MOD - Earnings call transcript Q2 2020 | Modine Manufacturing Company

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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]

conference being this reminder, a call recorded. is As turn over to would now host, conference to like I your the Ms. Kathy Relations. Powers, Investor Vice President, Treasurer, go Please ahead.

Kathy Powers

to our with Modine’s thank our and Officer. CEO, fiscal Good for and President Finance results. discuss Mick and Burke; call Financial Lucareli, XXXX here And quarter President, Modine’s am morning. I Tom second Vice you conference joining Chief

PDF slides accessed or be using website for posted the either by the will which our be today’s Investor We can the link through webcast accessing of Relations file on presentation, section modine.com.

will This there morning, our Tom our will session. be year. At results and will the update of Mick for and fiscal a to question-and-answer provide the rest an present ‘XX end call, quarter the the for outlook second of

notice with two release, our in regarding statements. as This forward-looking in Securities earnings filings Commission. the slide and contain is our forward-looking call statements may On company’s outlined as as well our Exchange

turn to my is it call Tom the pleasure that, Burke. With to over

Tom Burke

you, past CIS seen few everyone. in served months, In end by and Kathy, segments. the our many markets have significant decline VTS a morning, we and Thank the of key good

weakness last and to to XXXX. slowdown Automotive addition year into projecting commercial fiscal the and remainder we through off-highway fiscal continue the mentioned In now are additional markets the that expect in vehicle quarter, we of our

outlook sales remainder to than conditions expected second fiscal and center the our also orders HVAC had have being segment, data We both in significantly the to lower earnings a lower to seeing the cooler and CIS quarter led are These lower and to originally coils for our market markets. year. of refrigeration the we sales including

fiscal call. sales and therefore ��XX. the additional provide lowered for have details We later in Mick guidance earnings will our

change number implementing Given measures. conditions, in are aggressive and market of outlook our a we significant order cost-containment the rapidly

to some months. will initiatives, are annual Some over short-term XX million and $XX and million savings of that cost designed longer deliver of these between are term savings drive next immediate $XX the actions

and structural changes and reductions, These our from earnings of include the expense improving accelerated operational operating resulting flows. measures SG&A and headcount with goal cash immediate reductions procurement savings

that some our important the a to experiencing markets performance actions know we our of shareholders correction are taking appropriate in are serve major goals. we path now on we ensure It’s meet to and for the stay to

to Automotive the turning results on our segment the would to of potential the I like Before business. for provide an divestiture quarter, update

and late diligently prepare business know, managing sale entered while a summer early you timeframe have industry challenging of months, spring, in environment. most we we working into been several the past the of As sale a to over the formal process through the for

companies from and process, -- buyers. interest strategic expressed we numerous Throughout received both in business the and see bids we the financial

the we the buyer. Over particular believed and one group with reach that several months, last we agreement could narrowed an

Unfortunately, value. including the complexity due been negotiations terminated. market factors, deal combination general a This and and conditions, with counterparty to recently economic overall of have is

than to taking we analyze make to interested continue strategic the will Though decision other and sale is shareholders. all will process have and while continuing but right We the uncertainty, anticipated our parties industry options. with economic longer we for the process, the due

is on to the is a hard The team business. is Modine investment exit for necessary this has significant. prudent investment worked and a But believe extremely Automotive it we the separation step the because

a will company make short-term in Modine our diversified We believe stronger, shareholders, and long-term business best that and becoming once complete. interest profitable more more of is industrial the

Now X%. turning quarter to decreased second our quarter overall, sales second results,

basis on versus constant year. quarter currency sales strong XX% a with Our Building HVAC segment prior had the another up

end-markets and had to continued However, weakness businesses primarily declines, currency sales CIS our our year-over-year both VTS in due impacts. and unfavorable

$XX.X was volume down segments. income year, quarter XX% million our CIS lower primarily in the million second sales and the adjusted or due VTS $X.X operating prior to from Our

sales for were from a page segment to Turning on the currency down year VTS four, constant XX% basis. or the X% prior

markets vehicle vehicular sales overall customers significantly, slowed XX% have and off-highway to down commercial sales were XX%. key were Our down

start market continue late only hear word quarter Early our from still but our began a At in in point, year-over-year commercial our Automotive sales significant customers. growth. We softening seeing first appeared to markets. stable, adjustments off-highway signal decline inventory of research we the early estimates quarter, this market third-party in second with to vehicle

end data It rest quarter, receiving the of mixed saw the we until significant reflecting learned commercial started the off-highway and off-highway extent October of third-party second year market the the half of second portion early full sales. these By for a to declines year. wasn’t impact we of market both orders for signals a drop that a and our that begin the vehicle of of and in

now We data monitor volume understand that declined than as quarter XXXX, quarter continue volumes the our indicate. much In the we worse market calendar we would fourth the declines XXXX, but in cases, by first to calendar with year-over-year current publish XX%. the expect in of customers, some as of significantly talk data, maybe as we

