Modine Manufacturing Company (MOD) 2019 Q1 法說會逐字稿

Good morning, ladies and gentlemen and welcome to Modine Manufacturing Company First Quarter Fiscal 2019 Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Kathy Powers, Vice President, Treasurer, Investor Relations and Tax.

各位女士、先生，早安，歡迎參加 Modine Manufacturing Company 2019 會計年度第一季財報電話會議。(接線員指示) 提醒各位，本次電話會議將被錄音。現在我想把電話會議交給今天的主持人：Kathy Powers，副總裁、財務主管、投資人關係與稅務。

Thank you, and good morning. Thank you for joining us in our conference call to discuss Modine's first quarter fiscal 2019 results. I'm 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, www.modine.com. This morning, Tom and Mick will present our first quarter results and confirm our revenue and earnings guidance for fiscal '19. At the end of the call, there will be a question-and-answer session.

謝謝，各位早安。感謝各位參加我們的電話會議，一同討論 Modine 2019 會計年度第一季的業績結果。我與 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 一同出席。今天的簡報將使用投影片，各位可透過網路直播連結存取，或至我們網站 www.modine.com 的投資人關係專區下載已張貼的 PDF 檔。今天上午，Tom 與 Mick 將說明第一季業績，並確認 2019 會計年度的營收與獲利指引。電話會議最後將進行問答環節。

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.

投影片第 2 頁為我們關於前瞻性陳述的聲明。本次電話會議可能包含前瞻性陳述，相關內容如同我們的盈餘新聞稿以及本公司向美國證券交易委員會提交的文件中所述。

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

接下來，我很高興把電話會議交給 Tom Burke。

Thank you, Kathy, and good morning, everyone. I'm pleased to report that we've started up fiscal 2019 with another strong quarter. Overall, sales increased 10% or 6% on a constant-currency basis. Each of our segments reported sales growth with improvements across most of our major end markets. Our first quarter adjusted operating income was $36 million, up $4 million or 14% from the prior year, with particularly strong contributions from our Vehicular and Commercial Industrial segments.

謝謝你，Kathy，各位早安。我很高興向各位報告，我們在 2019 會計年度開局又交出一個強勁的季度表現。整體而言，銷售額成長 10%，若以固定匯率基礎則成長 6%。我們各事業部皆呈報銷售成長，且在多數主要終端市場均有改善。第一季調整後營業利益為 3,600 萬美元，較去年增加 400 萬美元或 14%，其中車用與商用工業事業部貢獻尤為強勁。

Now I'd like to briefly review the segment results for the first quarter. Turning to Page 5. As a reminder, this is the first quarter we will be reporting on our new organizational structure with 3 operating segments. Our Vehicular Thermal Solutions, or VTS, segment is a combination of our previous Americas, Europe and Asia segments. In addition, we are now reporting our legacy North America coil sales in the CIS segment. All prior year results have been restated for this change. Sales for the VTS segment increased 12% or 8% on a constant-currency basis to $353 million. This increase was primarily -- driven primarily by a 25% increase in sales to off-highway customers, primarily in North America and in Asia. We also benefited from an 18% increase in sales to automotive customers globally. Commercial vehicle sales were up 5% with increases in Asia and Europe. Commercial vehicle sales in the Americas were flat as program wind-downs in heavy-duty programs offset volume increases in mediums. We are pleased with the ongoing trends in auto and the need for specialized engine cooling products, resulting in a 21% increase in engine product sales. We continue to have significant growth in Asia, where sales were up 51% from the prior year. In addition, sales in the Americas were up 3% and sales in Europe were up 9%. Adjusted operating income for the VTS segment was $26.5 million, 10% higher than the prior year. The increase was primarily due to higher sales volume and a positive impact from foreign currency translation. Adjusted operating margin in VTS segment was 7.5%, down 10 basis points from the prior year. Gross margin was impacted by both higher material costs and operating inefficiencies at 2 of our plants that are working through large volume increases, due to many new program launches. We have assigned additional resources and expertise to address these issues and expect to see improvements in the next few quarters. Effective SG&A cost management within the VTS segment helped to offset the higher material costs.

接下來我想簡要回顧第一季各事業部的表現。請看第 5 頁。提醒各位，這是我們依新的組織架構、以 3 個營運事業部進行揭露的第一個季度。我們的車用熱管理解決方案（Vehicular Thermal Solutions，簡稱 VTS）事業部，是由先前的美洲、歐洲與亞洲事業部合併而成。此外，我們現在也將原北美線圈（coil）銷售歸入 CIS 事業部揭露。所有前一年度的結果均已依此變更重編。VTS 事業部銷售額成長 12%，若以固定匯率基礎則成長 8%，至 3.53 億美元。此一成長主要——主要是由非公路（off-highway）客戶銷售額成長 25% 所帶動，主要發生在北美與亞洲。我們也受惠於全球汽車客戶銷售額成長 18%。商用車銷售額成長 5%，其中亞洲與歐洲均有增加。美洲地區的商用車銷售持平，因重型車專案逐步結束所造成的下滑，抵銷了中型車的出貨量增加。我們對汽車市場的持續趨勢以及對專用引擎冷卻產品的需求感到滿意，使得引擎產品銷售額成長 21%。我們在亞洲持續有顯著成長，銷售額較去年增加 51%。此外，美洲銷售額成長 3%，歐洲銷售額成長 9%。VTS 事業部調整後營業利益為 2,650 萬美元，較去年成長 10%。此一增加主要來自較高的銷售量，以及外幣換算帶來的正面影響。VTS 事業部調整後營業利益率為 7.5%，較去年下降 10 個基點。毛利率同時受到材料成本上升，以及我們其中 2 座工廠在因應大量增量（由多項新專案啟動所致）過程中出現的營運效率不佳所影響。我們已指派額外資源與專業人員來處理這些問題，並預期未來幾季將看到改善。VTS 事業部在銷售、一般及行政（SG&A）費用上的有效成本管理，有助於抵銷較高的材料成本。

I would like to take this opportunity to make a few comments on the impact that tariffs are having on our business. In general, we source the vast majority of the raw materials for our U.S. plants from U.S. suppliers. We do have 1 specialty aluminum alloy from Europe that we cannot localize and have applied for an exclusion with the U.S. Government from the 10% tariff. However, some U.S. suppliers raised fabrication costs last fall in anticipation of increased demand. This increase was included in our cost estimates for this fiscal year. We are continuing to feel the impact of the higher demand for domestically-produced aluminum on our business, including increased freight costs as producers reach their capacity limitations. We believe much of this has contributed to a large increase in Midwest transaction premium, which is the premium added to the base cost of the metal to cover logistics costs. Like most manufacturing companies, we're also concerned about the recently announced tariffs with China. For Modine, this includes tariffs on imported heat exchanger components, including some aluminum and stainless steel castings that we currently import from China. These components will now be subject to a 25% tariff, significantly increasing our cost. We will file for exclusions related to these items, but at this point, we're doubtful if they will be granted. These, and any additional rounds of tariffs, could result in additional cost increases if we have to fully absorb the cost. So as a result, we are currently working diligently with our customers to pass along the impact of tariffs through price increases, assuming we cannot get the necessary exclusions. These are certainly challenges for our business, however, we believe that we are in a unique position with regard to these tariff concerns. First, within our VTS segment, we tend to source, manufacture and sell within a given geographic region. So we currently purchase these -- the majority of these base aluminum and stainless steel products for U.S. production from U.S. suppliers. Second, for raw materials for industrial businesses, which together are approaching 50% of total company sales, are generally not affected by the tariffs because of the short-term contracts, where we can move quickly to adjust prices. These are clearly benefits of having an improved diversification of our end markets.

