Modine InvPres - 120815 Final

7/24/2019 Modine InvPres - 120815 Final

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Modine Manufacturing Company

Investor PresentationDecember 2015


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This presentation contains statements, including information about future financial performance and market conditions,accompanied by phrases such as believes, estimates, expects, plans, anticipates, intends, and other similar

forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Modine's actual results,performance or achievements may differ materially from those expressed or implied in these statements because of certainrisks and uncertainties, including, but not limited to, those described under Risk Factors in Item 1A of Part I of thecompany's Annual Report on Form 10-K for the year ended March 31, 2015 and under Forward-Looking Statements in Item7 of Part II of that same report and in the companys Quarterly Report on Form 10-Q for the quarters ended June 30, 2015and September 30, 2015. Other risks and uncertainties include, but are not limited to, the following: the overall health andprice-down focus of Modines customers, particularly in light of remaining market challenges; the ability of the company tosuccessfully implement its Strengthen, Diversify and Grow strategic transformation; uncertainties regarding the costs and

benefits of Modines restructuring activities in our Americas and Europe segments, including the activities associated withthe closure of Modines facility in Washington, Iowa; operational inefficiencies as a result of program launches, unexpectedvolume increases and product transfers; the effects of the fire at Modines Airedale facility, including inefficiencies associatedwith Airedales operations in temporary sites, timely, continued recovery of insurance proceeds, and disruptions associatedwith Airedales relocation into its rebuilt facility; economic, social and political conditions, changes and challenges in themarkets where Modine operates and competes, including currency exchange rate fluctuations (particularly the value of theeuro, Brazilian real and British pound relative to the U.S. dollar), tariffs, inflation, changes in interest rates, recession,restrictions associated with importing and exporting and foreign ownership, and in particular the economic and marketconditions in Brazil and China and the remaining economic uncertainties in certain markets in Western Europe, Russia and

North America; the impact on Modine of any significant increases in commodity prices, particularly aluminum and copper,and our ability to pass these prices on to customers and/or successfully hedge the associated risk; Modine's ability tosuccessfully execute its strategic and operational plans; the nature of and Modines significant exposure to the vehicularindustry and the dependence of this industry on the health of the economy; costs and other effects of environmentalremediation or litigation; and other risks and uncertainties identified by the company in public filings with the U.S. Securitiesand Exchange Commission. The company does not assume any obligation to update any forward-looking statements.

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Forward-Looking Statements


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EGR Cooler

Oil Cooler Liqu id Charge AirCooler

Copper CoilData Center Chi ller

Condenser

Modine Overview

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Ticker: NYSE: MOD

Founded:1916 in Racine, WI

2015 Sales: $1.5 billion

Employees: 6,900 Worldwide

Global Footprint: HQ in Racine, WI with

operations in North America, South America,Europe, Asia and Africa

Markets:Vehicular (Powertrain & Engine)andIndustrial (Building HVAC & Coils)

A Global Leader In Thermal Management Technology And Solutions

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Diverse, Global End Markets & Customer Profi le

Johannesburg, South Africa

(Building HVAC)

Asian Headquar ter s

Shanghai, China

5 Locations and 2 JVs

serving Asia customers

& markets

Corporate Headquarters

Racine, WI

9 Locations servingNorth America

European Headquarters

Bonlanden, Germany

11 Locations serving Europe

So Paulo, Brazil

(Americas)

FY15 Sales

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Investment Highlights

Product Portfolio

Positioned to LeverageCurrent Market Trends

Strong Core Vehicular

Business and Growing

Industrial Business

Focused Management

Team Executing

Transformation Strategy

Disciplined

Management, Flexible

Balance Sheet, & New

Repurchase Program

Leader in thermal management technology and solutions

Over 2,200 patents innovations have set industry standards Products well positioned for global energy efficiency and emissions trends

Strong core position in vehicular market ability to leverageinnovations/capabilities across portfolio

Industrial business maintains higher margin profile and poised for growth incoming years

Focused organic growth of high margin businesses

Industrial acquisitions of at least $100 million

Cost reductions: $40-$50M within 18 months

Operating margin expansion from 4-5% to 7-8% by end of FY18

Reduced customer concentration, capital intensity and cyclical exposure

Management disciplined in cost management and productivity efforts

Low risk balance sheet well positioned to leverage strong financial positionto grow

