Modine Manufacturing Company (MOD) 2017 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Modine Manufacturing Company's Third Quarter Fiscal 2017 Conference Call. (Operator instructions) As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Ms. Kathy Powers, Vice President, Treasurer, Investor Relations, and Tax. Ma'am, go ahead.

各位女士、先生，早安，歡迎參加 Modine Manufacturing Company 2017 會計年度第三季電話法說會。（接線員指示）提醒各位，本次電話會議將被錄音。現在我想把電話交給本次會議主持人——Kathy Powers 女士，副總裁、財務主管、投資人關係與稅務負責人。女士，請開始。

Thank you. Thank you for joining us today for Modine's Third Quarter Fiscal 2017 Earnings Call. With me today are 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. Those links are available through the webcast link as well as a PDF file posted on the Investor Relations section of our company website, Modine.com. Also, should you need to exit the call prior to its conclusion, a replay will be available through our website beginning approximately two hours after the call concludes.

謝謝。感謝各位今天加入 Modine 2017 會計年度第三季財報電話會議。今天與我一同出席的有 Modine 總裁暨執行長 Tom Burke，以及我們的財務副總裁兼財務長 Mick Lucareli。我們將使用投影片進行今天的簡報。相關連結可透過網路直播連結取得，亦可在公司網站 Modine.com 的投資人關係專區下載 PDF 檔。另外，若您需在會議結束前離線，會議結束約兩小時後可透過我們的網站收聽重播。

On slide 2 is an outline for today's call. Tom and Mick will provide comments on our third quarter results, an update on our Strengthen, Diversify and Grow strategic initiative including the Luvata HTS acquisition, and provide an update to our revenue and earnings guidance for Fiscal 2017. At the end of the call, there will be a question-and-answer session.

投影片第 2 頁為今天會議的議程大綱。Tom 與 Mick 將就第三季業績發表評論，更新我們「強化、分散與成長」（Strengthen, Diversify and Grow，SDG）策略倡議（包含 Luvata HTS 併購案），並更新 2017 會計年度的營收與獲利指引。會議最後將進行問答環節。

On slide 3 is our notice regarding forward-looking statements. I want to remind you that 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.

投影片第 3 頁為我們關於前瞻性陳述的聲明提醒。提醒各位，本次電話會議可能包含前瞻性陳述，相關內容如同我們的財報新聞稿以及公司向美國證券交易委員會（SEC）提交之文件所述。

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

接下來，我很高興把電話交給 Tom Burke。

Thank you, Kathy, and good morning, everyone. On today's call I will discuss our third quarter results and provide an update on our Strengthen, Diversify, and Grow strategic transformation, including the acquisition of the Luvata HTS business. After that, Mick will provide a more detailed review of our consolidated financial results and will update our revenue and earnings guidance for Fiscal 2017. I will then provide a few closing remarks prior to opening the call for questions.

謝謝你，Kathy，各位早安。在今天的電話會議中，我將討論第三季業績，並就我們「強化、分散與成長」策略轉型（包含收購 Luvata HTS 業務）提供最新進展。之後，Mick 將更詳細地回顧我們的合併財務結果，並更新 2017 會計年度的營收與獲利指引。接著在開放提問前，我會做幾點結語。

As you know, we completed the Luvata HTS acquisition on November 30. We are now operating this business as our Commercial and Industrial Solutions segment. We will refer to this as CIS going forward. Completing this acquisition was a key component of achieving our objectives of our SDG strategic framework introduced over 15 months ago.

如各位所知，我們已於 11 月 30 日完成 Luvata HTS 併購案。我們目前將此業務作為「商用與工業解決方案」事業部門營運。後續我們將以 CIS 稱呼該部門。完成此併購是達成我們在 15 個多月前提出之 SDG 策略架構目標的關鍵組成。

In addition to completing the acquisition, we have also continued to identify savings from other components of our SDG initiative, and I will provide an update on where we stand versus our targets in a few minutes.

除完成併購外，我們也持續從 SDG 倡議的其他組成項目中辨識節省機會；幾分鐘後我將更新我們相對於目標的進度。

Moving on to our third quarter results, sales were up on a constant currency basis including $35 million of sales from our CIS business in the month of December. Our non-CIS, or base business, was down 3% on a constant currency basis, primarily due to lower sales in the Americas and Europe segments, partially offset by strong sales in the Asia segment.

接著談第三季業績：以固定匯率基礎計算，銷售額成長，其中包含 12 月份 CIS 業務貢獻的 3,500 萬美元銷售額。我們的非 CIS（或稱基礎）業務以固定匯率基礎計算下滑 3%，主要因美洲與歐洲事業部門銷售較低，部分被亞洲事業部門強勁銷售所抵銷。

Our adjusted operating income was $17.7 million, up 3% from the prior year. As I mentioned in our last call, I was very disappointed with our Q2 performance due to several operating inefficiencies in the Americas and Building HVAC segments. We have fully and appropriately addressed the large majority of the issues resulting in significant improvement sequentially in the third quarter. A few remaining items have already been, or will be corrected in Q4. In addition, I am very pleased with the strong performances in our Asia and Europe segments which also contributed to the improved earnings performance this quarter.

本季調整後營業利益為 1,770 萬美元，較去年同期成長 3%。如我在上次電話會議提到的，我對第二季表現非常失望，原因是美洲與建築 HVAC 事業部門出現多項營運效率不彰。我們已充分且適切地處理了絕大多數問題，使第三季較第二季有顯著的連續改善。少數剩餘事項已經在第四季修正，或將於第四季修正。此外，我也非常滿意亞洲與歐洲事業部門的強勁表現，這同樣促成本季獲利表現的改善。

Our adjusted earnings per share were $0.21 for the quarter, down $0.01 from the prior year, primarily due to an increase in interest expense from the debt taken on to finance the acquisition. Of note, December is seasonally one of the slowest months for our CIS business, so its contribution to our operating income was not material.

本季調整後每股盈餘為 0.21 美元，較去年同期減少 0.01 美元，主要因為為了籌資併購而承擔的債務使利息費用增加。值得注意的是，12 月在季節性上是 CIS 業務最淡的月份之一，因此其對營業利益的貢獻並不顯著。

As I review each segment, I will update our market outlook for calendar 2017. We are currently in the middle of our Fiscal 2018 planning process, so I'll be able to provide a market outlook for Fiscal 2018 with our fourth quarter results.

在我檢視各事業部門時，我將更新我們對 2017 年曆年的市場展望。我們目前正處於 2018 會計年度規劃流程的中段，因此我將在第四季業績公布時，提供 2018 會計年度的市場展望。

Now, I'd like to briefly review the segment results.

現在，我想簡要回顧各事業部門的表現。

Turning to page 6, sales for the Americas segment were down roughly 10% to $123.4 million, and were significantly impacted by lower sales to heavy-duty truck customers, which were down 42% from the prior year. We did not expect to see significant improvement to the North America markets this year. However, the markets have declined more than our initial expectations and we expect these conditions to continue into our fourth fiscal quarter.

翻到第 6 頁，美洲事業部門銷售額約下滑 10% 至 1.234 億美元，主要受到對重型卡車客戶銷售下滑的顯著影響，該部分較去年同期下降 42%。我們原本就不預期北美市場今年會有顯著改善。然而，市場下滑幅度超出我們最初預期，我們預期這些狀況將延續至本會計年度第四季。

Markets in Brazil continue to be weak across the board, with the exception of the agricultural equipment markets, where we are seeing some improvements. However, this is offset by a significant decline in our aftermarket sales, which continue to be lower than our expectation.