我想藉此機會就關稅對我們業務造成的影響做幾點說明。整體而言，我們美國工廠所需的絕大多數原物料皆向美國供應商採購。我們確實有 1 項無法在地化的歐洲特殊鋁合金，並已向美國政府申請排除適用 10% 關稅。然而，部分美國供應商在去年秋季因預期需求增加而調高加工成本。此一增加已納入我們本會計年度的成本估算。我們仍持續感受到國內生產鋁材需求上升對業務的影響，包括當生產商達到產能限制時所導致的運費增加。我們認為，這在很大程度上促成了「中西部交易溢價」（Midwest transaction premium）的大幅上升；該溢價是加在金屬基礎成本之上，用以涵蓋物流成本的加價。與多數製造業公司一樣，我們也關切近期宣布對中國加徵的關稅。就 Modine 而言，這包括對進口熱交換器零組件課徵關稅，其中包含我們目前自中國進口的部分鋁與不鏽鋼鑄件。這些零組件現在將適用 25% 關稅，將使我們的成本顯著上升。我們將就這些項目提出排除申請，但目前我們不確定是否會獲准。若我們必須完全吸收成本，這些關稅以及任何後續加徵的關稅輪次，都可能導致額外的成本上升。因此，若無法取得必要的排除，我們目前正積極與客戶合作，透過調漲價格來轉嫁關稅影響。這些確實是我們業務面臨的挑戰；然而，就關稅疑慮而言，我們相信自身處於相對獨特的位置。第一，在 VTS 事業部內，我們傾向於在特定地理區域內進行採購、製造與銷售。因此，我們目前用於美國生產的——這些基礎鋁材與不鏽鋼產品中的大多數，皆向美國供應商採購。第二，工業業務所需的原物料（合計接近公司總銷售額的 50%）通常不受關稅影響，因為其多為短期合約，我們可以迅速調整價格。這些都清楚顯示，我們終端市場多元化程度提升所帶來的好處。

Please turn to Page 7. Sales for our CIS segment increased 7%, or 4% on a constant-currency basis, to $184 million, primarily due to a 61% increase in sales to data center customers in North America and Europe, partially offset by a 24% decrease in sales to the industrial markets. The Industrial market accounts for only about 8% of CIS sales and the decline was anticipated, which was driven primarily by lower sales of transformer oil coolers in China, based on the government's recent pullback in the development of high voltage direct current lines in their grid network. Sales in Asia were down 6%. Sales in the Americas were up 8% and sales in Europe were up about 9%. In Europe, we expect sales to grow in line with GDP growth, with the impact of environmental regulations for refrigerant changes and energy efficiency being generally positive for our business. In the Americas, order intake remains strong with the increases for industrial coils and CO2 gas coolers. From a product standpoint, sales increased for coils, coolers and coatings. Coolers increased by 14%, driven primarily by sales to data center customers, as a significant customer in this space continues to expand data center capacity. This segment reported adjusted operating income of $13.3 million, a $1.9 million or 17% improvement over the prior year. This improvement was due to higher sales volume and synergy savings. The adjusted operating income margin was up 50 basis points from the prior year to 7.2%. This increase is primarily due to the decrease in SG&A as a percent of sales.

請翻到第7頁。我們CIS事業部的銷售額成長7%，若以固定匯率計算則成長4%，達到1.84億美元，主要是因北美與歐洲資料中心客戶的銷售額大增61%，但部分被工業市場銷售額下滑24%所抵銷。工業市場僅約占CIS銷售額的8%，且此下滑在預期之內，主要原因是中國變壓器油冷卻器銷售下降，係因政府近期縮減其電網中高壓直流（HVDC）線路的建設開發。亞洲地區銷售下滑6%。美洲地區銷售成長8%，歐洲地區銷售約成長9%。在歐洲，我們預期銷售將隨GDP成長同步增加；冷媒更換與能源效率相關環保法規的影響，整體而言對我們的業務是正面的。在美洲，訂單承接仍然強勁，工業用盤管與CO2氣體冷卻器的增幅帶動表現。就產品面而言，盤管、冷卻器與塗層的銷售均增加。冷卻器銷售成長14%，主要由資料中心客戶的銷售帶動，因該領域的一家重要客戶持續擴充資料中心產能。本事業部調整後營業利益為1,330萬美元，較去年增加190萬美元或成長17%。此改善來自較高的銷售量與協同效益節省。調整後營業利益率較去年提升50個基點至7.2%。此提升主要是因SG&A占銷售額比重下降。

Please turn to Page 9. Sales for our Building HVAC segment increased 5% or 2% on a constant-currency basis to $45 million. From an end market perspective, sales to commercial HVAC customers and to data center customers were both increased about 5%. From a product standpoint, the increase in sales is primarily driven by a 10% increase in heating products in North America and a 6% increase in air conditioning products in the U.K. This was partially offset by a 7% decrease in ventilation product sales, with sales declines in both North America and the U.K. Sales in North America were up 6%, driven by higher sales of heating products, partially offset by lower ventilation product sales, while sales in Europe increased 1%, driven by higher air conditioning products sales.

請翻到第9頁。我們建築HVAC事業部的銷售額成長5%，若以固定匯率計算則成長2%，達到4,500萬美元。從終端市場角度來看，對商用HVAC客戶以及資料中心客戶的銷售額皆約成長5%。從產品角度來看，銷售成長主要由北美供暖產品銷售成長10%以及英國空調產品銷售成長6%所帶動；但部分被通風產品銷售下滑7%所抵銷，北美與英國皆出現下滑。北美銷售成長6%，由供暖產品銷售增加帶動，但部分被通風產品銷售下降所抵銷；歐洲銷售成長1%，由空調產品銷售增加帶動。

Operating income increased 3% from the prior year to $3.2 million. This increase is driven by a higher gross profit on higher sales, partially offset by higher SG&A, driven by higher sales commissions and development spending.

營業利益較去年成長3%至320萬美元。此成長來自較高銷售帶動的較高毛利，但部分被較高的SG&A所抵銷，SG&A上升主要因銷售佣金與研發支出增加。

Operating income margin was 7.1%, compared to 7.2% last year. Gross margin was flat at 25.9% for the prior year, and SG&A as a percent of sales increased slightly. We have a very strong order activity in our Building HVAC segment and expect our markets to remain strong. In particular, we expect continued year-over-year improvements in heating and air conditioning sales for the reminder of the year.

營業利益率為7.1%，去年為7.2%。毛利率與去年持平為25.9%，而SG&A占銷售額比重略為上升。我們建築HVAC事業部的接單活動非常強勁，並預期市場將維持強勢。尤其是，我們預期今年剩餘期間供暖與空調銷售將持續呈現年對年改善。

With that, I'd like to turn over to Mick, for an overview of our consolidated financial results as well as our financial outlook for fiscal 2019.

接下來，我想把時間交給Mick，請他概述我們的合併財務結果，以及2019會計年度的財務展望。

Thanks, Tom. Good morning, everyone. Please turn to Slide 10. As Tom said, we are happy with Modine's results this quarter and off to a good start in fiscal 2019. Sales increased $51 million or 10% which includes a positive FX impact. On a constant-currency basis, sales increased $32 million or 6%. Revenue improved in all segments and benefited the quarter from a number of items, including favorable market trends, market share gains and maturing program volumes. Gross profit of $94 million was up 7%, with the margin down 50 basis points. We had positive impacts from higher sales volume, FX rates and ongoing purchasing initiatives. We also had a few negative impacts, mainly in our VTS segment. As Tom discussed, these relate to higher material costs and temporary production inefficiencies.

謝謝你，Tom。各位早安。請翻到第10張投影片。如Tom所說，我們對Modine本季的表現感到滿意，2019會計年度也有個好的開始。銷售額增加5,100萬美元或成長10%，其中包含匯率（FX）的正面影響。若以固定匯率計算，銷售額增加3,200萬美元或成長6%。所有事業部的營收皆有所改善，本季亦受惠於多項因素，包括有利的市場趨勢、市占率提升以及逐步成熟的專案量產規模。毛利為9,400萬美元，成長7%，但毛利率下滑50個基點。較高的銷售量、匯率以及持續的採購改善措施帶來正面影響。我們也有一些負面影響，主要在VTS事業部。如Tom所述，這些主要與材料成本上升及暫時性的生產效率不佳有關。

SG&A of $59 million has improved 100 basis points as a percentage of sales as we continue to leverage our top line growth in overall scale. We were able to hold SG&A essentially flat, as several favorable items more than offset normal wage and benefit inflation. Adjusted operating income was $36 million, up $4 million or 14%, including a 30 basis points improvement in our operating margin.

