Modine Manufacturing Company · NYSE:MOD
Modine Manufacturing — Shareholder Meeting (July 2007)
48 slides from Modine Manufacturing's shareholder meeting presentation, Jul 18, 2007
Slide 1: Annual Shareholders Meeting Fiscal 2006/2007
July 18, 2007 9:00 am Racine, Wisconsin Modine Manufacturing Company Annual Shareholders Meeting Fiscal 2006/2007
Slide 2: Annual Shareholders Meeting Agenda
Annual Shareholders Meeting Agenda Welcome Introductions Business meeting – Management proposals – Voting results President and Chief Executive Officer’s report Questions and answers Adjournment of meeting
Slide 3: Modine Board of Directors
Modine Board of Directors Charles Cooley Modine Board - October 2006 Audit Committee Chairman (new) Other Committees: – Pension – Technology – Corporate Governance and Nominating Senior Vice President, Treasurer and CFO of The Lubrizol Corporation, Cleveland, OH
Slide 4: Modine Board of Directors
Modine Board of Directors Richard Doyle Thanks Dick for your outstanding contribution to Modine Retiring after 20 years on Modine Board Former Audit Committee Chairman Retired - Formerly CEO and a director of three private electrical contracting corporations, Vice President of BorgWarner Corp., Chic
Slide 5: Modine Board of Directors
Modine Board of Directors Dr. Frank Incropera 8 years on Modine Board Technology Committee Chairman Other Committees: – Audit – Pension – Corporate Governance and Nominating Clifford and Evelyn Brosey Professor and former Dean of Mechanical Engineering of the University of Notre Dame’s College of En
Slide 6: Modine Board of Directors
Modine Board of Directors Frank Jones 25 years on Modine Board Pension Committee Chairman Other Committees: – Officer Nomination and Compensation – Technology – Corporate Governance and Nominating Independent Management Consultant, Tucson, AZ, Formerly Pres. and CEO of Giddings & Lewis, Inc.
Slide 7: Modine Board of Directors
Modine Board of Directors Dennis Kuester 14 years on Modine Board Committees: – Officer Nomination and Compensation – Corporate Governance and Nominating Chairman of the Board of Marshall & Ilsley Corp., Chairman of M&I Marshall and Ilsley Bank and Chairman of Metavante Corp., Milwaukee, WI
Slide 8: Modine Board of Directors
Modine Board of Directors Vincent Martin 15 years on Modine Board Committees: – Officer Nomination and Compensation – Pension – Technology – Corporate Governance Retired - Formerly Chairman and CEO of Jason Inc., Milwaukee, WI
Slide 9: Modine Board of Directors
Modine Board of Directors Gary Neale 30 years on Modine Board Lead Director Officer Nomination and Compensation Committee Chairman Other Committees: – Audit – Technology – Corporate Governance and Nominating Retired - Formerly Chairman, Chief Executive Officer and Pres. of NiSource Inc., Merrillvill
Slide 10: Modine Board of Directors
Modine Board of Directors Marsha Williams 8 years on Modine Board Committees: – Audit – Officer Nomination and Compensation – Corporate Governance and Nominating Senior Vice President and Chief Financial Officer of Orbitz Worldwide, Chicago, IL.
Slide 11: Modine Board of Directors
Modine Board of Directors Michael Yonker 14 years on Modine Board Corporate Governance and Nominating Committee Chairman Other Committees: – Audit – Officer Nomination and Compensation Retired - Formerly President and CEO of Portec, Inc., Lake Forest, IL
Slide 12: Directors Emeriti
2006/2007 Annual Shareholders Meeting Directors Emeriti
Slide 13: Earl E. Richter: 1923-2006
Earl E. Richter: 1923-2006 42 year Modine Career 1948 Started as a Junior Accountant 1974 Became President and CEO - Sales $110 million 1995 Retired as Board Chairman - Sales $913 million “Earl had an enormous impact on Modine. He was a true leader, entrepreneur, and a committed family man.” -Dave R
Slide 14: Modine Officers
Modine Officers Brad Richardson Executive Vice President, Finance and CFO 4 years with Modine Jim Rulseh Regional Vice President - Asia 30 years with Modine Tom Burke Executive Vice President and COO 2 years with Modine
Slide 15: Modine Officers
Modine Officers Klaus Feldmann Regional Vice President - Europe 11 years with Modine Chuck Katzfey Regional Vice President - Americas 20 years with Modine Dean Zakos Vice President, General Counsel and Secretary 25 years with Modine
Slide 16: Modine Officers
Modine Officers Margaret Kelsey Vice President, Finance, Corporate Treasury, Business Development and Assistant Secretary 6 years with Modine Greg Troy Vice President and Chief Human Resources Officer 1 year with Modine Dr. Tony De Vuono Vice President and Chief Technology Officer 11 years with Modi
Slide 17: Modine Officers