New share repurchase program of $50 million authorized in October 2015


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Modine Products Increase fuel efficiency

Reduce vehicular emissions

Leverage waste heat recovery

technology

Improve efficiency of

HVAC&R equipment

Reduce A/C refrigerantcharge requirements

Well Posit ioned for Global Market Trends

Increase EnergyEfficiency

Reduce

Greenhouse Gas

Emissions

Recover / Reuse

Waste Heat

Improve Indoor

Air Quality

G

lobalMarketTrends

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7/257MODINE CONFIDENTIAL PLEASE DO NOT COPY OR DISTRIBUTE

Strong Product Portfolio

Powertrain

Cooling (PTC)

Engine (EPG) Coils Building HVAC

Cooling module Radiator

Charge air cooler Oil cooler Condenser

Oil cooler Charge air cooler

EGR cooler Condenser

Copper RTPF coils Stainless steel

RTPF coils Aluminum

microchannel

condensers and

evaporators

Gas unit heaters Packaged

ventilation Air handlers Chillers Precision A/C Geothermal

MAINTAIN strong

market position

PRIORITIZE

investment for

growth

EXECUTE growth

and consolidation

strategy

EXPAND product

offering and reach

Vehicular 84% Industrial 16%


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Sales by Geography (FY'15)Sales by Product Group (FY'15)

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Market Size

Powertrain cooling $12-14B

Engine Products $5-6B

5-Year Unit Growth Rates

Powertrain Cooling 2 - 5%

Engine 5 - 10%

Vehicular (Powertrain & Engine) Market Overview


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Vehicular Position and Strategy

Industry Trends and Drivers

Powertrain cooling

Focus on fuel economy is driving the

need for higher efficiency and lowerweight products

Customers demand global support

Engine products

New heat exchangers are required for

fuel economy and emissions standards

Customers are looking for innovationto create their own competitive

advantage

Leverage and optimize powertrain cooling

Capitalize on engine cooling growth trends

Modine Priorities

Address underperformers in

global product portfolio

Accelerate low cost

manufacturing footprint,

leverage global production scale

Optimize supply chain

management

Focus product development on

supporting lower fuel economystandards and emission targets

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Sales by Geography (FY'15)Sales by Product Group (FY'15)

Market Size

Building HVAC $3.0-3.3B

Coils $2.0-2.5B

5-Year Unit Growth Rates

Building HVAC 5-10%

Coils 4-7%

Industrial (BHVAC & Coils) Market Overview


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Industry Trend and Drivers

Building HVAC

Increased focus on energy efficiency

and total cost of ownership

Demand for free-cooling and full

product line solutions

Large install base creates barrier to

entry

Long-term distributor relations

Coils

Increased emphasis on energy

efficiency

Smaller OEMs value product design

services from Coils provider as they

typically lack heat exchanger expertise

Modine Priorities

Drive organic growth through

expanded product offering and

geographic reach Develop and maintain strong

relationships with specifiers

Achieve and maintain large

installed base to leverage

replacement business

Pursue inorganic growth throughstrategic acquisitions

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Strive to be recognized as the most trusted brand in HVAC & Coils

providing integrated thermal solutions, differentiated through innovation

Industrial (BHVAC & Coils) Posit ion & Strategy


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Strengthen Optimize global

manufacturing capabilities

Execute global procurement

project

Operational & SG&A

expense reductions

GOALS:

Cost reductions: $40-$50M

within 18 months

Operating margin expansion

from 4-5% to 7-8% by end

of FY18

Grow Utilize balance sheet to aggressively pursue Industrial acquisitions and

expand share in vehicular growth areas

GOALS:

Acquire at least $100 million in incremental Industrial revenue

Expand target leverage ratio (net debt/EBITDA) between 1.5 and 2.5x

Diversify Organic and inorganic investment

in BHVAC, Coils, and other

Industrial applications

GOALS:

Reduced customer concentration

and cyclical exposure Increase share of high margin

business

Shift mix:

FY15 FY18

Vehicular 84% 60-70%

Industrial 16% 30-40%

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Transformation Goals


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Our Journey to Strengthen, Diversify & Grow