SG&A為5,900萬美元，作為銷售額百分比改善100個基點，因我們持續透過整體規模擴大來提升營收槓桿效益。我們基本上將SG&A維持持平，因多項有利因素足以抵銷一般的薪資與福利通膨。調整後營業利益為3,600萬美元，增加400萬美元或成長14%，其中包含營業利益率提升30個基點。

Please note that in the appendix, we include an itemized list of adjustments to operating income and a full reconciliation to our U.S. GAAP results. The adjustments totaled $1.2 million for the quarter and relate to environmental charges, restructuring expenses and the remaining acquisition integration costs.

請注意，在附錄中，我們提供營業利益調整項目的明細清單，並完整調節至美國GAAP結果。本季調整項目合計120萬美元，與環境費用、重整費用以及剩餘的併購整合成本有關。

Income tax expense was $5 million, up $2.3 million over the prior year, resulting in an adjusted tax rate of 25%, compared to 16% in the prior year. This increase was primarily due to a $3.5 million development credit in the prior year. We also reversed the portion of a valuation allowance on our deferred tax assets, resulting in a $2 million benefit in income tax expense. However, the benefit from the reversal was excluded from our calculation of adjusted EPS. Our adjusted earnings per share of $0.41, an improvement of 5% over year-over-year.

所得稅費用為500萬美元，較去年增加230萬美元，使調整後稅率為25%，去年為16%。此增加主要是因去年有350萬美元的研發抵減（development credit）。我們也回轉了遞延所得稅資產估值備抵（valuation allowance）的一部分，使所得稅費用減少200萬美元。然而，該回轉所帶來的利益未納入我們調整後EPS的計算。我們的調整後每股盈餘為0.41美元，年對年改善5%。

Turn to Slide 11, please. As we anticipated, our first quarter operating cash flow was negative, compared with $21 million in the prior year. The decrease was heavily impacted by the timing of cash payments and the combination several other items, including temporary working capital builds, along with higher employee benefit and incentive compensation payments. Inventory increased due to higher expected volumes, along with plant inefficiencies, as Tom previously mentioned. Please note that much of this is seasonal and the temporary increases will be worked down throughout the year.

請翻到第11張投影片。如我們所預期，第一季營運現金流為負值，相較去年為2,100萬美元。下降主要受到現金付款時點影響，並與其他多項因素共同作用，包括營運資金的暫時性增加，以及較高的員工福利與獎酬激勵金支付。如Tom先前提到，庫存增加係因預期出貨量提高，以及工廠效率不佳所致。請注意，其中多數具有季節性，這些暫時性的增加將在全年逐步消化下降。

Capital expenditures were higher than the prior year by $1 million. Full year capital spending is expected to be slightly higher than the prior year. Given the operating cash flow, we reported negative free cash flow in the quarter. As a reminder, it is typical for us to run negative cash flow in Q1, due to the timing of certain cash payments.

資本支出較去年增加100萬美元。全年資本支出預期將略高於去年。考量營運現金流，本季我們呈報自由現金流為負值。提醒一下，由於特定現金付款的時點因素，我們在第一季出現負現金流是常態。

In looking at the full year, we do expect positive free cash flow and for it to be stronger than fiscal 2018.

就全年而言，我們確實預期自由現金流為正，且將強於2018會計年度。

Finally, our net debt increased by $25 million during the quarter and our leverage ratio was at 2.5, which remains within our target range.

最後，本季我們的淨負債增加了2,500萬美元，槓桿比率為2.5，仍維持在我們的目標區間內。

Now let's turn to our full year guidance on Slide 12. Modine's first quarter earnings were in line with our expectations and we are pleased to report that we're confirming our fiscal 2019 outlook. To summarize our guidance, we project sales to be up 3% to 8%. We expect ongoing vehicular market growth partially offset by the wind-down of multiple truck programs. For our CIS and Building HVAC markets, we expect low- to mid-single-digit market growth, with our sales outpacing the market. In addition to the revenue growth, we are planning to drive earnings growth through margin improvements across all segments. We expect adjusted operating income to be in the range of $135 million to $145 million. This equates to year-over-year growth of 12% to 21%.

現在請看第12張投影片的全年指引。Modine第一季獲利符合我們的預期，我們很高興宣布確認2019會計年度展望。概括而言，我們預估銷售額將成長3%至8%。我們預期車用市場持續成長，但將部分被多項卡車專案逐步結束所抵銷。就我們的CIS與建築HVAC市場而言，我們預期市場將呈現低至中個位數成長，而我們的銷售成長將優於市場。除營收成長外，我們也計畫透過各事業部門的毛利率改善來推動獲利成長。我們預期調整後營業利益將介於1.35億至1.45億美元。這相當於年增12%至21%。

As usual, I want to briefly review some of our key assumptions. First, metals have stabilized recently, yet we anticipate this to be an ongoing headwind until our pass through agreements fully adjust. Second, we expect annual interest expense of approximately $24 million. Third, we are using current foreign exchange rates, which result in a slightly negative impact year-over-year. And finally, we are carefully following the tariff situation and our guidance reflects our current expectations in this area.

照例，我想簡要回顧幾項關鍵假設。第一，金屬價格近期已趨於穩定，但在我們的轉嫁協議完全調整到位之前，我們預期這仍將是持續的逆風。第二，我們預期全年利息費用約為2,400萬美元。第三，我們採用目前的外匯匯率，導致相較去年略為負面影響。最後，我們正密切關注關稅情勢，而我們的指引反映了目前在此方面的預期。

I also want to spend a moment reviewing our tax environment, which remains fluid and very complicated. We are evaluating various tax planning opportunities that could result in lower income tax expense for the year. However, we've not completed the analysis and have not, therefore, updated our assumptions. Given the current situation, we expect our adjusted tax rate to be approximately 27% to 28% in fiscal 2019 versus 12% in fiscal 2018.

我也想花點時間說明我們的稅務環境，仍然多變且非常複雜。我們正在評估各種稅務規劃機會，可能使本年度所得稅費用降低。然而，我們尚未完成分析，因此也尚未更新相關假設。在目前情況下，我們預期2019會計年度的調整後有效稅率約為27%至28%，相較之下2018會計年度為12%。

Based on these assumptions, we anticipate our adjusted EPS will be between $1.50 and $1.65. And to wrap up, we're managing all the market dynamics and anticipating positive momentum throughout the remainder fiscal 2019. Tom, I will turn it back to you.

基於上述假設，我們預期調整後每股盈餘（EPS）將介於1.50至1.65美元。最後作個總結，我們正管理各項市場動態，並預期在2019會計年度剩餘期間維持正向動能。Tom，我把時間交還給你。

Thanks, Mick. Please turn to Page -- for Slide 13. As I mentioned last quarter, we continued to focus our strategy around strengthen, diversify and grow and have been working on developing our next round of short- and long-term targets and the actions that will allow us to achieve them. This strategy has served us quite well over the last years, resulting in a much more diversified portfolio, improved financial metrics and increased shareholder value. In order to continue to strengthen our business, we've completed the strategic portfolio assessment that we started working on last year. This assessment and framework allows us to prioritize those end markets where we have the right products and channel access, along with positive market drivers, to foster growth. At the same time, we're addressing underperforming businesses by actively shifting them back towards growth and profitability or by deciding to deprioritize or exit as we've demonstrated with 2 recent decisions in our Building HVAC segment. We are prioritizing and will allocate our capital based on these drivers. We're now setting multiyear targets, ensuring that future capital is allocated based on our strategic priorities. Finally, under strengthen, we will focus our practice and continue our practice of relentlessly drive in SG&A reduction through process improvement and cost containment.

