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TheStreet Open House

Modine Reports Third Quarter Fiscal 2013 Results; Continues European Restructuring; Affirms Guidance

Financial Disclosures

Operating income excluding impairment and restructuring charges, earnings per share excluding impairment and restructuring charges, constant currency, net debt and free cash flow (which are defined below) as used in this press release are not measures that are defined in generally accepted accounting principles (GAAP). These non-GAAP measures are used by management as performance measures to judge liquidity and the company’s overall performance. These measures provide a more consistent view of performance than the closest GAAP equivalent for management and investors. Management compensates for this by using these measures in combination with the GAAP measures. However, these measures are not, and should not be, viewed as substitutes for the GAAP measures.

Definition – Operating income and earnings per share excluding impairment and restructuring charges

Operating income (loss) or earnings per share plus impairment charges and restructuring and repositioning expenses within the Europe segment. These are measures of overall performance not including non-cash impairment charges and costs associated with our restructuring program in Europe.

Definition – Constant currency

Constant currency translates financial data from foreign operations for a period into U.S. Dollars using the same foreign currency exchange rates as those used to translate financial data for the prior period. This measure provides a more consistent indication of our performance, without the effects of currency exchange rate fluctuations.

Definition - Net debt

The sum of debt due within one year and long-term debt, less cash on hand. This is an indicator of the company's debt position after considering on hand cash balances.

Definition - Free cash flow

Net cash provided by operating activities less expenditures for property, plant and equipment. This is a measure of cash generated from operations during the period that is available for strategic capital decisions.

- Financial tables follow -

         
Modine Manufacturing Company
Consolidated statements of operations (unaudited)
(In millions, except per share amounts)
 
Three months ended December 31, Nine months ended December 31,
2012   2011* 2012   2011*
Net sales $ 326.1 $ 373.3 $ 1,016.4 $ 1,188.4
Cost of sales   277.9     313.2     863.9     996.1  
Gross profit 48.2 60.1 152.5 192.3
Selling, general & administrative expenses 42.3 40.7 126.8 140.4
Impairment charges 8.3 2.2 25.1 2.2
Restructuring and repositioning expenses   1.4     -     7.3     -  
Operating (loss) income (3.8 ) 17.2 (6.7 ) 49.7
Interest expense (2.8 ) (2.9 ) (9.2 ) (9.2 )
Other expense - net   (0.3 )   (1.6 )   -     (7.6 )
(Loss) earnings from continuing operations before income taxes (6.9 ) 12.7 (15.9 ) 32.9
Provision for income taxes   (1.5 )   (3.9 )   (5.3 )   (10.6 )
(Loss) earnings from continuing operations (8.4 ) 8.8 (21.2 ) 22.3
Earnings from discontinued operations (net of income taxes)   -     0.3     -     0.7  
Net (loss) earnings (8.4 ) 9.1 (21.2 ) 23.0
Less: Net earnings attributable to noncontrolling interest   (0.3 )   (0.1 )   (0.9 )   (0.1 )
Net (loss) earnings attributable to Modine $ (8.7 ) $ 9.0   $ (22.1 ) $ 22.9  
 
 
(Loss) earnings per share from continuing operations attributable to Modine shareholders:
Basic $ (0.19 ) $ 0.18 $ (0.47 ) $ 0.47
Diluted $ (0.19 ) $ 0.18 $ (0.47 ) $ 0.47
 
Net (loss) earnings per share attributable to Modine shareholders:
Basic $ (0.19 ) $ 0.19 $ (0.47 ) $ 0.49
Diluted $ (0.19 ) $ 0.19 $ (0.47 ) $ 0.49
 
Weighted average shares outstanding:
Basic 46.7 46.5 46.6 46.5
Diluted 46.7 46.8 46.6 46.9
 
                   
 
Condensed consolidated balance sheets (unaudited)
          (In millions)
      December 31, 2012   March 31, 2012

Assets

Cash and cash equivalents $ 32.9 $ 31.4
Trade receivables 161.8 216.1
Inventories 121.4 120.8
Other current assets   59.3     59.2  
Total current assets   375.4     427.5  
Property, plant and equipment - net 359.4 412.1
Other noncurrent assets   64.8     53.9  
Total assets $ 799.6   $ 893.5  
 

Liabilities and shareholders' equity

Debt due within one year $ 27.1 $ 22.4
Accounts payable 123.7 156.9
Other current liabilities   90.7     118.3  
Total current liabilities   241.5     297.6  
Long-term debt 137.6 141.9
Other noncurrent liabilities   117.7     127.9  
Total liabilities   496.8     567.4  
Total equity   302.8     326.1  
Total liabilities & equity $ 799.6   $ 893.5  
 
* Prior period results have been revised to reflect the correction of errors identified in fiscal 2012 (quarter ended March 31, 2012).
       