Modine Officers Robert Kampstra Corporate Controller 1 year with Modine Gary Fahl Vice President, Environmental, Safety and Security 26 years with Modine
Slide 18: David B. Rayburn President and Chief Executive Officer
David B. Rayburn President and Chief Executive Officer 2006/2007 Annual Shareholders Meeting
Slide 19: Management Proposals
Management Proposals To elect three members to the Board of Directors. The Board has nominated Charles P. Cooley, Gary L. Neale, and David B. Rayburn to serve on the Board of Directors until the annual meeting of shareholders in 2010. Approve the Modine Manufacturing Company 2007 Incentive Compensat
Slide 20: CEO Report
David B. Rayburn President and Chief Executive Officer 2006/2007 Annual Shareholders Meeting CEO Report
Slide 21: Forward-Looking Statements
Forward-Looking Statements Statements made in this presentation regarding future matters are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, including those regarding a positive impact from new business programs, accr
Slide 22: Agenda - CEO Report
Agenda - CEO Report State of the Company - Key Messages Business Environment Fiscal 2007 Results Fiscal 2008 Guidance Changing the Business Model Intermediate Term View Conclusion
Slide 23: State of the Company - Key Messages
State of the Company - Key Messages Significant headwinds – Material costs (aluminum, copper, nickel) – Customer pricing – Structural cost challenges – Cyclical downturn in the North American truck market Company is responding - changing the business model – Organizational structure – Manufacturing
Slide 24: Business Environment
Business Environment Oil Cooler Average Sales Price Sixth consecutive year of global economic growth Global competition intensifies – Unprecedented margin compression China and India - rapid expansion continues – 7 to 10 percent GDP growth – Significant growth in consumption of raw materials Copper,
Slide 25: Green Opportunities
Green Opportunities Emission Reduction Highly engineered solutions Engines Powertrain Fuel cells Chillers Growth opportunities Oil Prices Next generation products Fuel Mileage Standards “Green” initiatives
Slide 26: Fiscal 2007 Results
Fiscal 2007 Results (in millions, except per share amounts) * From continuing operations as reported Sales $1,757 $1,629 Earnings $42 $61 EPS $1.31 $1.78 Cash flow $102 $129 Debt to capital 26.7% 23.8% Return on invested capital 7.2% 9.7%
Slide 27: Fiscal 2007 - Sales
Fiscal 2007 - Sales Commercial Products Europe Americas Asia * From continuing operations as reported $1.8 Billion Sales* $1.80B 2002-2007 13.5% annual growth 2007 - Record revenues 2007 - 8% increase vs. 2006 – Global agriculture and construction market strength – New program launches – North Ameri
Slide 28: Fiscal 2007 - Earnings
Fiscal 2007 - Earnings $1.79 $0.99 $1.04 $1.78 Earnings Per Share* $1.31 $0.70 $ * From continuing operations as reported 2007 Results Significant impact of raw material and price pressures - ($1.03) Repositioning and restructuring costs - ($0.27) Tax rate and planning benefits - $0.47
Slide 29: Fiscal 2007 - Earnings Components
Fiscal 2007 - Earnings Components 15.9 (10.3) (9.1) 14.8 5.8 (40.8) 22.7 (17.5) $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $42.3 $60.8 Earnings ($ in Millions)
Slide 30: Fiscal 2007 - Cash Flow
Fiscal 2007 - Cash Flow Working capital focus 2002-2007 – 57 → 53 Days sales outstanding – 6.4 → 12.8 Inventory turns 2007 Results Lower overall income performance Priority Uses of Cash (listed in order) Invest for profitable growth Acquisitions Dividends Share buyback $180M Cash Flow From Operation
Slide 31: Fiscal 2007 - Debt to Capital
Fiscal 2007 - Debt to Capital $ Debt $ Millions 10% 20% 30% 15% 25% 5% $179 Debt to Capital % Debt to Capital 0% 35% 40% Remain Conservatively Financed Provides Future Flexibility Industry average Debt Higher level due to acquisitions and share repurchases Debt to Capital Ratio of 26.7 percent Targe
Slide 32: Fiscal 2007 - Return on Average Capital Employed (ROACE)
TARGET Fiscal 2007 - Return on Average Capital Employed (ROACE) Gross Margin Operating Margin Sales Relative to Investments - Capital Turns Margins ROACE 6.7% 9.0% 9.7% 7.2% 5.9% 4.1% Net Impact of Commodities ROACE - function of margins and capital turns Margin decline in 2007 related to raw materi
Slide 33: Fiscal 2008 Guidance
Fiscal 2008 Guidance Key messages Increased fiscal 2008 guidance Stabilization of margins despite weakness in the North American truck market Overall growth in pre-tax earnings Positive impact of SG&A initiatives Capital spending remains high in support of the manufacturing realignment These expecta