謝謝，Mick。請翻到第13張投影片的頁面。如我在上季提到的，我們持續將策略聚焦在「強化、分散與成長」，並著手制定下一輪短期與長期目標，以及達成目標所需的行動方案。這項策略在過去幾年對我們非常奏效，使我們的產品組合更加多元、財務指標改善，並提升股東價值。為了持續強化我們的業務，我們已完成去年開始進行的策略性投資組合評估。此評估與架構使我們能優先聚焦於那些我們具備合適產品與通路觸及、且有正向市場驅動因素的終端市場，以促進成長。同時，我們也在處理表現不佳的業務，透過積極將其導回成長與獲利軌道，或如同我們在建築HVAC事業部近期兩項決策所示，決定降低優先順序或退出。我們將依據這些驅動因素來設定優先順序並配置資本。我們目前正在設定多年期目標，確保未來資本配置符合我們的策略優先事項。最後，在「強化」方面，我們將聚焦並持續透過流程改善與成本控管，持續不懈地推動SG&A（銷售、一般及行政費用）降低。

Secondly, we will continue to diversify our business, following on with the success of our acquisition of the CIS business. Our priority will be higher margin and cash generating businesses that will build upon our Commercial and Industrial and Building HVAC segments. Specifically, we will look for M&A opportunities that will improve our right to win and increase our value add to our customers and to Modine shareholders. Our overall goal is to increase the percentage of our revenue contributed by our industrial businesses. This will allow us to further reduce customer concentration and the impact of economic cycles.

第二，我們將延續收購CIS業務的成功，持續分散我們的業務組合。我們的優先方向將是高毛利且能創造現金的業務，以強化我們的商用與工業以及建築HVAC事業部。具體而言，我們將尋找能提升我們「致勝權」（right to win）、並提高我們對客戶及Modine股東價值貢獻的併購（M&A）機會。我們的整體目標是提高工業業務對營收的貢獻比重。這將使我們能進一步降低客戶集中度以及經濟循環的影響。

Finally, we will continue to grow by using our capital to drive growth and profitability. Whether the growth comes from inorganic sources or from organic growth, we will continually seek high returns on our invested capital. We will focus on those markets where we have market-leading technology and strong channel access or where there are technology or market drivers that will lead us to success. In our Vehicular markets, this will include thermal solutions for electric vehicles. As I mentioned many times, we are actively working with new and existing customers to provide thermal management solutions for EVs and are winning our fair share of business. In our Industrial markets, we're providing coolant for data centers as the increase in cloud computing drives demand for data center growth. In addition, the rise in farm-to-table delivery of frozen and chilled food and beverages is helping to increase demand for refrigeration and refrigerated transportation products. Greenhouse heating has long been a key subsegment for our Building HVAC business. This market is evolving to include more sophisticated control solutions and we are well positioned to maintain our strength in this market. In addition, we see strong drivers and opportunity and permanent industrial growing as the need expands for HVAC and control solutions. Strengthen, diversify and grow will continue to drive our decisions. I'm very excited for the next phase of our strategic initiatives that will build upon the strong base that our teams have created. We will provide further updates each quarter, including targets and accomplishments towards our goals.

最後，我們將持續透過運用資本來推動成長與獲利。無論成長來自外部併購或內生成長，我們都將持續追求投入資本的高報酬。我們將聚焦於那些我們具備市場領先技術與強大通路觸及的市場，或是存在技術或市場驅動因素、可帶領我們成功的市場。在車用市場方面，這將包括電動車的熱管理解決方案。如我多次提到的，我們正積極與新舊客戶合作，提供電動車熱管理解決方案，並取得我們應得的業務份額。在工業市場方面，隨著雲端運算成長帶動資料中心擴建需求，我們正為資料中心提供冷卻液解決方案。此外，冷凍與冷藏食品飲料的「產地到餐桌」配送興起，也有助於提升對冷凍冷藏與冷鏈運輸產品的需求。溫室供暖長期以來一直是我們建築HVAC業務的關鍵子領域。該市場正演進至更精密的控制解決方案，而我們具備良好定位以維持在此市場的優勢。此外，隨著對HVAC與控制解決方案的需求擴大，我們也看到永久性工業種植（permanent industrial growing）具備強勁驅動因素與機會。「強化、分散與成長」將持續驅動我們的決策。我對下一階段的策略性倡議感到非常振奮，這些倡議將建立在我們團隊所打造的堅實基礎之上。我們將在每一季提供進一步更新，包括目標以及朝目標邁進的成果。

With that, we will take your questions.

接下來，我們將開始回答各位的提問。

(Operator Instructions) Your first question comes from the line of Mike Shlisky with Seaport Global.

(接線生指示) 第一個問題來自Seaport Global的Mike Shlisky。

So Tom on your last comment there it sounds like you've got a nice SDG II strategy teed up here. But are there any new targets to watch for on the financial side? Is there a higher margin target or a higher volume target we should be thinking about? And if so, what might the time frame be?

Tom，針對你剛才最後的評論，聽起來你們已經把一個不錯的SDG II策略準備就緒。但在財務面上，有沒有任何新的目標值得關注？例如更高的毛利率目標或更高的出貨量目標，是我們應該思考的方向嗎？如果有，時間框架大概會是什麼？

Yes, yes. Well, you can expect an update next quarter, okay, with more definition around the targets. We're clearly working very hard right now and clearly the things we can control and opportunities we're evaluating are making sure we come out, that we have a high degree of confidence in those targets. So I expect a good update with each quarter. Mick, would you add anything to that?

是的，是的。嗯，你可以預期下個季度會有更新，好嗎？而且會對目標有更明確的界定。我們現在顯然非常努力在做，並且很清楚我們能控制的事項以及正在評估的機會，都是為了確保我們推出時，對這些目標具有高度信心。所以我預期每個季度都會有不錯的更新。Mick，你要補充什麼嗎？

Yes. Mike, I would say as Tom said, we're regrinding through all of those with the next set of specific actions, actions we've won, SDG I, our target was 7% to 8% operating margin. We've improved probably 200 basis points since that time. This quarter is 6.4%. We haven't crossed the 7%. So for sure, we're pushing Modine to continue to move towards that 7% to 8% operating margin. The other area we're really focused on, we talked about a lot publicly is, free cash flow generation and the amount of free cash flow Modine generates. Again, last 3 years have been really strong and much improved, but we think we can improve as well in our cash flow conversion or free cash flow margin.

是的。Mike，我會說，正如Tom所說，我們正針對所有這些重新梳理，並配合下一組具體行動、我們已經拿下的行動。SDG I，我們的目標是7%到8%的營業利益率。自那時以來，我們大概改善了200個基點。本季是6.4%。我們還沒有跨過7%。所以可以肯定的是，我們正推動Modine持續朝7%到8%的營業利益率邁進。我們真正聚焦的另一個領域，我們也在公開場合談了很多，就是自由現金流的創造能力，以及Modine產生的自由現金流規模。同樣地，過去3年表現非常強勁且大幅改善，但我們認為在現金流轉換率或自由現金流利潤率方面仍可再提升。

Okay. But let's just be clear, Mick, if you add back some of the intangible amortization from Luvata that you didn't obviously anticipate when you first announced SDG, you would be very close to 7%. Is that correct?

好的。但我們要說清楚，Mick，如果把你們在最初宣布SDG時顯然未預期到、來自Luvata的一些無形資產攤銷加回去，你們就會非常接近7%。這樣說對嗎？

Great point, Mike. Yes. Thank you for that.

