Modine Manufacturing Company (MOD)
F4Q10 (Qtr End 03/31/10) Earnings Call
June 3, 2010 11:00 am ET
Susan Fisher – Director, IR and Corporate Communications
Tom Burke – President and CEO
Bob Kampstra – VP, Corporate Controller and Chief Accounting Officer
Greg Williams – JPMorgan Chase
Walt Liptak – Barrington Research Associates, Inc.
Adam Brooks – Sidoti & Company
David Leiker – Robert W. Baird & Co.
Brian Sponheimer – Gabelli & Company, Inc.
Previous Statements by MOD
» Modine Manufacturing Company F3Q10 (Qtr End 12/31/09) Earnings Call Transcript
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» Modine Manufacturing Company F2Q09 (Qtr End 09/30/08) Earnings Call Transcript
Good day, ladies and gentlemen and welcome to the Modine Manufacturing Q4 earnings conference call. My name is Deidre and I will be your coordinator for today's call. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session following the presentation. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.
I would now like to turn the presentation over to your host for today's call, Ms. Susan Fisher, Director of Investor Relations and Corporate Communications. Please proceed.
Thank you, operator and thank you to everyone for joining us today for Modine's fourth quarter fiscal 2010 earnings call. With me today are Modine's President and CEO, Tom Burke; as well as Bob Kampstra, our Vice President, Controller, and Chief Accounting Officer.
We will be using slides with today's presentation. Those slides are available through both the webcast link, as well as a PDF file which is posted on the Investor Relations homepage of our company website modine.com. Also, should you need to exit the call prior to its conclusion, a replay will be available through our website beginning approximately two hours after the call concludes or through replay – dial-in information, which is included in today's earnings release.
Before we begin, I would remind you that this call may contain forward-looking statements as outlined in today's earnings release, as well as in our company's filings with the Securities and Exchange Commission.
With that, it is my pleasure to turn the call over to Tom Burke. Tom?
Thanks, Susan and good morning everyone. Let me start first with an overview of our full fiscal year results. Although fiscal 2010 challenged our company and many others in a number of ways, we are proud of the measurable progress we made this past year. While there is still more to do, Modine has come a long way in the past 12 months. We addressed our debt covenant challenges and have a strong balance sheet while our financial results have improved substantially.
For the year, we saw a 17% decrease in our sales. However, we recorded modest sequentially sales growth in each of the last three quarters. Year-over-year, despite the lower sales, our gross margin improved by 130 basis points to 14.6%. At the same time, through a concerted effort by our employees, our SG&A decreased by $42 million to $158 million in total or 13.5% of sales versus 14.2% of sales a year earlier.
Our pretax results improved by $92 million from a loss of $103 million in fiscal 2009 to a loss of $11 million in fiscal 2010. Our adjusted EBITDA totaled $86 million for the year, which far exceeded our minimum adjusted EBITDA loan covenants. Free cash flow for the year was a positive $23 million on our improved year-over-year results.
To sum it up, fiscal 2010 was a pivotal year for Modine. We entered the year with a two-fold mission, first, get the company through the severe economic downturn and second, emerge from it a leaner, stronger, more competitive company. Through the commitment and hard work of our employees around the world, we have achieved both of these near-term objectives and enter the new fiscal year with confidence and a clear sense of momentum building within our business.
Turning to slide five, let's now take a look at our results in the fourth quarter as we finished out the fiscal year. In view of the overall business climate and the headwinds we've anticipated as we moved into the fourth quarter, I am pleased with our overall results. Our sales increased 28% versus a year ago and were up 7% sequentially from the third quarter.
As we had anticipated and mentioned in our last quarterly earnings call, the gross margin came under pressure from increased commodity metal prices and the lagging nature of our materials pass-through agreements with our customers, as well as a wind-down of the heating season within our commercial products segment and costs associated with our plant closure activities. These were the primary factors in our reported pretax loss of $4 million. While down, as expected, from a profit of $2 million in the third quarter of fiscal 2010, this compares quite favorably to the pretax loss of $37 million reported just one year ago.
Adjusted EBITDA of $21 million, while down by $4 million from the third quarter, reflected a $20 million improvement versus a year ago. All in, as we continue to aggressively execute our Four-Point Plan, our business has continued to perform well under the challenging market conditions.
During the quarter, we closed our Pemberville, Ohio manufacturing facility and we are on track to close our facilities in Logansport, Indiana and Harrodsburg, Kentucky during the first quarter of fiscal 2011. This is all part of our commitment to continuously review our manufacturing footprint. This will ensure we remain well positioned to provide the highest-quality thermal management solutions supported by an even more competitive cost base moving forward.
To provide context for just how far we have come this past fiscal year, please turn now to the charts on slide six. These three panels, which were reviewed many times, show our measured progress. Through the combination of modest sales increases during the past three quarters and disciplined execution of our Four-Point Plan, we have been able to significantly lower our cost base, increase gross margins, and significantly improve our adjusted EBITDA. These are solid results that we believe are good indicators as we enter fiscal 2011, a period when we expect market volumes to continue to recover.