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

Nov 08, 2019 • 09:00 am ET

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

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Q & A
Operator
Operator

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

Analyst
Michael Shlisky

Good morning, everybody.

Executive
Thomas A. Burke

Good morning, Mike.

Analyst
Michael Shlisky

Okay. So I wanted to just briefly touch on some of the one-time costs surrounding the auto parts divestiture. When I go back over the last bunch of quarters, it looks like when you add up, it's you've spent at least $27 million so far, I think if I'm wrong, correct me there. Can I ask you a little color as to kind of what those costs are, I'm not really sure why it would so much to sell something that is relatively small from an EBITDA perspective, you might have actually already spent a whole segment EBITDA on these fees. So I'm just kind of curious as some more detail there. And if you don't end up selling it for some reason, I was just kind of curious is there any contractual provision that you get some of that cash back from your vendors?

Executive
Michael B. Lucareli

Yes. Hey, Mike, it's Mick. I'll take the first shot and then Tom can comment on the non-financial side. Yes. We knew heading into the process and we've talked about the cost to prepare the business for divestiture would be significant. And the primary reasons are the biggest driver is we need to stand this up as a separate business, otherwise we can't carve it out and having that then integrated into multiple business units over the past and then most recently 3 of 4 regions, all part of the VTS segment. There is a significant amount of accounting and financial work to be able to separate out the financials, not only on a historical basis, but on a monthly and go forward.

The second big piece of that is from an IT standpoint. We have to duplicate and stand up the IT system in order for us to be able to do separate the business. The challenge with that and your question about kind of cost benefit is the alternatives is as you know, the footprint of the business and the alternatives of thinking about a wind down are really significant costs to Modine and the shareholders. So Tom and I continue to believe that spending investment to separate the business, is this the most flexibility to determine what to do with it going forward. But that's the main drivers of the costs we've spent. We anticipate probably another quarter or two of investment and then we'll be ready to stand this business up as a separate entity, and that will help us going forward quite a bit from both visibility and full separate entity. Tom anything that?

Executive
Thomas A. Burke

Yes, no, and I think maybe just a general statement overall. I mean this remains a strategic priority for the company, the divestiture of auto. We went through a process, very thorough process, this narrowed down, we had quite a big interest at the beginning that narrowed down to a smaller