Modine reports third quarter fiscal 2015 results

Special to The Freeman

Feb. 4, 2015

RACINE  Modine Manufacturing Company (NYSE: MOD), a diversified global leader in thermal management technology and solutions, is reporting a an increase in sales for its third quarter.

Sales in the third quarter of fiscal 2015 grew $16.6 million, or 5 percent, from the third quarter of fiscal 2014. On a constant currency basis, sales were up 9 percent, with increases in all segments other than South America, as economic conditions remained weak in Brazil.

Gross profit increased $2.6 million, or 5 percent, and gross margin was flat at 16.4 percent, as positive volume impacts were offset by higher materials costs. Selling, general and administrative expenses increased $0.7 million, but were down as a percentage of sales. The company recorded $1.9 million of restructuring expenses, of which $0.6 million related to the ongoing restructuring program in Europe, $0.7 million related to severance expenses in South America, and $0.6 million related to the closure of the McHenry, Illinois manufacturing facility in North America.

The company also recorded a $3.2 million gain on the sale of a wind tunnel in Europe during the quarter.

Earnings from continuing operations of $9.1 million improved $12.5 million from the prior year. Excluding restructuring expenses and the gain on the sale of the wind tunnel, the company reported adjusted operating income of $14.2 million, up $1.9 million from the prior year, and adjusted earnings per share of $0.15, compared with $0.16 in the third quarter of last year.

Free cash flow in the quarter was $10.0 million. Net debt was $73.7 million as of Wednesday, December 31, 2014, which is a decrease of $3.5 million from the end of fiscal 2014. Cash and cash equivalents at the end of the third quarter were $79.9 million.

"We anticipate that the heating and commercial truck markets will remain strong for the remainder of our fiscal year," said Modine President and Chief Executive Officer, Thomas A. Burke. "However, we expect further weakness inSouth America and in the global off-highway markets and continued, unfavorable currency conditions. Based on these factors and given the proximity to our fiscal year-end, we are lowering our revenue guidance and tightening our earnings guidance range at this time."

Based on current exchange rates and market outlook, Modine provides the following guidance for fiscal 2015:

     Full fiscal year-over-year sales up 1 to 3 percent, which reflects an approximately 150 basis point reduction in sales growth as a result of unfavorable foreign exchange rates compared to our prior outlook of a 3 to 6 percent annual sales increase;

     Adjusted operating income of $65 million to $70 million, up from $61.3 million in fiscal 2014; and

     Adjusted earnings per share of $0.63 to $0.70, reflecting the impact of higher income tax expense following our reversal of the U.S. valuation allowance in the fourth quarter of fiscal 2014.

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