Modine Manufacturing Company · NYSE:MOD
Modine Manufacturing — Q4 FY2016 Earnings Presentation
28 slides from Modine Manufacturing's earnings presentation, May 26, 2016
Slide 1: Fourth Quarter Fiscal 2016
Fourth Quarter Fiscal 2016 May 26, 2016 8:00 a.m. CDT
Slide 2: Agenda
Agenda Introduction Kathy Powers VP, Treasurer and Investor Relations Fourth 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 Lucareli 2
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 d
Slide 4: Fourth Quarter Highlights and Segment Review
Fourth Quarter Highlights and Segment Review Tom Burke President and Chief Executive Officer
Slide 5: FY2016 – Fourth Quarter Highlights
FY2016 – Fourth Quarter Highlights • Sales down 3% on a constant currency basis due to weak market conditions – Increases in Europe and Asia segments offset by decreases in Americas and Building HVAC segments • Gross margin improved 80 basis points to 18.1% – Favorable material costs – Improved plan
Slide 6: Q4 FY2016 - Americas
Q4 FY2016 - Americas Americas Market Outlook (Fiscal 2017) ($ in millions) Q4 Q4 Better / North America YOY Change 2016 2015 (Worse) Automotive +2% to +4% Net sales $ 145.1 $ 166.1 $ (21.0) Medium Duty Truck Flat Heavy Duty Truck -25% Gross profit 27.3 30.5 (3.2) Construction/Mining -15% % of net sa
Slide 7: Q4 FY2016 - Europe
Q4 FY2016 - Europe Europe Market Outlook (Fiscal 2017) ($ in millions) Q4 Q4 Better / 2016 2015 (Worse) YOY Change Net sales $ 139.1 $ 136.0 $ 3.1 Automotive +2% Gross profit 21.1 15.7 5.4 % of net sales 15.2% 11.5% 370 bp Commercial Vehicle +5% SG&A expenses 9.9 10.6 0.7 % of net sales 7.1% 7.7% 60
Slide 8: Q4 FY2016 - Asia
Q4 FY2016 - Asia Asia Market Outlook (Fiscal 2017) ($ in millions) Q4 Q4 Better / 2016 2015 (Worse) YOY Change Net sales $ 22.9 $ 21.2 $ 1.7 China Automotive +5% Gross profit 4.0 3.1 0.9 % of net sales 17.4% 14.5% 290 bp Asia Excavator -5% to Flat SG&A expenses 2.3 2.7 0.4 % of net sales 10.2% 12.9%
Slide 9: Q4 FY2016 – Building HVAC
Q4 FY2016 – Building HVAC Building HVAC Market Outlook (Fiscal 2017) ($ in millions) Q4 Q4 Better / 2016 2015 (Worse) YOY Change Net sales $ 40.4 $ 43.8 $ (3.4) Commercial Heating - NA Flat to +2% Gross profit 10.9 13.2 (2.3) % of net sales 26.9% 30.2% (330 bp) Air Conditioning - EMEA +3% to +5% SG&
Slide 10: Strengthen, Diversify & Grow
Strengthen, Diversify & Grow • Financial objectives – Achieve $40-$50 million in gross cost reductions leading to improved operating margin of 7-8% – Acquire at least $100 million of incremental non-vehicular revenue – Expand our leverage ratio to between 1.5x to 2.5x • SG&A and other personnel-rela
Slide 11: Financial Overview and Outlook
Financial Overview and Outlook Mick Lucareli Vice President, Finance and Chief Financial Officer
Slide 12: Q4 FY2016 vs. Prior Year
Q4 FY2016 vs. Prior Year • Sales down $9M, or 3% in constant currency (In millions, except per share amounts) Q4 Q4 Better • Gross margin improved 80 bps to 18.1% 2016 2015 (Worse) – Lower commodity prices Net sales $ 343.7 $ 363.0 $ (19.3) – Operational improvements – Savings from procurement initi
Slide 13: Cash Flow & Net Debt
Cash Flow & Net Debt ($ in millions) FY FY ($ in millions) 3/31/16 3/31/15 2016 2015 Operating cash flow $ 72.4 $ 63.5 Cash $ 68.9 $ 70.5 Capital expenditures (62.8) (58.3) Total debt 162.6 148.7 Restructuring payments Net Debt $ 93.7 $ 78.2 12.8 10.8 and other adjustments Free Cash Flow $ 22.4 $ 16
Slide 14: FY2017 Guidance
FY2017 Guidance FY 2017 Guidance Assumptions -1% to 3% increase • EUR = 1.12 USD; USD = 3.50 BRL Net Sales from prior year • Includes approximately $16M of positive currency impact Adjusted • Excludes restructuring costs & other adjustments $65 to $71 million Operating Income • Includes approximatel
Slide 15: FY2016 – Conclusions
FY2016 – Conclusions • Major accomplishments in Fiscal 2016 – Delivered 21% improvement in full-year adjusted earnings per share*, despite a decline in sales – Announced our Strengthen, Diversify and Grow strategic framework – Implemented a share repurchase program to return cash to shareholders – C
