Modine Manufacturing Company (NYSE:MOD) Q2 2020 Earnings Conference Call Transcript

Nov 08, 2019 • 09:00 am ET

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Modine Manufacturing Company (NYSE:MOD) Q2 2020 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning, ladies and gentlemen, and welcome to Modine Manufacturing Company's Second Quarter Fiscal 2020 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to your host, Ms. Kathleen Powers, Vice President, Treasurer, Investor Relations. Please go ahead.

Executive
Kathleen T. Powers

Good morning and thank you for joining our conference call to discuss Modine's Second Quarter Fiscal 2020 results. I am here with Modine's President and CEO, Tom Burke and Mick Lucareli, our Vice President, Finance, and Chief Financial Officer. We will be using Slides for today's presentation, which can be accessed either through the webcast link or by accessing the PDF file posted on the Investor Relations section of our website modine.com.

This morning, Tom and Mick will present our second quarter results for fiscal '20 and will provide an update to our outlook for the rest of the year. At the end of the call, there will be a question-and-answer session. On Slide 2 is our notice regarding forward-looking statements. This call may contain forward-looking statements as outlined in our earnings release, as well as in our company's filings with the Securities and Exchange Commission.

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

Executive
Thomas A. Burke

Thank you, Kathy. Good morning, everyone. In the past few months, we have seen a significant decline in many of the key end markets served by our VTS and CIS segments. In addition to the automotive slowdown mentioned last quarter, we are now projecting additional weakness in the commercial vehicle and off-highway markets that we expect to continue through the remainder of our fiscal year and into fiscal 2021. We're also seeing lower orders in our CIS segment, including both cooler sales to the data center market and coils sales to the HVAC and refrigeration markets.

These conditions have led to our second quarter earnings being lower than we had originally expected and to a significantly lower outlook for the remainder of the fiscal year. We have therefore lowered our sales and earnings guidance for fiscal '20. Mick will provide additional details later in the call. Given the significant change in our order outlook and market conditions, we are rapidly implementing a number of aggressive cost-containment measures.

Some of these are immediate actions that will drive short-term cost savings and some are longer-term initiatives, designed to deliver between $25 million and $30 million of annual savings over the next 18 months. These measures include operational and SG&A expense reductions, resulting from accelerated procurement savings structural changes and head count reductions with the immediate goal of improving our operating earnings and cash flows.

It's important for our shareholders to know that we are experiencing a major correction in some of the markets we serve and are taking the appropriate actions now to ensure we stay on path to meet our performance goals. Before turning to the segment results for the quarter, I would like to provide an update on the potential divestiture of our automotive business. As most of