Modine Reports Second Quarter Fiscal 2010 Results

http://www.businesswire.com/news/home/20091029005563/en

Delivers Improved Gross Margin, Adjusted EBITDA and Free Cash Flow

Reduces Net Debt by $81 Million
RACINE, Wis.--(Business Wire)--
Modine Manufacturing Company (NYSE: MOD), a diversified global leader in thermal
management technology and solutions, today reported its financial results for
the second quarter of fiscal 2010, as follows:

Second Quarter 2010 2009 Change
($ in millions except per share data)
Net Sales $ 282.3 $ 390.5 $ (108.2 )
Gross Profit $ 42.4 $ 52.6 $ (10.2 )
% of Sales 15.0 % 13.5 % 150 bp
Selling, General & Administrative (SG&A) Expenses $ 37.0 $ 57.5 $ (20.5 )
Pre-Tax Loss from Continuing Operations $ (4.0 ) $ (15.2 ) $ 11.2
Loss from Continuing Operations $ (4.9 ) $ (12.9 ) $ 8.0
Diluted Loss Per Share from Continuing Operations $ (0.15 ) $ (0.40 ) $ 0.25
Adjusted EBITDA $ 22.7 $ 19.7 $ 3.0

Free Cash Flow $ 11.9 $ (7.0 ) $ 18.9
Net Debt (a) $ 124.7 $ 205.7 $ (81.0 )
(a) As of September 30, 2009 and March 31, 2009, respectively

"We are pleased with Modine`s performance during the second quarter of fiscal
2010, especially given the current economic environment," said Thomas A. Burke,
Modine President and Chief Executive Officer. "On a sequential basis, sales rose
11 percent and we saw significant improvements in gross margin and adjusted
EBITDA since the first quarter. Although sales were down 28 percent year over
year, we delivered a 150 basis point improvement in gross margin, reduced SG&A
costs by more than $20 million and generated the strongest adjusted EBITDA in
five quarters. During the quarter, we completed a public offering of our common
stock and used the proceeds to significantly reduce net debt. As we move into
the second half of fiscal 2010, we are encouraged by the sales trends in our
business and the early signs of stabilization and selective, modest improvements
within our end markets. Yet we are mindful of continued recessionary pressures,
along with the impact that restructuring, new program launch activities and
recent increases in material costs may have on our future financial results. As
we execute our Four-Point Plan, we are positioning Modine for profitable growth
as market volumes recover."

Second Quarter Overview

* Sales volumes declined 28 percent from a year ago as a result of the economic
downturn, yet improved sequentially across all segments, up 11 percent compared
to the first quarter of fiscal 2010;
* Gross margin of 15.0 percent rose 150 basis points from the second quarter of
fiscal 2009 and 90 basis points from the first quarter of fiscal 2010, primarily
attributable to a significant reduction in direct and indirect costs in the
company`s manufacturing facilities;
* Selling, general & administrative expenses decreased $20.5 million, or 36
percent, from the second quarter of fiscal 2009, as the company`s refocused
product portfolio has enabled it to significantly lower SG&A expenses;
* Adjusted EBITDA of $22.7 million during the second quarter of fiscal 2010 and
$39.6 million year-to-date exceeded the company`s expectations and was in
compliance with its minimum adjusted EBITDA loan covenants;
* The company`s recently completed public offering of common stock generated
proceeds of approximately $93 million that were used primarily to reduce the
company`s indebtedness and, thereby, provide additional financial flexibility
and liquidity;
* The company recorded an impairment charge of $2.8 million for its Harrodsburg,
Kentucky, facility based on the company`s intention to close this facility. The
company announced the intended closure of this facility last week in an effort
to create greater scale efficiencies as part of its Four-Point Plan; and
* Effective in the second quarter of fiscal 2010, the company`s Fuel Cell
business, which previously was reported as a separate segment, is now reported
as a product line within the company`s Original Equipment - North America
segment for all periods presented.