巴西市場整體仍然疲弱，唯獨農業設備市場例外，我們在該市場看到一些改善。然而，這被我們售後市場（aftermarket）銷售的大幅下滑所抵銷，而該表現仍低於我們的預期。

The automotive aftermarket in Brazil tends to be a stable market, even during a recession. However, in the past couple of quarters, we have seen a 20% year-over-year decline in this market, evidence of just how deep the Brazilian recession is reaching. We are the heat transfer market leader in the Brazilian automotive aftermarket and are maintaining this position despite the dip in sales caused by the market decline.

巴西的汽車售後市場即使在景氣衰退期間通常也相對穩定。然而，在過去幾個季度，我們看到該市場年對年下滑 20%，顯示巴西衰退的影響程度之深。我們是巴西汽車售後熱交換市場的領導者，儘管市場下滑造成銷售下跌，我們仍維持此一領先地位。

The drop in sales volume negatively impacted our third quarter gross margin, which is down 170 basis points. While the markets have not been entirely kind, we recognize that many things are within our control, and we have continued to do some significant work in the segment to improve our cost basis of our operations. This includes completing the Washington, Iowa plant closure, and accelerating significant procurement savings. We were also able to offset much of the drop in gross profit with a $2.1 million year-over-year reduction in SG&A expense.

銷售量下滑對第三季毛利率造成負面影響，毛利率下降 170 個基點。雖然市場環境並非完全有利，但我們也認知到許多事項在我們可控範圍內，因此我們持續在該事業部門進行大量工作，以改善營運成本基礎。這包括完成愛荷華州華盛頓（Washington, Iowa）工廠關閉，以及加速推動顯著的採購節省。我們也透過 SG&A 費用年對年減少 210 萬美元，抵銷了毛利下滑的大部分影響。

During the third quarter, we had a higher recovery of development costs, and savings from headcount reductions in conjunction with our SDG initiatives. Taking all those pushes and pulls together, adjusted operating income for the Americas segment was $6.8 million, down $2.8 million from the prior year, but significantly up from the second quarter.

第三季期間，我們研發成本回收較高，並且配合 SDG 倡議進行人力精簡而產生節省。綜合上述各項增減因素，美洲事業部門調整後營業利益為 680 萬美元，較去年同期減少 280 萬美元，但相較第二季則大幅提升。

Next quarter, we will update our outlook for our 2018 fiscal year, but given the state of the markets we do not expect improvement in our North America markets in calendar 2017, and unfortunately we are planning for additional declines in commercial vehicles and off-highway equipment. We expect the automotive market to be flat, which is a small but growing component of our North America business. We also expect to see some improvement in the markets in Brazil, and as I mentioned, we have already started to see some volume increases in the agricultural market. However, after significant declines we have seen in the past couple years, these increases are off of a low base.

下個季度我們將更新對 2018 會計年度的展望；但就市場現況而言，我們不預期 2017 年曆年北美市場會改善，且不幸的是，我們正為商用車與非道路（off-highway）設備的進一步下滑做規劃。我們預期汽車市場將持平，而該市場在我們北美業務中占比不大但正在成長。我們也預期巴西市場將出現一些改善；如我所提到的，我們已開始在農業市場看到一些出貨量增加。然而，在過去幾年出現大幅下滑之後，這些增幅是建立在較低的基期之上。

Please turn to page 7. As anticipated, sales for our Europe segment were down 4% in the third quarter on a constant currency basis, as a result of planned program wind-downs and lower sales to off-highway customers. The planned program wind-downs included $5 million of commercial vehicles and $2 million with BMW. This was partially offset by higher automotive sales.

請翻到第 7 頁。如同預期，我們歐洲事業部第三季以固定匯率計算的銷售額下滑 4%，主要因為既定專案逐步結束，以及對非公路（off-highway）客戶的銷售降低。這些既定專案的逐步結束包括商用車 500 萬美元以及與 BMW 相關的 200 萬美元。此影響部分被較高的汽車銷售所抵銷。

Gross margin improved by 170 basis points from the prior year, despite the decrease in sales. Similar to last quarter, we achieved a higher gross margin on lower sales due to favorable operating performance and sales mix. We continue to see better operating performance due to our purchasing initiatives and labor and overhead improvement.

儘管銷售下滑，毛利率較去年同期提升 170 個基點。與上季類似，我們在較低銷售額下仍達成較高毛利率，主要受惠於良好的營運表現與銷售組合。由於採購措施以及人力與製造費用（overhead）改善，我們持續看到更佳的營運表現。

Operationally, we continued to transfer production of certain products to Hungary and have broken ground on the expansion at our largest facility in Hungary. This was an important step in ensuring that we have the capacity to absorb all newly awarded and transferred business, so that we can continue to realize gross margin improvements like we have for the past five quarters. Adjusted operating income was up 12% to $8.4 million, due primarily to the higher gross profit.

在營運方面，我們持續將部分產品的生產移轉至匈牙利，並已在匈牙利最大廠區的擴建工程上破土動工。這是確保我們具備足夠產能以承接所有新獲授與及移轉業務的重要一步，使我們能如過去五個季度一樣持續實現毛利率改善。調整後營業利益年增 12% 至 840 萬美元，主要由較高的毛利所帶動。

We expect the European automotive market to remain stable, the commercial vehicle market to be down about 1%, and the off-highway market to be down about 5% in calendar 2017. We expect that we will continue to see growth in our automotive programs as we launch new business, where this will be offset by planned wind-downs in the low-margin commercial vehicle programs that began last quarter. We are continuing to focus on supporting our European automotive customers as they intensify the development of their electrification strategy. As I mentioned last quarter, this is a major area of investment for our European customers which expect major growth in these product offerings in the near future.

我們預期 2017 年曆年歐洲汽車市場將維持穩定，商用車市場約下滑 1%，非公路市場約下滑 5%。隨著我們推出新業務，我們預期汽車專案將持續成長；但此成長將被自上季開始、低毛利商用車專案的既定逐步結束所抵銷。我們持續聚焦支援歐洲汽車客戶，因其正加速推動電動化策略的開發。如我上季所提，這是歐洲客戶的重要投資領域，且其預期這些產品在不久的將來將大幅成長。

Please turn to page 8. Sales for our Asia segment were up 60% compared to the prior year on a constant currency basis. This significant improvement related primarily to higher sales to automotive and off-highway customers in China, and incremental sales from our new joint venture. The sales growth we have seen over the past two years has been largely driven by significant volume of layered-core oil coolers for programs that we were awarded beginning in 2012. At that time, we mentioned that we expected significant volume increases over the next several years, as we launched this critically important product. We continue to aggressively ramp up production towards our mature volumes on these programs, and expect double-digit sales growth to continue in this segment as new programs continue to launch.

請翻到第 8 頁。我們亞洲事業部以固定匯率計算的銷售額較去年同期成長 60%。這項顯著改善主要來自中國汽車與非公路客戶的銷售增加，以及我們新合資企業帶來的新增銷售。過去兩年我們看到的銷售成長，主要由自 2012 年起獲授專案所帶動的分層芯（layered-core）機油冷卻器的大量出貨所驅動。當時我們提到，隨著這項關鍵產品的導入，我們預期未來數年出貨量將大幅提升。我們持續積極提升這些專案的產能爬坡至成熟量產水準，並預期隨著新專案持續導入，本事業部將延續雙位數的銷售成長。

I am also encouraged by the continued improvements in the off-highway markets in China and Korea, which have also contributed to our sales growth over the past two quarters. Higher sales volume led to $2.4 million improvement in gross profit, nearly doubling from the prior year. Gross margin improved by 370 basis points to 17.6%, delivering the highest gross margin of our vehicular segments. Adjusted operating income for the Asia segment increased $2.4 million in the third quarter, compared to the prior year, primarily due to higher sales volumes and lower SG&A expenses.