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Reorganization

Phase

2005 - 2007

Continuousimprovement -Modine OperatingSystem (MOS)

New product/matrixorganizationalstructure

Rationalizedproduct portfolio bydivesting ofunderperforming

businesses Reduced global

manufacturingfootprint from 34manufacturingplants to 25(currently 24, going

to 22) Refinanced and

recapitalized thebalance sheet

Lowered SG&A byone third

Lowered annualoperating costsby $16M

Reduced assets

by $30M Consolidated

Germanmanufacturingoperations

Four Point Plan

2007 - 2011

European

Restructuring

2012 - 2015

Strengthen,

Diversify &

Grow

2015 - 2018

Strengthen- target $40-50M in cost savingsover 18 months,expand operating

margins to 7-8% Diversify- increase

investment in Industrialbusiness, with targetportfolio of 60-70%Vehicular, 30-40%Industrial

Grow- target $100M inincremental Industrialrevenue and netleverage ratio of 1.5 to2.5x


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Financial Review

Highlights FY13 vs. FY 15

Revenue up 9% (+11% excluding FX impact)

Gross margin up 130 bps

Adjusted operating income* up $23 million or 55%

Significant earnings growth despite unfavorable FX

impact and weak conditions in some end-markets

Closed McHenry, Ill. facility and announced plans to

close plant in Washington, Iowa

Fiscal 2016 Guidance (provided 10/30/15)

Revenue down 2-7%, or flat to up 5% excluding

approximately $110 million negative FX impact

Adjusted operating income of $65 to $70 million,

up 6% to 13% on a constant currency basis

Adjusted EPS of $0.75 to $0.82

Expect earnings growth despite FX and market

challenges in fiscal 2016* See Appendix for Non-GAAP reconciliations

Financial Highlights

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FY Ended

March 31,2013 2014 2015

Revenues $1,376 $1,478 $1,496

Gross margin 15.2% 16.1% 16.5%

Adjusted operat ingincome*

$42 $61 $65

Adjusted operat ingmargin*

3.1% 4.1% 4.3%

Adjusted EPS* $0.40 $0.73 $0.63

ROACE* 6.0% 8.7% 7.8%

Net debt-to-capital* 34.3% 15.3% 17.8%

($ in millions, except per share amounts)


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Conclusion

Robust product portfolio positioned to leverage current market

trends to increase fuel economy, reduce vehicular emissions,

improve indoor air quality and increase energy efficiency

Strong core vehicular business and growing industrial withstrategies to capitalize on industry trends and drivers

Focused and experienced management team with proven trackrecord executing transformation strategy to Strengthen, Diversify

and Grow the business

Disciplined management, flexible balance sheet, & new $50Mshare repurchase authorization


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Appendix


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18%

12%

11%

16%

20%

6%

17%Heavy Truck

Medium Truck

Light Vehicle

Ag/Construction

Service

SA Aftermarket

NA Coils/Industrial/Other

Americas (44% of Net Sales)

FY Ended

March 31,2013 2014 2015

Net sales $692.3 $688.3 $666.9


52.2 52.0 47.1


7.5% 7.6% 7.1%

($ in millions) (Unaudited)

Seven manufacturing facilities announced plans toclose Washington, Iowa plant

Diversified revenue mix across major end-markets Segment well positioned for future success based on

improved manufacturing footprint and cost structure

New growth opportunities with off-highway andautomotive customers

Key customers: CAT, Deere, Navistar, DaimlerTrucks North America (DTNA), MAN, AGCO, CNH

FY 2015 Sales Mix

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* See Non-GAAP reconc iliations


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Europe (38% of Net Sales)

FY Ended

March 31,2013 2014 2015

Net sales $498.0 $584.4 $578.2


15.7 30.8 24.5


3.2% 5.3% 4.2%

($ in millions)


Seven manufacturing facilities serving Europe

Recently consolidated manufacturing operations in

Germany, restructuring winding down Managing launch activity mainly in oil cooler and liquid

charge air cooler (LCAC) products

Key customers: VW, Daimler, MAN

FY 2015 Sales Mix

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Asia (5% of Net Sales)