Cash and Liquidity

"The additional capital raised in our recently completed secondary stock
offering, combined with our strong performance during the quarter, enabled
Modine to generate positive free cash flow and substantially reduce our debt
balance," said Bradley C. Richardson, Executive Vice President - Corporate
Strategy and Chief Financial Officer. "With our improved liquidity and
Four-Point Plan framework, we are well positioned to maintain a more
conservative balance sheet, while having the flexibility to invest a portion of
the proceeds generated from the stock offering to:

* Protect our vehicular business and accelerate our restructuring;
* Grow our Commercial HVAC business; and
* Fund working capital needs."

Free cash flow was $11.9 million during the second quarter of fiscal 2010,
compared with a free cash outflow of $7.0 million in the comparable period of
fiscal 2009. The improvement in income from operations resulting from our cost
reduction efforts, as well as reduced capital spending, contributed to the year
over year improvement in free cash flow. The company`s net debt at September 30,
2009 was $124.7 million, compared to $205.7 million at March 31, 2009. As of
September 30, 2009, the company had cash on hand of approximately $55 million
and additional available borrowing capacity of approximately $129 million. The
company believes it has sufficient liquidity to manage its business and expects
to be in compliance with its financial covenants through the remainder of fiscal
2010 and through the term of the credit agreement.

Outlook

While Modine is anticipating modest sales volume improvement in certain key
markets and improved commercial vehicle build rates in North America, the
sluggish economy continues to have an adverse effect on the company. The
company`s expectations for the remainder of fiscal 2010 include:

* Revenues slightly higher than the second quarter 2010 run rate based on
program launches and modest end-market improvements;
* Increased manufacturing costs based on higher material costs and the impact of
expected production inefficiencies driven by new program launches and plant
closure activities, all of which will put pressure on the company`s gross
margin;
* SG&A costs relatively consistent at a quarterly run rate of approximately $40
million;
* Planned capital spending of approximately $30 million; and
* Positive free cash flow and a decrease in net debt balances over the remainder
of the fiscal year, further improving the company`s liquidity.

"As we move forward in fiscal 2010, we are driving the fundamentals of our
Four-Point Plan, which include portfolio rationalization, manufacturing
realignment, SG&A cost reduction and capital allocation discipline," concluded
Burke. "This combination of strategies has served us well during the economic
downturn and is having a positive effect on our financial results as we manage
the business through the economic trough. We are realizing the benefits of the
aggressive actions we have taken to improve profitability and lower our cost
structure and break-even levels. Although the general business climate remains
challenging, we are building long term business momentum through a more focused
product portfolio, better utilization of our asset base and significant cost
reductions. Perhaps most encouraging, the fundamental growth drivers of our
business - emissions reduction, energy efficiency, and infrastructure
development - remain intact and are resulting in improved customer relationships
and new, incremental program wins globally."

Conference Call and Webcast

Modine will conduct a conference call and live webcast, with a slide
presentation, on Thursday, October 29, 2009 at 10:30 a.m. Central Time (11:30
a.m. Eastern Time) to discuss the fiscal 2010 second quarter. The webcast and
accompanying slides will be available on the investor section of the Modine
website at www.modine.com. The dial-in phone number for the audio portion of the
call is 800-510-0178 passcode: 27993102. The international call-in number is
617-614-3450; passcode: 27993102. Participants are encouraged to log on to the
webcast and conference call about 10 minutes prior to the start of the event. A
replay of the audio and the slides will be available on the investor relations
section of the Modine website at www.modine.com about two hours after the live
call concludes. A call-in replay will be available through November 30, 2009, at
888-286-8010; passcode: 46489773 or, for international callers, at 617-801-6888;
passcode: 46489773. A transcript of the call will be posted to the company`s
website after October 30, 2009.

About Modine

Modine, with fiscal 2009 revenues of $1.4 billion, specializes in thermal
management systems and components, bringing highly engineered heating and
cooling technology and solutions to diversified global markets. Modine products
are used in light, medium and heavy-duty vehicles, heating, ventilation and air
conditioning equipment, off-highway and industrial equipment, refrigeration
systems, and fuel cells. The company employs approximately 7,000 people at 32
facilities worldwide in 15 countries. For more information about Modine, visit
www.modine.com.

