Modine Manufacturing Company (MOD) 2019 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Modine Manufacturing Company's Second Quarter Fiscal 2019 Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

各位女士、先生，早安，歡迎參加 Modine Manufacturing Company 2019 會計年度第二季財報電話會議。(接線員指示) 提醒各位，本次電話會議將被錄音。

I would now like to turn the conference over to your host, Ms. Kathy Powers, Vice President, Treasurer of Investor Relations and Tax.

現在我想把電話會議交給本次主持人——投資人關係與稅務副總裁兼財務長 Kathy Powers 女士。

Good morning and thank you for joining our conference call to discuss Modine's second quarter fiscal 2019 results. I am here with Modine's President and CEO, Tom Burke, and Mick Lucareli, our Vice President Finance, and Chief Financial Officer. We will be using slides with 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 second quarter results and update our revenue and earnings guidance for fiscal '19. At the end of the call, there will be a question-and-answer session.

早安，感謝各位加入我們的電話會議，一同討論 Modine 2019 會計年度第二季的業績。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。我們將使用今天簡報的投影片，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 將說明我們第二季的業績，並更新 2019 會計年度的營收與獲利指引。在電話會議結束前，將有問答時間。

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，其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提交之文件中所述。

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

接下來，很高興把電話會議交給 Tom。

Thank you, Kathy, and good morning, everyone. Our top line momentum continued this quarter, as our global team drove record second quarter sales and overall double-digit top line growth on a constant currency basis. In particular, our CIS segment made a solid contribution with significant increases in both sales and earnings. However, we were not able to convert on sales as planned in our VTS segment in part due to continued cost pressures driven by the direct and indirect impact of tariffs as well as isolated operational inefficiencies we are continuing to work through.

謝謝你，Kathy，各位早安。本季我們的營收動能持續，全球團隊帶動第二季銷售創下新高，並在固定匯率基礎上實現整體兩位數的營收成長。其中，我們的 CIS 事業部門貢獻穩健，銷售與獲利皆大幅增加。然而，在 VTS 事業部門方面，我們未能如計畫將銷售轉化為獲利，部分原因是關稅的直接與間接影響所帶來的持續成本壓力，以及我們仍在改善中的個別營運效率不彰。

Overall, sales increased 8% or 10% on a constant-currency basis. Each of our segments reported sales growth and all of our major end markets showed positive top line growth. Our first quarter adjusted operating income was $26.5 million, down slightly from the prior year. Mick and I will provide more details on the drivers, but growth in the CIS segment was offset by lack of earnings conversion in the VTS segment, which came in well below our expectations. Although our second quarter earnings were somewhat below our expectations, we are still planning to have a record year with solid sales and earnings growth.

整體而言，銷售成長 8%，若以固定匯率計算則成長 10%。我們各事業部門皆呈現銷售成長，所有主要終端市場的營收也都呈現正成長。我們第一季調整後營業利益為 2,650 萬美元，較去年同期略為下降。Mick 與我將進一步說明其驅動因素，但 CIS 事業部門的成長被 VTS 事業部門獲利轉化不足所抵銷，而 VTS 的表現明顯低於我們的預期。雖然第二季獲利略低於預期，我們仍規劃今年將創下紀錄，並實現穩健的營收與獲利成長。

Before moving on to the segment results, I also wanted to mention that our Board of Directors recently approved a 2-year, $50 million share repurchase program. The last time we had an authorization in place was in 2015 prior to the Luvata acquisition. This authorization demonstrates our Board's confidence in the future of our business and in our ability to continue to execute on our strategic initiatives.

在進入各事業部門業績之前，我也想提到，我們董事會近期核准了一項為期兩年、總額 5,000 萬美元的庫藏股回購計畫。我們上一次有回購授權是在 2015 年、Luvata 併購案之前。此項授權展現董事會對我們業務未來以及我們持續推動並落實策略性計畫之能力的信心。

Now I would like to briefly review the segment results for the second quarter. Turning to Page 5, sales for the VTS segment increased 8% or 10% on a constant-currency basis to $335 million. This increase was driven primarily by a 24% increase in sales to off-highway customers primarily in North America and in Asia. We also benefited from a 6% increase in sales to automotive customers despite declining sales in Europe.

接下來我想簡要回顧第二季各事業部門的業績。請看第 5 頁，VTS 事業部門銷售成長 8%，若以固定匯率計算則成長 10%，達 3.35 億美元。此增幅主要來自非公路（off-highway）客戶銷售成長 24%，主要發生在北美與亞洲。此外，儘管歐洲銷售下滑，我們對汽車客戶的銷售仍成長 6%，也帶來助益。

Commercial vehicle sales were up 2% with increases in the Americas more than offsetting a decline in Europe. We continue to have a significant sales growth in Asia, where sales were up 26% from the prior year, driven by multiple program launches. In addition, sales in the Americas were up 15%, driven by improvements across all end markets and again, multiple new programs. Europe, sales were down 4%, driven primarily by lower sales of powertrain cooling products to automotive customers in line with the market.

