MOD Modine Manufacturing Co

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  May 21, 2024

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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Information to be Included in the Report

On May 21, 2024, Modine Manufacturing Company (the “Company”) issued a press release announcing the results of operations and financial condition for the fourth quarter and fiscal year ended March 31, 2024.

During a conference call scheduled to be held at 11:00 a.m. Eastern Time on May 22, 2024, the Company’s President and Chief Executive Officer, Neil D. Brinker, and Executive Vice President, Chief Financial Officer, Michael B. Lucareli, will discuss the Company’s results for the fourth quarter and fiscal year ended March 31, 2024.

Attached to this Current Report on Form 8-K as Exhibit 99.1 is a copy of the Company’s press release in connection with the announcement.  The information in this Item 2.02, including Exhibit 99.1, is furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section, and shall not be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.

The following exhibits are being furnished herewith:

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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NEWS RELEASE

FOR IMMEDIATE RELEASE

Modine Reports Fourth Quarter Fiscal 2024 Results

Continued growth in targeted markets and outstanding gross margin improvement provided a strong finish to fiscal 2024

Fiscal 2025 outlook indicates revenue growth driven by Climate Solutions and strong earnings and margin expansion across both segments

 

Fourth Quarter Highlights:

 

•	Net sales of $603.5 million decreased 2 percent from the prior year, organic sales were flat

•	Operating income of $46.8 million decreased $1.7 million from the prior year, including $12.9 million of restructuring expenses

•	Adjusted EBITDA of $78.8 million increased $13.3 million, or 20 percent, from the prior year

•	Earnings per share of $0.48 decreased $1.21, largely due to the reversal of a tax valuation allowance in the prior year

•	Adjusted earnings per share of $0.77 increased $0.10, or 15 percent, from the prior year

 

Full Year Highlights:

 

•	Net sales of $2.4 billion increased 5 percent from the prior year

•	Operating income of $240.7 million increased $90.3 million, or 60 percent, from the prior year

•	Adjusted EBITDA of $314.3 million increased $102.2 million, or 48 percent, from the prior year

•	Earnings per share of $3.03 compared to $2.90 in the prior year, and adjusted earnings per share of $3.25 increased $1.30, or 67 percent, from the prior year

 

Fiscal 2025 Outlook:

 

•	Net sales growth between 5% to 10%

•	Adjusted EBITDA growth of 16% to 22%, resulting in an Adjusted EBITDA range of $365 million to $385 million

•	Adjusted earnings per share of $3.55 to $3.85

“Our fiscal 2024 results were among the best in the company’s history, clearly benefiting from our actions to transform Modine and drive sustainable margin improvement,” said Modine President and Chief Executive Officer, Neil D. Brinker. “We delivered another year of record sales and adjusted EBITDA, led by our data center business with revenues increasing 69 percent from the prior year. Performance Technologies showed tremendous improvement, with gross margin increasing by 600 basis points to 20 percent in the fourth quarter and delivering a gross margin of 18.2 percent for the fiscal year. Our adjusted EBITDA margin of 13.1 percent in fiscal 2024 was comfortably above the high end of the 10 to 12 percent range we laid out at our 2022 Investor Day. We continue to track ahead of those initial expectations and expect these improvements to continue into fiscal 2025.”

 

Fourth Quarter Financial Results

 

Net sales decreased 2 percent to $603.5 million, compared with $618.1 million in the prior year, including a $24.2 million impact from businesses divested in the third fiscal quarter. Organic sales were flat compared with the prior year.

 

Gross profit increased 21 percent to $135.3 million and gross margin improved by 420 basis points to 22.4 percent, primarily due to the benefits from ongoing 80/20 initiatives, higher average selling prices, lower material costs and favorable sales mix.

 

Selling, general and administrative (“SG&A”) expenses increased $14.7 million to $75.6 million. The increase was primarily due to higher compensation-related expenses, including higher incentive compensation driven by improved financial results and acquisition and integration costs.

 

Operating income was $46.8 million, compared to $48.5 million in the prior year. The decrease was driven by higher SG&A and restructuring expenses as compared to the prior year, partially offset by higher gross profit. During the fourth quarter of fiscal 2024, the Company recorded $12.9 million of restructuring expenses, primarily related to targeted headcount reductions to reduce overhead costs by consolidating technical services, and $4.1 million of acquisition and integration costs. During the fourth quarter of fiscal 2023, the Company recorded $2.8 million of restructuring expenses, and environmental charges of $0.4 million. Adjusted EBITDA, which excludes restructuring expenses, certain other charges, and depreciation and amortization expense, was $78.8 million, an increase of $13.3 million, or 20 percent, compared with $65.5 million in the prior year. 

 

Earnings per share was $0.48, compared with $1.69 in the prior year. This decrease was primarily due to the reversal of a tax valuation allowance in the prior year.  Adjusted earnings per share was $0.77, compared with adjusted earnings per share of $0.67 in the prior year. This improvement of $0.10, or 15 percent, was primarily driven by higher gross profit.