taking fiscal decline We base and our are to balance forecast volumes for we for our customer year. to both the a continue of and In more feedback. conservative the data current preparing our market are environment, approach

the and the heard OE has equipment. most where customers we higher off-highway of in area large a high this large seen line of mix harvesters earnings negatively with business. escalators, high have includes in were impacted we This commentary been engines and large impacts space, generally quarter. what the tractors, tonnage our and These from horsepower Within have

the XX% This Automotive China. China partially down Automotive commercial primarily due In XX% Asia, sales in sales to year, Korea. was due down. and by were off-highway Europe in region by as in and customers. sales higher were drop programs to were steep sales lower the Sales driven continue prior X% vehicle lower wind primarily to down in Americas from offset to to year, from in sales prior customers Sales the off-highway a down

million which below for to than Adjusted has decline Adjusted driven operating This the lower segment was prior targets. margin X.X%. the volume points our $X.X lowered level the $X.X a down is that million returns income VTS clearly basis year. was our for segment XXX is to operating quarter,

far, fixed we So direct quickly now have rapidly our team as VTS our is costs, focused reducing well. but the adjusted labor on cost

with production adjusting team operations sales is overhead requirements aggressively forecast. labor and Our line latest in rebalancing spending in our schedules

page to turn five. Please

had year, data quarter we XX% of sales the the will quarter from second this Our XX% to decreasing down sales year. from prior year. level quarter, down Similar knew customers the be last strong were year. CIS segment center to down also with Sales from another last the in prior

largest this We our segment customers still and performance. happy with relationship a are our they have strong in with

We they even has are working this are and the capacity, find to the rest actively fiscal them slowed, growing for impacted growth with the quarter though year. their center data rate of this the business which to our opportunities forecast still and grow of second both

customers. is in we this the ability our However, to our base. our our have testament is It the market of believe customers new the products and our future to success and gives of which obtain is initiatives relationship concentrated, we for fairly This services. data difficult, a had with diversification but largest effort makes piece us CIS confidence customer our center segment

was and in CIS to the due to were segment well, as to end primarily In a sales environment. other data operating addition decrease This reported tough center, our segment negative down year. down This adjusted volumes driven markets $X.X by prior from sales of mix. to gross profits, million, industrial due lower lower sales income XX%

recently assuming leadership for segment was We our Operations the Chief change responsibility Bowser, segment. announced CIS over Scott Officer,

am drive in sides making to of clearly both the leadership ensure growth that this further to leadership in and confident proven team do execute Scott’s business. have we in We some also improvement this improvement on profit plans. operational commercial and will segment. will be this our work We changes structural and I

profit and strengthen and are product profitability In room structure our coils we channels. reviewing our there by where is to improvement business, particular, on focused distribution we pricing believe customer our in by and are

In organizational this addition, examining also we the of structure business. are

regionally managed Last still to year strengths world. group areas focus, the of a the structure. moved CIS, from In around different business manage with is our weaknesses business global regionally and VTS a

to and further We business global our product looking our strengthen presence that a are structure to move coolers will coils our in profitability in now market improve help to business.

Please turn to six. page

spot and heating in U.K., the Turning driven of quarter. partially to in product in increased Sales sales data our non-data center and North primarily the offset ventilation center segment school bright the by higher higher America Building lower sales by U.K. XX% in products HVAC sales for

This sales million increase driven from Adjusted the favorable operating volume prior XXX increased adjusted and margin XX.X%. XX% $X.X basis higher operating and by points income to to increased year was mix. sales

be encouraged the by to our competitive strong in position continue this performance segment. We in

entered a solutions the that into supply provide announced a center with data We in cooling recently agreement of global manager to center owner and for projects properties Europe. data we CyrusOne,

great this Airedale market. provide energy solutions U.K. cooling a is Our growing in position to in unit business to efficient

With for to Mick that, consolidated I’d our an fiscal for results like to ‘XX. turn overview over to outlook update and of our

Mick Lucareli

slide to Please everyone. morning, seven. Good turn

in things end had negative I due As Both challenging we than lower anticipated quarter, are sales, we reviewed more year-over-year even trends QX, the CIS VTS last a key and difficult expected. markets. to their

With regards weakness particular and to off-highway data we orders saw with experienced customers. we from side, VTS CIS, and the commercial vehicle global center, commercial On refrigeration customers. HVAC lower

$XX result, sales decreased second a X%. quarter or million As

$XX negative the X%. sales million Excluding FX impact were down of

continuing sales their Tom Building As momentum. XX%, covered, segment increased HVAC positive

gross XX%, with on Gross generally cost Downside conversion a our by resulting profit margin $XX fixed million based of expectations lower and structures. variable was of in current in line was XX.X%.

compared impact year. exchange prior gross on a to our addition, had In profit foreign the negative

