Modine Manufacturing (NYSE: MOD) reported Q4 EPS of $0.24, $0.08 better than the analyst estimate of $0.16. Revenue for the quarter came in at $472.9 million versus the consensus estimate of $490.82 million.

Fourth Quarter Highlights:

• Net sales of $472.9 million decreased 15 percent from the prior year
• Operating income declined to $5.6 million and adjusted operating income to $24.8 million
• Loss per share of $0.13 and adjusted earnings per share of $0.24
• Automotive business sale temporarily delayed, but the Company will resume the process as soon as possible

Fourth Quarter Segment Review

• VTS segment sales were $279.5 million, compared with $340.0 million one year ago, a decrease of 18 percent. This decrease was driven by lower sales to all vehicular end markets and included the planned wind down of certain commercial vehicle programs. The segment reported gross margin of 12.8 percent, down 100 basis points from the prior year. This decrease was primarily due to lower sales volume. The segment's operating loss of $1.4 million decreased $11.1 million compared to operating income of $9.7 million in the prior year. This decrease was due to lower gross profit on the lower sales volume and the impact of $8.0 million in impairment charges, partially offset by lower SG&A and restructuring expenses as compared to the prior year.
• CIS segment sales were $150.9 million, compared with $178.5 million one year ago, a decrease of 15 percent. This decrease was driven by lower sales across all major end markets, including commercial HVAC, refrigeration and data centers. The segment reported gross margin of 15.3 percent, down 140 basis points compared with the prior year, primarily due to lower sales volumes and unfavorable sales mix. Operating income of $7.1 million was down $7.1 million, primarily due to lower gross profit and higher restructuring and impairment charges, partially offset by lower SG&A expenses as compared to the prior year.
• BHVAC segment sales were $51.2 million, compared with $52.5 million one year ago, a decrease of 2 percent. This decrease was driven primarily by lower sales of air conditioning and ventilation products in the U.K. The segment reported gross margin of 33.3 percent, which was 510 basis points higher than the prior year. This improvement was primarily due to favorable pricing and materials. The segment reported operating income of $8.8 million, an increase of $2.9 million, primarily due to higher gross profit and lower SG&A expenses.

"We finished a challenging year on a strong note despite the impact of the COVID-19 pandemic on our manufacturing operations in March," said Modine President and Chief Executive Officer, Thomas A. Burke. "Modine faced unprecedented conditions in many of our end markets this year, but rose to the challenge by quickly implementing cost saving measures in response to lower end-market demand. In addition, we successfully amended our credit agreement to increase our flexibility and temporarily paused activities related to the sale of our auto business, which we will resume once economic conditions allow. The pandemic has presented new challenges for us, and we are continuing to take the actions necessary to prioritize the health of our employees and to serve our customers and communities during these difficult times."

Outlook

The Company is not providing a financial outlook at this time. There is currently significant uncertainty regarding the short-term and longer-term business impacts of the COVID-19 pandemic. Customer orders and production schedules are currently very unpredictable, so it is difficult to forecast revenue and earnings for fiscal 2021.

"We are making the difficult decisions necessary to run our business as we deal with the uncertainty created by the COVID-19 pandemic, including aligning our production schedules with customer demand, while implementing the protocols necessary to keep our employees and communities safe," commented Burke. "We are taking all the actions necessary to protect the company and preserve liquidity at the expected lower revenue levels. This includes reducing workforce where possible, implementing salary cuts and delaying all possible capital spending. At this time, it is very difficult to know the length and severity of the current economic downturn, but we believe that we will weather this storm and that our actions today will allow us to be in a strong position when end markets recover."

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