Forward-Looking Statements

This press release contains statements, including information about future
financial performance, accompanied by phrases such as "believes," "estimates,"
"expects," "plans," "anticipates," "intends," and other similar
"forward-looking" statements, as defined in the Private Securities Litigation
Reform Act of 1995. Modine`s actual results, performance or achievements may
differ materially from those expressed or implied in these statements, because
of certain risks and uncertainties, including, but not limited to, those
described under "Risk Factors" in Item 1A of Part II of the company's Annual
Report on Form 10-K for the year ended March 31, 2009 and under Forward-Looking
Statements in Item 2 of Part I of that same report, as revised by Exhibit 99.1
to the Company`s Current Report on Form 8-K dated September 15, 2009, and the
company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009.
Other risks and uncertainties include, but are not limited to, the following:
the company`s ability to remain in compliance with its debt agreements and
financial covenants going forward; Modine`s ability to fund its liquidity
requirements and meet its long-term commitments; the impact the current global
economic uncertainty is having on Modine, its customers and its suppliers and
any worsening of such economic conditions; the secondary effects on Modine`s
future cash flows and liquidity that may result from Modine`s customers and
lenders dealing with the economic crisis and its consequences; Modine`s ability
to limit capital spending and/or consummate planned divestitures; Modine`s
ability to successfully execute its four-point recovery plan; the nature of the
vehicular industry, including continued depressed customer build rates; and
other risks and uncertainties identified by the company in public filings with
the U.S. Securities and Exchange Commission. The company does not assume any
obligation to update any forward-looking statements.

Non-GAAP Financial Disclosures

Adjusted EBITDA, 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 and
the company`s lenders as performance measures to judge liquidity and covenant
compliance for the company`s business. 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. The presentations of the
non-GAAP measures in this press release are made alongside the most directly
comparable GAAP measures.

Definition - Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA)

The company`s (loss) earnings from continuing operations before interest expense
and provision for income taxes, adjusted to exclude unusual, non-recurring or
extraordinary non-cash charges and up to $34.0 million of cash restructuring and
repositioning charges, and further adjusted to add back depreciation and
amortization expense, as defined in the applicable debt agreements. This is a
financial measure of the profit generated excluding the above mentioned items.

Definition - Net Debt

The sum of short- 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

The sum of net cash provided by (used for) operating and investing activities,
further adjusted for net cash provided by (used for) financing activities except
for advances and repayments of long-term debt, issuance of common stock and
dividends. This is a liquidity measure of the cash available for permitted
distributions.

-- Financial tables follow --

Modine Manufacturing Company
Consolidated statements of operations (unaudited)
(In thousands, except per share amounts)

Three months ended September 30, Six months ended September 30,
2009 2008 2009 2008
Net sales $ 282,298 $ 390,488 $ 535,930 $ 828,359
Cost of sales 239,939 337,857 457,706 702,878
Gross profit 42,359 52,631 78,224 125,481
Selling, general & administrative expenses 37,017 57,520 75,564 116,010
Restructuring (income) expense (3,159 ) 2,872 (1,963 ) 2,819
Impairment of long-lived assets 3,849 3,031 4,843 3,165
Income (loss) from operations 4,652 (10,792 ) (220 ) 3,487
Interest expense 9,643 2,922 15,102 5,545
Other (income) expense - net (976 ) 1,455 (6,681 ) (298 )
Loss from continuing operations before income taxes (4,015 ) (15,169 ) (8,641 ) (1,760 )
Provision for (benefit from) income taxes 871 (2,262 ) 1,887 4,563
Loss from continuing operations (4,886 ) (12,907 ) (10,528 ) (6,323 )
Loss from discontinued operations (net of income taxes) (1,571 ) (1,167 ) (10,432 ) (813 )
Gain on sale of discontinued operations (net of income taxes) - 848 - 1,697
Net loss $ (6,457 ) $ (13,226 ) $ (20,960 ) $ (5,439 )