很好的觀點，Mike。是的。謝謝你指出。

I just wanted to make sure. Okay, I also wanted to ask secondly in your comments and slides, I saw that you've got in CIS, you've got a very strong data center business [up 50] plus, but it wasn't quite as high of a growth rate in building [HVAC]. Can you kind of contrast what's going on between each of those 2 segments (inaudible)

我只是想確認一下。好的，我也想再問第二點，在你們的評論和投影片中，我看到你們在CIS的資料中心業務非常強勁（[成長50]％以上），但在建築[HVAC]的成長率就沒有那麼高。你能否對比一下這兩個部門各自發生了什麼情況（聽不清）

Yes. It's a great question. If you look at the breakdown, about 14%, 20% of sales went to the data center market inside the CIS and about, just about 28% in the Building HVAC segment. So that was becoming a pretty sizeable piece of our business. Obviously, the drivers that are in that business, the big mega trends are in our favor. You can really say that about that we have 1 large customer in the CIS side that had increased significantly this quarter as I mentioned, but still, we have significant growth across the whole spectrum. In Building HVAC, we supply end items, as a reminder to you. So we're actually serving specific data centers with solutions that are turnkey for them. So that's kind of we're the end item provider. In CIS, we are component supplier or cooler supplier that is a subsystem of the end item. We supply that through multiple providers of Building HVAC systems. So we kind of have full end item approach of precision cooling and chillers in the U.K. serving that market and we have globally with CIS, coil supply and cooler supply that goes across various end item providers. So a really exciting part of our portfolio as we combine those and really, with the mega trends towards digitalization, we see this as a key factor that we're really going to be concentrating on.

是的。這是個很好的問題。如果看拆分，在CIS內部，大約14%、20%的銷售是面向資料中心市場，而在建築HVAC部門大約是28%。所以那正在成為我們業務中相當可觀的一部分。顯然，該業務的驅動因素、那些大型的長期趨勢對我們有利。你也可以說，在CIS這邊我們有1個大型客戶，如我提到的，本季大幅增加，但即便如此，我們在整個範圍內仍有顯著成長。在建築HVAC方面，提醒你一下，我們供應的是終端產品。因此我們實際上是為特定資料中心提供交鑰匙的解決方案。所以我們算是終端產品供應商。在CIS方面，我們是零組件供應商或冷卻器供應商，屬於終端產品的一個子系統。我們透過多家建築HVAC系統供應商來供應。因此，我們在英國以精密冷卻與冷水機組的完整終端產品方式服務該市場；同時在全球範圍內，透過CIS提供盤管與冷卻器供應，覆蓋各種終端產品供應商。當我們把這些結合起來，這會是我們產品組合中非常令人振奮的一部分；而且隨著數位化的大趨勢，我們把這視為一個關鍵因素，未來會高度聚焦。

Okay. Thirdly I wanted to ask about the price of aluminum and the price of copper. It looks like as of today, for this quarter so far, both of those are actually down from the prior year, I mean, it's only August. But so far, we're actually down. Could you maybe comment on some of the noncontractual products, like in CIS, where it's just make it and deliver it. Is there a potential margin benefit happening over the prior year for that business? And then secondly, in the part that is contractual, in your VTS contracts, are those -- is there a chance we'll start to see the catch up in the price of commodities in your contracts in the back half of fiscal 2019 here?

好的。第三點我想問鋁價與銅價。看起來截至今天，就本季目前為止，這兩者其實都比去年同期低，我是說，現在才8月。但到目前為止確實是下降的。你能否評論一下某些非合約型產品，例如在CIS，就是生產後交付。相較去年，該業務是否可能正在出現毛利率受益？另外第二點，在屬於合約型的部分，也就是你們的VTS合約，是否有機會讓我們在2019財年下半年開始看到合約中大宗商品價格的追補反映？

So Mike, I'll take that first and see if Tom wants to add anything. So a lot of questions you had in there. One is, yes, we've been happy to see the raw material stabilized here. The big -- probably the biggest drivers, though, is Tom referenced the Midwest Transaction premium. So on top of the LME price, there is an adder. A year ago, that was about $0.08 or $0.09 a pound. That is now almost doubled, we've been running in the $0.18 to $0.20 a pound. So that's one impact for us. With regards to the pass-throughs, yes, I think the opportunity for us from a financial standpoint is if they hold where they're at, we will continue to pass through prices and catch up to last year. We had significant price adjustments in our first quarter. Unfortunately, we had an equal rise in -- equal or greater rise in commodity costs to us. The last -- I think, you were also asking about margin improvement. The way that works from just a financial side, on VTS, it's actually, it can be dilutive if you're passing through your costs. So it's definitely not a margin enhancer. It's a complete pass-through. On the other half of our business, the CIS and Building HVAC, as Tom mentioned there too, it's a lot more fluid. Every program, every opportunity is a fresh quote and a fresh pricing opportunity. So we kind of like that aspect to that side of the business. It makes us more flexible.

Mike，我先回答第一部分，看看Tom是否要補充。你裡面問了很多問題。第一，是的，我們很高興看到原物料在這裡趨於穩定。不過最大的——可能最主要的驅動因素，是Tom提到的美國中西部交易溢價（Midwest Transaction premium）。也就是在LME價格之上，還會再加一個附加費。一年前大約是每磅0.08或0.09美元。現在幾乎翻倍，我們一直在每磅0.18到0.20美元的區間。所以這對我們是一個影響。至於轉嫁（pass-through），是的，我認為從財務角度來看，如果它們維持在目前水準，我們將持續轉嫁價格，並追上去年的水準。我們在第一季做了顯著的價格調整。不幸的是，我們的商品成本也同樣上升——上升幅度相當或更高。最後——我想你也在問毛利率改善。從純財務角度來看，在VTS上，如果你是在轉嫁成本，實際上可能會稀釋（dilutive）。所以它絕對不是提升毛利率的因素。它是完全轉嫁。在我們業務的另一半，也就是CIS與建築HVAC，如Tom也提到的，那邊更具彈性。每個專案、每個機會都是一份新的報價與新的定價機會。所以我們滿喜歡那一側業務的這個特性。它讓我們更有彈性。

Your next question comes from a line of David Leiker with Baird.

你的下一個問題來自Baird的David Leiker。

This is Joe Vruwink for David. Maybe I'll pick it back up with the commodity question. Can you actually quantify the raw material headwind you absorbed this quarter?

我是代替 David 的 Joe Vruwink。也許我先接著回到大宗商品的問題。你們能否實際量化本季吸收的原物料逆風有多少？

Yes. Joe, it was about $2.5 million total company and most of that, 90-plus percent of that, almost 98%, 99% of that, was in VTS.

可以。Joe，總公司合計大約是 250 萬美元，其中大部分，超過 90%，幾乎 98%、99% 都是在 VTS。

So I know, I can't just add it back, but, let's say, I add back that $2.5 million, it looks like your incremental margin at the gross profit line was, call it, 16%. I -- you've talked in the past about a 25% target. Are the ramp up inefficiencies you alluded to really the biggest delta there, between 16% and the target of 25%?

所以我知道，我不能就這樣把它加回去，但假設我把那 250 萬美元加回去，看起來你們在毛利那一行的增量毛利率大概是 16%。我——你們過去談過 25% 的目標。你們提到的爬坡期低效率，是否真的是 16% 與 25% 目標之間最大的差距來源？

Yes. Yes. Great, great question. We look at it a very similar when we look at our and analyze our businesses internally. The other factor I would say is there's $18 million of FX impact in revenue that, as you know, isn't, you can't look at an incremental margin on. It's not a volume or a variable. So when we look at, we adjust for metals and FX, our conversion, Joe, was about 19% or 20%. Then the gap to really where we want to be, we had the inefficiencies in the quarter were about $3 million. That would have put us at 30-plus percent type conversion.

