Modine Manufacturing Company · NYSE:MOD
Modine Manufacturing — Q3 FY2018 Earnings Presentation
31 slides from Modine Manufacturing's earnings presentation, Jan 31, 2018
Slide 1: Third Quarter Fiscal 2018
Third Quarter Fiscal 2018 January 31, 2018 8:00 a.m. CST
Slide 2: Agenda
Agenda Introduction Kathy Powers VP, Treasurer, Investor Relations and Tax Third Quarter Highlights Tom Burke and Segment Review President and Chief Executive Officer Financial Overview Mick Lucareli and Outlook VP, Finance and Chief Financial Officer Summary Tom Burke Q&A Tom Burke and Mick Lucarel
Slide 3: Forward-Looking Statements
Forward-Looking Statements This presentation contains statements, including information about future financial performance and market conditions, accompanied by phrases such as “believes,” “estimates,” “expects,” “plans,” “anticipates,” “intends,” and other similar “forward- looking” statements, as
Slide 4: Third Quarter Highlights and Segment Review
Third Quarter Highlights and Segment Review Tom Burke President and Chief Executive Officer
Slide 5: FY2018 ‒ Third Quarter Highlights
FY2018 ‒ Third Quarter Highlights • Strong quarter with significant sales and earnings growth • Q3 sales increased 47% from the prior year – Includes $110M of incremental sales from our CIS business • Q3 adjusted operating income of $27.0M, up $8.6M or 47% • Q3 adjusted earnings per share of $0.35,
Slide 6: Q3 FY2018 ‒ Americas
Q3 FY2018 ‒ Americas Americas Market Outlook (Fiscal 2018) ($ in millions) Q3 Q3 Better / YOY Change 2018 2017 (Worse) NA Automotive -4% Net sales $ 140.5 $ 123.4 $ 17.1 NA Medium Duty Truck +6% Gross profit 21.7 18.4 3.3 NA Heavy Duty Truck +30% % of net sales 15.4% 14.9% 50 bp NA Construction/Mini
Slide 7: Q3 FY2018 ‒ Europe
Q3 FY2018 ‒ Europe Europe Market Outlook (Fiscal 2018) ($ in millions) Q3 Q3 Better / 2018 2017 (Worse) YOY Change Net sales $ 134.6 $ 119.8 $ 14.8 Automotive +1% Gross profit 17.9 18.6 (0.7) % of net sales 13.3% 15.5% (220 bp) Commercial Vehicle Flat to +5% SG&A expenses 10.5 9.9 (0.6) % of net sal
Slide 8: Q3 FY2018 ‒ Asia
Q3 FY2018 ‒ Asia Asia Market Outlook (Fiscal 2018) ($ in millions) Q3 Q3 Better / 2018 2017 (Worse) YOY Change Net sales $ 42.8 $ 28.6 $ 14.2 China Automotive +1% Gross profit 8.2 5.0 3.2 % of net sales 19.0% 17.6% 140 bp Asia Excavator +35% SG&A expenses 3.1 2.4 (0.7) India Automotive +5% % of net
Slide 9: Q3 FY2018 ‒ Commercial and Industrial Solutions
Q3 FY2018 ‒ Commercial and Industrial Solutions Commercial and Industrial Solutions Market Outlook (Fiscal 2018) ($ in millions) Q3 Q3 Better / 2018 2017 (Worse) YOY Change Net sales $ 144.9 $ 34.7 $ 110.2 Commercial & Residential AC +3% Gross profit 18.6 4.4 14.2 Refrigeration +2% % of net sales 12
Slide 10: Q3 FY2018 ‒ Building HVAC
Q3 FY2018 ‒ Building HVAC Building HVAC Market Outlook (Fiscal 2018) ($ in millions) Q3 Q3 Better / 2018 2017 (Worse) YOY Change Net sales $ 56.1 $ 47.2 $ 8.9 Commercial Heating - NA +3% Gross profit 19.0 15.3 3.7 % of net sales 33.8% 32.4% 140 bp Air Conditioning - EMEA +3% SG&A expenses 9.8 8.5 (1
Slide 11: Financial Overview and Outlook
Financial Overview and Outlook Mick Lucareli Vice President, Finance and Chief Financial Officer
Slide 12: Q3 FY2018 vs. Prior Year
Q3 FY2018 vs. Prior Year (In millions, except per share amounts) Q3 Q3 Better 2018 2017 (Worse) • Sales increased $147M or 42% on a Net sales $ 512.7 $ 349.8 $ 162.9 constant-currency basis – Excluding CIS sales, up $39M or 12% Gross profit 85.4 59.0 26.4 constant-currency % of net sales 16.7% 16.9%
Slide 13: Cash Flow & Net Debt
Cash Flow & Net Debt (In millions) Q3 YTD Q3 YTD (In millions) 12/31/17 3/31/17 FY2018 FY2017 Cash $ 47.8 $ 34.2 Operating cash flow $ 105.6 $ 35.0 Total debt 485.9 510.9 Capital expenditures (55.0) (46.0) Net Debt $ 438.1 $ 476.7 Free cash flow $ 50.6 $ (11.0) Leverage Ratio 2.5x 2.9x • Operating c
Slide 14: FY2018 Guidance
FY2018 Guidance (In millions, except per share amounts) FY 2017 Results FY 2018 Guidance % Increase Net Sales $1,503 $2,044 to $2,104 36% to 40% Adjusted Operating Income * $72.2 $112 to $117 55% to 62% Adjusted EBITDA * $124.7 $187 to $192 50% to 54% Adjusted EPS * $0.78 $1.44 to $1.52 85% to 95% •
Slide 15: Q3 FY2018 – Conclusion
Q3 FY2018 – Conclusion • Modine is a more profitable, diversified industrial company – Reorganized regional vehicular business into a global business unit – Ongoing strategic review will help prioritize capital for profitable growth • One year anniversary of CIS acquisition – Significant accretion t
Slide 16: Q&A
Q&A
Slide 17: Appendix
Appendix
Slide 18: Americas (25% of Net Sales)