Loss from continuing operations per common share:
Basic $ (0.15 ) $ (0.40 ) $ (0.32 ) $ (0.20 )
Diluted $ (0.15 ) $ (0.40 ) $ (0.32 ) $ (0.20 )

Net loss per common share:
Basic $ (0.19 ) $ (0.41 ) $ (0.64 ) $ (0.17 )
Diluted $ (0.19 ) $ (0.41 ) $ (0.64 ) $ (0.17 )

Weighted average shares outstanding:
Basic 33,194 32,065 32,629 32,052
Diluted 33,194 32,065 32,629 32,052

Dividends paid per share $ - $ 0.10 $ - $ 0.20

Comprehensive earnings (loss), which represents net loss adjusted by the post-tax change in foreign-currency translation, the effective portion of cash flow hedges and change in benefit plan adjustment recorded in shareholders' equity, for the three month periods ended September 30, 2009 and 2008 were $9,400 and $(59,864), respectively, and for the six month periods ended September 30, 2009 and 2008, were $24,375 and $(48,755), respectively.

Condensed consolidated balance sheets (unaudited)
(In thousands)
September 30, 2009 March 31, 2009
Assets
Cash and cash equivalents $ 54,649 $ 43,536
Short term investments 1,058 1,189
Trade receivables - net 144,764 122,266
Inventories 90,328 88,077
Assets held for sale 47,282 29,173
Other current assets 46,795 41,610
Total current assets 384,876 325,851
Property, plant and equipment - net 457,647 426,565
Assets held for sale 32,257 34,328
Other noncurrent assets 63,362 65,388
Total assets $ 938,142 $ 852,132
Liabilities and shareholders' equity
Debt due within one year $ 211 $ 5,232
Accounts payable 113,104 94,506
Liabilities of business held for sale 43,611 28,018
Other current liabilities 115,805 123,277
Total current liabilities 272,731 251,033
Long-term debt 179,139 243,982
Deferred income taxes 11,688 9,979
Liabilities of business held for sale 16,088 12,181
Other noncurrent liabilities 95,235 91,120
Total liabilities 574,881 608,295
Shareholders' equity 363,261 243,837
Total liabilities & shareholders' equity $ 938,142 $ 852,132

Modine Manufacturing Company
Condensed consolidated statements of cash flows (unaudited)
(In thousands)
Six months ended September 30, 2009 2008

Cash flows from operating activities:
Net loss $ (20,960 ) $ (5,439 )
Adjustments to reconcile net loss with net cash provided by operating activities:
Depreciation and amortization 33,076 38,705
Impairment of long-lived assets 12,489 3,165
Other - net (631 ) (6,213 )
Net changes in operating assets and liabilities (5,105 ) 10,038
Net cash provided by operating activities 18,869 40,256

Cash flows from investing activities:
Expenditures for plant, property and equipment (33,947 ) (46,207 )
Proceeds from dispositions of assets 4,941 10,638
Settlement of derivative contracts (5,438 ) 599
Other - net 3,418 3,145
Net cash used for investing activities (31,026 ) (31,825 )

Cash flows from financing activities:
Net (decrease) increase in debt (71,309 ) 25,288
Issuance of common stock 93,589 -
Cash dividends paid - (6,451 )
Other - net (2,536 ) 2,463
Net cash provided by financing activities 19,744 21,300

Effect of exchange rate changes on cash 3,722 (5,636 )
Change in cash balances held for sale (196 ) -

Net increase in cash and cash equivalents 11,113 24,095

Cash and cash equivalents at beginning of the period 43,536 38,595

Cash and cash equivalents at end of the period $ 54,649 $ 62,690

Condensed segment operating results (unaudited)
(In thousands)