VTS unfavorable the margins and declined gross CIS as primarily volumes. our volumes drop The margin mix. decline. a to CIS in customers VTS, on center declined segment sales gross of of had decreased the primary product negative margin margins. due Within impact a to drivers cooler also data in result lower segments were

we a reversing margin negative trend. coils In are on addition, focused

a spot Building mentioned, the gross with As leadership margin a top Tom improving segment team. basis of remains profitability bright points. HVAC improving coils is priority XXX new

quarter lower that as adjusted the million. controllable our the business of see from $XX Automotive million, we note The cost operating decreased revenue please by been in $XX These income remain headwinds, sale. have was focused also, costs million excluded details was can you expenses remaining and for SG&A offset SG&A preparing market to the SG&A face on the appendix. related for $X we

VTS of and Adjusted the the HVAC the $XX reviewed decline was Lower negative by $X from earnings growth income offset offset CIS. operating declines million previously in volume the as the impact. million foreign prior SG&A year, down and in was Building helped currency

U.S. our totaled of an usual, our includes Automotive adjustments previously million as to $XX.X and itemized million a reconciliation results. mentioned, appendix These relates of GAAP adjustments As list full the divestiture. $XX.X

to Automotive The other separate costs million business severance of restructured relates $X.X and the VTS VTS. the balance primarily we as

large unfortunately and and We has unexpected swing a GAAP tax in adjusted see results. the rate, our impacted which

on against impact attributes rate. First, we that had US the allowances significant recorded quarterly a tax valuation tax certain

Second, deduction this in introduced under down the The enter earnings more the from which deduction in our the position in of resulted losing is year. which our U.S. prior inclusion, position $X.XX, Adjusted when one in the a tax Tax being in results projected of is companies Act. U.S. of pre-tax quarter per provisions actually the the were new loss GILTI the XX% loss loss tax $X.XX share expense U.S.

reviewed, combined just higher to is rate. the tax As due I the sales decline lower with primarily

eight, million. cash free Year-to-date, $XX divestiture. earnings year-to-date down and flow to costs lower to was due anticipated cash the our is to negative cash related Turning flow Automotive slide large

payments includes restructuring to of $XX related strategy this However, million costs. and

year slightly expenditures Capital our due separation and higher the than business. Automotive partially to were prior of that’s

largely capital additional last be is these costs. higher, As I to mentioned spending expected quarter, to slightly full-year due

year. positive Automotive addition and to year-to-date higher teams we separation. million spending the the the our slightly have net flow finally, high expenditures, cash And is on plant been our operations inventory second cash free half increased ratio $XX anticipate fiscal the separation, level X.X. our debt our carrying the Despite support of in Automotive cash to leverage In of

and of to Now to fiscal weakness fiscal customer are in trends sales our reducing let’s the XXXX guidance second Based nine. our additional on feedback, half guidance market slide on our year. reflect we turn recent results,

VTS As commercial and Tom their vehicle off-highway across market, softening reviewed, especially anticipate we customers. with further

extrapolate including we not markets, ongoing we have addition, fiscal our data released customer. Many expecting In the March XXXX center year are weakness CIS to in a trends. have but we outlook, tried a current their end, given companies have key that

guidance, ‘XX on from our now move this of fiscal based midpoint of project $XXX majority the X% the with range, reduction we To about our XX%. This down sales half to the of summarize updated our year. to million be second represents fiscal coming

we half impact. of due growth sales second to regards CIS, HVAC, Building the slower we expecting markets, sales growth although to are negative With negative the second expecting half. In with are the the exchange to global along continue, slowing foreign year, primarily in a in

a versus The second in to largest half are anticipate decline segment all prior Americas, where sales the also significant markets We in year. our in decline projected the is the end be down. VTS

vehicle have in Automotive certain of wind down weakening markets the and challenge a and with We the Europe continue to commercial off-highway continued programs.

share gains. and sales expect also a for We year, small market offsetting the have reduced forecast continued Asia decline market our substantially

significant immediate we are targeting savings. As Tom cost and cutting actions mentioned, taking

need the the and However, time implement reductions full effect. fully achieve will we to

be Adjusted $XX of based now The a represents of our approximately $XX million. to XX% corresponding operating is the income the change expected earnings million downside in sales in range change. on outlook to conversion

be to due addition estimated business foreign our earnings, to year tax of I our tax projected is and to the higher and In regulations. unusual tax specifically, full previously mentioned, rate now mix items

expense, example despite some we For tax will jurisdictions, in loss. income have pre-tax

$X.XX control our Based earnings adjusted of remain are and expected cost margin and the tax protecting on the that per anticipate market the strategic areas By aggressively XX%, can reducing positioning downturns structure, be approximately and share improvement. on between further will on Modine the we we from We for executing $X.XX. company Automotive separating a rate the we and plan. business significant focused

it turn will I Tom, back you. to

Tom Burke

enabled as as and years efforts for more making a decision thermal diversified Mick. to a Thanks, management that framework ago, strengthened our Four served we a company. has platform become announced us diversified growth This and management strategic risk a company. platform

our continuing business. decision to better strengthen, exit us have to continued an plan on the that Automotive focus set targets financial to on us led which with to to and on strategies and our new executed us We the diversify, a strategy, execute allow is will important for future. in step our to the capital us and grow help time management the reach operating forward, going our business of This

a be This structure shareholders. the moving best anticipated, and taken originally than process interest is we but valuation that to will our longer remain committed in towards of

markets is us which recent the additional includes immediate However, to actions, downturn the in take our plan. end savings forcing cost more