 

Fourth Quarter Segment Review

 

 

 

Full-Year Financial Results

 

Net sales increased 5 percent to $2,407.8 million. The increase was driven by higher sales in both segments, with particularly strong gains in sales of data center products. Gross margin increased 490 basis points to 21.8 percent, primarily due to higher average selling prices, lower material costs, and improved operating efficiencies, partially offset by higher labor and inflationary costs, as compared to the prior year.

 

The Company reported operating income of $240.7 million compared to $150.4 million in the prior year, an improvement of $90.3 million, or 60 percent. During fiscal 2024, the Company recorded a $4.0 million gain on the sale of German automotive businesses, $15.0 million in restructuring expenses, and $6.5 million of other charges including acquisition-related costs and environmental charges. During fiscal 2023, the Company recorded restructuring expenses and other charges totaling $7.2 million. Excluding these items and depreciation and amortization expense, adjusted EBITDA was $314.3 million in fiscal 2024 and $212.1 million in fiscal 2023, an improvement of $102.2 million, or 48%. Earnings per share in fiscal 2024 was $3.03 compared with $2.90 in fiscal 2023, and adjusted earnings per share in fiscal 2024 was $3.25, compared with $1.95 in fiscal 2023.

 

Balance Sheet & Liquidity

 

Net cash provided by operating activities for the year ended March 31, 2024 was $214.6 million, an increase of $107.1 million compared to the prior year. Free cash flow for the year ended March 31, 2024 was $126.9 million, an improvement of $70.1 million from the prior year, primarily resulting from higher operating earnings and favorable net changes in working capital as compared to the prior year. Cash payments for restructuring activities, acquisition and integration costs, environmental costs and certain other items during the year ended March 31, 2024 totaled $14.2 million.

 

Total debt was $431.6 million as of March 31, 2024. Cash and cash equivalents at March 31, 2024 were $60.1 million. Net debt was $371.5 million as of March 31, 2024, an increase of $85.9 million from the end of fiscal 2023.  This increase was primarily due to incremental borrowings to fund the acquisition of Scott Springfield Manufacturing in the fourth quarter of fiscal 2024, partially offset by free cash flow generated throughout fiscal 2024.

 

Outlook

 

“Our strong fiscal 2024 results and the redeployment of capital to our highest return opportunities provide momentum as we enter fiscal 2025,” added Brinker. “The Climate Solutions segment will continue to leverage revenue growth in our targeted markets, along with the benefit of our most recent acquisition of Scott Springfield Manufacturing. Supported by a strong backlog and pipeline, we are adding additional data center manufacturing capacity in the US, Canada and in the UK to ensure that we can meet demand from our customers in the future. Our Performance Technologies segment will remain focused on driving favorable changes in the mix of revenue, resulting in higher margins and earnings. Overall, we expect revenue growth to be driven by continued strength in the data center market and growth in other targeted markets, partially offset by lower sales resulting from the impact of Performance Technologies divestitures and other planned reductions. We expect further margin improvements in both segments as we leverage 80/20 to focus our investments, improve our sales mix, and increase our operational efficiency. I am proud of what this team has accomplished, and am confident that our strategies will result in further improvements as we work to meet our commitments and reach our goals.”

 

Based on current exchange rates and market outlook, Modine provides its outlook for fiscal 2025:

 

 

Conference Call and Webcast

 

 

About Modine

 

At Modine, we are Engineering a Cleaner, Healthier World™. Building on more than 100 years of excellence in thermal management, we provide trusted systems and solutions that improve air quality and conserve natural resources.  More than 11,000 employees are at work in every corner of the globe, delivering the solutions our customers need, where they need them. Our Climate Solutions and Performance Technologies segments support our purpose by improving air quality, reducing energy and water consumption, lowering harmful emissions and enabling cleaner running vehicles and environmentally friendly refrigerants. Modine is a global company headquartered in Racine, Wisconsin (U.S.), with operations in North America, South America, Europe and Asia. For more information about Modine, visit www.modine.com.

 

Forward-Looking Statements

 