Slide 34: Changing the Business Model
Drives significant new business wins Gross Margins 18-20% SG&A 11.5% Asset Turns 2.5 ROACE 11-12% Changing the Business Model Organizational structure Manufacturing realignment Rationalization - markets, customers, products Technology acceleration
Slide 35: Changing the Business Model: Organizational Structure
Changing the Business Model Organizational Structure Goal – Respond to the globalization of markets and customers – Optimize asset utilization and performance – SG&A cost challenge (10 percent reduction) New business structure (November 2006) – Five global product groups Powertrain Cooling, Engine,
Slide 36: Changing the Business Model: Manufacturing Realignment
Changing the Business Model Manufacturing Realignment New capacity in low cost countries (LCC) – Regional growth and LCC sourcing ($60 million investment) China (2), Hungary, India, Mexico North American “scale” expansion – Four closings announced (Clinton, Jackson, Richland, Toledo) – Reducing floo
Slide 37: New Capacity
New Capacity Gy ö ngyös, Hungary Nuevo Laredo, Mexico Changzhou,China Chennai, India
Slide 38: Changing the Business Model: Rationalization
Changing the Business Model Rationalization - markets, customers, products Market and product evaluation – Exit products and markets Taiwan - high volume computer business Electronics cooling business – Detailed reviews and exit non-strategic product lines – Automotive - 36 to 25 percent of total sa
Slide 39: Changing the Business Model: Technology Acceleration
Changing the Business Model Technology Acceleration Key attribute of Modine history - Innovation and commercial success – Spirex, serpentine products, donut oil cooler, BetaWeld Radiator, Parallel Flow (PF) condenser New board technology committee Intellectual property alignment with product roadmap
Slide 40: Applications (0-4 years)
Applications (0-4 years) Freightliner Module 2007 product - 30-40 percent heat transfer performance increase vs. 2002, plus higher pressures and temperatures Cooling module mounted to the engine instead of chassis Radiator struts and other mounting hardware eliminated or simplified Improved servicea
Slide 41: New Product Development - Pull (3-5 years)
New Product Development - Pull (3-5 years) Air Cooled EGR Cooler Intent - to remove the EGR cooler heat load from the coolant circuit by cooling it with air from a separate air stream Engine or remote mounted (patent applied for) Several customers very interested – Agriculture, truck, construction m
Slide 42: Research and Development - Push (4-15 years)
Research and Development --- Push (4-15 years) Next Generation Powertrain Cooling and Heat Transfer Technology New design and process – Tubes - Mill design – Inserts - Roll forming – Headers - Attachment methods – Tanks Application – Radiators - Charge-air coolers – Condensers - Oil coolers Markets
Slide 43: Technology Acceleration - Green Opportunities
Changing the Business Model Technology Acceleration - Green Opportunities Environmental “green” opportunities = profitable growth – Engine systems – High efficiency chillers – Idle-off systems – Waste heat recovery – Solid oxide fuel cells
Slide 44: Technology Acceleration - Green Opportunities: Waste Heat Recovery
Technology Acceleration - “Green” Opportunities 100 kW 27 kW of Thermal Energy to Radiator (~100 C) 41 kW of Mechanical Energy to drive Vehicle 32 kW of Thermal Energy in Exhaust (~600 C) Design Objective A 10% recovery of exhaust energy would be a 7% gain in fuel economy Active program with several
Slide 45: Solid Oxide Fuel Cell (SOFC) Technology
Technology Acceleration - “Green” Opportunities Solid Oxide Fuel Cell (SOFC) Technology Fuel Cell Group formed in 2000 (incubator R&D) Initial focus on PEM fuel cells Continued activities PEM, fuel processing and SOFC Significant inventory of Intellectual Property (knowledge and patents) Solid Oxide
Slide 46: Intermediate Term View
TARGET Intermediate Term View Gross Margin Operating Margin Sales Relative to Investments - Capital Turns Margins ROACE 6.7% 9.0% 9.7% 7.2% 5.9% 4.1% Industry fundamentals remain challenging North American truck build rate recovery Plans in place to address challenges – Changing the business model R
Slide 47: Conclusion
Conclusion Solid financial framework – Right metric in place - Return on Average Capital Employed Strong management team Building strong relationships Outstanding new technology “Green” initiatives drive opportunity and growth Changing business model – Will drive right results
Slide 48: 2006/2007 Annual Shareholders Meeting
2006/2007 Annual Shareholders Meeting
Modine Manufacturing — Shareholder Meeting (July 2007) on 6ix