我也對中國與韓國非公路市場的持續改善感到鼓舞，這也在過去兩個季度推動了我們的銷售成長。較高的銷售量使毛利增加 240 萬美元，較去年同期幾乎倍增。毛利率提升 370 個基點至 17.6%，為我們車用事業群中最高的毛利率。亞洲事業部第三季調整後營業利益較去年同期增加 240 萬美元，主要因銷售量提升及 SG&A（銷售、一般及行政）費用降低。

We expect the growth trends to continue in Asia, with continued improvement in the construction markets in China and Korea. We will continue to benefit from higher volumes of automotive oil coolers as our programs continue to launch. We also expect both the automotive and commercial vehicle markets in India to grow 5%, which is great news for our high-performing India operations.

我們預期亞洲的成長趨勢將持續，並且中國與韓國的建築工程市場將持續改善。隨著專案持續導入，我們將持續受惠於汽車機油冷卻器更高的出貨量。我們也預期印度的汽車與商用車市場皆將成長 5%，這對我們表現優異的印度營運而言是個好消息。

Turning to page 9, sales for our Building HVAC segment were flat compared to the prior year on a constant currency basis. Lower sales of heating and ventilation products in North America were partially offset by higher precision air conditioning sales in the UK. North American heating sales were below expectations due to the mild weather, except for a short spike during the cold snap in December.

翻到第 9 頁，我們建築 HVAC 事業部以固定匯率計算的銷售額與去年同期持平。北美暖氣與通風產品銷售下滑，部分被英國精密空調銷售成長所抵銷。北美暖氣銷售因天氣溫和而低於預期，僅在 12 月寒流期間短暫出現一波成長。

Our gross margin fell 160 basis points to 32.4%, but was significantly higher than 25.8% reported in the second quarter. The improvement for the second quarter was due to the seasonally higher heating sales in North America and the benefits from cost reduction efforts. We remain focused on improving our cost structure, particularly in the UK business. We are seeing the benefit of our past actions including early retirements and other workforce reductions, and we will continue to see ongoing improvements.

我們的毛利率下滑 160 個基點至 32.4%，但仍顯著高於第二季所報告的 25.8%。第二季的改善主要來自北美季節性較高的暖氣銷售，以及成本降低措施帶來的效益。我們仍專注於改善成本結構，特別是英國業務。我們已看到過去措施（包括提前退休與其他人力縮減）帶來的效益，且將持續看到後續改善。

In addition, we are reviewing all of our business practices for this segment in detail, with the goal of bringing our gross margins back to historical levels. This year-over-year decrease in gross margin was mainly due to unfavorable product mix in the UK as we sold higher volumes of lower-margin product. We have seen a shift in our UK business, as the "Brexit" has caused a decline in overall investment in our core markets. In response, we have instituted an across the board price increase in September, and are attacking our cost structure from top to bottom. Our goal is to significantly improve our gross margin, while maintaining a competitive position in the marketplace.

此外，我們正針對本事業部的所有營運作法進行詳細檢視，目標是將毛利率拉回歷史水準。毛利率年對年下滑主要因英國產品組合不利，我們銷售了較高比例的低毛利產品。我們已看到英國業務出現變化，因「脫歐」（Brexit）導致核心市場整體投資下滑。為此，我們已於 9 月全面調漲價格，並自上而下全面檢視並改善成本結構。我們的目標是在維持市場競爭地位的同時，顯著提升毛利率。

Adjusted operating income was down slightly from the prior year, but improved as a percentage of sales. This decline in gross profit was offset by lower SG&A expense, resulting from cost saving initiatives. I am encouraged by the improvement of the segment since the second quarter, but there is still additional work to do particularly in the UK business.

調整後營業利益較去年同期小幅下滑，但以銷售額百分比衡量則有所改善。毛利下滑被較低的 SG&A 費用所抵銷，該費用下降源自節省成本的措施。我對本事業部自第二季以來的改善感到鼓舞，但仍有額外工作要做，特別是在英國業務方面。

As I mentioned last quarter, we have made significant leadership changes that are focused on making improvements to our UK business. As expected, we started seeing results this quarter, and should see continued improvements in the fourth quarter. However, we are lowering our overall expectations for this segment for the remainder of the fiscal year, as the warm weather in January will most likely result in fourth quarter heating sales that are below our original forecast.

如我上季所提，我們已進行重大的領導團隊調整，聚焦於改善英國業務。如預期，我們本季開始看到成果，且第四季應可持續改善。然而，由於 1 月天氣溫暖很可能導致第四季暖氣銷售低於原先預測，我們下調本事業部在本會計年度剩餘期間的整體預期。

Please turn to page 10. Before turning it over to Mick, I'd like to give an update on our Strengthen, Diversify and Grow objectives, including some initial thoughts on our acquisition of Luvata HTS.

請翻到第 10 頁。在交給 Mick 之前，我想就我們「強化、分散與成長」（Strengthen, Diversify and Grow）的目標提供最新進展，包括對我們收購 Luvata HTS 的一些初步看法。

I have personally visited seven of the CIS locations and have been met with genuine enthusiasm about the joining of our two businesses. Both the CIS management team and the general workforce around the world are excited to be part of the Modine family. We are actively working on the integration of this business, and we see many opportunities to create future value together. Our dedicated integration management office has been tasked with driving synergy savings throughout the organization, and we have identified actions to reach our initial target of $15 million of cost synergies over the next three to four years.

我親自造訪了 CIS 的七個據點，並感受到大家對兩家企業結合的真誠熱忱。CIS 管理團隊以及全球一般員工都很興奮能成為 Modine 大家庭的一員。我們正積極推動此業務的整合，並看到許多共同創造未來價值的機會。我們專責的整合管理辦公室已被賦予在全組織推動綜效節省的任務，我們也已確認可採取的行動，以在未來三到四年達成初始目標：15 百萬美元的成本綜效。

A significant amount of savings will come from procurement optimization, operational improvements, and organizational efficiencies. We also have challenges to address in our new CIS segment, particularly related to a temporary change in product mix with a large data center customer. This change has resulted in lower year-over-year volumes and margins, which we knew prior to completing the acquisition. We will continue to work closely with this important customer to ensure that we have sufficient and timely information to support our planning and production processes.

相當大一部分的節省將來自採購最佳化、營運改善與組織效率提升。我們在新的 CIS 事業部也有一些挑戰需要處理，特別是與某大型資料中心客戶的產品組合暫時性變動相關。此變動導致年對年出貨量與毛利率下降，而我們在完成收購前即已知悉。我們將持續與這位重要客戶密切合作，確保取得充分且及時的資訊，以支援我們的規劃與生產流程。

At Modine, we pride ourselves on our focus on continuous improvements through a methodology we call the Modine Operating System, or "MOS". Through MOS, we strive to improve every process, every day, and create a culture of mentoring at all levels of the organization, from administrative offices to the shop floor. We are looking forward to bringing the benefits of MOS to our new CIS business.

在 Modine，我們以專注於持續改善為榮，並透過我們稱為 Modine 營運系統（Modine Operating System，簡稱「MOS」）的方法論來推動。透過 MOS，我們致力於每天改善每一道流程，並在組織各層級建立導師文化，從行政辦公室到生產現場皆然。我們期待將 MOS 的效益帶到我們新的 CIS 業務。

This acquisition clearly brings together all of the key attributes of our Strengthen, Diversify and Grow strategy, providing us with significant commercial and industrial revenue in transforming our business into a more diversified thermal management company. The transaction effectively completed all of our diversification and growth transformational goals associated with the SDG strategy.

這項收購明確地匯聚了我們「強化、分散與成長」（Strengthen, Diversify and Grow，SDG）策略的所有關鍵要素，為我們帶來可觀的商用與工業收入，並推動我們的業務轉型為更為多元化的熱管理公司。此交易有效完成了與 SDG 策略相關的所有分散與成長轉型目標。

In terms of our core operational goals, our actions during the past 15 months have significantly strengthened our business, leading to over $50 million in annual run rate savings, exceeding our original target. We have achieved a portion of these savings this year and have already seen the positive impact of our results. We estimate that we will achieve an additional $20 million of savings next year, including the full benefit of the closure of the Washington, Iowa plant, and incremental procurement savings. These savings are critically important to offset the increased costs related to wage inflation, higher material costs, and contractual price down commitments. This, along with volume improvements from the eventual recovery of some of our key markets, will allow us to reach our 7% to 8% operating margin target.

