Modine Manufacturing Company Reports Operating Results (10-Q)

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Feb 17, 2009
Modine Manufacturing Company (MOD, Financial) filed Quarterly Report for the period ended 2008-12-31.

Modine operates primarily in a single industry consisting of the manufacture and sale of heat transfer equipment. This includes heat exchangers for cooling all types of engines transmissions auxiliary hydraulic equipment air conditioning components used in cars trucks farm and construction machinery and equipment and heating and cooling equipment for residential and commercial building HVAC (heating ventilating air conditioning and refrigeration equipment). Modine Manufacturing Company has a market cap of $66.59 million; its shares were traded at around $0.96 with and P/S ratio of 0.04. The dividend yield of Modine Manufacturing Company stocks is 19.7%.

Highlight of Business Operations:

Commodity derivatives: As further noted above under the section entitled “Commodity Price Risk Management”, the Company utilizes futures contracts related to certain of the Company s forecasted purchases of aluminum and natural gas. The Company s strategy in entering into these contracts is to reduce its exposure to changing purchase prices for future purchase of these commodities. These contracts have been designated as cash flow hedges by the Company. Accordingly, unrealized gains and losses on these contracts are deferred as a component of accumulated other comprehensive (loss) income, and recognized as a component of earnings at the same time that the underlying purchases of aluminum and natural gas impact earnings. During the three and nine months ended December 31, 2008, $1.6 million and $0.3 million of expense, respectively, were recorded in the consolidated statements of operations at the same time the underlying transactions impacted earnings. At December 31, 2008, $10.0 million of unrealized after-tax losses remain deferred in accumulated other comprehensive (loss) income, and will be realized as a component of net earnings over the next 78 months.

The Company also enters into futures contracts related to certain of the Company s forecasted purchases of copper and nickel. The Company s strategy in entering into these contracts is to reduce its exposure to changing purchase prices for future purchases of these commodities. The Company has not designated these contracts as hedges, therefore gains and losses on these contracts are recorded directly in the consolidated statements of operations. During the three and nine months ended December 31, 2008, $2.6 million and $4.5 million of expense, respectively, were recorded in cost of sales related to these futures contracts.

Our common stock is currently listed on the New York Stock Exchange (the “NYSE”). The NYSE maintains continued listing requirements relating to, among other things, market capitalization (including that the average global market capitalization over a consecutive 30 trading-day period is not less than $75 million and, at the same time, total stockholders' equity is not less than $75 million) and minimum stock price (including that the average closing price of common stock be not less than $1.00 for 30 consecutive trading days). Although we are currently in compliance with NYSE listing requirements, our stock price has declined severely in recent months and our market capitalization has gone below $75 million. If in the future we are unable to satisfy the NYSE criteria for continued listing, we would be notified by the NYSE and given an opportunity to take corrective action. Our stock could be subject to delisting if we are not in compliance after the cure period (generally six months). A delisting of common stock could negatively impact the Company by reducing the liquidity and market price of our stock and reducing the number of investors willing to hold or acquire our common stock. If this were the case, we may not be able to raise additional funds through an equity financing.

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