$XX XX are targeting We annual $XX in million to months. million savings next over the

of procurement As from these other variety mentioned, headcount overhead consolidations plant including I savings and come reductions, savings, a reductions. will and sources, SG&A

to the to We this are target meet necessary we the steps initial take continue take to timeline. and actions starting will and

goals. before through and have have not executed We this only our met have but been

we have be responded We proven will record this a and downturns quickly market track to different. and time no

against markets a As a we are have past much of the the moved when than in better in been us. we have fact, matter position

made In this is changes actions this change I significant we these am segment and additional a track. to get our confident back on CIS leadership that how segment, will we make segment managed. will have

to HVAC margins results. segment Meanwhile, earnings, we segment’s it our prospects and and to our continues about strong and to growth continues are company contribute total optimistic the more more Building as future generate

our end markets Automotive businesses. We are key our with in leading non- well-positioned shares in

have on growth in these right industrial strong where win. focus long-term will investment our a with We trends, mega we markets to

margins prioritize cash will We businesses that flows. in improve will invest capital our and

we that, your questions. take will with And

Operator

Shlisky of Company. line Instructions] first from Our the comes Dougherty of [Operator question Mike &

open. is line Your

Mike Shlisky

Good morning, everybody.

Tom Burke

morning, Mike. Good

Mick Lucareli

Mike. morning, Good

Mike Shlisky

Okay.

something a I correct perspective. so the I to bunch costs quarters, back of When over me kind spent not costs it’s have auto if on you when are? Can So small I like at relatively am you it it $XX of sell is that of think, up, EBITDA I divestiture. you add much wrong, color parts far, sure to what would last there. touch some I wanted the the from to ask I an million looks surrounding am least those really go just as little one-time briefly so why

already EBITDA these whole a actually have might You fees. segment spent on

So was that some just there more reason, curious there. up back if selling any of I don’t And that I contractual get you just of kind your provision you cash am as for some from some is curious detail end kind it vendors? of

Mick Lucareli

business, the the Yeah. take business separate stand be as Hey, carve Mike. to then is about It’s process the divestiture have we Mick. talked the prepare to for will up can’t I significant shot are Tom side. primary on the driver heading knew need and we a can into it otherwise comment the first non-financial this out. We would and we biggest Yeah. cost the and reasons

then of multiple work units all three, the separate monthly to and a part historical able financial go And into recently out a basis, not VTS of be accounting segment, over having integrated financials, but a the there only business regions, most that is on the four then and past forward. on to amount and significant

piece The second is IT an that of standpoint. big from

duplicate wind to shareholders. the to about the the your and business alternatives footprint order IT of Modine be as to able down and standup challenge thinking cost significant the for have system the of in alternatives kind are costs know, us and benefit We you that of is do is business. really question and to The with the separate a about the

business, that’s So with what continue the costs determine the forward. of investment spent. drivers believe flexibility do and to But the this main to we to I spending is that have separate the Tom to most going it

separate stand forward this quite to from help full another we do We and entity. business be Tom anything bit investment up two or you and add? anticipate visibility a of want separate quarter then going to will both a as that ready entity will probably us and

Tom Burke

Yeah. No.

I overall. to that, number negotiation the had from and in narrowed a of, to not that process, frankly on just thorough happen. down think concerns with maybe conditions, standpoint to time this then interest priority priority, general go strategic forward very will I smaller one remains process, think we of simply top I a We auto. through remains went this just factor frame, company, mean beginning the head decided we this week’s quite on this the and final quite a statement a at for potential also down, of divestiture narrowed a valuation this big that selected our last the because but go completed, market the into a buyer

going are back. get to We

good not are we We company, -- we we flow said. just we want sure the into consider of our going this that to focus getting back in round what But the deal will posted can make -- on can done second shareholders of a decided keep for to but for you that a I to get to timeline. of that’s reasons the the it’s because quarter, -- and we pursue that frankly, be, was alternatives

So arrangement of right time a it it’s the with planning matter the happen, a This of and will remains priority. just right buyer.

Mike Shlisky

of repeating Okay. months save XX the one-time comments for parts auto that’s to? months, just whole in million right? other just And divestiture, not some next your not expenses cost to going XX to to looking $XX housekeeping $XX item, a set That’s and a of the these simply about million

Mick Lucareli

our The costs question. operating one-time $XX the Great Yeah. completely Good to separate million within $XX Great. It’s talked company. from about No. the Yeah. Tom clarification. costs. are million

to are business. separate Auto now spending We the

Mike Shlisky

for maybe color issues question. some to the move countries us move quickly as a be Okay. acquired that. happen? centers. how in changes we that where and on it in on and then, here that costs you given you quarters between what’s little your will that footprint and to think give two-part to is One, any raw maybe a going far Kind business, you regulation secondly, any Thanks here is for can just facilities few any forecast been easy to in or commentary given for a or of And changes other as additional how some now risk and materials? on there shipping or CIS, data structure as to have do global And business? there, of Is write-down also a there one-time CIS global happened -- headed what’s

