Modine Reports Third-Quarter Results in Line With Expectations
17 January 2001
Modine Reports Third-Quarter Results in Line With Expectations
RACINE, Wis.--Jan. 17, 2001--Modine Manufacturing Company today reported third-quarter results that were consistent with projections made on Nov. 30, 2000.For the period ended Dec. 26, sales of $252 million were down 11 percent from the prior year and earnings of $6 million, or $0.20 per diluted share, declined 62 percent. The company's most recent forecast projected quarterly sales and earnings to decrease 10-13 percent and 55-65 percent, respectively. Net earnings in the current quarter were also impacted negatively by $3 million in nonrecurring, pre-tax charges related to exiting an unprofitable product line in Europe and severance charges related to staff reductions in North America.
On Nov. 30, Modine revised its outlook for the fiscal year ending March 31, 2001. The new forecast estimated annual sales to be 7- to 10-percent lower and earnings 25- to 30-percent below the previous year. The primary factors behind the revised projection included: a sharply lower heavy-truck market; slowing light-vehicle sales plus a delay in the startup of a new business program; continued softness in the North American aftermarket; and protracted weakness in the Euro versus the U.S. dollar. With the exception of the Euro, which recently has strengthened somewhat, there have been no appreciable changes in these external market forces, and Modine anticipates similar market conditions to prevail for the balance of this fiscal year.
Although worldwide sales to off-highway and building-HVAC (heating, ventilating, air-conditioning) customers rose in the quarter, these increases were not sufficient to offset lower sales to truck and auto OEMs (original equipment manufacturers) and to the automotive aftermarket. In addition, volume increases in Europe were more than offset by the continuing strength of the U.S. dollar. The currency translation effect in the quarter reduced revenues by $20 million and earnings by four cents per share.
Both cost of sales and SG&A (selling, general & administrative) expenses were down in absolute terms compared with the prior year's third quarter even though both increased slightly on a relative basis due to a greater reduction in sales in the current quarter. Modine also experienced significantly higher effective tax rates in the current period compared with the year before, related to changes in tax-loss carryforwards at a foreign subsidiary. The difference was due primarily to a one-time adjustment, increasing taxes by $1 million in the current period, compared with a tax reduction amounting to $4 million last year.
Nine-month sales of $809 million were down five percent and earnings of $43 million, or $1.46 per diluted share, decreased 15 percent. Sales would have been $45 million higher without the impact of a stronger U.S. dollar, which also reduced consolidated earnings by ten cents per diluted share.
Despite the lower earnings, year-to-date operating cash flows of $115 million were at record levels, having increased $56 million over the same period the year before, due primarily to working-capital reductions. Year-to-date capital expenditures were 26 percent below spending levels in the prior period. Inventories were down more than 16 percent from the same time last year. Total debt to equity decreased to 33 percent from 49 percent the year before.
On Dec. 14, Modine announced its entry into the fastest-growing segment of the electronics-cooling market through the proposed acquisition of Thermacore International, Inc. Thermacore provides customized thermal-management solutions for high-end servers, telecommunications equipment, and other electronics applications. The total transaction of $110 million will be accounted for as a pooling of interests of the two companies and is expected to be accretive to earnings in Modine's next fiscal year. The closing date is anticipated to occur in early 2001. This immediate growth platform in a new, high-growth market complements Modine's recently announced development work on CO2 (carbon dioxide) air-conditioning systems and on thermal management of fuel cells. This new electronics-cooling line of business also represents a significant opportunity for the company to broaden its revenue base and drive earnings growth going forward.
These and other forward-looking statements about sales, earnings, and operations involve risks and uncertainties, as detailed on page 17 of Modine's Annual Report to shareholders.
With sales of more than $1 billion, Modine has operations in 18 countries and employs about 8,100 persons worldwide. Modine specializes in thermal management, bringing technology to diversified markets. Core markets include: powertrain cooling of internal combustion engines, vehicular and building HVAC (heating, ventilating, air-conditioning), and various industrial and refrigeration markets. Modine is on the Internet at www.modine.com.
Modine Manufacturing Company
Consolidated statements of earnings for the third quarter, nine-month
period, and trailing 12 months ended December 26, 2000 and 1999
(unaudited)
(In thousands, except per-share amounts)
----------------------------------------------------------------------
Three months Nine months Twelve months
ended December 26 ended December 26 ended December 26
2000 1999 2000 1999 2000 1999
----------------------------------------------------------------------
Net sales $252,346 $283,520 $808,605 $854,058 $1,093,816 $1,135,085
Cost of
sales 186,884 205,184 589,545 614,169 797,155 816,798
----------------------------------------------------------
Gross profit 65,462 78,336 219,060 239,889 296,661 318,287
Selling,
general, &
administrative
expenses 53,507 57,016 164,449 163,467 219,434 215,081
----------------------------------------------------------
Income from
operations 11,955 21,320 54,611 76,422 77,227 103,206
Interest
(expense) (1,758) (2,490) (5,929) (6,004) (8,392) (7,983)
Patent
settlements 0 0 16,959 1,000 16,959 1,000
Other income -
net 1,012 772 5,566 3,367 5,959 6,342
----------------------------------------------------------
Earnings before
income taxes 11,209 19,602 71,207 74,785 91,753 102,565
Provision for
income taxes 5,100 3,407 28,118 23,985 34,061 34,324
----------------------------------------------------------
Net earnings $6,109 $16,195 $43,089 $50,800 $ 57,692 $ 68,241
----------------------------------------------------------
Net earnings as a
percent of net
sales 2.4% 5.7% 5.3% 5.9% 5.3% 6.0%
Net earnings per share of common stock:
Basic $0.21 $0.55 $1.47 $1.72 $1.97 $2.31
Assuming
dilution 0.20 0.55 1.46 1.71 1.95 2.29
Weighted average shares outstanding:
Basic 29,486 29,494 29,275 29,519 29,337 29,516
Assuming
dilution 29,809 29,657 29,426 29,781 29,546 29,794
Net cash provided
by operating
activities $32,837 $29,548 $114,905 $59,237 $146,870 $74,483
Earnings before
interest expense,
income taxes,
depreciation, and
amoritization
expense $24,416 $34,678 $113,061 $117,669 $148,012 $157,668
Dividends paid
per share $0.25 $0.23 $0.75 $0.69 $0.98 $0.90
Comprehensive(loss)/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
December 26, 2000 and 1999, respectively, were $(1,877) and $12,707
for 3 months, $29,806 and $47,423 for 9 months, and $44,498 and
$53,137 for 12 months.
Consolidated condensed balance sheets (unaudited)
(In thousands)
December 26, 2000 March 31, 2000
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Assets
------
Cash and cash equivalents $ 19,855 $ 31,070
Trade receivables - net 158,986 182,724
Inventories 148,391 168,597
Other current assets 36,913 47,164
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Total current assets 364,145 429,555
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Property, plant, and equipment - net 350,989 337,987
Other noncurrent assets 160,176 163,565
------------------------------
Total assets $ 875,310 $ 931,107
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Liabilities
-----------
Debt due within one year $ 25,999 $ 9,447
Accounts payable 70,297 84,893
Other current liabilities 87,625 81,137
------------------------------
Total current liabilities 183,921 175,477
------------------------------
Long-term debt 137,547 211,112
Deferred income taxes 25,293 24,536
Other noncurrent liabilities 39,281 39,740
------------------------------
Total liabilities 386,042 450,865
------------------------------
Shareholders' investment 489,268 480,242
------------------------ ------------------------------
Total liabilities and
shareholders' investment $ 875,310 $931,107
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