商用車銷售成長 2%，美洲地區的成長足以抵銷歐洲的下滑。我們在亞洲持續有顯著的銷售成長，受多項專案啟動帶動，銷售較去年同期成長 26%。此外，美洲地區銷售成長 15%，主要來自各終端市場的改善，以及同樣有多項新專案。歐洲方面，銷售下滑 4%，主要因汽車客戶的動力系統冷卻產品銷售下降，與市場趨勢一致。

Adjusted operating income for the VTS segment was $16 million, $4 million lower than the prior year. And adjusted operating margin was down 160 basis points to 4.8 -- down to 4.8%. As I mentioned, we were not able to convert on the higher sales volume in this segment due to a number of factors, some of which were within our control and others that were outside of our control.

VTS 事業部門調整後營業利益為 1,600 萬美元，較去年同期減少 400 萬美元。調整後營業利益率下降 160 個基點至 4.8 -- 降至 4.8%。如我所提，我們未能在該事業部門將較高的銷售量轉化為獲利，原因有多項，其中部分在我們可控範圍內，另一些則不在我們可控範圍內。

Like many industrials this quarter, we are still experiencing the year-over-year impact of higher material costs. Although we continue to benefit from the pricing provisions in our contractual material pass-through agreements, this only covers the LME component of the cost. Much of the impact of our cost has been driven by other factors, including fabrication and freight. This resulted in a net impact in the quarter being negative. A big driver of these increased costs were the direct and indirect impact of tariffs that are being imposed on our raw materials. These tariffs are not only increasing the cost of the components that we import, but are also disrupting our domestic supply base. Domestic aluminum and steel suppliers are continuing to leverage their positions related to import tariffs and have raised prices as expected. As we renew our supply contracts, we're receiving significant increases in fabrication costs. In some cases, we're even being asked to find other sources.

如同本季許多工業公司一樣，我們仍在承受原物料成本年增的影響。雖然我們持續受惠於合約中的原物料成本轉嫁（pass-through）定價條款，但該條款僅涵蓋成本中的 LME（倫敦金屬交易所）部分。我們成本影響的很大一部分來自其他因素，包括加工與運輸。因此，本季的淨影響為負面。這些成本上升的一大驅動因素，是對我們原物料課徵關稅所造成的直接與間接影響。這些關稅不僅提高我們進口零組件的成本，也擾亂了我們的國內供應基礎。國內鋁與鋼供應商持續利用進口關稅所帶來的優勢，並如預期調高價格。在我們更新供應合約時，收到加工成本大幅上調的要求。在某些情況下，我們甚至被要求尋找其他來源。

In addition to fabrication costs, the Midwest transaction premium has doubled from the prior year and is adding to our increased cost. As you may recall, this premium covers freight and warehousing cost that historically have been relatively stable.

除了加工成本之外，中西部交易溢價（Midwest transaction premium）較去年同期翻倍，也推升了我們的成本。各位或許記得，這項溢價涵蓋運輸與倉儲成本，而這些成本過去相對穩定。

In addition, we're continuing to file for exclusion requests on imported components that are now subject to tariffs. The requests that have been submitted so far are pending without comment. Although there have not been any objections raised, we do not know when or if we will receive an exemption. For those imported components where we do not believe we'll receive an exemption, we are working diligently with our customers to pass along the cost, but this is a complicated and time-consuming process. We are invoicing these costs, but in most cases, the customers are requesting more information and have not paid. We are working through this process and are together evaluating whether there are alternative sources for these materials.

此外，對於目前已被課徵關稅的進口零組件，我們仍持續提出排除（豁免）申請。截至目前已提交的申請仍在審理中，尚未收到任何回覆。雖然目前未出現任何反對意見，但我們不知道何時或是否能獲得豁免。對於那些我們認為不太可能獲得豁免的進口零組件，我們正與客戶密切合作以轉嫁成本，但這是一個複雜且耗時的流程。我們已就這些成本開立發票，但多數情況下客戶要求提供更多資訊，並尚未付款。我們正持續推進此流程，並共同評估這些材料是否有替代來源。

Second, we are still experiencing operating inefficiencies at a few of our VTS plants as a result of the many new program launches. We are disappointed that the inefficiencies have dragged on longer than we expected, and are working to address these issues that are within our control. We have deployed some of our most experienced operational leaders to these sites, and I am pleased by the improvements we have seen over the recent weeks, and I am confident that we will achieve our expected improvements in the second half of the fiscal year.

