Good And Bad News For Modine Third Quarter Results for Fiscal 2002
RACINE, Wis.--Jan. 17, 2002--Modine Manufacturing Company today reported net earnings of $1.3 million or $0.04 per fully diluted share on total revenue of $270.4 million for the quarter ended December 26, 2001, the company's third fiscal quarter. Compared to the prior year, revenue increased by 1.9% and net earnings declined by 82.3%. Earnings in the current period were impacted negatively by restructuring charges of $8.5 million and other closure related costs of $3.8 million associated with the company's previously announced plans to reduce manufacturing capacity. The one-time charges related to capacity reductions were partially offset by a $6.5 million reduction to workers' compensation reserves, which resulted from a change in accounting estimates. Excluding these one-time items, operating income declined by 24.7% to $10.1 million for the quarter. Also in the quarter, the company's effective income tax rate was substantially higher at 65.8% versus 44.0% due to the greater relative impact of non-deductible expenses in the current quarter.Sales for the first nine months declined 3.5% to $820.2 million from $849.9 million. Modine's reported earnings declined 60.8% to $18.3 million from $46.6 million reported during the first nine months of last year. Year-to-date earnings also included the same one-time items that affected the third quarter, as well as additional expenses related to the Thermacore acquisition. In total, these one-time items reduced year-to-date earnings by approximately $9.0 million on a pretax basis. In addition, Modine's last fiscal year included pretax patent settlements totaling $17.0 million in the second quarter. Excluding the one-time items, Modine's operating income would have declined 38.1% to $37.4 million from $60.5 million. The company's year-to-date income tax rate also increased to 42.8% from 39.3% last year.
During the current fiscal year, Modine has improved its balance sheet, reduced capital spending, reduced total debt, and generated strong cash flow. Excluding cash, Modine reduced its working capital by $47.6 million or 27.0% during the first nine months of the fiscal year. A major driver of the working capital improvement was a $27.5 million or 18.0% reduction in inventory. Also during the year, the company reduced capital expenditures by 47.0% to $31.2 million from $58.9 million in the prior year. Modine ended the quarter with $63.8 million in cash, a $42.1 million increase from the beginning of the year. For the quarter and year-to-date, the company was able to generate cash flow from operations of $38.1 million and $107.6 million, respectively. As a result, Modine was able to reduce total debt from the beginning of the year by $22.7 million to $160.3 million.
Both quarter and year-to-date sales were positively affected by the introduction of new programs in Modine's North American and European automotive businesses. However, Modine continues to experience weakness in the aftermarket, heavy-duty, truck, electronics, and heating markets. In addition to general market softness, Modine's earnings have been negatively affected by pricing pressures in key markets and higher levels of depreciation. Management has responded by taking strong measures to improve short-term performance while continuing to work on future thermal management technologies that will create long-term growth opportunities for Modine. Year-to-date, Modine has reduced SG&A expenses by $8.1 million or 4.7%. The company is executing its restructuring plan and expects to incur other closure-related costs over the next 12 months. Through the restructuring, Modine will reduce underperforming assets and increase overall asset utilization. The company expects to begin realizing the savings and synergies from these actions in the next fiscal year.
Excluding restructuring costs and other one-time items, Modine anticipates that its earnings for the fiscal year ending March 31, 2002 will be at the lower end of the $0.75 to $0.85 range provided in the company's last quarterly earnings release. Modine continues to win new business in core markets, as demonstrated by its recent announcement with BMW. In addition, its research and development work in electronics cooling, CO2 air-conditioning, and fuel cells is creating significant new growth opportunities.
Modine specializes in thermal management, bringing heating and cooling technology to diversified markets. Modine products are used in light, medium and heavy-duty vehicles, HVAC (heating, ventilating, air conditioning) equipment, industrial equipment, refrigeration systems, fuel cells, and electronics. 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 December 26,
2001 and 2000 (unaudited)(1)
(In thousands, except per-share amounts)
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Three months Nine months
ended December 26 ended December 26
2001 2000 2001 2000
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Net sales $270,433 $265,393 $820,178 $849,890
Cost of sales 203,592 195,209 614,411 615,918
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Gross profit 66,841 70,184 205,767 233,972
Selling, general, &
administrative expenses 53,864 56,808 165,438 173,521
Restructuring charges 8,507 - 8,507 -
--------------------- ---------------------
Income from
operations 4,470 13,376 31,822 60,451
Interest (expense) (1,822) (1,946) (6,029) (6,425)
Patent settlement - - - 16,959
Other income - net 1,017 1,178 6,210 5,886
--------------------- ---------------------
Earnings before
income taxes 3,665 12,608 32,003 76,871
Provision for
income taxes 2,413 5,549 13,704 30,236
--------------------- ---------------------
Net earnings $ 1,252 $ 7,059 $ 18,299 $ 46,635
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Net earnings as a
percent of net sales 0.5% 2.7% 2.2% 5.5%
Net earnings per share
of common stock:
Basic $0.04 $0.22 $0.55 $1.45
Assuming dilution 0.04 0.22 0.55 1.42
Weighted average shares
outstanding:
Basic 33,224 32,198 33,050 32,180
Assuming dilution 33,382 32,813 33,325 32,832
Net cash provided by
operating activities $ 38,061 $ 34,801 $107,611 $119,958
Earnings before
interest expense, income taxes,
depreciation,
and amortization
expense $ 21,684 $ 26,358 $ 83,166 $120,329
Dividends paid per share $0.25 $0.25 $0.75 $0.75
Comprehensive earnings/(loss), which represents net earnings
adjusted by the change in foreign-currency translation and minimum
pension liability recorded in shareholders' equity, for the periods
ended December 26, 2001 and 2000, respectively, were $3,611 and $(988)
for 3 months, and $12,081 and $33,169 for 9 months.
(1) 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.
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Consolidated condensed balance sheets (unaudited)(1)
(In thousands)
----------------------------------------------------------------------
December March
26, 2001 31, 2001
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Assets
Cash and cash equivalents $ 63,828 $ 21,744
Trade receivables - net 169,226 177,972
Inventories 125,586 153,096
Other current assets 36,868 55,248
----------------------
Total current assets 395,508 408,060
----------------------
Property, plant, and equipment - net 354,726 366,854
Other noncurrent assets 159,612 162,264
----------------------
Total assets $909,846 $937,178
----------------------
Liabilities
Debt due within one year $ 42,443 $ 45,160
Accounts payable 73,518 80,028
Other current liabilities 86,995 84,822
----------------------
Total current liabilities 202,956 210,010
----------------------
Long-term debt 117,811 137,766
Deferred income taxes 33,086 31,796
Other noncurrent liabilities 40,586 38,909
----------------------
Total liabilities 394,439 418,481
----------------------
Shareholders' equity 515,407 518,697
----------------------
Total liabilities & shareholder's equity $909,846 $937,178
----------------------
(1) 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.