Tom Burke

What was get? didn’t Mike the I last question

Mike Shlisky

your goodwill business. I data deal? and what’s in forecast curious of if the from I is a quarters in write-down the was couple just about if last that given in over risk a with elsewhere centers there am happened curious of

Tom Burke

first to the it then the of then. question take part back second and the will Mick I part swing on

made make we have the announcement As the assessment. far we leadership an on as just change

integration. We within functions have now been some time globalizing with for the the CIS

the things like over done. with procurement So basis a involved are are optimizing that that buys global on already

market really matter the market of that by also the product varies both selling in for Now of how market coils and haven’t have, position on the the as in this strategies, optimization different we obviously share to instance, globally how is go a our we planning open addressed proposition of and largest we we really operationally. run that commercially regions

So lot we a both oversight of can so on making there’s basis. have a sure things this, really -- global there’s we ends by optimize on

overall where position as to it a be standpoint, well. also to in of focus Yes, is really sales whether bringing operations America North we Europe regions and our regionally, which the strong strategy an coolers, it product, the comes coils, from of down very is and but running and other those have concentration

to feel commercial are operational strategy the focused level that’s very a what global we what So the confident with to it’s really globe around bring. bringing and consistency best going and on

Mick Lucareli

we through, process. I and our of heavy the it’s a indicators answer look in will fiscal we do jump always and question impairments. on just The we no. you look and goodwill Mike, impairment any at each always is planning But part short go Yeah. year-end

growth. one the you year know strong earnings had had acquisition, really actually after coming a out or two we are As years

with coming So -- off of dip are is where of business. coming we really we the phase than happy we the some bought off growth not good But higher is are it. what

technical is of different business are those side, the the other balance thing on margins some of well, CIS to is The that, within of on intangibles a lot have of the that that strong areas sheet. quite applied areas those accounting goodwill doing and support some

be So, part planning we will looking and our yes, of it as process. will keep review at next

Tom Burke

your I go back if to first This Tom. question. Mike, is

of One about in are we the we things, talking as strategies performance the and the that. globalize CIS, prioritization drive but

we that a U.K. focus the that data know I You out a of on computing in center is, cloud have really say, our focus business CIS HVAC the center have Group. side and data Building we in

really look both We on of we concentrating how one we link of those a days, make that that’s early market. the strong two face those are a can to to something is in can smarter are as at but we that advantage way channels to priority. grow together sure have take market That’s well to business

Mike Shlisky

Okay.

be the the VTS cost to to auto in be just or main the CIS going will business business all question And been all it’s in out HVAC savings, upcoming will in on a going carved those to even be or is here? it also I think wanted savings the Just cost two and also be the in in it segments? ask that’s

Tom Burke

of look everything HVAC, Building make we side. there. going have want focus can are to the priority we we and flows VTS to are is clearly, possible we Well, CIS all But growth where of side workflows, the leveraging opportunities sure and and on at the on

to fully CyrusOne business had to recent that the and across the recently that announcement to the center mentioned, I at going and deliver Europe data but as further. we and want success able on be opportunities are So carefully even so we co-location look grow of that be support front, with

the using main focus course VTS and accelerating and we mentioned then opportunities of But CIS savings, procurement there.

be let’s targeted Mick, mostly others in you So anything add it CIS. will that? will in spots, would VTS and but be, say, to

Mick Lucareli

Yeah.

Automotive down a with will VTS. it’s Just, your of is VTS. of act, the balancing have to we Automotive as question to rest well side as Clearly, versus the on yeah, regards do part

adjustments So the the of careful and but in very so talking have level buyers times middle take time be indicated at are of are we to we the same about would process. we you at sale the to reductions

I a look, and it as Tom $XX remaining company. $XX heavier obviously, to be the think will are our million million I focused much on

one-time that all they your these coming the things about question Dakota. aren’t So We focus of and the part stay most the the costs business, costs won’t be going us, run, the in long to going us at separation put help remaining so Modine. out of to on into with of lean the is

Mike Shlisky

Okay.

for I question, of in fed of Okay. the I I facilities, I who coincidence few their for, business your new want good plans not from yourself? was from guess, more squeeze far pass major as And try impacts In were that maybe folks the one just up seen due the auto of a that’s have them year, curious then one one am by to quarter, if I maybe at there auto along, something relationships. here big last any think, to before or from no OEMs? I just confirm. to to are the numbers old strike your either to or maybe hiring And trends secondary -- you are a

Tom Burke

levels in of part I the okay, First America question North to mention that is to reductions probably engine as not that, material, and at look supplying specifically some we are some as personnel, as here far GM with the answer okay? going we But know, operations far don’t our inside as the through rebalancing I of load. of where have across plant operations, know can’t we don’t I products impact,

materially. to one, impacted but clearly not that answer the with know the part, don’t but I it’s So first

Mike Shlisky

Okay guys. I appreciate the color. Thanks much. so

Tom Burke

Mike. you, Thank

Operator

Leiker question Baird. next from comes the of with David Our line

is line Your open.

