Modine Manufacturing Company Q2 FY2020 Earnings Call

· Earnings call transcript and AI-powered summary

Executive Overview

  • Management reported significant market deterioration across key end‑markets, especially in Vehicular Thermal Solutions (VTS) and Commercial & Industrial Solutions (CIS).
  • Automotive, commercial vehicle, off‑highway, data center cooling, and HVAC/refrigeration markets all showed pronounced slowdowns versus prior expectations.
  • As a result, Modine reduced full‑year fiscal 2020 sales and earnings guidance.
  • Cost‑containment actions are accelerating, targeting $25–$30 million in annual savings within 18 months.
  • Automotive divestiture negotiations with the lead buyer were terminated due to valuation gaps and market conditions. The company continues to pursue other interested parties.

Consolidated Financial Performance (Q2 FY2020)

  • Sales decreased 9% year‑over‑year (7% in constant currency), primarily driven by declines in VTS and CIS.
  • Gross profit fell 14%, with margins down to 15.1% from prior-year levels. FX negatively impacted results.
  • Adjusted operating income was $20.2 million, down 24% compared to the prior year.
  • Adjusted EPS was $0.13, down $0.22 from the prior year, affected by lower sales and a significantly higher tax rate.
  • Free cash flow year‑to‑date was negative $24 million due to divestiture‑related costs and higher inventory buildup.

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Operator: Good morning, ladies and gentlemen. And welcome to Modine Manufacturing Company’s Second Quarter Fiscal 2020 Earnings Conference Call. At this point, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Kathy Powers, Vice President, Treasurer, Investor Relations. Please go ahead. Kathy Powers: Good morning. And thank you for joining our conference call to discuss Modine’s second quarter fiscal 2020 results. I am here with Modine’s President and CEO, Tom Burke; and Mick Lucareli, our Vice President, Finance and Chief Financial Officer. We will be using slides for today’s presentation, which can be accessed either through the webcast link or by accessing the PDF file posted on the Investor Relations section of our website modine.com. This morning, Tom and Mick will present our second quarter results for fiscal ‘20 and will provide an update to our outlook for the rest of the year. At the end of the call, there will be a question-and-answer session. On slide two is our notice regarding forward-looking statements. This call may contain forward-looking statements as outlined in our 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. To

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