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Modine Manufacturing Company Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: June 14, 2011 04:49PM

Modine Manufacturing Company (MOD) filed Annual Report for the period ended 2011-03-31. Modine Manufacturing Co. has a market cap of $677.6 million; its shares were traded at around $14.56 with a P/E ratio of 45.5 and P/S ratio of 0.5.

Highlight of Business Operations:

During fiscal 2011, the Company reported revenues from continuing operations of $1.45 billion, a 25 percent increase from $1.16 billion in fiscal 2010. The Company s end markets are showing strong improvement from the deep recession experienced during 2009 and 2010. This improvement is seen across most of Modine s end markets, including the commercial vehicle, off-highway and automotive markets. The commercial HVAC markets are showing early signs of modest improvement, as these markets generally trend with commercial construction build rates, which have not yet recovered in 2011 from the recent recession. While the Company s business volumes improved significantly in fiscal 2011, the volumes remained approximately 10 percent below pre-recessionary annual sales of $1.6 billion. Over the last several years, the Company has implemented a number of cost and operational efficiency measures designed to improve our longer-term competitiveness, including the realignment of our manufacturing facilities, portfolio rationalization, capital allocation and selling, general and administrative (SG&A) cost containment. As volumes begin to recover, the benefits of these actions can be seen in the Company s gross margin, which improved from 14.8 percent in fiscal 2010 to 16.0 percent in fiscal 2011. In addition, SG&A as a percentage of sales has declined from 13.7 percent in fiscal 2010 to 12.8 percent in fiscal 2011. With these improvements, the Company reported $42.8 million of earnings from operations in fiscal 2011, which significantly exceeds the earnings from operations of $7.0 million reported in fiscal 2010.

During the second quarter of fiscal 2011, we entered into a four-year, $145.0 million Amended and Restated Credit Agreement, which amended and restated the Company s then existing revolving credit facility. On the same date, the Company issued $125.0 million of 6.83 percent Secured Series A Senior Notes maturing on August 12, 2020 (the “2020 Notes”). The proceeds from the 2020 Notes were used to repay our then outstanding senior notes. These actions extended the maturity of our outstanding debt obligations, providing the Company a long-term source of financing at reduced interest rates. The Company recognized a loss of $19.9 million on early extinguishment of the debt and write-off of unamortized costs as a component of interest expense during the fiscal year.

The improved sales volumes and lower cost structure of the Company, partially offset by the loss on debt extinguishment, resulted in earnings from continuing operations of $9.2 million, or $0.20 per fully diluted share during fiscal 2011. This represents a significant improvement from the loss from continuing operations of $19.7 million, or $0.50 per fully diluted share reported during fiscal 2010, and also represents the first time the Company has reported earnings since fiscal 2007.

Reported net earnings (loss) for fiscal 2011, 2010 and 2009 was $6.2 million, ($28.7) million and ($109.1) million, respectively, or earnings (loss) per fully diluted share of $0.13, ($0.73) and ($3.40), respectively.

The Company exports from North America to foreign countries and receives royalties from foreign licensees. Export sales as a percentage of net sales were 5 percent for fiscal 2011, 4 percent for fiscal 2010 and 5 percent for fiscal 2009. Royalties from foreign licenses were $1.6 million, $3.3 million and $4.1 million for fiscal 2011, 2010 and 2009, respectively.

The Company remains committed to its vision of creating value through technology. Company-sponsored R&D activities support the development of new products, processes and services, and the improvement of existing products, processes, and services. R&D expenditures were $67.0 million, $56.9 million and $73.2 million in fiscal 2011, 2010 and 2009, respectively. Over the last three years, R&D expenditures have averaged 5 percent of sales. This level of investment reflects the Company s continued commitment to R&D in an ever-changing market. Our current R&D is focused primarily on company-sponsored development in the areas of powertrain cooling, engine products and commercial HVAC products. The Company is involved with several industry-, university- and government-sponsored research organizations that conduct research and provide data on technical topics deemed to be of interest to the Company for practical applications in the markets the Company serves. The research developed as a result is generally shared among the member organizations.

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