This press release contains statements, including information about future financial performance and market conditions, accompanied by phrases such as “believes,” “estimates,” “expects,” “plans,” “anticipates,” “intends,” “projects,” 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 I of the Company’s Annual Report on Form 10-K for the year ended March 31, 2023 and under Forward-Looking Statements in Item 7 of Part II of that same report and in the Company’s Quarterly Report on Form 10-Q for the quarters ended June 30, 2023, September 30, 2023, and December 31, 2023. Other risks and uncertainties include, but are not limited to, the following: the impact of potential adverse developments or disruptions in the global economy and financial markets, including impacts related to inflation, energy costs, supply chain challenges or supplier constraints, tariffs, sanctions and other trade issues or cross-border trade restrictions; the impact of other economic, social and political conditions, changes and challenges in the markets where we operate and compete, including foreign currency exchange rate fluctuations, increases in interest rates or tightening of the credit markets, recession or recovery therefrom, restrictions associated with importing and exporting and foreign ownership, public health crises, and the general uncertainties, including the impact on demand for our products and the markets we serve from regulatory and/or policy changes that have been or may be implemented in the U.S. or abroad, including those related to tax and trade, climate change, COVID-19 or future public health threats, and military conflicts, including the current conflicts in Ukraine and in the Middle East and heightened tensions in the Red Sea; the overall health and pricing focus of our customers; our ability to successfully realize anticipated benefits, including improved profit margins and cash flow, from our strategic initiatives and our application of 80/20 principles across our businesses; our ability to be at the forefront of technological advances and the impacts of any changes in the adoption rate of technologies that we expect to drive sales growth; our ability to accelerate growth organically and through acquisitions and successfully integrate acquired businesses; our ability to effectively and efficiently manage our operations in response to sales volume changes, including maintaining adequate production capacity to meet demand in our growing businesses while also completing restructuring activities and realizing benefits thereof; our ability to fund our global liquidity requirements efficiently and comply with the financial covenants in our credit agreements; operational inefficiencies as a result of product or program launches, unexpected volume increases or decreases, product transfers and warranty claims; the impact on Modine of any significant increases in commodity prices, particularly aluminum, copper, steel and stainless steel (nickel) and other purchased components and related costs, and our ability to adjust product pricing in response to any such increases; our ability to recruit and maintain talent in managerial, leadership, operational and administrative functions and to mitigate increased labor costs; our ability to protect our proprietary information and intellectual property from theft or attack; the impact of any substantial disruption or material breach of our information technology (“IT”) systems; the impact of a material weakness identified in our internal controls related to IT system access in Europe on our financial reporting process; costs and other effects of environmental investigation, remediation or litigation and the increasing emphasis on environmental, social and corporate governance matters; our ability to realize the benefits of deferred tax assets; and other risks and uncertainties identified in our public filings with the U.S. Securities and Exchange Commission. Forward-looking statements are as of the date of this press release, and we do not assume any obligation to update any forward-looking statements.

Non-GAAP Financial Disclosures

 

Adjusted EBITDA, adjusted EBITDA margin, adjusted earnings per share, net debt, free cash flow, organic sales and organic sales growth (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 as performance measures to evaluate the Company’s overall financial performance and liquidity. These measures are not, and should not be viewed as, substitutes for the applicable GAAP measures, and may be different from similarly-titled measures used by other companies.

 

Definition – Adjusted EBITDA and adjusted EBITDA margin

 

The Company defines adjusted EBITDA as net earnings excluding interest expense, the provision or benefit for income taxes, depreciation and amortization expenses, other income and expense, restructuring expenses, acquisition and integration costs, and certain other gains or charges.  Adjusted EBITDA margin represents adjusted EBITDA as a percentage of net sales. The Company believes that adjusted EBITDA and adjusted EBITDA margin provide relevant measures of profitability and earnings power. The Company views these financial metrics as being useful in assessing operating performance from period to period by excluding certain items that it believes are not representative of its core business. Adjusted EBITDA, when calculated for the business segments, is defined as GAAP operating income excluding depreciation and amortization expenses, restructuring expenses, and certain other gains or charges.

 

Definition – Adjusted earnings per share

 

Diluted earnings per share plus restructuring expenses, acquisition and integration costs, and excluding changes in income tax valuation allowances and certain other gains or charges. Adjusted earnings per share is an overall performance measure, not including costs associated with restructuring and acquisitions and certain other gains or charges.

 

Definition – Net debt

 

The sum of debt due within one year and long-term debt, less cash and cash equivalents. Net debt is an indicator of the Company’s debt position after considering on-hand cash balances.

 

Definition – Free cash flow

 

Free cash flow represents net cash provided by operating activities less expenditures for property, plant and equipment. Free cash flow presents cash generated from operations during the period that is available for strategic capital decisions.

 

Forward-looking non-GAAP financial measures

 

The Company’s fiscal 2025 guidance includes adjusted EBITDA and adjusted earnings per share, as defined above, which are non-GAAP financial measures. The full-year fiscal 2025 guidance includes the Company’s estimates for interest expense of approximately $28 to $30 million, a provision for income taxes of approximately $64 to $68 million, and depreciation and amortization expense of approximately $80 to $84 million. The non-GAAP financial measures also exclude certain cash and non-cash expenses or gains. These expenses and gains may be significant and include items such as restructuring expenses (including severance costs and plant consolidation and relocation expenses), acquisition and integration costs, impairment charges and certain other items.  Beyond a $1.6 million inventory purchase accounting adjustment related to the acquisition of Scott Springfield Manufacturing, which we expect to charge to cost of sales during the first quarter of fiscal 2025, estimates of these expenses and gains for fiscal 2025 are not available due to the low visibility and unpredictability of these items.

Modine Manufacturing Company

Consolidated statements of operations (unaudited)

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Condensed consolidated balance sheets (unaudited)

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Modine Manufacturing Company

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Modine Manufacturing Company

Segment operating results (unaudited)

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Adjusted financial results (unaudited)

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Modine Manufacturing Company

Segment adjusted financial results (unaudited)

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(a)	See the Adjusted EBITDA reconciliation on the previous page for information on restructuring expenses and other adjustments.

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Modine Manufacturing Company

Organic sales and organic sales growth (unaudited)

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SOURCE: Modine

 

Kathleen Powers

(262) 636-1687
kathleen.t.powers@modine.com

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