David Leiker

morning, everyone. Good

Mick Lucareli

David. Hi,

David Leiker

popping there On end of doing that on in the couple some come the anything are that well you lines are the some quarters? Building any up those up there when HVAC, there, look that -- in could you horizon, is signs next are or there, there weakness are issues markets along

Mick Lucareli

okay? some, non-data So, data in and look, the I by you If the offset growth, center significant sales down are center. the mentioned U.K.

that’s a issue -- in down see it’s I slowing point. now at So right what But with that’s things think we England. Brexit this

the I are America in can say great. North sales

now, We sales, season heating going have product a school I right are mentioned going on great strong. sales

So any America. we have not in North indication seen really

David Leiker

side, you the been or that, And trying center able data help that in know customers center then on some flows break to but and out are data actions have broaden signs that to there? into are any there smooth to the any working other you I

Tom Burke

Yeah.

into time of lot that, a putting are We David.

team questions made bringing people leadership a voice caller leverage segments we a of team in relationships And follow-up that we CIS, question that a market have As phase I pulling can building in this talked are with together. we got we earlier now, last we it to with that in quarter together one to but together one are of into change that that leverage bringing the the both and mentioned some in we the is earlier market.

in are clearly For American that, you in do significant best repeat us okay? are order They so North based really instance, that. I we And going way important. that the region, firms relationships interested in there, is the company. U.K., this the supplying are we that that them CyrusOne received means very looking the through engineering That specifier and deal contractors to also a at

have both a channels putting arrangement place leverage. in very got to the of based we are sides both up market that set We strong relationship on

the right and should be market resources our call. earnings time, again addressing about our lot next we are approach a talk on to able So putting in that more to we that putting the on

David Leiker

Great. Okay.

you hope may of there in that can that one of item terms don’t be to any any business, that the future to rates accomplish there what position you Just there any Are are profitability the terms in on growth CIS, offer in way? more you -- parts along targets do want of to is want? not opportunity share you just

Tom Burke

with points to clearly targets points we Scott Mick driving basis let I thinking have that? I those that going some really in in is am get, into into color the We right want to will basis you changes Yeah. to But, go now. But detail. Mick, XXX want leading improvement out. it further XXX

Mick Lucareli

behind had on get our good our large one Were execution the of customer. are on some we good large the -- initial data -- good Yeah. We of synergies. with a really roll. frankly We center us momentum

finished, XX% next XX% two running in we EBITDA. year about in business be one X.X% think year, last the We year-and-a-half. to And more years, David, to should that

have a think got good I path forward We we know.

price Your need product. to with businesses, that to we coils The tackling talked piece getting and that’s cost and about just about everybody is in question largest exit, of knows Tom regards to big we back blocking the -- no. that how that, and build, business

we in months. margin our or like year XX% significant more down EBITDA target XX a little be and the will This But a probably X% team’s next is XX% see improvement. bit the goal EBITDA, but

David Leiker

Okay. Thank you.

Operator

And our comes Matt of line Davidson. of Summerville next question D.A. from the

open. is line Your

Matt Summerville

of couple A questions. Thanks.

are in indeed sort portions can of your coils First, then share give loss? you us and or the business of And off-highway VTS? in results your some book-to-bill like feel vehicle indicative what seeing the of were look for market commercial not whether

Tom Burke

Okay.

So obviously, we I don’t give book-to-business data don’t vehicle, mean, that in out publicly. we commercial project,

globe commercial business around are the very with pleased vehicle. on We wins our

up our recently their next down. see understanding their spent their of several more and the of importantly, sales coming So customers time reasons our XX XX they the adjusted outlook, months months to vehicle we with we is commercial what which in one strategies. But really

business. winning are our we But

did but push with We position see multi-nationals in there part specific some of top with well due were that customers as We of part position in are two domestic one or in delay. a X customers that both out China smaller North with to and China delayed Europe, America growing China, of launches there. and three course,

good saw segment. that and platforms well in strong leverage we that truck a the very commercial to very, specialty offer into are able a position, very of product I and into deeper we course, but bit going bus manner little So smart vehicle then,

the Great major North we and companies there Europe, especially electrification America that growing bus well. in we position and truck opportunities as with all with the in are companies are especially involved seeing

that I am in commercial very vehicle very, in our perspective. positive So on position

our On is mentioned, independent we important share I market to think, position that in of is standpoint we question again, very back believe customers. I supply your the think and getting the and XX% coils was good, from second part to are XX% largest share deleveraging it globally as that we coils thousands of our share we CIS, approaching was that

commercially visibility of getting far time we a The making of is need value thing, from and value type manage which a we have weeks lead one focus the is as so proposition how far pricing matter a is that there in to way we probably -- in orders less as and are sure sales standpoint. the strengths of all that have on to responding we the fast and the we

those also investments get the which on a to have the to out working vertical door really customers needs helps able cost side and be response And integration, on to us necessary to respond and of too. fast

we So which take in feel it’s position, that need better that to to of leading share wise position. that a we are leverage advantage we