就我們的核心營運目標而言，過去 15 個月的行動已大幅強化我們的業務，帶來超過 5,000 萬美元的年度化節省（annual run rate savings），超出我們原先的目標。我們今年已實現其中一部分節省，並已看到成果帶來的正面影響。我們估計明年將再額外實現 2,000 萬美元的節省，其中包括關閉愛荷華州華盛頓（Washington, Iowa）工廠的完整效益，以及額外的採購節省。這些節省對於抵銷與薪資通膨、更高的材料成本，以及合約降價承諾相關的成本上升至關重要。再加上部分關鍵市場最終復甦所帶來的出貨量改善，將使我們得以達成 7% 至 8% 的營業利益率目標。

With that, I'd like to turn it over to Mick for an overview of our consolidated financial results, including review of the results of our CIS business for the month of December, and to provide an update for Fiscal 2017 guidance.

接下來，我想把時間交給 Mick，請他概述我們的合併財務結果，包括回顧 CIS 業務 12 月份的單月結果，並提供 2017 會計年度的財測更新。

Thanks, Tom. Please turn to slide 12. I'd like to start by saying I'm pleased with the significant improvement over the prior quarter, and effort of our employees to drive earnings while dealing with the volume challenges. As anticipated, we were able to improve earnings significantly after a difficult Q2, but not able to fully offset additional volume drops in North America, South America, and Heating.

謝謝，Tom。請翻到第 12 頁投影片。我想先說，我對相較上一季的顯著改善感到滿意，也肯定員工在面對出貨量挑戰時仍努力推動獲利的付出。如同預期，在艱難的第二季之後，我們得以大幅改善獲利，但仍無法完全抵銷北美、南美以及供暖（Heating）業務額外的出貨量下滑。

Beginning with the top-line, our third quarter sales increased $21.1 million, including $34.7 million of sales from the Luvata HTS acquisition. Excluding CIS, constant currency sales were down $9.5 million, or 3% year-over-year. Reported gross profit of $58.7 million was up slightly for the quarter, however, this includes a negative $2.9 million purchase accounting adjustment related to inventory.

先從營收端來看，我們第三季銷售額增加 2,110 萬美元，其中包含 Luvata HTS 收購案帶來的 3,470 萬美元銷售額。若排除 CIS，以固定匯率計算的銷售額年減 950 萬美元，或年減 3%。本季報告毛利為 5,870 萬美元，略有增加；然而其中包含與存貨相關的 -290 萬美元購買會計調整（purchase accounting adjustment）。

As a result, gross margin had a negative 80 basis point impact from the inventory step-up estimated fair value. Excluding CIS and this adjustment, gross margin on the base business improved 30 basis points over the prior year, to 18.1%, and this is on lower sales.

因此，存貨按公允價值調升（inventory step-up）對毛利率造成 80 個基點的負面影響。若排除 CIS 與此項調整，基礎業務的毛利率較去年提升 30 個基點至 18.1%，而且是在銷售額較低的情況下達成。

Moving on to SG&A, we are keeping a relentless focus on cost control. SG&A of $51.1 million includes two significant items worth noting. First, we incurred professional fees of $7.2 million for transaction and integration costs related to the acquisition. Second, the CIS segment included $4.7 million of SG&A. Excluding these items, core SG&A was down $4.1 million, or 9% lower than the prior year.

接著看 SG&A（銷售、一般及行政費用），我們持續以不懈的態度專注於成本控管。SG&A 為 5,110 萬美元，其中包含兩項值得注意的重要項目。第一，我們因收購相關的交易與整合成本而產生 720 萬美元的專業服務費。第二，CIS 部門包含 470 萬美元的 SG&A。若排除上述項目，核心 SG&A 減少 410 萬美元，較去年下降 9%。

Also during the quarter, we recorded $1.6 million of restructuring expenses. These primarily relate to equipment transfers and plant consolidation in the Americas.

此外，本季我們認列 160 萬美元的重整費用。這些費用主要與美洲地區的設備移轉與工廠整併相關。

Interest expense was up $1.8 million over the prior year, primarily due to the additional acquisition-related debt. Third quarter adjusted operating income of $17.7 million was up half a million, or 3%, and our adjusted earnings per share was $0.21, down $0.01 compared to last year.

利息費用較去年增加 180 萬美元，主要是因收購而新增的相關負債所致。第三季調整後營業利益為 1,770 萬美元，增加 50 萬美元（或 3%）；調整後每股盈餘（EPS）為 0.21 美元，較去年下降 0.01 美元。

Given only one month of results, the CIS impact was not material to our adjusted operating income. Our EPS was negatively impacted by approximately $0.02 from the incremental interest expense due to the acquisition.

由於僅納入一個月的結果，CIS 對我們調整後營業利益的影響並不重大。由於收購導致的額外利息費用，我們的 EPS 約受到 0.02 美元的負面影響。

The lower table shows the walk of our adjusted operating income. As usual, we've included a full reconciliation between our reported results and adjusted operating results in the appendix. Our US GAAP income statement is included in the appendix of this presentation and in our earnings release.

下方表格顯示我們調整後營業利益的變動橋接（walk）。如同以往，我們在附錄中提供報告結果與調整後營運結果之間的完整調節表。我們的美國一般公認會計原則（US GAAP）損益表亦收錄於本簡報附錄及我們的財報新聞稿中。

Turning to slide 13, in the quarter adjusted free cash flow was $16.6 million and much improved from last quarter. Year-to-date operating cash flow has been temporarily impacted by cash restructuring and acquisition-related costs. Adjusted free cash flow year-to-date is $10.8 million, which is down from last year. This is due to the combination of several items. These include slightly lower cash earnings, tooling payments, higher working capital, and the timing of capital expenditures.

請看第 13 頁投影片，本季調整後自由現金流為 1,660 萬美元，較上一季大幅改善。年初至今的營運現金流暫時受到重整現金支出與收購相關成本的影響。年初至今調整後自由現金流為 1,080 萬美元，較去年下降。這是由多項因素共同造成。包括現金獲利略低、工裝（tooling）付款、較高的營運資金，以及資本支出時點的影響。

Consistent with the past few years, we expect our full-year capital spending will remain in the $60 million to $65 million range, including CIS. The adjustments include restructuring payments of $12.1 million which are related to plant consolidation and severance, with the remaining items mainly related to acquisition activities.

與過去幾年一致，我們預期全年資本支出將維持在 6,000 萬至 6,500 萬美元區間（包含 CIS）。調整項目包含 1,210 萬美元的重整付款，與工廠整併及資遣相關；其餘項目主要與收購活動相關。

Turning to slide 14, I want to review Modine's capital structure which changed significantly as a result of the acquisition. The table on the upper left breaks down our current capital structure, including total debt of $514 million. This includes $71 million of short-term debt and $443 million of long-term debt. In conjunction with the acquisition, we entered into an amended and extended credit agreement with a syndicate of banks. This includes a renewed $175 million, five-year revolving credit facility, and a new $275 million, five-year term loan facility. We also entered into a new $50 million, 10-year private placement.