Three months ended September 30, Six months ended September 30,
2009 2008 2009 2008
Sales:
Original Equipment - Asia $ 7,183 $ 3,464 $ 13,477 $ 9,049
Original Equipment - Europe 112,340 169,858 217,608 386,986
Original Equipment - North America (a) 100,745 127,600 192,263 261,939
South America 27,976 44,772 50,617 86,118
Commercial Products 45,221 53,186 79,585 102,070
Segment sales 293,465 398,880 553,550 846,162
Corporate and administrative 692 885 1,538 1,734
Eliminations (11,859 ) (9,277 ) (19,158 ) (19,537 )
Total net sales $ 282,298 $ 390,488 $ 535,930 $ 828,359

Operating income/(loss):
Original Equipment - Asia $ (1,351 ) $ (2,284 ) $ (2,955 ) $ (4,166 )
Original Equipment - Europe 7,151 9,630 9,357 36,486
Original Equipment - North America (a) (b) 1,347 (13,877 ) 4,093 (24,182 )
South America 2,315 6,418 3,508 10,608
Commercial Products 5,779 4,835 8,204 8,708
Segment income from operations 15,241 4,722 22,207 27,454
Corporate and administrative (b) (10,611 ) (15,480 ) (22,541 ) (23,979 )
Eliminations 22 (34 ) 114 12
Income (loss) from operations $ 4,652 $ (10,792 ) $ (220 ) $ 3,487

(a) Sales and operating income/(loss) were retrospectively adjusted for comparative purposes to reflect the realignment of the Fuel Cell segment into the Original Equipment - North America segment for the three and six months ended September 30, 2009 and 2008.

(b) Operating income/(loss) was retrospectively adjusted for comparative purposes to reflect the realignment of $4,782 and $9,953 of support department costs previously included in Corporate and administrative into the Original Equipment - North America segment for the three and six months ended September 30, 2008, respectively.

Modine Manufacturing Company
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations (unaudited)
(In thousands)

Three months ended September 30, Six months ended September 30,
2009 2008 2009 2008
Loss from continuing operations $ (4,886 ) $ (12,907 ) $ (10,528 ) $ (6,323 )
Interest expense 9,643 2,922 15,102 5,545
Provision for (benefit from) income taxes 871 (2,262 ) 1,887 4,563
Depreciation and amortization (a) 16,183 17,589 31,938 35,577
EBITDA from continuing operations 21,811 5,342 38,399 39,362

Restructuring and repositioning (income) charges (2,334 ) 4,762 (71 ) 7,066
Non-cash charges (b) 3,264 9,549 1,228 9,903
Adjusted EBITDA $ 22,741 $ 19,653 $ 39,556 $ 56,331

(a) Depreciation and amortization expense represents total depreciation and amortization from continuing operations less accelerated depreciation which is included in non-cash charges.

(b) Non-cash charges are comprised of long-lived asset impairments, non-cash restructuring and repositioning charges, exchange gains or losses on intercompany loans and non-cash charges which are unusual, non-recurring or extraordinary.

Net debt (unaudited)
(In thousands)

September 30, 2009 March 31, 2009
Debt due within one year $ 211 $ 5,232
Long-term debt 179,139 243,982
Total debt 179,350 249,214

Less: cash and cash equivalents 54,649 43,536
Net debt $ 124,701 $ 205,678

Free cash flow (unaudited)
(In thousands)

Three months ended September 30, Six months ended September 30,
2009 2008 2009 2008
Net cash provided by operating activities (c) $ 14,334 $ 25,138 $ 22,318 $ 40,256
Net cash used for investing activities (4,699 ) (22,102 ) (31,026 ) (31,825 )
Other financing activities - net (410 ) (4,289 ) (2,536 ) 2,463
Effect of exchange rate changes on cash 1,587 (5,737 ) 3,722 (5,636 )
Change in cash balances held for sale 1,072 - (196 ) -
Free cash flow $ 11,884 $ (6,990 ) $ (7,718 ) $ 5,258

(c) Net cash provided by operating activities for the three and six months ended September 30, 2009 excludes the make-whole payment of $3,449 related to the paydown of long-term debt as a result of the issuance of common stock.

Modine Manufacturing Company
Susan Fisher,262-636-8434
s.h.fisher@na.modine.com

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