Matt Summerville

related of the And Mick, ‘XX, that. to respect part into of door fiscal your of savings, of to as of balance cadence sort and the terms million cost out ‘XX the realization in some can early accomplish to of you With we the out $XX fiscal please? anticipated cash million restructuring sense is through $XX give the look what us

Mick Lucareli

Matt. Yeah. Yeah. Great question,

confident in million So can of get hitting and the $X we the fiscal and early, million other XX% we that savings this of to are got now estimate targeting probably above will feel we total. balance $X to million likely then to next obviously, year, right between most it, we year cost With annualizing beyond. we ideas savings, regards cash and $X it the fiscal have it’s in million $X achieve be and but

our that bit hitting here next little four full to the a the carries $XX the in is next be million to within may million million here over, or $X months million again, get to There but months. five $X $XX goal XX with months,

Matt Summerville

change, commercial the then out, talked that it? being much I on being is about if what could driven you by way in of out, and is parse driven parse how impact a guide you rate if at EPS maybe have down the much how the there take vehicle the look -- Is to tax off-highway you what calculate the is by VTS, in CIS the dynamics

Mick Lucareli

Yeah.

back to the last So a it’s but quarter. it’s about standpoint, when VTS split mix here really evenly think we income operating little in pretty a From change of an bit CIS. guidance side, and the been VTS going more the heavy on

as quantified but could tax with And that offline. do it, I haven’t you we side,

on a XX% clearly side tax XX% up have a rate. moved to We rate from the

So split VTS has really the and been then downturn side. on the CIS

Matt Summerville

with drivers just growing to you to year, that guys anticipate the business in Got given it. want plus maybe plus I maybe And up sure in you still bit? in so organic respect the the of I help half and through that of talk organic are back some a you Building understand correctly, make QX, HVAC, comp QX a XX heard me organically there, little comp against XX

Tom Burke

the was QX business will off Yeah. phenomenon Well, with side of that our clearly, more strong season, which finishing in strength type North is -- is American a I heater mean, QX QX, coming sales, the be schools. we out retrofitting which of of which school

that in with that U.K. center back in on the we data focus the I well talked The the the have deliveries as years the landed orders CyrusOne big about.

So growth on feel that of organic positive side and about the we expanding it. opportunity very

Matt Summerville

Thank it. Got guys. you,

Tom Burke

you, Thank Matt.

Operator

of line next of our And question Gabelli Funds. comes Sponheimer Brian from the

open. Your line is

Brian Sponheimer

guys. morning, Good Hey.

Tom Burke

Hi, Brian.

Brian Sponheimer

sooner, comment here, $XX million $X.X wasn’t couple $XX guess million question we will just there? guess, the million. on becomes, out I A cash door then the Hey. that it is going start cost annual questions basis the done to an to why different that to of I save back the

Tom Burke

the of Yeah. us. it majority drop, the Well, still clearly if the in second the half the is of you mentioned, timing of this that of front year, in Mick drop is

the We are going early recessionary, potential pretty what get that shape ready, our think on of this a comments contraction that deep I have so responding are a went, it, to okay? we markets and talked now sales broader is better We in anyway. be let’s about and working driving focus early kind to is Mike, in

be, making need mind, for we here margins, want with necessary we taking on smart as change the so yeah, to in we some it are with that are our really thing sure doing to this Mick come as we we are our on the But mentioned, as within as we to are way. to So, not for being a and to out in aggressive far eye are risk company with -- okay? what as the contraction. we think some take we focused changes adjust management going be striving this off is of We that are that targets and those

starting and more, through the that over our -- on a put buy, it we but we into things. logistics those straight, savings type to are broadening side, indirect the So deliver now lot the those last years savings investment buy, of of just procurement couple even procurement team not have only of and direct

is I chain our with natural are maturity where whole level, focus. think a we management supply

the excellence question. operational say think timing add rest this to good this of in to side. some to of supply so make the going chain, that’s great out variable structurally within want I So get is to I with then functional line the think just then would building I a changes and and fully contraction, And Mick, we on you are have that? to through contracting

Mick Lucareli

Yeah.

and the Just a little question on more lever sooner. pulling forecast color

on discussion, to were the also auto. also call we we last in levers been knew July, was pulling on there some As and for year planning and time Automotive we the cost have of talked softness reductions, we the separation this back

took really from came And again. cost levers then million actual expected quarter bit $X and in tune year-to-date we pulled a a talked as then, from out forecast, closing we getting were CIS headcount and that and the were little the mixed seeing drop, in signals September already had topline annualized. hard about Tom VTS. we lighter drop we look versus a second significant of to customers the million in $X saw we of that. or in rates out. order what pulls reduction, then on EDR October, a we And So was some

target looking the now. scrub in about we -- we Brian. rolled up Tom as forecast going today, current deep another up and you are go did really to everybody immediately October, to we went said went right we okay, based get and a we today, that that’s ended That’s XXXX, into, out, it we and come obviously, concerns, So and set we on into we laid bigger when how where back