第二，我們仍因多項新專案啟動而在部分VTS工廠面臨營運效率不彰的情況。我們對這些效率問題持續的時間超出預期感到失望，並正著手處理我們可控範圍內的相關問題。我們已派遣一些最資深的營運領導者前往這些據點；我很高興看到近幾週已有所改善，並有信心在本會計年度下半年達成我們預期的改善幅度。

Please turn to Page 7. Sales for our CIS segment increased 9%, or 10% on a constant-currency basis, to $178 million, primarily due to a 65% increase in sales to data center customers in North America and Europe, partially offset by a 30% decrease in sales to the industrial markets. As I mentioned last quarter, the decline in industrial market sales relates to the lower sales of transformer oil coolers in China, based on the government's recent pullback in the development of high-voltage, direct-current power grid systems. This was expected and was also the cause of the drop in Asia. Sales in the Americas were up 24% and sales in Europe were up 1%. In Europe, higher data center sales were partially offset by the lower industrial sales. Excluding the impact of the data center sales, growth in the Americas is low-single-digits driven by higher commercial HVAC and refrigeration sales.

請翻到第7頁。我們CIS事業部的銷售額成長9%，以固定匯率計成長10%，至1.78億美元，主要因北美與歐洲資料中心客戶銷售額成長65%，但部分被工業市場銷售額下滑30%所抵銷。如我在上季所提到，工業市場銷售下滑與中國變壓器油冷卻器銷售降低有關，原因在於政府近期縮減高壓直流電網系統的開發。這在預期之內，也同樣是亞洲地區下滑的原因。美洲地區銷售成長24%，歐洲地區銷售成長1%。在歐洲，較高的資料中心銷售部分被較低的工業銷售所抵銷。若排除資料中心銷售的影響，美洲地區的成長為低個位數，主要由商用HVAC與冷凍產品銷售增加所帶動。

From a product standpoint, sales increased for coils and coolers, while sales of coatings were flat. Coolers increased by 19%, driven by the sales to data center customers, in line with the ongoing expansion of data center capacity.

就產品面而言，線圈與冷卻器的銷售增加，而塗層產品銷售持平。冷卻器銷售成長19%，由資料中心客戶銷售帶動，與資料中心容量持續擴張的趨勢一致。

This segment reported operating income of $12.9 million, a $3.9 million or 43% improvement over the prior year. The operating income margin was up 170 basis points from the prior year to 7.2%. This improvement was due to the higher sales volume, favorable sales mix and lower SG&A as a percent of sales. Overall, I am very pleased with the performance of the CIS segment. When we completed this acquisition nearly 2 years ago, we knew it was the right move for Modine. Now we're seeing the benefits to our diversification strategy as we continue to serve the growing global opportunities such as data center market where countries are increasingly demanding additional capacity.

本事業部的營業利益為1,290萬美元，較去年增加390萬美元，或成長43%。營業利益率較去年提升170個基點至7.2%。此改善主要來自較高的銷售量、有利的銷售組合，以及SG&A占銷售比重下降。整體而言，我對CIS事業部的表現非常滿意。我們在近兩年前完成這項收購時，就知道這對Modine而言是正確的決策。如今我們正看到多元化策略的效益，並持續把握全球成長機會，例如資料中心市場；各國對新增容量的需求正日益提高。

Turning to Page 9. Sales for our Building HVAC segment increased 4% on a constant-currency basis to $50.7 million. From an end-market perspective, sales to the commercial HVAC customers increased 4% and sales to data center customers increased 3%. From a product standpoint, the increase in sales was primarily driven by a 4% increase in heating products in North America and an 18% increase in aftermarket and service sales primarily in the U.K. Sales in North America were up 3%, driven by higher sales of heating products, partially offset by lower ventilation product sales. Sales in Europe increased 6%, driven by higher data center and aftermarket and service sales. Adjusted operating income increased 3% from the prior year to $6.5 million. This increase was driven by higher sales volume along with a slight decrease in SG&A expense. Adjusted operating income margin was down slightly to 12.8%, compared to 13% last year.

接著看第9頁。我們Building HVAC事業部的銷售額以固定匯率計成長4%，至5,070萬美元。從終端市場來看，商用HVAC客戶銷售成長4%，資料中心客戶銷售成長3%。從產品面來看，銷售成長主要由北美供暖產品銷售成長4%，以及主要在英國的售後市場與服務銷售成長18%所帶動。北美銷售成長3%，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6%，由較高的資料中心以及售後市場與服務銷售所帶動。調整後營業利益較去年成長3%至650萬美元。此增幅由較高的銷售量以及SG&A費用小幅下降所帶動。調整後營業利益率小幅下降至12.8%，去年為13%。

We also continue to see strong order activity in our Building HVAC segment in both North America and in the U.K. We continue to grow our leading market share for gas unit heaters in North America and have seen -- and particularly have seen strong sales in Canada. In the U.K., we have recently had several large data center orders for both our chiller and precision air conditioning lines. We also continuing to focus on the Greenhouse segment where our high-efficiency products are some of the first in the industry to connect to the building management systems allowing for greater energy efficiency.