請看第 14 頁投影片，我想回顧 Modine 的資本結構；由於本次收購，資本結構已出現顯著變化。左上方表格拆解我們目前的資本結構，包括總負債 5.14 億美元。其中包含 7,100 萬美元的短期負債與 4.43 億美元的長期負債。配合本次收購，我們與銀行聯貸團簽訂修訂並展延的授信協議。其中包括續約的 1.75 億美元、五年期循環信用額度，以及新增的 2.75 億美元、五年期定期貸款額度。我們也新增 5,000 萬美元、10 年期的私募融資。

The table on the right shows our net debt position, along with our current leverage ratio. Modine currently has $464 million of net debt, up $370 million from the prior year-end. Our leverage ratio is now 2.8, up from 1.2 at the prior year end. We have previously communicated our steady-state goal to keep Modine's leverage ratio between 1.5 and 2.5, and plan to reduce our overall leverage during the next year.

右側表格顯示我們的淨負債部位，以及目前的槓桿比率。Modine 目前淨負債為 4.64 億美元，較上一會計年度年底增加 3.70 億美元。我們的槓桿比率目前為 2.8，較上一會計年度年底的 1.2 上升。我們先前已溝通穩態目標是將 Modine 的槓桿比率維持在 1.5 至 2.5 之間，並計畫在未來一年降低整體槓桿。

For added cushion, I'd like to point out that our debt agreements allow for our leverage ratio to be temporarily raised after the acquisition. Currently, our max leverage ratio covenant is 3.75 through the second quarter of Fiscal 2018. Then, it drops to 3.5 through the first quarter of Fiscal 2019 and finally reverts to 3.25 thereafter.

為了提供額外緩衝，我想指出，我們的債務協議允許在收購後暫時提高槓桿比率。目前，我們的最高槓桿比率契約（covenant）在 2018 會計年度第二季之前為 3.75。之後在 2019 會計年度第一季之前降至 3.5，最後在其後回復至 3.25。

Turning to slide 15, I want to take a few minutes to review the financial implications of the CIS acquisition and its potential earnings profile. We are early in the integration process, but so far things have been going smoothly. We have a dedicated integration team in place that is helping to facilitate a smooth transaction, and they are now quickly shifting their focus to synergy execution. As most of you know, purchase accounting can be complex, and we are currently in the middle of our analysis.

請看第 15 頁投影片，我想花幾分鐘回顧 CIS 收購案的財務意涵及其潛在獲利輪廓。我們仍處於整合流程的早期階段，但截至目前進展順利。我們已成立專責整合團隊以協助促成交易順利進行，且目前正迅速將重點轉向協同效益（synergy）的落實執行。如各位所知，購買會計可能相當複雜，而我們目前正處於分析的進行中。

With the December close, we have included our best estimate of the opening balance sheet and associated increase in non-cash fixed costs, which will show up as depreciation and amortization. Our goal is to complete all purchase accounting adjustments in Q4 even though a few topics may continue into Fiscal 2018 as the various items are fully evaluated.

隨著12月結帳，我們已納入對期初資產負債表的最佳估計，以及相關的非現金固定成本增加，這些將反映在折舊與攤銷中。我們的目標是在第四季完成所有購買會計調整，儘管少數議題可能會延續到2018財年，直到各項目完成全面評估。

As I mentioned earlier, our Q3 included only one month of CIS sales, and the adjusted operating income impact was immaterial. Based on initial estimates, CIS incurred $1 million of additional intangible amortization and fixed asset depreciation expense created through the acquisition.

如我先前提到的，我們第三季僅包含CIS一個月的銷售，對調整後營業利益的影響並不重大。根據初步估計，CIS因本次收購所產生的無形資產攤銷與固定資產折舊費用增加約100萬美元。

As we look ahead to our fourth quarter forecast for CIS, I want to highlight that the numbers are in line with our pre-close expectations. We anticipate CIS sales in the $125 million to $135 million range, and adjusted operating income of $4 million to $5 million. Keep in mind that this includes at least $3 million of increased amortization and depreciation expense due to the purchase accounting impact.

展望CIS第四季預測時，我想強調這些數字與我們在結帳前的預期一致。我們預期CIS銷售額將落在1.25億至1.35億美元區間，調整後營業利益為400萬至500萬美元。請記住，這其中包含至少300萬美元因購買會計影響而增加的攤銷與折舊費用。

Now switching gears to full-year expectations, our detailed Fiscal 2018 guidance will be provided next quarter, but we expect CIS to be accretive in the first full fiscal year. To put things in perspective, prior to the acquisition, Luvata HTS annual sales were approximately $500 million with an operating margin of 8% to 9%. Going forward, we will have to adjust for purchase accounting, which we estimate will have an annual impact of $13 million to $14 million through increased non-cash depreciation and amortization expenses. We also anticipate an incremental annual interest expense of $14 million to $15 million. On a pro forma basis, this clearly leads to significant earnings accretion, both on operating income and EPS.

接著談全年展望，我們將在下季提供2018財年的詳細指引，但我們預期CIS在第一個完整財年將具增益（accretive）。為了讓大家更有概念，收購前Luvata HTS年銷售額約為5億美元，營業利益率為8%至9%。未來我們必須調整購買會計影響，我們估計其每年將透過增加非現金折舊與攤銷費用，帶來1,300萬至1,400萬美元的影響。我們也預期每年將新增1,400萬至1,500萬美元的利息費用。以備考（pro forma）基礎來看，這顯然會在營業利益與每股盈餘（EPS）兩方面帶來顯著的獲利增益。

In addition, our goal is to offset incremental depreciation, amortization, and improve earnings through cost synergies. I will provide more information on those costs, benefits and timing next quarter. Even though we are only about 60 days into the acquisition, I continue to be optimistic about the financial impact from CIS.

此外，我們的目標是透過成本綜效來抵銷新增的折舊與攤銷，並提升獲利。我將在下季提供更多關於這些成本、效益與時程的資訊。儘管我們完成收購僅約60天，我仍對CIS帶來的財務影響保持樂觀。

Now, let's turn to our Fiscal 2017 guidance on slide 16.

現在，讓我們看第16頁投影片中的2017財年指引。

We are updating our Fiscal 2017 guidance following the CIS acquisition and other market factors in our base business, including the recent rise in metal prices, the change in exchange rates, and a declining outlook in Americas and Building HVAC since we last updated in October. We now expect sales to be up 9% to 11% from the prior year. This includes four months of sales from CIS of approximately $160 million to $170 million. This also reflects the strengthening of the US dollar, which has had a negative impact on our sales. The increase from CIS is partially offset by the lower sales outlook in our base business, which we estimate will be down 1% to 3%.

在完成CIS收購，以及本業其他市場因素影響下，我們更新2017財年指引；這些因素包括近期金屬價格上漲、匯率變動，以及自10月上次更新以來，美洲與建築HVAC市場展望轉弱。我們目前預期銷售額將較前一年成長9%至11%。其中包含CIS四個月的銷售，約1.6億至1.7億美元。這也反映美元走強，對我們銷售造成負面影響。CIS帶來的增量部分被本業較低的銷售展望所抵銷；我們估計本業銷售將下滑1%至3%。

We expect adjusted operating income to remain in the same range of $65 million to $71 million based on the moving parts I just described. This equates to an increase of 3% to 12% over the prior year. In addition to the lower sales outlook, we have considered the rapid increase in commodity metal prices since September, both for aluminum and copper.

基於我剛才描述的各項變動因素，我們預期調整後營業利益仍維持在6,500萬至7,100萬美元的同一區間。這相當於較前一年增加3%至12%。除了較低的銷售展望外，我們也考量自9月以來大宗金屬價格快速上漲的影響，包括鋁與銅。

Improvements in Europe and Asia, along with further SG&A cost reductions, have helped to offset the economic challenges. Last but not least, the addition of CIS is also offsetting these headwinds.

歐洲與亞洲的改善，加上進一步的銷售、一般及管理費用（SG&A）成本降低，有助於抵銷經濟挑戰。最後但同樣重要的是，CIS的加入也在抵銷這些逆風。

We expect the adjusted EPS to be between $0.74 and $0.80, down from the prior range of $0.77 to $0.87. This change is primarily driven by $5 million of incremental interest resulting from the acquisition.

