Modine Manufacturing pany(MOD) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The company's unaudited statements show significant year-over-year growth in net sales and net earnings Consolidated Statements of Operations The company reports substantial growth in net sales, operating income, and diluted EPS for the quarter Consolidated Statements of Operations (Unaudited) | | Three months ended June 30, | | :--- | :--- | :--- | | (In millions, except per share amounts) | 2023 | 2022 | | Net sales | $622.4 | $541.0 | | Gross profit | $127.9 | $83.4 | | Operating income | $66.5 | $25.6 | | Net earnings attributable to Modine | $44.8 | $14.3 | | Diluted EPS | $0.85 | $0.27 | Consolidated Balance Sheets The balance sheet reflects an increase in total assets and shareholders' equity as of June 30, 2023 Consolidated Balance Sheet Highlights (Unaudited) | | June 30, 2023 | March 31, 2023 | | :--- | :--- | :--- | | (In millions) | | | | Total current assets | $894.1 | $846.4 | | Total assets | $1,607.9 | $1,565.9 | | Total current liabilities | $506.7 | $507.1 | | Long-term debt | $330.0 | $329.3 | | Total liabilities | $963.4 | $966.3 | | Total Modine shareholders' equity | $637.9 | $592.8 | Condensed Consolidated Statements of Cash Flows Operating cash flow increased significantly year-over-year, contributing to a net increase in cash Condensed Consolidated Statements of Cash Flows (Unaudited) | | Three months ended June 30, | | :--- | :--- | :--- | | (In millions) | 2023 | 2022 | | Net cash provided by operating activities | $41.7 | $14.5 | | Net cash used for investing activities | ($18.4) | ($10.4) | | Net cash provided by financing activities | $3.7 | $12.0 | | Net increase in cash, cash equivalents and restricted cash | $26.8 | $13.5 | Notes to Condensed Consolidated Financial Statements Notes detail revenue disaggregation, debt compliance, strong data center growth, and a subsequent acquisition - The company refined its revenue reporting for the Climate Solutions segment to align with three market-based verticals: heat transfer products, HVAC & refrigeration, and data center cooling[29] Revenue by Product Group (YoY Comparison) | Product Group (Segment) | Q1 FY24 Sales ($M) | Q1 FY23 Sales ($M) | Change (%) | | :--- | :--- | :--- | :--- | | Data center cooling (Climate Solutions) | $68.2 | $30.5 | +123.6% | | Liquid-cooled (Performance Tech) | $134.7 | $110.9 | +21.5% | | Air-cooled (Performance Tech) | $172.7 | $153.0 | +12.9% | - As of June 30, 2023, the company was in compliance with all debt covenants, including its leverage ratio and interest coverage ratio[76] - On July 1, 2023, the Company acquired Napps Technology Corporation for $5.3 million, which will be reported within the Climate Solutions segment[89] Management's Discussion and Analysis of Financial Condition and Results of Operations Management highlights a 15% increase in net sales and improved margins driven by strong segment performance Consolidated Results of Operations Net sales grew 15% year-over-year, with gross margin improving 520 basis points due to higher volumes and favorable pricing Consolidated Results of Operations Highlights | (in millions) | Q1 FY24 | Q1 FY23 | Change | | :--- | :--- | :--- | :--- | | Net sales | $622.4 | $541.0 | +$81.4M (+15%) | | Gross profit | $127.9 | $83.4 | +$44.5M | | Gross margin | 20.6% | 15.4% | +520 bps | | Operating income | $66.5 | $25.6 | +$40.9M (+160%) | | Operating margin | 10.7% | 4.7% | +600 bps | - SG&A expenses increased by $5.1 million, primarily due to approximately $4.0 million in higher compensation-related expenses driven by improved financial results[98] Segment Results of Operations Both Climate Solutions and Performance Technologies segments delivered strong year-over-year growth in sales and operating income Climate Solutions Segment Results | (in millions) | Q1 FY24 | Q1 FY23 | Change | | :--- | :--- | :--- | :--- | | Net sales | $271.8 | $244.4 | +11% | | Gross profit | $69.0 | $50.4 | +$18.6M | | Operating income | $44.3 | $27.0 | +$17.3M | | Operating margin | 16.3% | 11.0% | +530 bps | - Climate Solutions sales growth was primarily driven by a $37.7 million increase in sales of data center cooling products compared to the prior year[103] Performance Technologies Segment Results | (in millions) | Q1 FY24 | Q1 FY23 | Change | | :--- | :--- | :--- | :--- | | Net sales | $358.9 | $304.3 | +18% | | Gross profit | $58.6 | $33.0 | +$25.6M | | Operating income | $32.0 | $7.4 | +$24.6M | | Operating margin | 8.9% | 2.4% | +650 bps | Liquidity and Capital Resources The company maintains strong liquidity through operating cash flow, cash reserves, and available credit facilities - Primary liquidity sources are cash flow from operations, $92.5 million in cash and cash equivalents, and $258.3 million of available borrowing capacity[112] - Net cash provided by operating activities increased by $27.2 million to $41.7 million compared to the prior year, primarily due to higher earnings[113] - Capital expenditures were $15.1 million, an increase of $4.7 million YoY, supporting strategic growth initiatives[114] Quantitative and Qualitative Disclosures About Market Risk The company's market risk profile has not materially changed since the fiscal year-end 2023 filing - The Company's market risks have not materially changed since the fiscal 2023 Form 10-K was filed[124] Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were effective - Based on an evaluation as of June 30, 2023, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective[126] - There were no material changes in internal control over financial reporting during the first quarter of fiscal 2024[127] PART II. OTHER INFORMATION Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 42,799 shares of common stock under its authorized repurchase program Issuer Purchases of Equity Securities (Q1 FY2024) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | May 2023 | 16,633 | $26.32 | | June 2023 | 26,166 | $30.69 | | Total | 42,799 | $28.99 | - The Company has a Board authorization to repurchase up to $50.0 million of common stock, which expires in November 2024[128] Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter - During the quarter ended June 30, 2023, no director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement"[129] Exhibits This section lists all exhibits filed with the Form 10-Q, including award agreements and certifications - Filed exhibits include Form of Fiscal 2024 Performance Stock Award Agreement, Restricted Stock Unit Award Agreements, and CEO/CFO certifications under Rule 13a-14(a)/15d-14(a) and Section 1350[130]