我們也持續看到Building HVAC事業部在北美與英國的訂單活動強勁。我們持續提升在北美燃氣式單元加熱器的領先市占率，並且看到——尤其是在加拿大——銷售表現強勁。在英國，我們近期在冷水機與精密空調產品線都取得數筆大型資料中心訂單。我們也持續聚焦溫室（Greenhouse）領域；我們的高效率產品是業界最早可連接建築管理系統（BMS）的產品之一，從而提升能源效率。

With that, I'd like to turn it over to Mick for an overview of our consolidated financial results as well as to provide an update on our outlook for the remainder of 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，並更新我們對2019會計年度剩餘期間的展望。

Michael B. Lucareli: Thanks, Tom. Good morning, and please turn to Slide 10. First, I want to say that we remain on track for another record year of sales and earnings despite some VTS challenges in the quarter. Sales increased $41 million or 8% including a negative FX impact. Revenue improved in all business segments this quarter, with the highest rate of growth in the off-highway and data center markets. Gross profit of $88 million was up 2%, but our margin was down 100 basis points. The Building HVAC margin was in line with our expectations and CIS showed significant improvement.

Michael B. Lucareli：謝謝你，Tom。各位早安，請翻到第10張投影片。首先，我想說，儘管本季VTS面臨一些挑戰，我們仍按計畫朝著再創銷售與獲利新高的一年邁進。銷售額增加4,100萬美元，或成長8%，其中包含匯率帶來的負面影響。本季所有事業部營收皆改善，其中成長率最高的是非公路與資料中心市場。毛利為8,800萬美元，成長2%，但毛利率下降100個基點。Building HVAC的毛利率符合我們的預期，而CIS則顯著改善。

On the VTS side, we had positive impacts from higher sales volume and ongoing purchasing initiatives. Unfortunately in the quarter, we continued to see higher material costs and we did not realize the anticipated level of operating improvements. Given the material cost challenges, we are tightly managing SG&A. At $63 million, it improved 70 basis points as a percentage of sales, as we continue to leverage our top line growth. The 2% increase in SG&A was due to normal increases in employee compensation and also includes $1.9 million of environmental charges. Adjusted operating income was $26.5 million, down slightly and mainly due to the gross margin decline in VTS.

在VTS方面，我們受惠於較高的銷售量以及持續推動的採購措施所帶來的正面影響。但不幸的是，本季我們仍看到材料成本上升，且未能實現預期的營運改善水準。鑑於材料成本的挑戰，我們正嚴格控管SG&A。SG&A為6,300萬美元，占銷售比重改善70個基點，因我們持續運用營收成長帶來的槓桿效益。SG&A增加2%係因員工薪酬的正常增加，並包含190萬美元的環境相關費用。調整後營業利益為2,650萬美元，略為下降，主要因VTS毛利率下滑所致。

Please note that in the appendix is included an itemized list of adjustments to operating income and a reconciliation to our U.S. GAAP results. These adjustments totaled $3.7 million and relate to the sale of our small South Africa business, and environmental charges related to previously-owned manufacturing facilities.

請注意，附錄中包含營業利益調整項目的明細清單，以及與我們美國GAAP結果的調節表。這些調整合計370萬美元，與出售我們在南非的小型業務，以及與先前持有之製造設施相關的環境費用有關。

I also want to point out that we recorded a benefit in the U.S. GAAP income tax line this quarter of $22.9 million. This included a $10.8 million benefit related to adjustments of the provisional charges related to tax reform. In addition, we were able to record $13.6 million -- well, a $13.6 million benefit for foreign tax credits that will be utilized in the future. Both of these benefits are excluded from the calculation of adjusted earnings per share. After adjusting for tax reform and foreign tax credit benefits, along with certain other items, we had a low effective tax rate of just 5%, our adjusted earnings per share of $0.35, which is down $0.01 from the prior year.

我也想指出，我們本季在美國GAAP所得稅項下認列了2,290萬美元的利益。其中包含與稅改相關之暫估費用調整所帶來的1,080萬美元利益。此外，我們也得以認列1,360萬美元——也就是1,360萬美元的利益——來自未來將可使用的外國稅額抵免。上述兩項利益皆不納入調整後每股盈餘的計算。在就稅改與外國稅額抵免利益以及其他若干項目進行調整後，我們的有效稅率偏低，僅5%；調整後每股盈餘為0.35美元，較去年下降0.01美元。

Let's turn to cash flow on Slide 11. Our operating cash flow year-to-date of $37 million benefited from a strong second quarter, which was $41 million. Second quarter free cash flow was $26 million. Year-to-date, our working capital has been running higher due to strong sales across the company offsetting the improved cash earnings. Based on the current trends and outlook, we expect our full year free cash flow to be in line with the prior year. And our leverage ratio is 2.4, which is within our target range of 1.5 to 2.5.