Modine Manufacturing Company
Condensed consolidated statements of cash flows (unaudited)
            (In millions)
Nine months ended December 31,       2012   2011*
 
Cash flows from operating activities:
Net (loss) earnings $ (21.2 ) $ 23.0

Adjustments to reconcile net (loss) earnings with net cash provided by operating activities:

Depreciation and amortization 41.8 43.4
Impairment charges 25.1 2.2
Other - net 9.2 15.0
Net changes in operating assets and liabilities   (13.5 )     (65.3 )
Net cash provided by operating activities   41.4       18.3  
 
Cash flows from investing activities:
Expenditures for property, plant and equipment (33.6 ) (45.3 )
Acquisition, net of cash received (4.9 ) -
Other - net   (1.3 )     0.2  
Net cash used for investing activities   (39.8 )     (45.1 )
 
Cash flows from financing activities:
Net increase in debt 0.3 20.4
Other - net   (0.2 )     0.9  
Net cash provided by financing activities   0.1       21.3  
 
Effect of exchange rate changes on cash   (0.2 )     (1.3 )
 
Net increase (decrease) in cash and cash equivalents 1.5 (6.8 )
 
Cash and cash equivalents at beginning of the period 31.4 32.9
     
Cash and cash equivalents at end of the period $ 32.9     $ 26.1  
 
                   
 
 
Segment operating results (unaudited)
                  (In millions)
 
Three months ended December 31, Nine months ended December 31,
2012   2011* 2012   2011*
Net sales:
North America $ 128.2 $ 139.2 $ 425.2 $ 444.7
Europe 115.7 139.9 359.9 458.7
South America 31.7 42.2 97.1 138.2
Asia 13.2 20.9 42.8 62.1
Commercial Products   41.3       39.3     105.3       108.5  
Segment net sales 330.1 381.5 1,030.3 1,212.2
Corporate and eliminations   (4.0 )     (8.2 )   (13.9 )     (23.8 )
Net sales $ 326.1     $ 373.3   $ 1,016.4     $ 1,188.4  
 
Operating income (loss):
North America (a) $ 8.2 $ 10.6 $ 28.9 $ 32.4
Europe (b) (5.7 ) 6.8 (15.8 ) 26.8
South America 2.6 4.0 7.6 9.8
Asia (2.5 ) (1.5 ) (7.1 ) (1.4 )
Commercial Products   4.7       5.8     8.3       12.1  
Segment operating income 7.3 25.7 21.9 79.7
Corporate and eliminations   (11.1 )     (8.5 )   (28.6 )     (30.0 )
Operating (loss) income $ (3.8 )   $ 17.2   $ (6.7 )   $ 49.7  
 
(a) The year-to-date fiscal 2013 operating income includes $1.0 million of impairment charges.
 
(b) The third quarter fiscal 2013 operating loss includes $9.7 million of impairment, restructuring and repositioning charges.
The year-to-date fiscal 2013 operating loss includes $31.4 million of impairment, restructuring and repositioning charges.
 
* Prior period results have been revised to reflect the correction of errors identified in fiscal 2012 (quarter ended March 31, 2012).
       
Modine Manufacturing Company
Operating income and earnings per share excluding impairment and restructuring charges (unaudited)
(In millions, except per share amounts)
 
Three months ended December 31, Nine months ended December 31,
2012   2011 2012   2011
Operating (loss) income $ (3.8 ) $ 17.2 $ (6.7 ) $ 49.7
Impairment charges - Europe 8.3 2.2 24.1 2.2
Impairment charges - North America - - 1.0 -
Restructuring and repositioning expenses - Europe (a)   1.4     -     7.3     -  
Operating income excluding impairment and

restructuring charges

$ 5.9   $ 19.4   $ 25.7   $ 51.9  
 

Net (loss) earnings per share attributable to Modine shareholders - diluted

$ (0.19 ) $ 0.19 $ (0.47 ) $ 0.49
Impairment charges - Europe 0.18 0.05 0.52 0.05
Impairment charges - North America - - 0.02 -
Restructuring and repositioning expenses - Europe (a)   0.03     -     0.15     -  
Earnings per share excluding impairment and

restructuring charges

$ 0.02   $ 0.24   $ 0.22   $ 0.54  
 
(a) Restructuring and repositioning expenses primarily relate to salaried headcount reductions at our regional headquarters in Germany.
 

There is no income tax impact as a result of the impairment, restructuring and repositioning charges because of income tax valuation allowances in the U.S. and Germany.

                 
 
Net debt (unaudited)
                (In millions)
 
 
December 31, 2012   March 31, 2012
Debt due within one year $ 27.1 $ 22.4
Long-term debt   137.6     141.9  
Total debt   164.7     164.3  
 
Less: cash and cash equivalents   32.9     31.4  
Net debt $ 131.8   $ 132.9  
                 
 
Free cash flow (unaudited)
                (In millions)
 
Three months ended December 31, Nine months ended December 31,
2012   2011 2012   2011
Net cash provided by operating activities $ 14.6 $ 15.1 $ 41.4 $ 18.3
Expenditures for property, plant and equipment   (12.9 )   (12.8 )   (33.6 )   (45.3 )
Free cash flow $ 1.7   $ 2.3   $ 7.8   $ (27.0 )




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