我們預期調整後每股盈餘（EPS）介於0.74至0.80美元，低於先前的0.77至0.87美元區間。此變動主要是由收購帶來的新增利息費用500萬美元所致。

So, to wrap up, we made a lot of progress in achieving our second half targets, and a lot of hard work remains. As Tom noted, we are seeing the operational improvements in all regions with further opportunity in the fourth quarter. We are clearly facing some market headwinds in the Americas, and HVAC segments. But, we're glad to have CIS onboard and lead the way into Fiscal 2018.

總結來說，我們在達成下半年目標方面取得了許多進展，但仍有大量艱鉅工作要做。如Tom所提，我們在所有地區都看到營運改善，且第四季仍有進一步提升的機會。我們在美洲以及HVAC業務區隔明顯面臨一些市場逆風。不過，我們很高興CIS加入，並帶領我們邁入2018財年。

Integration plans are well under way, and we are pleased with the opportunities that are being presented. So, with that, Tom, I'll turn it back to you.

整合計畫正在順利推進，我們也對所呈現的機會感到滿意。那麼，Tom，我把時間交還給你。

Thanks, Mick. And as Mick mentioned last quarter, we mentioned that we expected that our second half performance would improve significantly from the first half of the year, and we have delivered with our third quarter results. I am pleased with the excellent progress being made on addressing the majority of the second quarter operational issues, and can confirm that we continue to remediate remaining issues that impacted our third quarter results and expect continued and sustained improvements in Q4.

謝謝你，Mick。正如Mick上季提到的，我們當時表示預期下半年表現將較上半年顯著改善，而我們已透過第三季結果交出成績。我對於在解決第二季多數營運問題上所取得的優異進展感到滿意，也可以確認我們持續改善仍影響第三季結果的剩餘問題，並預期第四季將持續且穩定地改善。

However, as we look forward, we see continued market-driven volume challenges in the Americas and Building HVAC segments. In addition, we expect higher metal prices and foreign exchange will continue to pressure our earnings. I am pleased that earnings accretion from the addition of the CIS business will offset some of these challenges, and although it is still early, we are very confident this acquisition will deliver to Modine and its shareholders the value we anticipated.

然而，展望未來，我們仍看到美洲與建築HVAC業務區隔持續面臨由市場驅動的出貨量挑戰。此外，我們預期較高的金屬價格與外匯將持續對獲利造成壓力。我很高興CIS業務加入所帶來的獲利增益將抵銷部分挑戰；雖然目前仍在早期階段，但我們非常有信心這項收購將為Modine及其股東帶來我們所預期的價值。

That being said, there's plenty of hard work being done around this organization to build a stronger, more diversified industrial company. We will deliver the cost savings objectives of our SDG strategy and continue to benefit from our actions into the Fiscal 2018 and beyond. The work on our cost structure will allow us to continue to provide our customers with superior products at competitive prices.

話雖如此，整個組織仍投入大量艱辛工作，以打造更強大、更多元化的工業公司。我們將達成SDG策略的成本節省目標，並在2018財年及其後持續受益於我們的行動。我們在成本結構上的工作，將使我們能持續以具競爭力的價格，為客戶提供更優質的產品。

In addition, the creation of the Commercial and Industrial Solutions business, through the acquisition of Luvata HTS, allows us to expand our presence in familiar markets with products and technologies that are squarely in our wheelhouse. We are actively working on the integration of this business into Modine, and look forward to providing updates along the way.

此外，透過收購Luvata HTS而成立的商用與工業解決方案（Commercial and Industrial Solutions）事業，使我們能以我們熟悉的產品與技術，擴大在熟悉市場中的布局，這些都正是我們的強項。我們正積極推動將該業務整合進Modine，並期待在過程中提供最新進展。

With that, we'll take your questions.

接下來我們開始回答各位的提問。

(Operator instructions) Our first question comes from Gabelli & Company. Your line is now open.

(接線員指示) 我們的第一個問題來自Gabelli & Company。您的線路已開通。

Hey, good morning, everybody.

嗨，各位早安。

Good morning.

早安。

Good morning.

早安。

Just wanted to start off the first question with, about recent proposals that we've seen regarding tax policies. I guess given your diverse geographic end markets, how much benefit do you think you could even get from a lower corporate tax rate? And along those lines, could you also speak to the impacts that you see from a potential border adjustment tax?

我想先從第一個問題開始，關於我們近期看到的稅制政策提案。我想，鑑於你們終端市場的地理分布相當多元，你們認為公司稅率降低能帶來多少效益？另外，也請談談你們所看到的潛在邊境調整稅（border adjustment tax）可能帶來的影響。

Yes, we're getting a lot of questions on that, and I think the short answer is, we really need to wait to see how all the policies shake out before we can assess the impact to Modine. I think if there's any type of tax change, there's clearly going to be a short-term, non-cash impact, as we adjust our balance sheet. All companies will have to adjust for taxed assets and liabilities. And then, going forward from a cash basis, really have to assess and hopefully that will only be positive news from a cash tax basis going forward.

是的，我們收到很多相關問題；我想簡短的回答是，在我們能評估對Modine的影響之前，確實需要先觀察各項政策最終如何定案。我認為若有任何稅制變更，當我們調整資產負債表時，短期內顯然會有非現金影響。所有公司都必須就課稅資產與負債進行調整。接著，從現金角度來看，則需要進一步評估；並希望未來在現金稅負方面只會是正面消息。

All right, and then you also mentioned earlier potential benefits from electric vehicles. Could you speak to some of the products that serve those, and how you view the potential growth in that market?

好的，另外您先前也提到電動車可能帶來的效益。能否談談一些服務於這些需求的產品，以及您如何看待該市場的潛在成長？

Sure. Obviously, this market is really heating up. We've had initial success in North America, with North American-based companies providing, whether it be what we call chillers, which is part of the overall system of cooling batteries and the passenger compartment, that's expanded into higher content into other what we call power train coolant products. So, the overall system, and then looking at battery plates. So that's been our basis over the last couple years in North America, but this is picking up globally now. So, as I mentioned, the Europe customers really in the last year have accelerated their electrification strategies and we are very involved in those products. So, think of battery plate coolers, think of chillers that manage the overall system performance, and specific components that manage the overall what we call power train, that is the balance between heating and cooling of drive train and passenger thermal management compartments. So, a lot of potential content, but a lot of acceleration going into this market with some big edicts that are going on in the world. We're saying that they expect to see a significant increase starting in electric vehicles over the next five years.

當然。很明顯，這個市場正在快速升溫。我們在北美已取得初步成功，北美本土公司所提供的產品包括我們所稱的冷卻器（chillers），它是整體系統的一部分，用於冷卻電池與乘客艙；而這也已擴展到我們所稱的動力總成冷卻液（power train coolant）產品中更高的內容價值。因此，涵蓋整體系統，並進一步延伸到電池冷卻板（battery plates）。這是我們過去幾年在北美的基礎，但現在全球也開始加速。如我所提到，歐洲客戶在過去一年確實加快其電動化策略，我們也深度參與這些產品。所以，可以想像電池冷卻板冷卻器、管理整體系統性能的冷卻器，以及管理我們所稱動力總成整體的特定零組件，也就是在傳動系統與乘客艙熱管理之間，平衡加熱與冷卻。因此，內容價值的潛力很大，而且在全球一些重大政策指令推動下，這個市場正快速加速。我們的看法是，未來五年電動車的導入將出現顯著增加。

Great, and then the last one for me, just a little housekeeping question. Do you have the share count at the end of the quarter?

很好，最後一個問題，算是例行性確認。請問季度末的流通股數是多少？

Yes, I'll grab that for you. So in the quarter, 47.3.

是的，我幫您查一下。本季度是47.3。

Okay.

