RACINE, Wis. -- Modine Manufacturing Co. has reported its financial results for the first quarter of fiscal 2010.
Sales volumes declined 42 percent from a year ago as a result of the weakened economy, instability in the global financial markets, and a corresponding downturn in the company’s vehicular markets, yet were relatively flat compared to the fourth quarter of fiscal 2009. Gross margin of 14.1 percent declined 250 basis points from the first quarter of fiscal 2009 based on lower sales volumes and the corresponding underabsorption of fixed costs in the company’s manufacturing facilities.
On a sequential basis, however, the company said gross margin rose 480 basis points from the fourth quarter of fiscal 2009 and reached its highest level in four quarters, reflecting a reduction in direct and indirect costs in the company’s manufacturing facilities and lower material costs. Selling, general & administrative expenses decreased $20 million, or 34.1 percent, from the first quarter of fiscal 2009, reflecting the company’s intense focus on lowering its cost structure commensurate with the decline in sales.
The company completed the sale of its joint venture in China for $4.9 million and recognized a gain on sale of $1.5 million as part of its continuing portfolio rationalization strategy.
Adjusted EBITDA of $16.8 million during the first quarter of fiscal 2010 exceeded the company’s expectations and contributed to the cumulative excess adjusted EBITDA of $40.5 million over the company’s minimum required adjusted EBITDA loan covenant for the two quarters ended June 30.
“Given the continued global recessionary pressures on our business, we are pleased with the sequential improvement in Modine’s performance during the first quarter of fiscal 2010,” said Thomas Burke, Modine president and chief executive officer. “Although sales declined 42 percent versus a year ago, sales levels have stabilized versus the fourth quarter of fiscal 2009 and we are seeing the benefits of our focus on SG&A cost reduction, as well as the impact from our repositioning actions taken throughout fiscal 2009. During the first quarter, we were able to reduce our total SG&A costs by $20 million, while the gross margin improved for the first time in four quarters, rising 480 basis points from the fourth quarter of fiscal 2009. Adjusted EBITDA of $16.8 million was at its highest level since the second quarter of last year. Although we anticipate the next several quarters will remain challenging, we are encouraged by the performance trends in the business and believe Modine is well positioned for profitable growth as market volumes recover. We remain encouraged with the rate of new order intake, including a significant new truck module order utilizing our advanced Origami technology. The fundamental growth drivers of the business – emissions reduction, energy efficiency and infrastructure investment - remain intact."