讓我們來看第 11 頁的現金流。我們年初至今的營運現金流為 3,700 萬美元，受惠於強勁的第二季表現，第二季為 4,100 萬美元。第二季自由現金流為 2,600 萬美元。年初至今，由於全公司強勁銷售抵銷了現金獲利的改善，我們的營運資金水準一直較高。基於目前的趨勢與展望，我們預期全年自由現金流將與前一年持平。而我們的槓桿比率為 2.4，落在我們 1.5 至 2.5 的目標區間內。

Last, as Tom mentioned, I'm very pleased to report that our Board recently authorized a $50 million share repurchase plan. We will follow our capital allocation strategy and balance repurchases with our priorities of investments that support diversification and growth. In addition, we remain committed to continuing to delever our balance sheet and keeping our leverage ratio within the targeted range.

最後，如 Tom 所提到的，我很高興報告我們董事會近期核准了一項 5,000 萬美元的庫藏股回購計畫。我們將遵循資本配置策略，在回購與支持多元化與成長的投資優先事項之間取得平衡。此外，我們仍致力於持續降低資產負債表槓桿，並將槓桿比率維持在目標區間內。

Now let's turn to our fiscal 2019 guidance on Slide 12. We adjusted our outlook based on the most recent quarter and evolving tariff situation. In short, we are holding our revenue and adjusted earnings per share while slightly lowering our adjusted operating income. With regards to revenue, we continue to project sales to be up 3% to 8%. We expect ongoing vehicular market growth driven by global off-highway sales. With regards to CIS and Building HVAC, we expect low-to mid-single-digit market growth, with our sales outpacing the market. In addition, we expect the second half will be better than the first due to operational improvements in VTS, the North American heating season -- seasonality and continued strength in our data center markets.

現在讓我們看第 12 頁的 2019 會計年度指引。我們根據最近一季的表現以及不斷演變的關稅情勢調整了展望。簡而言之，我們維持營收與調整後每股盈餘不變，但略微下調調整後營業利益。就營收而言，我們仍預估銷售將成長 3% 至 8%。我們預期車輛市場將持續成長，主要由全球非公路（off-highway）銷售帶動。就 CIS 與 Building HVAC 而言，我們預期市場將呈現低至中個位數成長，且我們的銷售成長將優於市場。此外，由於 VTS 的營運改善、北美供暖季節——季節性因素，以及資料中心市場持續強勁，我們預期下半年將優於上半年。

As Tom and I both covered, the tariff situation is creating multiple cost challenges that our teams are working through on a continuous basis. We now expect our adjusted operating income to be in the range of $130 million to $140 million, about 3% to 4% below our previous range of $135 million to $145 million. Despite the adjustment, we continue to see year-over-year growth of 8% to 17%.

如 Tom 和我都提到的，關稅情勢帶來多重成本挑戰，我們的團隊正持續不斷地加以因應。我們目前預期調整後營業利益將落在 1.30 億至 1.40 億美元區間，較先前 1.35 億至 1.45 億美元的區間低約 3% 至 4%。儘管有所調整，我們仍預期年對年成長 8% 至 17%。

As usual, I want to briefly review some of our key assumptions. First, metals prices have stabilized, yet we anticipate this will be an ongoing headwind until our pass-through agreements adjust. This includes the Midwest transaction premium in the U.S. that is still up over 100%. 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.

照例，我想簡要回顧幾項關鍵假設。第一，金屬價格已趨於穩定，但在我們的轉嫁（pass-through）協議調整之前，我們預期這仍將是持續的逆風。其中包括美國中西部交易溢價（Midwest transaction premium），目前仍上升超過 100%。第二，我們預期年度利息費用約為 2,400 萬美元。第三，我們採用目前的外匯匯率，年對年將帶來些微負面影響。

And finally, we expected our adjusted tax rate to be approximately 22% to 23% in fiscal '19 versus 12% in fiscal 2018. This is better than our previous expectation due to the recent tax planning and second quarter actions. Given the lower expected tax rate, we anticipate adjusted EPS to be -- remain between $1.50 and $1.65.

最後，我們預期 19 會計年度的調整後稅率約為 22% 至 23%，相較於 2018 會計年度的 12%。這比我們先前的預期更好，主要受惠於近期的稅務規劃以及第二季的相關措施。在較低的預期稅率下，我們預期調整後 EPS 將——維持在 1.50 至 1.65 美元之間。

And just to wrap up, we are currently seeing operating improvements within our VTS segment and we expect to regain our positive momentum through the remainder of fiscal 2019.

最後做個總結，我們目前在 VTS 事業部看到營運改善，並預期在 2019 會計年度剩餘期間重新取得正向動能。

Tom, I'll turn it back to you.

Tom，接下來交還給你。

Thanks, Mick. Turn to Slide 13, please. As I mentioned last quarter, we continue to focus our strategy around our core strategic building blocks of Strengthen, Diversify and Grow. And we'd like to provide an update on where we stand today. First off, our focus continues to be on driving growth. We have several areas that we are targeting for improved organic growth across our segments. In our VTS segment, we continue to believe that the electrification of buses and other on-and-off highway specialty vehicles will develop quickly in the market. And we're in an advantaged position to provide thermal management solutions.