是的。是的。這個問題問得很好。我們在內部檢視與分析各項業務時，看的方式非常類似。我還要補充的另一個因素是，營收中有 1,800 萬美元的匯率（FX）影響，如你所知，這部分你無法用增量毛利率去看。它不是量的因素，也不是變動因素。所以當我們調整金屬與匯率後，Joe，我們的轉換率大約是 19% 或 20%。接著，距離我們真正想達到的水準之間的差距，本季的低效率大約是 300 萬美元。如果把那部分拿掉，我們的轉換率就會是 30% 以上的水準。

And so into the back half of this year, when we maybe get some stabilization in commodities, the inefficiencies go away, to be doing an incremental margin of around 30%, that would be your expectation?

所以進入今年下半年，當大宗商品可能趨於穩定、低效率消失後，你們對增量毛利率大約 30% 的預期就是這樣嗎？

Yes. And I think what we're going to see is, as we adjust to the volume ramps in those very select locations Tom was alluding to, we're going to be a ramp in our conversion rate. So Q2 will improve over Q1, and we're expecting Q3 to improve over Q2 and so forth. So it won't be a step function, but it will be a ramp as we continue to go through the year. Tom?

是的。而且我認為我們會看到的是，隨著我們在 Tom 剛才提到的那些非常特定的據點，去調整產量爬坡，我們的轉換率會逐步爬升。所以第二季會比第一季改善，我們預期第三季會比第二季改善，以此類推。因此不會是階梯式的一次跳升，而是隨著我們在一年中持續推進而逐步上升。Tom？

Yes, Joe, specifically, let me just talk here. 2 plants are both tied to our heaviest launch activity plants. So you saw the 51% growth in Asia this quarter and that specifically is coming down to the high degree of launches going on in China, specifically at our Shanghai facility, where we're just bulging at the seams right now, adding capacity to offset that and obviously some expertise to come and help with some of the specific launches. But we have literally dozens of launches that have occurred in this past quarter between that. And Nuevo Laredo, Mexico is the other one where we've been doing some product transfers over the last couple years as you are well aware of. Those transfers have stabilized and now it's pure launch activity and so the plant is undergoing a lot of stress and strain preparing for that and launching dozens of new programs this year. So it's all been set up to provide this opportunity for growth. We're doing it. We will start improving better, as Mick said, and I feel very confident that you will see that sequentially as we move forward.

是的，Joe，我具體說明一下。有兩座工廠都與我們最密集的新案導入活動相關。所以你看到本季亞洲成長 51%，那主要是因為中國的新案導入程度非常高，特別是在我們上海廠；我們現在幾乎是滿到爆，正在增加產能來抵消這個狀況，當然也引進一些專業人員來協助特定的新案導入。但我們在過去這一季，實際上就有數十個新案導入發生。另一個是墨西哥的 Nuevo Laredo，你也很清楚，過去幾年我們一直在做一些產品移轉。那些移轉已經穩定下來，現在就是純粹的新案導入活動，因此工廠在為此準備並在今年導入數十個新專案時，承受了很大的壓力與負荷。所以這一切的布局都是為了提供這個成長機會。我們正在做到。如 Mick 所說，我們會開始改善得更好，而且我非常有信心，隨著我們往前推進，你會看到逐季改善。

Okay. Great. If we can focus on CIS for a minute, I think, when you bought this business and you got the look-back financials, it was more typically a 2% to 3% organic grower, a bit stronger than that this quarter. So 2 questions. One is, have you started to realize maybe some revenue synergies between your existing HVAC infrastructure or vice versa really and is that contributing to better organic growth, that will be one question. And then on the second question, with data center customers and how they choose to invest in and build out their supply-chain, it can be incredibly lumpy. So should we be considering some giveback in a future quarter as maybe they work through what they bought from you this quarter? Or just given how robust construction is for data centers overall, can you sustain growth?

好的。很好。如果我們先聚焦 CIS 一下，我想當你們收購這項業務、並取得回溯的財務資料時，它通常是 2% 到 3% 的有機成長者，而本季比那更強一些。所以有兩個問題。第一，你們是否已開始在既有的 HVAC 基礎設施（或反過來）之間實現一些營收協同效益？這是否正在促成更好的有機成長？這是第一個問題。第二個問題是，資料中心客戶在投資與擴建其供應鏈時，可能會非常不均勻、起伏很大。所以我們是否應該考慮未來某一季會有一些回吐，因為他們可能在消化本季向你們採購的量？或者，鑑於整體資料中心建置非常強勁，你們能否維持成長？

That's a great point. And I'll start with that one. As it is project based on data center, right? So they're the project based on capacity increases at data centers. So right now, there's -- the trend is very positive. Our order book is still very well, very strong for, let's say, the balance of this fiscal year for sure and we see it going into next fiscal year, but it is lumpy. I should say, it is basically a result of projects being approved by cloud providers and other data center type companies. So it's a good point. Good trend, we're very positive it's going to be a positive effect through the fiscal year into next year, but that is subject to change, good point. As far as sales synergies, we're right at beginning of that, yes, we have some clear things going on with technology conversions from copper to aluminum microchannel and things like that. We're looking at the best way to do that. But that really hasn't impacted that much yet. We see opportunities -- significant opportunities looking forward using some of the product-based platforms that maybe is more vehicular based that can be applied towards things that supply, let's call it, the industrial and/or refrigeration type of end items, our end markets that we can provide like, let's say, plate coolers and things like that. So - being studied, some early indications are positive, but that really hasn't hit yet.

這點說得很好。我先從這個問題開始。因為資料中心是以專案為基礎，對吧？也就是以資料中心擴充容量的專案為基礎。所以目前趨勢非常正向。我們的訂單能見度仍然非常好、非常強勁，至少就本財年剩餘期間而言是如此，而且我們也看到延伸到下一個財年；但它確實是起伏不均的。我應該說，這基本上取決於雲端服務供應商與其他資料中心類型公司是否核准專案。所以你提得很好。趨勢良好，我們非常正向，認為這會在本財年並延續到明年帶來正面影響，但這也可能改變，你說得對。至於銷售協同效益，我們才剛開始，是的，我們在技術轉換方面已經有一些明確的事情在進行，例如從銅轉為鋁微通道之類。我們正在評估最佳的推進方式。但那部分目前還沒有造成太大的影響。我們看到機會——往前看有顯著的機會，利用一些以產品為基礎的平台（可能更偏車用），把它們應用到供應端，我們稱之為工業和／或冷凍冷藏類的終端項目，也就是我們的終端市場；例如我們可以提供板式冷卻器之類的產品。所以——正在研究中，初步跡象是正面的，但目前還沒有真正反映出來。

Okay. On the vehicle business, so really incredible automotive growth this quarter. I think global volumes are only up 3% or 4%, so the 18% growth is pretty remarkable. As I think about that in the remaining quarters this year and specifically if maybe into next quarter, so we're battling a few things it seems in Europe. Various European automakers have communicated different expectations for what production might ultimately end up being as we implement this new WLTP emissions requirements. Some are impacted. Others say, no change in our schedules. And then in China, there has been, maybe some concern that inventories got a bit elevated last quarter and so we're due for a bit of a giveback this quarter. Anything you're seeing from, it wouldn't be your backlog, obviously, because that's really strong, but from an industry standpoint that maybe moderates growth rates next quarter?

好的。談到車用業務，本季汽車相關成長真的非常驚人。我想全球產量只成長 3% 或 4%，所以 18% 的成長相當引人注目。當我思考今年剩餘季度、尤其可能到下一季時，看起來我們在歐洲正面臨幾個因素。各家歐洲車廠對於在導入新的 WLTP 排放要求後，最終產量會是多少，已傳達不同的預期。有些受到影響。其他則表示，他們的排程不變。另外在中國，可能有人擔心上季庫存有點偏高，因此本季可能需要一些回吐。從產業角度（顯然不是看你們的積壓訂單，因為那非常強勁）來看，你們是否看到任何可能讓下一季成長率放緩的跡象？

Yes, no, you bring up a good point, specifically on the WLTP. We've looked for softening, for instance, in our EGR business. On the automotive side out of our plant in Germany, we have not seen any signs of that yet, that was something we anticipated. Overall, releases remain strong. And again, we're feeling it in our capacity constraints and launch activity. So yes, we watch that very carefully and we read and hear about some of the shifts that may occur, but as of right now, we're not feeling that in this quarter.