好的。

Did you catch that, at the end of the quarter [47.3 million]. And then in the press release you see the weighted average shares used in the quarter, [48.5 million].

您有聽到嗎？季度末是[47.3百萬股]。另外在新聞稿中您會看到本季度使用的加權平均股數是[48.5百萬股]。

Got it, okay. Appreciate it.

了解，好的。謝謝。

Thank you.

謝謝。

Our next question comes from David Leiker from Baird, your line is now open.

下一個問題來自Baird的David Leiker，您的線路已開通。

Good morning, everyone.

各位早安。

Hi, David.

嗨，David。

First on CIS, I guess just a housekeeping item to start with. Is CIS all of Luvata in CIS, and is CIS only Luvata, or are there some moving pieces between the other segments?

先談CIS，我想先從一個例行性問題開始。CIS是否包含CIS地區的整個Luvata？另外，CIS是否只有Luvata，還是與其他事業部之間有一些調整或移轉？

CIS is Luvata plus the coils business that we have established in North America. So think about that, $50 million to $60 million worth of coils business in North America that we've had for some time, that is being folded into that business as well, as we speak.

CIS是Luvata加上我們在北美建立的盤管（coils）業務。所以可以這樣想：我們在北美已有一段時間、約5,000萬到6,000萬美元規模的盤管業務，目前也正如我們所說，會一併納入該業務之中。

But that's not in the numbers for the quarter?

但這部分沒有反映在本季度的數字裡？

I'm saying that as a big picture, that's where we're going. So for the quarter, Mick, go ahead.

我的意思是從整體方向來看，這是我們要前往的目標。至於本季度，Mick，你來補充。

Yes, for the quarter and then really the plan will be for the next fiscal year while we're integrating Luvata, the business Tom referenced will stay in the Americas section and I have plans operationally that'll be run and let out immediately by our new leadership team at CIS. But, from an accounting standpoint, we'll go through as part of our integration, how to move that from an accounting standpoint from the Americas into the CIS segment. That'll probably take most of, into Fiscal 2018, David.

是的，就本季度而言，以及其實在我們整合Luvata的下一個會計年度計畫中，Tom提到的那項業務會先留在美洲（Americas）部門；在營運上，我們的新CIS領導團隊會立即接手並推動。但從會計處理角度，我們會在整合過程中評估如何把它在帳務上從美洲移轉到CIS事業部。David，這可能會花掉大部分時間，延續到2018財年。

Okay. And then on the -- Tom, when you talk about the data center, I know you talked to this a little bit but can you frame that for us in terms of size and timing? And what needs to happen there? On the CIS, or Luvata?

好的。接著談到資料中心——Tom，我知道你稍早有稍微提到，但你能否就規模與時程幫我們框架一下？那邊需要發生什麼？是指CIS，還是Luvata？

Okay, the impact I mentioned, the large customer --

好的，我提到的影響，是那個大型客戶——

The large data center customer.

那個大型資料中心客戶。

Yes, right, yes. So yes, we saw in due diligence, and discovered and of course confirmed that there is a transition of product mix going on with the large customer in a data center market. That's again been confirmed both internally and with the customers, they transition from one product platform to another. So, there's kind of a -- think of it as a lull, okay, as they make that transition to this temporary position, to a new, let's call it, product platform I guess, the best way to call it, a significant product platform of content. But, so again, we're pleased with the customer relationship and the opportunity, as we transition, think of it from one product platform to another there's this transition phase that we're going through and that leaves a lower margin product, that's from earlier. The product platform they transitioned to, the new one. So, that's kind of the mix story going on.

對，沒錯。所以，是的，我們在盡職調查中看到、也發現並且當然也確認：在資料中心市場中，該大型客戶正在進行產品組合（product mix）的轉換。這點已在內部以及與客戶端雙方確認：他們正從一個產品平台轉換到另一個產品平台。因此，在他們轉換到新的、姑且稱之為產品平台（我想這是最貼切的說法）——一個內容價值顯著的產品平台——的過程中，會出現一段「空窗期」或「低谷」。但總之，我們對客戶關係與機會仍感到滿意；在從一個產品平台轉到另一個產品平台的過程中，會有這個我們正在經歷的轉換期，這會使得目前留下的是較低毛利的產品，也就是先前的那一代。而他們轉換到的新產品平台，就是新的那一個。這就是目前產品組合變化的故事。

So, I can't give you any timing focus on that, but that transition we will inform of course our shareholders and investors as that moves forward. But again, it's as we saw, and as right as we planned for and we'll see that transition over the next several quarters.

所以我現在無法給你任何明確的時程焦點，但隨著這個轉換推進，我們當然會向股東與投資人更新。不過，正如我們所看到的、也如我們規劃的，我們會在接下來幾個季度看到這個轉換。

Okay. And then, on China, the Asia business -- it's nice seeing those volumes up at these levels. I'm sure that's exciting for you folks.

好的。再來談中國、亞洲業務——很高興看到出貨量在這些水準上升。我相信這對你們來說很令人振奮。

Very exciting.

非常令人振奮。

As you continue to ramp the contracts you have there, I mean, you're pushing $30 million a quarter run rate there. How much more upside is there on the volume out of Asia?

隨著你們持續拉升那邊的合約，我的意思是，你們那邊的季度年化（run rate）已接近每季3,000萬美元。亞洲的出貨量還有多少上行空間？

Well, we have not hit our mature levels yet, so we still have upside to where we're running right now, and especially we're really encouraged just to see that as we gain share in the automotive side, which we've been really targeting, is that we're seeing some strengthening in the construction business as well which is encouraging. So, all in all, I'd say we feel very positive. As I mentioned, we continue to expect to see double-digit growth in that segment.

我們尚未達到成熟水準，因此相較於目前的運行水準仍有上行空間；而且我們特別受到鼓舞的是，隨著我們在汽車端（這一直是我們重點鎖定的領域）持續提升市占，我們也看到建築業務有所轉強，這點很令人振奮。總體而言，我會說我們感覺非常正面。如我所提到，我們仍預期該事業部將維持雙位數成長。

Yes, if we look at what the mix of that revenue is today between the automotive and the construction side, what would you think it is?

如果看目前該營收在汽車端與建築端之間的組合，你認為大概各占多少？

It's approaching a 50% automotive now, where it used to be about 80% construction. So, it's about a 50% automotive, 35% construction probably, and the rest commercial vehicle.

汽車端現在接近50%，而過去建築端大約占80%。所以大概是汽車約50%、建築約35%，其餘是商用車。

Okay, great. And then what about the profitability there? Nice margins there, what's your longer-term targets, so do you think that's up a little bit?

好的，很好。那獲利能力呢？那邊的利潤率很不錯，你們的長期目標是什麼？你覺得還能再往上嗎？

Yes, I mean, it's been a while, David. I'm not sure I'd see a day where we talk about a quarter where Asia had the highest operating margin of all of our segments. I think from here on out, it's going to be -- I think it's really going to be, we're going to reach a normalization here, I think. I think in the 17% to 18% type gross margins, SG&A is being tightly managed. So, more inflationary levels. So, I think from here it's all going to be about a volume story, with barely stable margins.

是的，這已經過了一段時間了，David。我不確定我是否曾想過會有一天我們會談到某個季度，亞洲的營業利益率是我們所有事業部中最高的。我認為從現在開始，將會——我覺得我們會在這裡達到一個常態化。我認為毛利率大概在17%到18%這樣的水準，SG&A也被嚴格控管。所以會更接近通膨型的水準。因此我認為接下來主要會是量的故事，而利潤率大致維持穩定。

Okay, and then one last item on China. With the tax there on the automotive side and some pre-buy activity in December, I know that folks are just coming back from the New Years, but do you have any sense of what the build rates are currently running as we settle into the new tax regime there?