謝謝，Mick。請翻到第 13 頁。如我在上一季提到的，我們持續將策略聚焦在核心策略基石：強化（Strengthen）、多元化（Diversify）與成長（Grow）。我們也想更新目前的進展。首先，我們的重點仍是推動成長。我們在各事業部有數個目標領域，致力於提升內生成長。在 VTS 事業部，我們仍相信巴士及其他公路與非公路專用車輛的電動化將在市場上快速發展。而我們具備有利的地位，可提供熱管理解決方案。

In our CIS segment, the growth this year has been led by sales to data center customers and we expect this trend to continue for the upcoming quarters.

在 CIS 事業部，今年的成長主要由資料中心客戶的銷售所帶動，我們預期此趨勢在接下來幾季將持續。

In our Building HVAC segment, we will continue on our focus on our end markets, looking for ways to improve productivity and efficiency for our customers.

在 Building HVAC 事業部，我們將持續聚焦終端市場，尋找提升客戶生產力與效率的方法。

I previously mentioned the Greenhouse segment, but this can be extended to various forms of indoor industrial growing, where our products and controls can provide climate humidity control required for this growing market segment.

我先前提到溫室（Greenhouse）事業，但這也可延伸至各種室內工業化種植形式；在這些成長中的市場區隔中，我們的產品與控制系統可提供所需的氣候與濕度控制。

Our growth focus is not only organically focused. Our Strengthen, Diversify and Grow strategy led us to the decision to acquire the CIS business, which has proven to be a great move for Modine. As we look forward, we continue to look for opportunities for bolt-on acquisitions in both our CIS and Building HVAC segments. Our goal is to continue to expand our Industrial portfolio of products to sustain the long-term sales and profitable growth.

我們的成長重點不僅限於內生成長。我們的「強化、多元化與成長」策略促使我們決定收購 CIS 業務，事實證明這對 Modine 是一項非常正確的舉措。展望未來，我們將持續在 CIS 與 Building HVAC 事業部尋找補強型（bolt-on）併購機會。我們的目標是持續擴大工業產品組合，以支撐長期的銷售與獲利成長。

As discussed, this has been a challenging quarter with various items impacting our VTS margins. We continue to focus on improving operating margins by rapidly correcting inefficiencies and controlling our costs globally. We believe that actions we have already taken will lead to improved operating margins in the second half of the year, but we're also putting a heavy focus on further actions that will improve the overall return of this business segment in the current environment. Following a complete strategic review of our VTS business portfolio, we have a clear focus on where to prioritize our capital and ensure we are driving sustainable returns on investment.

如前所述，本季充滿挑戰，VTS 毛利率受到多項因素影響。我們持續專注於透過迅速修正低效率並在全球範圍控管成本，以改善營業利益率。我們相信已採取的行動將帶動下半年營業利益率改善，但同時也高度聚焦於進一步的措施，以在目前環境下提升該事業部整體報酬。在完成對 VTS 業務組合的全面策略檢視後，我們已明確聚焦資本優先投入方向，並確保推動可持續的投資報酬。

We see clear opportunities in both the commercial vehicle and off-highway markets. With our recently-developed global product platforms for commercial vehicle and off-highway applications, I am very pleased with our recent business wins in both North America and in Asia. Modine just demonstrated at the IAA Show in Hanover, Germany, we have an advantaged position in the rapidly-growing electric bus market. We have the right products, technology and customer relationships to support electrification of these vehicles, along with other on-and-off-highway specialty vehicles.

我們在商用車與非公路市場都看到明確機會。憑藉我們近期開發的商用車與非公路應用全球產品平台，我對我們近期在北美與亞洲取得的業務斬獲感到非常滿意。Modine 剛在德國漢諾威的 IAA 展會上展示，我們在快速成長的電動巴士市場具備有利地位。我們擁有合適的產品、技術與客戶關係，可支持這些車輛以及其他公路與非公路專用車輛的電動化。

Within our automotive markets, which makes up approximately 25% of Modine's total sales, we have a strong position with our engine and electric drive-train platforms. However, there are portions of this business that are highly capital-intensive and struggle to meet our financial targets. We have identified approximately $200 million of revenue in this area for strategic review. We are evaluating all options and capital investments for these product lines are being controlled judiciously. I will continue to provide updates as we proceed with our analysis and decisions as we go forward.

在我們的汽車市場中（約占 Modine 總銷售額的 25%），我們在引擎與電動傳動系統平台方面具備強勢地位。然而，這項業務中有部分領域資本密集度很高，且難以達成我們的財務目標。我們已辨識出此領域約 2 億美元的營收，將進行策略性檢視。我們正在評估所有選項，並對這些產品線的資本投資採取審慎控管。隨著我們持續推進分析與後續決策，我也會持續提供最新進展。

And with that, we'd like to take your questions. Thank you.

接下來，我們想開始回答各位的提問。謝謝。

(Operator Instructions) Our first question is from Matthew Paige with Gabelli. Your line is now open.

