Modine Manufacturing Company (MOD, Financial) filed Quarterly Report for the period ended 2010-06-30.
Modine Manufacturing Company has a market cap of $477.9 million; its shares were traded at around $10.33 with and P/S ratio of 0.4.
During the first quarter of fiscal 2011, we recorded a $3.3 million provision for income taxes, which represents an effective tax rate of 51.4 percent. This compares to a provision for income taxes of $1.0 million recorded during the first quarter of fiscal 2010, which represented a 22.0 percent effective tax rate. During the first quarter of fiscal 2011, we recorded a valuation allowance of $2.7 million predominately against the net deferred tax assets in the U.S. as we continue to assess that it is more likely than not that these assets will not be realized in the future.
Earnings from continuing operations of $3.1 million for the first quarter of fiscal 2011 represent a $8.7 million improvement from the loss from continuing operations of $5.6 million for the first quarter of fiscal 2010. In addition, diluted earnings per share from continuing operations of $0.07 increased $0.25 from diluted loss per share from continuing operations of $0.18 for this same period last year. The increase in sales volumes and improved gross margin were the primary drivers of this increase.
Original Equipment – Europe net sales increased $26.9 million from the first quarter of fiscal 2010 to the first quarter of fiscal 2011, driven by a $36.6 million increase in underlying vehicular sales volumes partially offset by a $9.7 million unfavorable impact of foreign currency exchange rate changes. Gross profit increased $7.0 million from the first quarter of fiscal 2010 to the first quarter of fiscal 2011 and gross margin improved 270 basis points to 15.5 percent from 12.8 percent over this same period. The improvement in gross margin is primarily attributable to a significant reduction in direct and indirect costs in the European manufacturing facilities and the increased sales volumes. SG&A expenses are comparable from the first quarter of fiscal 2010 to the first quarter of fiscal 2011 yet decreased as a percentage of sales due to the positive impact of SG&A cost containment efforts. A long-lived asset impairment charge of $0.2 million was recorded in the first quarter of fiscal 2010 related to an investment in an affiliate with an “other than temporary” decline in value. Income from operations increased $7.7 million, primarily due to the improved gross margin and significant increase in sales volumes.
Original Equipment – North America net sales increased $38.5 million from the first quarter of fiscal 2010 to the first quarter of fiscal 2011, primarily driven by improvements in the North American truck and off-highway markets. Gross margin decreased 70 basis points to 12.5 percent during the first quarter of fiscal 2011 from 13.2 percent during the first quarter of fiscal 2010 due to higher year-over-year commodity costs which more than offset improved operating leverage on higher sales volume. SG&A expenses increased $0.9 million primarily due to higher engineering and development costs and higher pension costs partially offset by a $1.0 million gain on the sale of two manufacturing facilities previously recorded as assets held for sale. Despite the increase in SG&A expenses, as a percentage of sales SG&A expenses decreased 210 basis points from the first quarter of fiscal 2010 to the first quarter of fiscal 2011 as the increase in sales volumes was greater than the increase in SG&A costs. A long-lived asset impairment charge of $0.8 million was recorded during the first quarter of fiscal 2010 for a program that was not able to support its asset base. Income from continuing operations increased $4.2 million from the first quarter of fiscal 2010 to the first quarter of fiscal 2011, primarily due to the increased sales volumes.
South America net sales increased $14.2 million from the first quarter of fiscal 2010 to the first quarter of fiscal 2011, due to increased sales volumes within their off-highway and commercial vehicle markets and a favorable impact on foreign currency exchange rate changes of $5.0 million. Gross margin decreased from 21.2 percent during the first quarter of fiscal 2010 to 20.1 percent in the first quarter of fiscal 2011, due to year-over-year increased materials pricing which more than offset improved operating leverage on higher sales volume. SG&A expenses increased $0.6 million largely due to an unfavorable impact of foreign currency exchange rate changes. Restructuring expense of $0.6 million was recorded during the first quarter of fiscal 2010 related to a workforce reduction within the Brazilian operation. Income from continuing operations improved $2.6 million, based on the increased sales volumes and the absence of restructuring charges.
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Modine Manufacturing Company has a market cap of $477.9 million; its shares were traded at around $10.33 with and P/S ratio of 0.4.