是的、不是，你提出了一個很好的觀點，特別是關於 WLTP。我們一直在尋找是否有趨緩的跡象，例如在我們的 EGR 業務中。在汽車端，就我們德國工廠而言，我們目前還沒有看到任何那樣的跡象，那是我們原先預期可能會發生的。整體而言，放量仍然強勁。而且再說一次，我們從產能受限與新案導入活動中也感受得到。所以是的，我們非常密切地關注，也會閱讀與聽到一些可能發生的變化，但截至目前，我們在本季還沒有感受到那種影響。

That's great. And then my last question, can you quantify, there is clearly some tailwinds from the backlog, yet I think you alluded to some truck program roll-offs, which are a bit of a moderating factor. Can you maybe quantify the things to consider that detract a little bit from growth, just so we don't get too ahead of ourselves in modeling out?

太好了。那我最後一個問題，你能否量化一下：顯然積壓訂單帶來了一些順風，但我想你也提到有些卡車專案在退場，這會稍微起到抑制作用。你能否量化一下有哪些因素會對成長造成一些拖累，這樣我們在建模時就不會過度超前預期？

Yes, Joe. We went into this year -- I think, we talked about either on this call or the prior call, the one before, we went into the year planning on about $20 million plus or minus of truck program wind-down, fairly evenly split between Europe and North America. It's a little bit of a challenge to kind of manage those. I think the positive news is in Q1, they seem to be winding down or ramping down at a slower rate, whether that's just the transition or the strength of the market. So it's been good news. The short answer to your question is if things hold, we'd have about a $20-ish million revenue headwind from the program wind-downs.

是的，Joe。我們進入今年時——我想我們在這通電話或前一次電話、再前一次電話中談過——我們在年度規劃中預計卡車專案收尾約有 2,000 萬美元上下的影響，歐洲與北美大致各占一半。這些專案的管理確實有點挑戰。我認為好消息是，在第一季，它們似乎以較慢的速度在收尾或降載，可能是因為轉換期或市場強勁。所以這是好消息。對你問題的簡短回答是：如果情況維持不變，專案收尾將帶來約 2,000 萬美元左右的營收逆風。

(Operator Instructions) Our next question comes from the line of Matthew Paige with Gabelli.

(接線員指示) 我們的下一個問題來自 Gabelli 的 Matthew Paige。

I just have a couple of questions. You mentioned inorganic growth opportunity. Do you have the capacity now, either balance sheet wise or intellectually, to do another acquisition?

我只有幾個問題。你提到非有機成長機會。你們現在是否有能力——不論是資產負債表層面或「智力」層面——再做一次收購？

Yes, yes, intellectually. That's interesting.

有，有，智力上有。這很有意思。

Yes. Yes. I hope you mean bandwidth.

有。有。我希望你指的是人力帶寬（bandwidth）。

Yes, absolutely, that's exactly what I mean.

是的，完全正是我的意思。

Great question. No, we, within our current bank agreements, we have plenty of flexibility based on the types of acquisitions that we're looking at and the sizes. If you include the plan this year to have equal or greater free cash flow to what we did last year, if we do $50 million to $70 million of free cash flow, as we go through the year, that even expands our balance sheet if you, if you say it that way. And then I'll turn over Tom, I think, we learned a lot, good experience from the Luvata integration, but to do it well takes significant commitment and dedicated resources. So I think we have constant discussions about the bandwidth question.

問得很好。不，我們在現有的銀行協議架構下，依據我們正在看的收購類型與規模，我們有很大的彈性。如果把今年的計畫也算進來——也就是自由現金流要與去年相當或更高——若我們今年能做到 5,000 萬到 7,000 萬美元的自由現金流，隨著年度推進，這甚至會擴大我們的資產負債表空間，如果你用這種方式來看。接著我把話交給 Tom。我想我們從 Luvata 的整合中學到很多，也有很好的經驗，但要把它做好需要相當大的承諾與專責資源。所以我認為我們一直在持續討論「帶寬」這個問題。

It is a great point. And we have stood up a, what we call strategy and business development section in the company, that we have 3 or 4 key resources constantly focused on our strategic actions, both in each element of strengthen, diversify and grow, but specifically, a lot of attention being put into targeting opportunities that, that can be on inorganic side to build on the strength that we developed with the CIS acquisition. So it remains a key part of our strategy and I feel very, very

這確實是一個很好的觀點。我們在公司內成立了我們稱之為策略與業務發展的部門，配置了 3 到 4 位關鍵資源，持續聚焦於我們的策略行動，涵蓋強化、多元化與成長的各個面向；但特別是投入大量心力在鎖定非有機機會，以在我們透過 CIS 收購所建立的優勢基礎上再加以擴展。因此這仍是我們策略的關鍵部分，而我感到非常、非常

positive and confident with our approach. We're not -- running around wildly looking for something. We're looking for something that fits well and adds to the value of the company and value that our shareholders can expect.

正向且有信心於我們的方法。我們不是——到處亂跑、瘋狂地找東西。我們在尋找的是契合度高、能提升公司價值，並能為股東帶來可期待價值的標的。

I know you've mentioned that the focus would be on Building HVAC or CIS, but is there any technology that your portfolio needs in your opinion on the electric vehicle side?

我知道你提到重點會放在建築 HVAC 或 CIS，但在你看來，在電動車這一端，你們的產品組合是否需要補上任何技術？

Good point. So as systems develop and subsystems, there are things like electronic valves and things that could complement as far as flow, control and balancing the system and optimizing the system for the complete vehicle thermal management needs. So that is something that we can call an adjacency that we would look for an opportunity to develop and it could also be done through partners as well, which we're exploring. So it's a very good question.

好問題。隨著系統與子系統的發展，像是電子閥等技術，可以在流量、控制與系統平衡方面形成互補，並為整車熱管理需求來優化整體系統。所以這是我們會視為相鄰領域（adjacency）並尋找機會去發展的方向；也可以透過合作夥伴來完成，我們也正在探索。所以這確實是個很好的問題。

Got it. And then last question for me. Obviously Asia is a smaller business that's growing rapidly. Is there any structural or competitive reason why that business can't eventually get to within similar size of the Americas and Europe?

了解。那我最後一個問題。顯然亞洲是較小但成長很快的業務。是否有任何結構性或競爭性的原因，使得這個業務未來無法成長到與美洲和歐洲相近的規模？

Well, I think, I'll let Mick quantify that for you. Right now we have more activity than I ever imagined at this point. After years of kind of going over there and installing the base assets and technologies for the future, they're all hitting on all cylinders right now. And obviously, China is a key area of focus, but I also want to talk about India. Our India plant is doing phenomenally well, okay, growing with all the key end markets, the vehicular-focused strategy is. We have a Korea JV that's also doing well. So Asia for us, the growth rate of 51% is going to slow down a little bit, but it's just keeping that rate. But it's going to be continued strengthening part of our portfolio. And I also want to add that the bringing the VTS business under 1 segment lead and developing those strategies to prioritize is very important. In the regional focus, we could get out of balance sometimes and have one product or one element of the vehicular business prioritized over another one in a different region. So this whole product business set assessment that I talked about that we completed inside of the SDG assessment, is very, very important so we can make sure that we optimize our investments, both on financial capital and of course our key resources, our teams that are focused on that to make sure we optimize and grow that well.