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

Hey, good morning. Thanks for taking my question. I wanted to ask about the commercial vehicle market. There's been a lot of discussion there about constraints in the supply chain, especially in North America. So I wanted to hear what you were facing in terms of your own utilization. And if you aren't seeing any issues with your factories, is there an opportunity for you to gain share in the longer term?

嗨，早安。謝謝讓我提問。我想問一下商用車市場。那邊有很多討論都在談供應鏈的限制，尤其是在北美。所以我想了解就你們自身的產能利用率而言，你們面臨的是什麼情況。另外，如果你們的工廠沒有看到任何問題，長期來看是否有機會提升市占？

Well, clearly, there's an opportunity for us to gain share. I'll start with the end of your question and move forward. I mentioned we're really pleased with some recent product platform developments in our global design strategies that we're applying now. And that's resulting in business wins and share gain -- will result in share gain in the future. So that part I can confirm.

嗯，很明顯，我們確實有機會提升市占。我先從你問題的最後一部分開始回答，再往前說。我提過，我們對近期在全球設計策略上所推動的一些產品平台開發感到非常滿意，而我們現在正在加以應用。這已帶來業務斬獲與市占提升——並且未來將會帶來市占提升。所以這一點我可以確認。

As far as the current supply chain constraint, we're not -- obviously, we're having some of the issues that I mentioned with materials because of the indirect effects of the tariffs that are putting some pressure on aluminum producers specifically, okay? And so we're watching that carefully and managing that. We have a cross-functional team between engineering, purchasing and materials that are in our chem lab of making sure that we're looking at every options that we can take to get around what might be a short-term constraint that's resulted from that. But right now, we feel that we're moving down a path and feel that we don't see any direct impact of supply delivery issues to our customers. But again, I'd just like to reiterate, very positive about our product platforms going forward and our position in North America specifically on the commercial vehicle and off-highway markets.

至於目前的供應鏈限制，我們並沒有——當然，我們確實遇到一些我先前提到的材料問題，因為關稅的間接影響對鋁生產商特別造成一些壓力，好嗎？因此我們正密切關注並加以管理。我們有一個跨職能團隊，涵蓋工程、採購與材料部門，並在我們的化學實驗室中確保我們正在檢視所有可行選項，以因應可能由此造成的短期限制。但目前我們認為我們正沿著既定路徑前進，並且覺得沒有看到任何對我們客戶的供貨交付造成直接影響的問題。不過我還是想再次強調，我們對未來的產品平台非常正面，尤其是在北美的商用車與非公路（off-highway）市場，我們的定位也非常有利。

Great. I appreciate that color. And then just to touch on the last comment you made, what products fit into the electric drive-train product group that you mentioned that was up for strategic review, the $200 million of revenue?

很好。我很感謝這些補充說明。另外，延續你最後的評論，你提到要進行策略性檢視、約 2 億美元營收的那個電動傳動系統產品群，具體包含哪些產品？

Yes, so that $200 million does not include our electric product portfolio, okay?

是的，那 2 億美元不包含我們的電動產品組合，好嗎？

Okay.

好的。

What typically is -- if you break automotive down -- and we've talked about this a couple of times; I'll just slow down. We have -- essentially, in our automotive business, which is about 25% of total sales, we have a very strong automotive engine component business, okay? Those are components that are [mounted in] or integrated into the direct engine application or transmission oil cooling. Could be liquid charge air cooling, liquid condensers. That platform is doing very well and we're very excited about it. It also has -- able to convert into electric vehicle applications with things like chillers and other related components. So that part of the portfolio is very strong in automotive.

一般來說——如果你把汽車業務拆開來看——我們也談過幾次；我放慢一點說。我們——基本上，在我們的汽車業務中（約占總銷售額的 25%），我們有一個非常強的汽車引擎零組件業務，好嗎？這些是[安裝於]或整合到引擎直接應用或變速箱油冷卻中的零組件。可能是液冷式增壓進氣冷卻（charge air cooling）、液冷式冷凝器等。這個平台表現非常好，我們也非常振奮。它也具備——可轉換到電動車應用，例如冷卻器（chillers）及其他相關零組件。因此，汽車業務中這一部分的產品組合非常強。

The $200 million result is really focused on what we call our powertrain cooling, or typically the things that sit upfront in the car, mostly revolving around air conditioning condenser business, but it's -- there's where we're seeing some challenges on getting returns where they need to be as far as hitting a return on capital requirement. So that's where we're looking at strategic review is that $200 million of what I would call the front end type components that sit on the front end of the automotive vehicle, condenser mostly, but some other powertrain-related components and that's what we're reviewing. The engine side remains a very strong key part of our business portfolio.

這 2 億美元主要聚焦在我們所稱的動力總成冷卻（powertrain cooling），也就是通常位於車輛前端的那些部件，多數與空調冷凝器業務相關；但——我們在這一塊看到一些挑戰，因為就達成資本報酬要求而言，回報未達到應有水準。所以我們要做策略性檢視的，就是我所稱的車輛前端類型零組件約 2 億美元的部分，主要是冷凝器，但也包含一些其他與動力總成相關的零組件，這就是我們正在檢視的範圍。而引擎端仍然是我們業務組合中非常強、且關鍵的一部分。

All right, understood. Thanks for the clarification and congrats on a nice quarter.