Highlight of Business Operations:
Other expense of $3.6 million in the first quarter of fiscal 2011 represents a $9.3 million change from other income of $5.7 million reported during the first quarter of fiscal 2010. Other expense in the first quarter of fiscal 2011 consisted primarily of foreign currency exchange losses on inter-company loans denominated in a foreign currency while other income in the first quarter of fiscal 2010 consisted primarily of foreign currency exchange gains on inter-company loans denominated in a foreign currency. In addition, we sold our 50 percent ownership interest in Anhui Jianghaui Mando Climate Control Co. Ltd. resulting in a gain of $1.5 million during the first quarter of fiscal 2010.During the first quarter of fiscal 2011, we recorded a $3.3 million provision for income taxes, which represents an effective tax rate of 51.4 percent. This compares to a provision for income taxes of $1.0 million recorded during the first quarter of fiscal 2010, which represented a 22.0 percent effective tax rate. During the first quarter of fiscal 2011, we recorded a valuation allowance of $2.7 million predominately against the net deferred tax assets in the U.S. as we continue to assess that it is more likely than not that these assets will not be realized in the future.
Earnings from continuing operations of $3.1 million for the first quarter of fiscal 2011 represent a $8.7 million improvement from the loss from continuing operations of $5.6 million for the first quarter of fiscal 2010. In addition, diluted earnings per share from continuing operations of $0.07 increased $0.25 from diluted loss per share from continuing operations of $0.18 for this same period last year. The increase in sales volumes and improved gross margin were the primary drivers of this increase.
Original Equipment – Europe net sales increased $26.9 million from the first quarter of fiscal 2010 to the first quarter of fiscal 2011, driven by a $36.6 million increase in underlying vehicular sales volumes partially offset by a $9.7 million unfavorable impact of foreign currency exchange rate changes. Gross profit increased $7.0 million from the first quarter of fiscal 2010 to the first quarter of fiscal 2011 and gross margin improved 270 basis points to 15.5 percent from 12.8 percent over this same period. The improvement in gross margin is primarily attributable to a significant reduction in direct and indirect costs in the European manufacturing facilities and the increased sales volumes. SG&A expenses are comparable from the first quarter of fiscal 2010 to the first quarter of fiscal 2011 yet decreased as a percentage of sales due to the positive impact of SG&A cost containment efforts. A long-lived asset impairment charge of $0.2 million was recorded in the first quarter of fiscal 2010 related to an investment in an affiliate with an “other than temporary” decline in value. Income from operations increased $7.7 million, primarily due to the improved gross margin and significant increase in sales volumes.
Original Equipment – North America net sales increased $38.5 million from the first quarter of fiscal 2010 to the first quarter of fiscal 2011, primarily driven by improvements in the North American truck and off-highway markets. Gross margin decreased 70 basis points to 12.5 percent during the first quarter of fiscal 2011 from 13.2 percent during the first quarter of fiscal 2010 due to higher year-over-year commodity costs which more than offset improved operating leverage on higher sales volume. SG&A expenses increased $0.9 million primarily due to higher engineering and development costs and higher pension costs partially offset by a $1.0 million gain on the sale of two manufacturing facilities previously recorded as assets held for sale. Despite the increase in SG&A expenses, as a percentage of sales SG&A expenses decreased 210 basis points from the first quarter of fiscal 2010 to the first quarter of fiscal 2011 as the increase in sales volumes was greater than the increase in SG&A costs. A long-lived asset impairment charge of $0.8 million was recorded during the first quarter of fiscal 2010 for a program that was not able to support its asset base. Income from continuing operations increased $4.2 million from the first quarter of fiscal 2010 to the first quarter of fiscal 2011, primarily due to the increased sales volumes.
South America net sales increased $14.2 million from the first quarter of fiscal 2010 to the first quarter of fiscal 2011, due to increased sales volumes within their off-highway and commercial vehicle markets and a favorable impact on foreign currency exchange rate changes of $5.0 million. Gross margin decreased from 21.2 percent during the first quarter of fiscal 2010 to 20.1 percent in the first quarter of fiscal 2011, due to year-over-year increased materials pricing which more than offset improved operating leverage on higher sales volume. SG&A expenses increased $0.6 million largely due to an unfavorable impact of foreign currency exchange rate changes. Restructuring expense of $0.6 million was recorded during the first quarter of fiscal 2010 related to a workforce reduction within the Brazilian operation. Income from continuing operations improved $2.6 million, based on the increased sales volumes and the absence of restructuring charges.
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