Slide 16: Q&A
Q&A
Slide 17: Appendix
Appendix
Slide 18: Americas (43% of Net Sales)
Americas (43% of Net Sales) • Seven manufacturing facilities – executing on our FY 2016 Sales Mix plan to close Washington, Iowa plant Heavy Truck • Diversified revenue mix across major end-markets Medium Truck 14% 19% • Segment well positioned for future success based on Light Vehicle 5% improved m
Slide 19: Europe (38% of Net Sales)
Europe (38% of Net Sales) • Seven manufacturing facilities serving Europe FY 2016 Sales Mix • Consolidated manufacturing operations in Germany • Expanding capacity in Hungary, moving production 7% 4% 4% from Western Europe Construction Truck & Bus 33% • Managing launch activity mainly in oil cooler
Slide 20: Asia (6% of Net Sales)
Asia (6% of Net Sales) • Six manufacturing facilities serving China, India, FY 2016 Sales Mix Japan and Korea (3 Joint Ventures) • Strategic focus on creating new business 12% opportunities with local customers 34% • Diversifying our business model; reducing exposure Construction/Ag to excavator mar
Slide 21: Building HVAC (13% of Net Sales)
Building HVAC (13% of Net Sales) • Five facilities serving North America, United FY 2016 Sales Mix Kingdom and South Africa • Complementary business that provides Commercial Heating - NA 13% diversification to Modine’s vehicular segments 6% Air Conditioning - EMEA 40% • Strong financials due to prod
Slide 22: Q4 FY2016 GAAP Income Statement vs. Prior Year
Q4 FY2016 GAAP Income Statement vs. Prior Year ($ in millions, except per share amounts) Q4 Q4 Better 2016 2015 (Worse) Net sales $ 343.7 $ 363.0 $ (19.3) Cost of sales 281.5 300.3 18.8 Gross profit 62.2 62.7 (0.5) % of net sales 18.1% 17.3% SG&A expenses 41.6 48.7 7.1 % of net sales 12.1% 13.4% Res
Slide 23: Non-GAAP Reconciliations
Non-GAAP Reconciliations (a) Modine Manufacturing Company Restructuring expenses primarily relate to employee severance, equipment transfer and plant Adjusted operating income and earnings per share (unaudited) consolidation costs, and include activities under the Company's Strengthen, Diversify and
Slide 24: Non-GAAP Reconciliations
Non-GAAP Reconciliations Adjusted EBITDA ($ in millions) Three months ended June 30, September 30, December 31, March 31, 2015 2015 2015 2016 Total Earnings (loss) from continuing operations before income taxes $ 8.8 $ (34.9) $ 10.6 $ 5.6 $ (9.9) Net earnings attributable to noncontrolling interest
Slide 25: Non-GAAP Reconciliations
Non-GAAP Reconciliations Segment adjusted operating income and margin ($ in millions) Three months ended March 31, Americas 2016 2015 Operating income $ 11.4 $ 3.7 Restructuring expenses 3.8 0.7 Impairment charges - 7.8 Brazil legal reserve - 3.2 Environmental charges 1.1 - Adjusted operating income
Slide 26: Non-GAAP Reconciliations
Non-GAAP Reconciliations Segment adjusted operating income and margin ($ in millions) Three months ended March 31, Asia 2016 2015 Operating income $ 1.7 $ 0.4 JV legal and due diligence costs 0.2 - Adjusted operating income $ 1.9 $ 0.4 Net sales $ 22.9 $ 21.2 Adjusted operating margin 8.3% 1.6% Thre
Slide 27: Non-GAAP Reconciliations
Non-GAAP Reconciliations Segment adjusted operating income and margin ($ in millions) Years ended March 31, Americas 2012 2013 2014 2015 2016 Operating income $ 58.2 $ 50.4 $ 49.6 $ 33.4 $ 36.2 Restructuring expenses - - 1.2 2.7 8.8 Impairment charges - 1.8 1.2 7.8 - Brazil legal reserve - - - 3.2 -
Slide 28: Non-GAAP Reconciliations
Non-GAAP Reconciliations Segment adjusted operating income and margin ($ in millions) Years ended March 31, Asia 2012 2013 2014 2015 2016 Operating (loss) income $ (2.5) $ (8.8) $ (3.3) $ 0.3 $ 0.8 JV legal and due diligence costs - - - - 0.5 Adjusted operating (loss) income (2.5) (8.8) (3.3) 0.3 1.
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