Brian Sponheimer

Okay.

like it’s amazing So to just this an a two-year mean, I on because, Xx timeframe, I a loss just -- return. which Xx more be a seems prevention. clear payment, recovery this, on it’s want is in This

business? million to things that to is going some clearly stands into $XX that that when better million do to come the have back it $XX get reason to of So

Tom Burke

we $XX Well, includes I going to I we that and million million make, to planning talent on. data $XX some think, the focused, some center I to there are we key are know mean, resources okay? need investments we add mentioned

not it’s built So just upside the the cargo shipyard. of

we where sure grow. we want are ready focused making future, to are that We for and the

investment an So the and procurement processes. of more savings, again, of it’s resource

do only a chain. the technical -- matter yet, and focus and getting to but look optimize which buy, portion. significant on we -- into more I help you things also a data if whole can it’s direct efficient technical numbers -- there, buy supply as out deeper set as that the target but not that the sales, there, in split indirect buy the mentioned, using well effective in publicly direct analytics So but at driving we haven’t have smart we It’s

be on So we getting adjusting combination. drop is supply are natural and for are there going we standing -- sales we broad and going prepared caught that to need focus some side, just be on to on are there we for a it’s down, markets so it’s deep flatfooted not chain in really seeing and I a pretty ready key am progression management where our the

Brian Sponheimer

Okay. right. All

the groups, vehicle light on clear, in missed sale far that is business, that’s the apart banker of How business. spent so the much or were consulting opportunity of So want far be the fees? $XX let’s how been so separating over million the go million fees to to and hey, I $XX two

Mick Lucareli

banking been has there Brian, fees, -- the no amount. Yeah. in that

it it work, in banking and fees. most So of do per is there, no third-party it’s IT the separation se, legal the accounting work is legal consulting accounting so not to and of some majority

Brian Sponheimer

from were this a could you buyer contextualize how seller apart help perspective? price And in Okay. and far

Tom Burke

the a but we exclusivity time, No. comfortable we through that we quite get not, starting had at can Probably weren’t you tell valuation we same done felt when comfortable off I frankly that, But with. period. the

our So, the we company strategy for do best can for again, the position it’s and for ourselves doing thing shareholders. also

So a found the we targeted decided really it it but we that Yes, where this we second right just ourselves said. position I close for of was step we needed to out important was, reasons quarter to what commitment in not to is that. a us that’s those thing do

it’s entity carve separate to in the a and moving within we a company, I This that, strategy, that of imagine give in lot a Automotive of it But focused going us to company is emotional. up set the been our forward and it credit saying are smarter leadership as do transition long-term team -- out to you leadership to investment allow that want that a of it’s way, team, that’s our the with through that’s on them. to But going people lot has part can supporting okay? is a

you emotional not was that. changes with And it’s when factors financial more, decision, looked and the going decision, that easy so and at back and T to was an it Model making easy an

to to a the down industrial us going for company’s becoming continue and strategy. want this company. more this take We in complete our key path are We technique

Brian Sponheimer

sale, entirety takes given and I involved me see doesn’t just within to this the any now -- the Is be cyclicality markets… of that business sale last that vehicle put can And the as on would off-highway vehicle, one it though, the there for something No. respect near-term. that’s that commercial the thought to you adding Yeah. do place for the light emotion vehicle up something here, of be appear that in you the the

Tom Burke

Yeah. Yeah.

Brian Sponheimer

… on that? any thoughts

Tom Burke

is answer Yeah. no. The

Okay.

product have a strong that Matador, out our and lot that a put can have sure that We grow organizationally making positions are globally. we and focused of maintain that and work in we both on a strategy-wise, there position

we challenges I those business that Yes, we is of strong businesses quarters. whatever we that that, one of this strong, can next relationships are pleased very But and that feel to number that cyclicality business the again the drive with going nature are for that and mentioned, that send we see of are wins forward.

diversified is we it into front times. But return directly that very profile account, at flow business and taking data in cash makes that cyclicality the standpoint frankly, opportunities, yes, rebalancing center more industrial whether good, quite challenge growth have it’s the with is more of And more that be cash able a be this a and we be without going able or strategically, to move freed going do the be opportunities by up lot to to rather to are inorganic business to constraints, given our motor flexibility on. all will

Brian Sponheimer

Okay. you Thank questions. my entertaining for

Tom Burke

you, Thank Brian.

Operator

the like I am to back showing no conference Powers. further questions at this I time, would now Kathy to turn

Kathy Powers

have Thank A in us be through hope website you. and joining as great our available for you the well. call you a day all this of a will weekend great Thank Thanks. about hours. We morning. replay two

Operator

call. This conference concludes today’s

You may a disconnect. day. great Have now

Modine Manufacturing (MOD) 8 Nov 192020 Q2 Earnings call transcript