Americas (25% of Net Sales)1 • Six manufacturing facilities FY 2017 Sales Mix • Diversified revenue mix across major end-markets Heavy Truck • Segment well positioned for future success based on 16% 13% improved manufacturing footprint and cost structure Medium Truck 5% 13% Light Vehicle • New growt
Slide 19: Europe (28% of Net Sales)
Europe (28% of Net Sales) 1 • Seven manufacturing facilities in Europe FY 2017 Sales Mix • Consolidated manufacturing operations in Germany • Expanded capacity in Hungary, moved production 3% 8% 3% Construction from Western Europe Truck & Bus 32% • Managing launch activity mainly in oil cooler and L
Slide 20: Asia (6% of Net Sales)
Asia (6% of Net Sales) 1 • Six manufacturing facilities in China, India, Japan FY 2017 Sales Mix and Korea (3 Joint Ventures) • Strategic focus on creating new business 9% opportunities with local customers Construction/Ag 32% • Diversifying our business model; reducing exposure Truck & Bus to excav
Slide 21: Commercial and Industrial Solutions (32% of Net Sales)
Commercial and Industrial Solutions (32% of Net Sales) 1 • 15 manufacturing facilities in North America, Europe FY 2017 Sales Mix and Asia (closed Austria manufacturing facility) • Primary products include Coils, Coolers and Comm & Res AC 10% Coatings Mobile AC 15% 36% • CIS is a pioneer in bringing
Slide 22: Building HVAC (9% of Net Sales)
Building HVAC (9% of Net Sales) 1 • Five facilities in North America, United Kingdom FY 2017 Sales Mix and Africa • Complementary business that provides Commercial Heating - NA 14% diversification to Modine’s vehicular segments 5% Air Conditioning - EMEA • Strong financials due to product differenti
Slide 23: Q3 GAAP Income Statement
Q3 GAAP Income Statement (In millions, except per share amounts) Q3 Q3 Better 2018 2017 (Worse) Net sales $ 512.7 $ 349.8 $ 162.9 Cost of sales 427.3 290.8 (136.5) Gross profit 85.4 59.0 26.4 SG&A expenses 60.8 50.7 (10.1) Restructuring expenses 9.4 1.6 (7.8) Impairment charge 1.3 - (1.3) Operating
Slide 24: Non-GAAP Reconciliations
Non-GAAP Reconciliations Modine Manufacturing Company Adjusted operating income and earnings per share (unaudited) (In millions, except per share amounts) FY 2017 Operating income $ 42.3 (a) (a) On November 30, 2016, the Company acquired Luvata HTS. Acquisition-related costs in fiscal 2017, recorded
Slide 25: Non-GAAP Reconciliations
Non-GAAP Reconciliations Modine Manufacturing Company Adjusted financial results (unaudited) (In millions, except per share amounts) Three months ended December 31, Nine months ended December 31, 2017 2016 2017 2016 Operating income $ 13.9 $ 6.7 $ 65.0 $ 21.4 (a) Acquisition and integration costs 1.
Slide 26: Non-GAAP Reconciliations
Non-GAAP Reconciliations * Footnotes relate to the previous slide. (a) On November 30, 2016, the Company acquired Luvata Heat Transfer Solutions and has since operated the business as its Commercial and Industrial Solutions segment ("CIS"). Acquisition and integration costs in fiscal 2018, recorded
Slide 27: Non-GAAP Reconciliations
Non-GAAP Reconciliations Segment adjusted operating income and margin (In millions) Three months ended December 31, Europe 2017 2016 Operating income $ 6.3 $ 8.6 Restructuring expenses 1.1 0.1 Adjusted operating income $ 7.4 $ 8.7 Net sales $ 134.6 $ 119.8 Adjusted operating margin 5.5% 7.2% Three m
Slide 28: Non-GAAP Reconciliations
Non-GAAP Reconciliations Segment adjusted operating income and margin (In millions) Years ended March 31, Americas 2014 2015 2016 2017 Operating income $ 50.4 $ 33.7 $ 36.9 $ 27.9 Restructuring expenses 1.2 2.7 8.8 6.9 Impairment charges 1.2 7.8 - - Gain on sale of facilities - - - (1.1) Brazil lega
Slide 29: Non-GAAP Reconciliations
Non-GAAP Reconciliations Segment adjusted operating income and margin (In millions) Years ended March 31, Asia 2014 2015 2016 2017 Operating income (loss) $ (3.3) $ 0.3 $ 0.8 $ 7.7 Acquisition-related costs - - 0.5 - Adjusted operating income (loss) $ (3.3) $ 0.3 $ 1.3 $ 7.7 Net sales $ 71.5 $ 81.2
Slide 30: Non-GAAP Reconciliations
Non-GAAP Reconciliations Adjusted EBITDA (In millions) FY 2017 Earnings before income taxes $ 20.8 Net earnings attributable to noncontrolling interest (0.7) Interest expense 17.2 Depreciation and amortization expense (a) 58.3 Acquisition-related costs and adjustments (b) 19.1 Restructuring expenses
Slide 31: Forward-Looking Non-GAAP Financial Measures
Forward-Looking Non-GAAP Financial Measures Our fiscal 2018 guidance includes adjusted EBITDA, adjusted operating income and adjusted EPS. These are non-GAAP measures, which exclude certain cash and non-cash charges or gains. These charges and gains may be significant and include items such as restr
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