FY Ended

March 31,2013 2014 2015

Net sales $59.5 $71.5 $81.2

Operating (loss)income

(8.8) (3.3) 0.3

Operating margin (14.8%) (4.7%) 0.3%

($ in millions)

FY 2015 Sales Mix Five manufacturing facilities serving China, India,Japan and Korea (2 Joint Ventures)

Strategic focus on creating new businessopportunities with local customers

Diversifying our business model; high currentexposure to excavator market

More stringent emissions standards in China isshifting longer-term focus to local commercialvehicle customers

Key customers: Volvo CE, CAT, Hyundai HeavyIndustries, Ashok Leyland, Renault

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Building HVAC (13% of Net Sales)

FY Ended

March 31,2013 2014 2015

Net sales $139.3 $146.5 $186.3


10.0 9.9 19.1


7.2% 6.8% 10.2%

($ in millions)


FY 2015 Sales Mix Five facilities serving North America, UnitedKingdom, South Africa and the Middle East

Complementary business that providesdiversification to Modines vehicular segments

Strong financials due to product differentiation,manufacturing efficiencies and brand strength

Pursuing growth opportunities based on energyefficiency and other green initiatives

Ventilation, geothermal and data center cooling

Completed Barkell acquisition in Q4 fiscal 2014

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Adjusted operating income and margin

($ in millions)

2013 2014 2015

Operating income (loss) (0.6)$ 37.2$ 52.7$

Restructuring related expenses 17.0 20.4 4.7

Impairment charges 25.9 3.2 7.8

Gain on sale of wind tunnel - - (3.2)

Brazil legal reserve - - 3.2

Loss from Airedale fire - 0.5 -

Adjusted operating income 42.3 61.3 65.2

Net sales 1,376.0$ 1,477.6$ 1,496.4$

Adjusted operating margin 3.1% 4.1% 4.3%

Years ended March 31,

Non-GAAP Reconciliations

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Adjusted EPS

2013 2014 2015

Net earnings (loss) per share attributable

to Modine shareholders - diluted (0.52)$ 2.72$ 0.44$

U.S. tax valuation allowance reversal - (2.50) -






Adjusted EPS - diluted 0.40$ 0.73$ 0.63$



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22

ROACE (Return on Average Capital Employed)

($ in millions)

2013 2014 2015





Brazil l egal reserve - - 3.2



Tax applied at 30% rate (12.7) (18.4) (19.6)Minority interest (1.4) (1.5) (1.0)

Adjusted net operating profit after tax (NOPAT) 28.2$ 41.4$ 44.6$

Average capital employed (see below) 468.0$ 475.5$ 570.5$

ROACE = NOPAT / Average capital employed 6.0% 8.7% 7.8%

Capital employed (debt + Modine shareholder's equity):

Beginning of fiscal year 489.2$ 429.3$ 589.2$June 30 490.9 440.0 604.5

September 30 465.7 460.0 582.0

December 31 465.1 459.2 572.0

End of fiscal year 429.3 589.2 504.7

Average capital employed (a) 468.0$ 475.5$ 570.5$



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Net debt-to-capital

($ in millions)

2013 2014 2015

Total debt 163.6$ 164.4$ 148.7$

Less: cash and cash equivalents 23.8 87.2 70.5

Net debt 139.8 77.2 78.2

Total equity 268.3 428.6 360.6

Capital 408.1$ 505.8$ 438.8$

Net debt-to-capital 34.3% 15.3% 17.8%



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Segment adjusted operating income and margin

($ in millions)

Americas (unaudited) 2013 2014 2015

Operating income 50.4$ 49.6$ 33.4$

Restructuring expenses - 1.2 2.7




Net sales 692.3$ 688.3$ 666.9$



Europe 2013 2014 2015


Restructuring expenses 17.0 19.2 2.0

Impairment charges 24.1 2.0 -Gain on sale of wind tunnel - - (3.2)


Net sales 498.0$ 584.4$ 578.2$



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Segment adjusted operating income and margin

($ in millions)

Building HVAC 2013 2014 2015

Operating income 10.0$ 9.4$ 19.1$



Net sales 139.3$ 146.5$ 186.3$



Documents

Modine InvPres - 120815 Final