|
Six months ended September 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Gross profit
|
$
|
47.7
|
$
|
45.7
|
$
|
109.7
|
$
|
102.7
|
||||||||
Pension settlement loss (e)
|
-
|
8.3
|
-
|
8.3
|
||||||||||||
Gross profit excluding pension settlement loss
|
$
|
47.7
|
$
|
54.0
|
$
|
109.7
|
$
|
111.0
|
||||||||
Net sales
|
$
|
317.7
|
$
|
334.0
|
$
|
664.9
|
$
|
680.1
|
||||||||
Gross margin excluding pension settlement loss
|
15.0
|
%
|
16.2
|
%
|
16.5
|
%
|
16.3
|
%
|
||||||||
SG&A expenses
|
$
|
48.7
|
$
|
76.8
|
$
|
93.3
|
$
|
119.6
|
||||||||
Pension settlement loss (e)
|
-
|
30.9
|
-
|
30.9
|
||||||||||||
SG&A expenses excluding pension settlement loss
|
$
|
48.7
|
$
|
45.9
|
$
|
93.3
|
$
|
88.7
|
(a)
|
Restructuring amounts primarily relate to equipment transfer and plant consolidation costs and employee severance expenses, and include activities under the Company's Strengthen, Diversify and Grow strategic platform. For the three and six months ended September 30, 2016, restructuring expenses within the Building HVAC segment totaled $0.2 million and $0.6 million, respectively. For the six months ended September 30, 2016, restructuring income within the Europe segment totaled $0.3 million. For both the three and six months ended September 30, 2016, restructuring expense at Corporate totaled $0.3 million.
|
(b)
|
During the second quarter of fiscal 2017, the Company sold a facility within its Europe segment for cash proceeds of $4.3 million, and as a result, recorded a gain of $1.2 million.
|
(c)
|
During September 2016, the Company signed a definitive agreement to acquire Luvata Heat Transfer Solutions. Acquisition-related expenses, recorded at Corporate, primarily related to third-party legal and due diligence costs. See the recast Q1 fiscal 2017 adjusted operating income and earnings per share information, which reflects acquisition-related expenses incurred during the first quarter of fiscal 2017, on page 9.
|
(d)
|
During the second quarter of fiscal 2017, the Company increased the legal reserve recorded in Brazil (Americas segment) associated with a formal administrative investigation under Brazil’s antitrust laws.
|
(e)
|
Pension settlement loss, recorded at corporate, related to lump-sum payouts to certain U.S. pension plan participants in fiscal 2016. The income tax benefit related to the pension settlement loss was $15.2 million.
|
Modine Manufacturing Company
|
||||||||
Net debt (unaudited)
|
||||||||
|
(In millions)
|
|||||||
|
||||||||
|
September 30, 2016
|
March 31, 2016
|
||||||
Debt due within one year
|
$
|
53.8
|
$
|
37.1
|
||||
Long-term debt
|
117.2
|
125.5
|
||||||
Total debt
|
171.0
|
162.6
|
||||||
|
||||||||
Less: cash and cash equivalents
|
63.0
|
68.9
|
||||||
Net debt
|
$
|
108.0
|
$
|
93.7
|
Adjusted free cash flow (unaudited)
|
||||||||||||||||
|
(In millions)
|
|||||||||||||||
|
||||||||||||||||
|
Three months ended September 30,
|
Six months ended September 30,
|
||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
Net cash provided by operating activities
|
$
|
12.0
|
$
|
29.9
|
$
|
13.6
|
$
|
29.8
|
||||||||
Expenditures for property, plant and equipment
|
(17.5
|
)
|
(14.2
|
)
|
(32.0
|
)
|
(30.2
|
)
|
||||||||
Payments for restructuring expenses and other adjustments
|
6.3
|
2.8
|
12.6
|
5.9
|
||||||||||||
Adjusted free cash flow
|
$
|
0.8
|
$
|
18.5
|
$
|
(5.8
|
)
|
$
|
5.5
|
Recast Q1 fiscal 2017 adjusted operating income and earnings per share (unaudited)
|
||||||||
|
(In millions, except per share amounts)
|
|||||||
|
||||||||
|
Three months ended June 30, 2016
|
|||||||
|
Previously reported
|
Recast
|
||||||
Operating income
|
$
|
15.1
|
$
|
15.1
|
||||
Restructuring expenses - Americas
|
2.2
|
2.2
|
||||||
Restructuring income - Europe
|
(0.3
|
)
|
(0.3
|
)
|
||||
Restructuring expenses - Building HVAC
|
0.4
|
0.4
|
||||||
Acquisition-related costs - Corporate
|
-
|
1.4
|
||||||
Adjusted operating income
|
$
|
17.4
|
$
|
18.8
|
||||
|
||||||||
Net earnings per share attributable to Modine shareholders - diluted
|
$
|
0.18
|
$
|
0.18
|
||||
Restructuring expenses
|
0.03
|
0.03
|
||||||
Acquisition-related costs
|
-
|
0.02
|
||||||
Adjusted earnings per share
|
$
|
0.21
|
$
|
0.23
|
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