嗯，我想我讓 Mick 來為你量化說明。就目前而言，我們的活動量比我在這個時間點所能想像的還多。在多年到那邊佈建基礎資產與未來所需技術之後，現在各項業務都在全速運轉。而且很明顯，中國是我們關注的重點區域，但我也想談談印度。我們的印度工廠表現非常出色，好嗎？隨著所有關鍵終端市場成長，也符合以車用為核心的策略。我們在韓國也有一家合資公司（JV）表現良好。因此對我們而言，亞洲 51% 的成長率會稍微放緩一些，但重點是維持這個成長動能。不過它將持續成為我們產品組合中強化的一部分。我也想補充，把 VTS 業務納入同一個事業部門的領導之下並制定優先順序策略非常重要。在區域聚焦上，我們有時可能會失衡，讓某個地區的一項產品或車用業務要素被優先於另一個地區的其他要素。因此，我先前提到我們在 SDG 評估中完成的這套產品/業務組合評估非常、非常重要，能確保我們在財務資本的投資，以及當然我們的關鍵資源、專注於此的團隊投入上，都能達到最佳化並把它做好、把它做大。

Your next question comes from the line of Mike Shlisky with Seaport Global.

下一個問題來自 Seaport Global 的 Mike Shlisky。

I guess I've just got 2. I guess, first, I mean, just looking at your guidance range for the year. It was a pretty decent quarter. I was curious if you have any way you can maybe tilt us in one direction, do you think, given the good quarter and the good top line, and the improving commodity costs, that you might be tilted towards the high end at this point? Or are you still little a nervous that maybe the low end is still a possibility?

我想我只有兩個問題。首先，我是看你們今年的指引區間。這一季表現相當不錯。我想知道你們是否能給我們一些方向：考量到這一季表現良好、營收端也不錯，加上大宗商品成本在改善，你們目前是否更偏向指引區間的高端？還是你們仍有點擔心低端仍然有可能發生？

Yes. Good question, Mike, and a hard one to answer. I'll tell you the way we think about it and one of our forecast and maybe the risks and opportunities. So definitely a good Q1. From a Building HVAC, as you know, our Building HVAC business really ramps up in the second half of the year. So our visibility there is short and partly tied to weather, although we have -- we feel really good about the order bookings, early pre-season order bookings and order -- also the order bookings in the U.K. and around data centers. So that we kind of look at is we're feeling good, but it's way early. Then we go to CIS, again, same, very short visibility in that type of business, with so much of it being replacement. What we feel good about there, Tom mentioned on the data center there, our order book is, we're feeling really good about that and that is continuing to give us confidence through Q3 and into Q4 as Tom said. When you get to VTS, couple things there. I think, there's an opportunity if metals hold where they are at. And then I think what we're trying to balance here as well, which was new since we launched our fiscal year, was the tariffs, and we're managing those with our customer base. Tom said where we can, we're at, we're trying to get exclusions, that's one. I'd like to see another quarter behind us before we kind of adjust our guidance or guide you to a high end or a low end. I would say we're feeling really good about our range coming out of Q1. And before I would say, we're at the high end, I'd like to see another quarter and address a couple and make sure we have good visibility in a couple of the risk areas that I highlighted.

是的。好問題，Mike，而且很難回答。我會告訴你我們如何看待這件事、我們的一項預測，以及可能的風險與機會。所以確實是個很好的第一季問題。就建築HVAC而言，如你所知，我們的建築HVAC業務通常在下半年才會明顯升溫。因此我們在那邊的能見度較短，且部分與天氣相關，儘管我們——我們對接單情況感覺非常好，包括季前的早期預購訂單與接單——也包括英國以及資料中心周邊的接單。所以我們的看法是：我們感覺不錯，但現在還太早。接著看CIS，同樣地，這類業務的能見度也很短，因為其中很大一部分是汰換需求。我們對那邊有信心的地方是，Tom提到資料中心那塊，我們的訂單簿——我們對此感覺非常好，而且正如Tom所說，這也持續讓我們對第三季並延伸到第四季更有信心。談到VTS，有幾點。我認為，如果金屬價格能維持在目前水準，這裡就有機會。另外，我們也在努力平衡一件事——這是在我們發布本財年展望之後才出現的新因素——也就是關稅，而我們正與客戶群一起管理這些影響。Tom說在可行之處，我們正在嘗試取得豁免，這是一點。在我們調整指引，或引導你們看高端或低端之前，我希望先再多看一個季度的表現。我會說，第一季結束後，我們對我們的區間感覺非常好。而在我說我們處於高端之前，我希望再看一個季度，並處理幾個問題，確保我剛才提到的幾個風險領域我們有良好的能見度。

Okay. That's fair. And the other question I had, it's a bit out of left field, but I think I have to ask it. A few weeks ago, we heard in the media that Tesla started asking for some of their partners who they've been working with for some cash back on some projects that they may have done over the last few years that maybe didn't pan out as they expected. So I wanted to just confirm, just wanted to check, was Modine asked for any cash back by that partner?

好的。這很合理。我還有另一個問題，有點出其不意，但我想我必須問。幾週前，我們在媒體上聽到特斯拉開始向一些合作夥伴要求就某些專案退回部分款項，這些專案可能是在過去幾年做的，但結果可能沒有如他們預期。所以我想確認一下、也想核實一下：Modine是否有被那個合作夥伴要求退回任何款項？

No. We weren't.

沒有。我們沒有。

Your next question comes from the line of David Leiker with Baird.

下一個問題來自Baird的David Leiker。

I wanted to ask, by adding CIS, you have a less seasonal business, but in the past, the Q1 to Q2 decremental margins have sometimes been pretty wide. Would you expect something similar, Mick, you said you'd expect the year-over-year incrementals to actually improve as the year goes on, which would imply less seasonality than historically you've seen, but anything to consider in thinking about kind of a Q1 and a Q2 seasonality?

我想問的是，加入CIS之後，你們的業務季節性較低，但過去第一季到第二季的遞減毛利率有時候會相當大。你是否預期會出現類似情況？Mick，你說你預期隨著年度推進、年對年的增量（利潤率）其實會改善，這意味著季節性會比歷史上看到的更低；但在思考第一季與第二季的季節性時，有沒有什麼需要注意的？

Yes, so kind of a macro point and then a micro comment for your more specific. Yes, last year, we were very pleased with more so, Joe, right, than we've ever seen and you've been with us a long time, almost kind of 4 even quarters. And as we go forward, we expect this year would be similar, more level loaded. As we look to Q2, we're not looking for dramatic historic drop or change in our margin. You know that used to be that's when you start entering the slowdown, especially in Europe on the Vehicular side and the shutdown. I would say VTS will have a little bit, from a revenue side, a little bit of the impact of Europe slow down. On the other hand, we start to ramp up sequentially in building HVAC and it also starts to ramp up or continue to ramp up in CIS. So I think short answer is, we shouldn't look for a significant change in Q2 from Q1 other than within the pieces maybe a little bit of the summer slowdown from VTS in Europe and then a sequential growth in CIS and HVAC.

是的，我先講一個宏觀點，再針對你更具體的問題補充一個微觀評論。是的，去年我們非常滿意——更是如此，Joe，對吧——這是我們以前從未見過的情況，而你也跟了我們很久，幾乎像是四個季度都很平均。往後看，我們預期今年也會類似，更加平均分布。就第二季而言，我們不預期毛利率會出現歷史上那種劇烈下滑或變化。你知道，以前通常在那時開始進入放緩，尤其是歐洲車用端的放緩以及停工。我會說，VTS在營收面會受到一點歐洲放緩的影響。另一方面，我們的建築HVAC會開始逐季拉升，而CIS也會開始拉升或持續拉升。所以我想簡短的答案是：第二季相較第一季不應該有顯著變化；除了在各個組成部分內，可能會有一點歐洲VTS的夏季放緩，以及CIS與HVAC的逐季成長。

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

目前顯示沒有其他問題。我現在想把電話會議交回給Kathy Powers。

Thank you for joining us this morning. A replay of this call will be available through our website in about 2 hours. We hope that you have a great day.

感謝各位今天早上加入我們。本次電話會議的重播將在約2小時後於我們的網站提供。祝各位有美好的一天。

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may now disconnect.

各位女士、先生，今天的會議到此結束。感謝各位的參與，祝各位有美好的一天。您現在可以掛線。