Modine Announces Second Quarter Results and Revises Full-Year Outlook
RACINE, Wis.--Oct. 17, 2001--Modine Manufacturing Company reported sales of $269.1 million and earnings of $6.8 million, or $0.20 per fully diluted share for the quarter ended September 26th, 2001, the company's second-fiscal quarter. Sales declined 5.3% from the $284.1 million reported a year ago. Net earnings declined 66.5% from $20.4 million a year ago. Year-over-year earnings comparisons were negatively affected by a change in Modine's effective tax rate and a prior period patent settlement. The most recent quarter's effective tax rate rose 2.9 percentage points to 40.2% from 37.3% in the year ago period. Last year's results included a one-time, $17.0 million-patent settlement. Excluding the effect of the higher taxes and patent settlements, earnings declined by 26.3%.Sales for the first six months of the fiscal year declined 5.9% to $549.7 million from $584.5 million a year ago. Net earnings declined 56.9% to $17.0 million, or $0.51 per fully diluted share. If the effects of higher taxes and patent settlements were excluded, year-to-date earnings would have declined by 40.1%.
The company's second-quarter results were affected by a number of industry-wide factors related to a weakening U.S. economy. The North American heavy-truck market remained at depressed levels, off 50% from recent peak production volumes. Also, a weakening North American light-vehicle market served to mitigate the positive effects of new product launches. Demand for Modine's agricultural and construction products remained flat in the current quarter against the prior year's weak levels. The company's building ventilation-and-air-conditioning business was hurt by declining construction activity during the quarter. Modine's newest market, electronics cooling, was affected negatively in the quarter by the continued downturn in the computer and telecommunications equipment markets. Quarterly European revenues increased slightly in local currency from year ago levels, but finished down 4.1% due to a $4.6 million exchange-rate penalty.
In spite of very difficult market conditions, the company continued to maintain a solid balance sheet and generate strong operating cash flow in the second quarter. Specifically, Modine was able to generate $39.4 million in cash flow from operations in the second quarter and a total of $69.6 million for the first six months of the fiscal year. Similarly, second-quarter- capital expenditures were reduced 46.8% to $11.9 million from $22.4 million in the previous year. For the first half, capital expenditures were reduced by 35.8% to $25.1 million versus $39.2 million at this point in fiscal 2001. Compared to a year ago, Modine's working capital was down 15.5%, or $33.4 million, as a result of continued focus in this key area. Total interest-bearing debt declined by $11.7 million from a year ago and remained low at 24.0% of total capital.
Modine believes that the U.S. economy has continued to weaken during the year and the September 11th terrorist attacks have created additional elements of uncertainty. Due to the softening economy, the company sees continued weakness in its key markets. As a result, Modine is updating its forecast for the remainder of the fiscal year. Modine now expects fully diluted earnings per share to be in the $.75 to $.85 range, excluding any one-time items.
Modine's management is responding to this weakened outlook by reducing excess capacity and will take a $14 to $18 million pretax restructuring charge in the third quarter of fiscal 2002. This restructuring will include the closure and consolidation of six production facilities. Management expects the restructuring action to produce approximately $12 million in pretax annual savings, once fully in place.
Management remains optimistic about Modine's long-term outlook. The company continues to maintain a solid balance sheet and future growth prospects. Reduced capital expenditures and additional working capital improvements should continue to generate strong cash flow. Modine will be well-positioned for growth, once economic conditions improve in its core markets and have created additional opportunities by entering new markets such as the thermal management of fuel cells and electronics cooling.
Modine specializes in thermal management, bringing technology to diversified markets. Core markets include vehicles, HVAC (heating, ventilating, air conditioning), industrial, refrigeration, fuel cells, and electronics cooling. Modine can be found on the Internet at www.modine.com.
This news release contains forward-looking statements that involve assumptions, risks, and uncertainties, and Modine's actual results, performance, or achievements may differ materially from those expressed or implied in these statements. A detailed discussion of factors that could affect Modine's results are on page 19 of the company's fiscal 2001 Annual Report to Shareholders and in other public filings with the U.S. Securities and Exchange Commission. Modine does not assume any obligation to update any of these forward-looking statements.
Modine Manufacturing Company
Consolidated statements of earnings for the periods ended September
26, 2001 and 2000 (unaudited)(a)
(In thousands, except per-share amounts)
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Three months Six months
ended September 26 ended September 26
2001 2000 2001 2000
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Net sales $ 269,114 $ 284,056 $ 549,745 $ 584,497
Cost of sales 204,151 208,155 410,819 420,709
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Gross profit 64,963 75,901 138,926 163,788
Selling, general, &
administrative expenses 55,053 60,281 111,574 116,713
--------------------- ---------------------
Income from operations 9,910 15,620 27,352 47,075
Interest (expense) (2,142) (2,187) (4,207) (4,479)
Patent settlement - 16,959 - 16,959
Other income - net 3,656 2,077 5,193 4,708
--------------------- ---------------------
Earnings before
income taxes 11,424 32,469 28,338 64,263
Provision for income taxes 4,595 12,106 11,291 24,687
--------------------- ---------------------
Net earnings $ 6,829 $ 20,363 $ 17,047 $ 39,576
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Net earnings as a percent
of net sales 2.5% 7.2% 3.1% 6.8%
Net earnings per share of
common stock:
Basic $ 0.21 $ 0.63 $ 0.52 $ 1.23
Assuming dilution 0.20 0.62 0.51 1.21
Weighted average shares
outstanding:
Basic 33,041 32,175 32,962 32,171
Assuming dilution 33,394 32,900 33,296 32,842
Net cash provided by
operating activities $ 39,366 $ 42,397 $ 69,550 $ 85,157
Earnings before interest
expense, income taxes,
depreciation, and
amortization expense $ 28,415 $ 47,230 $ 61,482 $ 93,971
Dividends paid per share $ 0.25 $ 0.25 $ 0.50 $ 0.50
Comprehensive earnings, which represents net earnings adjusted by the
change in foreign-currency translation and minimum pension liability
recorded in shareholders' equity, for the periods ended September 26,
2001 and 2000 respectively, were $10,332 and $18,530 for 3 months, and
$8,470 and $34,157 for 6 months.
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Consolidated condensed balance sheets (unaudited)(a)
(In thousands)
----------------------------------------------------------------------
September 26, 2001 March 31, 2001
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Assets
Cash and cash equivalents $ 34,745 $ 21,744
Trade receivables - net 181,051 177,972
Inventories 135,252 153,096
Other current assets 35,754 55,248
---------------------------------
Total current assets 386,802 408,060
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Property, plant, and equipment
- net 365,094 366,854
Other noncurrent assets 160,703 162,264
---------------------------------
Total assets $ 912,599 $ 937,178
---------------------------------
Liabilities
Debt due within one year $ 45,070 $ 45,160
Accounts payable 73,835 80,028
Other current liabilities 86,011 84,822
---------------------------------
Total current liabilities 204,916 210,010
---------------------------------
Long-term debt 118,209 137,766
Deferred income taxes 32,559 31,796
Other noncurrent liabilities 39,556 38,909
---------------------------------
Total liabilities 395,240 418,481
---------------------------------
Shareholders' equity 517,359 518,697
-------------------- ---------------------------------
Total liabilities &
shareholder's equity $ 912,599 $ 937,178
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(a) In April 2001, Modine acquired Thermacore International, Inc., in
a merger accounted for as a pooling of interests. Financial
statements are presented as though Thermacore had always been a
part of Modine.