好的，接著關於中國最後一項。考量到汽車端的稅負以及12月的一些提前購買活動，我知道大家才剛從新年假期回來，但在那邊進入新的稅制後，您是否對目前的生產（組裝）速度大概是多少有任何概念？

I don't. I don't have that, but we can get back on that, we'll find that out.

我沒有。我手上沒有那個數據，但我們可以之後再回覆，我們會把它查清楚。

No one seems to have it. Okay, thanks.

看起來沒有人有。好的，謝謝。

Thank you, David.

謝謝你，David。

(Operator instructions) The next question comes from Mike Shlisky from Seaport Global. Your line is now open.

（接線員指示）下一個問題來自 Seaport Global 的 Mike Shlisky。您的線路已開通。

Hey guys, good morning.

各位早安。

Good morning, Mike.

早安，Mike。

Hi, Mike.

嗨，Mike。

Wanted to touch on a few things, here. First, on Luvata, on CIS, the annual interest expense of $14 million to $15 million you put in your slides and comments, does that assume no repayment from today onward, and can you maybe comment for us a little bit on the cadence of when some of the debt might be paid down, either in calendar 2017 or in Fiscal 2018?

想在這裡談幾件事。首先，關於 Luvata、關於 CIS，你們在投影片與評論中提到每年1,400萬到1,500萬美元的年度利息費用，這是否假設從今天起都不償還？另外，你們能否稍微談談可能在何時開始償還部分債務的節奏，不論是在2017曆年或2018財年？

Yes, so that is a full year annualized interest rate, interest payment, Mike, assuming that that debt does stay on for the full year. Really, it's fairly -- we've modeled and are looking at it, even though we're in our planning season, as fairly evenly-spread quarter-to-quarter. It'll partly depend on our final cash flows next year, that'll be the main driver of it. We do have plans to pay down the debt. So, I think we'd like to say the $14 million to $15 million is worst case, but I can't comment on the opportunity for it to go lower until we really complete our plan and the timing of cash flow.

是的，Mike，那是按全年年化的利率／利息支出來看，假設那筆債務整年都維持不變。實際上，它相當——我們已建模並在評估，即使目前在規劃季，也大致是按季度平均分布。部分將取決於我們明年的最終現金流，那會是主要驅動因素。我們確實有計畫償還債務。所以，我想我們可以說1,400萬到1,500萬美元是最壞情況，但在我們真正完成規劃並確認現金流時點之前，我無法評論是否有機會更低。

Okay, got it. Then I also wanted to ask about your outlook for North America, both heavy-duty and medium-duty. Is it fair to say on heavy-duty that perhaps the worst part of it, as far as declines year-over-year, could be in your fiscal fourth quarter or the calendar first quarter here? It might not be quite as negative as we go through Fiscal 2018?

好的，了解。我也想問一下你們對北美市場的展望，包括重型與中型。就重型而言，是否可以說就年對年下滑幅度來看，最糟的部分可能會出現在你們的第四財季或這裡的曆年第一季？在2018財年期間可能就不會那麼負面？

We certainly hope it's not as bad, that's for sure, but yes, it's been a real drop the last two quarters, the end of Q3 and what we anticipate this quarter. If it would even out more, that would be great.

我們當然希望不會那麼糟，這是肯定的；但沒錯，過去兩個季度確實大幅下滑，也就是第三季末以及我們預期本季的情況。如果能更趨於持平，那就太好了。

We're not, so far Mike, we're not -- just to add to that -- looking at it really any differently than the other market data sources. If they're correct in that there's a stabilization, or even start to improve in the second half of calendar 2017, to your question, that could be good for us as we come out of 2017 and even to our Q4, which would be early 2018, obviously.

Mike，到目前為止，我們並沒有——補充一下——用不同於其他市場數據來源的方式來看待。如果他們的判斷正確，認為在2017曆年下半年會趨於穩定，甚至開始改善，回到你的問題，這對我們在2017年走出低谷、甚至到我們的第四季（顯然是2018年初）都可能是好事。

Okay, got it, and then kind of following up on that question, on medium-duty I see your outlook here is for a decline of 5% in calendar 2017, but some of the forecasters are saying up 5% or 6% on the positive side. I was wondering what you're seeing differently between the big forecasters and what your business is?

好的，了解。接著延伸這個問題，在中型方面，我看到你們對2017曆年的展望是下滑5%，但有些預測機構卻說會正成長5%或6%。我想知道你們看到的情況，和大型預測機構以及你們自身業務之間，有什麼不同？

Well, it's just what we anticipate, obviously with the planning process of 2018, we will re-look at that going forward, and next quarter we can give a higher outlook. But right now, that's kind of what our -- we've kind of triangulated with information both from external sources and internally, what our people are thinking. So, it has not been effective as much, clearly. We have a strong position in medium-duty, that we feel great about that. So, we'll get back to you next quarter when we see that outlook going forward.

嗯，這就是我們目前的預期；當然，隨著2018年的規劃流程，我們會再往前重新檢視，下一季我們也可能給出更高的展望。但就目前而言，這大致是我們——我們把外部來源與內部資訊做了交叉比對（triangulate），也就是我們的人員所認為的情況。所以，顯然它受到的影響沒有那麼大。我們在中型市場有很強的地位，對此我們感覺很好。因此，等到下一季我們看到後續展望時，再回覆你。

Okay, and one last one for me. I just want to clarify, did you say that mix is going to be a benefit for you in calendar 2017 in Europe, as we saw the business in Fiscal 2017?

好的，我最後一個問題。我只是想確認一下，你們是說在歐洲，2017曆年產品組合（mix）會對你們有利，就像我們在2017財年看到的業務那樣嗎？

The mix of commercial truck volume going down, you're talking about?

你是指商用卡車銷量下滑的那個組合變化嗎？

It sounds to me as though you were just kind of talking about your overall margin, your overall margin mix with exiting some stuff in calendar 2016 that will improve your outlook for margins in Europe in calendar 2017. Is that what you were referring to? I just wanted to clarify.

我聽起來像是你剛才在談整體毛利、整體毛利的組合，因為你們在2016曆年退出了一些業務，這會改善你們在歐洲2017曆年的毛利展望。你指的是這個嗎？我只是想確認一下。

Yes, I think as we -- as Tom was describing, as we continue -- is what you've seen the last few quarters is, we continue to launch the automotive engine program, that's offsetting the wind-down of the commercial vehicle radiator program. We would expect that to be a positive mix shift.

是的，我想正如——如 Tom 所描述的——我們持續看到的是，隨著我們持續導入汽車引擎專案，這正在抵消商用車散熱器專案的逐步收尾。我們預期這會帶來正向的產品組合轉變。

Okay, I think that clears it up. Thank you very much, guys.

好的，我想這就釐清了。非常感謝，各位。

At this time, I'm showing no further questions. I would now like to turn the conference back to Kathy Powers.

目前我這邊顯示沒有其他問題。我現在想把電話會議交回給 Kathy Powers。

Yes, this is Mick -- one comment Kathy, before I turn it back to you. I just wanted to correct on the first question on the shares outstanding, as of December 31, 50.1 million, and then as of March 31, 2016, 47.4 million. So, March 31, 2016 47.4, and December 31, 2016, 50.1.

是的，我是 Mick——Kathy，在交回給你之前補充一點。我想更正第一個關於流通在外股數的問題：截至12月31日為5,010萬股，而截至2016年3月31日為4,740萬股。所以，2016年3月31日是4,740萬股，2016年12月31日是5,010萬股。

All right, thank you, Mick. This concludes today's call. Thank you for joining us this morning, and thanks again for your interest in Modine.

好的，謝謝你，Mick。今天的電話會議到此結束。感謝各位今天早上加入我們，也再次感謝各位對 Modine 的關注。

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now all disconnect. Everyone have a great day.

各位女士先生，感謝參與今天的電話會議。本次議程到此結束。各位現在可以掛線。祝各位有美好的一天。