好，了解。謝謝你的釐清，也恭喜本季表現不錯。

Thank you. (Operator Instructions) Our next question comes from Joe Vruwink with William Baird. Your line is now open.

謝謝。(接線員指示) 下一個問題來自 William Baird 的 Joe Vruwink。您的線路已開通。

Still Robert Baird. Hi, everyone. I wanted to start on VTS because -- and the last question kind of got at it -- there were a lot of disruptions in various vehicle markets during the quarter. And I'm surprised by how strong your growth ultimately still was. One region that specifically stands out is Europe, given that the German automakers reduced production by 20% to 25% in the September quarter. So can you maybe walk through in Europe specifically if you look at your performance excluding the commercial vehicle roll-offs, what adjusted organic growth might've been in Europe? And then from a global standpoint, did growth actually end up better than your expectation in the quarter within VTS?

還是 Robert Baird。各位好。我想先從 VTS 談起，因為——上一個問題其實也觸及到——本季在各種車輛市場出現了很多干擾。我對你們最終仍能維持如此強勁的成長感到意外。其中一個特別突出的地區是歐洲，因為德國車廠在 9 月季度將產量降低了 20% 到 25%。所以能否請你們說明一下，就歐洲而言，如果排除商用車業務的到期流失（roll-offs），你們在歐洲調整後的有機成長大概會是多少？另外從全球角度來看，VTS 本季的成長是否實際上也優於你們原先的預期？

Well, let's start first on Europe, okay? They were down 4% I think year-over-year in auto Europe, if I -- or general sales --

好，我們先從歐洲開始，好嗎？我記得歐洲汽車市場年對年下滑了 4%——如果我——或是整體銷售——

In the region.

在該地區。

-- in the region, which of course, that region is about 50% automotive. Our automotive sales weren't down as much. Specifically, the drop in sales in German providers was from the lower-displacement diesel engines, our EGR application specifically, and is going towards -- and a lot of our business is going towards higher displacement diesel engines and also [petrol] engines. So we were I think kind of -- were able to not be as impacted by the impact you talked about as far as German sales being down. So I think from that end, it ended up being a good mix for us with what the market conditions did because of the changes in the test certification requirements that went into September. So from that standpoint, I'm pleased.

——在該地區；當然，那個地區約有 50% 是汽車相關。我們的汽車銷售下滑幅度沒有那麼大。具體來說，德國供應商銷售下滑主要來自小排量柴油引擎，我們特別是 EGR 應用，並且正轉向——而我們很多業務正轉向較大排量柴油引擎以及[汽油]引擎。因此我認為——我們在某種程度上能夠不那麼受到你提到的德國銷售下滑影響。所以我認為就這一端而言，因為 9 月起生效的測試認證要求變更所帶來的市場狀況變化，對我們而言反而形成了不錯的組合。因此從這個角度來看，我很滿意。

Now, I wanted -- the second part of your question was -- I want to make sure I understand what that was, Joe.

現在，我想——你問題的第二部分是——我想確保我理解那部分是什麼，Joe。

From a global basis, would you actually say VTS exceeded your expectation from a revenue standpoint?

從全球角度來看，你會說 VTS 在營收表現上超出你的預期嗎？

Yes, and clearly, being up 10% for adjusted inflation, it is what I would say [positive] again when we're forecasting it. We have a lot of new model launches that were happening this year. You know about the China launches that, again, I think up this quarter 20-something-percent year-over-year and that's coming off a 50% quarter last year. Then we have a lot of launches going on in Mexico as well, supporting one of the big three providers on -- specifically on pickup trucks and some other big component launches. So you put that all together and saying that we manage through Europe with the mix that we have at a fairly decent level, you'd have to say that we're pleased with the growth.

是的，而且很明顯地，若以調整後通膨計算成長 10%，我會說這再次是[正面]的，當我們在做預測時也是如此。我們今年有很多新機型的上市。你也知道中國的上市案——我認為本季年增約 20 多個百分點，而這是在去年同季成長 50% 的基期之上。另外我們在墨西哥也有許多上市案，支援三大供應商之一——特別是在皮卡車以及其他一些大型零組件的上市。把這些都加總起來，再加上我們以目前的產品組合在歐洲也能以相當不錯的水準應對，你必須說我們對成長感到滿意。

We're not pleased with the conversion because we said, okay, in there we've got lots of ins and outs between materials that I'm sure you'll have a question or two on. But we'll rest assured that our operating inefficiencies that are really driven by these multiple program launches in two of our plants, okay, one in China and one in Mexico, are being addressed. I'm very pleased with the direction of the last, say, month on what we're doing. We're getting in front of that now, but again, that kept us from having from what I'd say is a really positive quarter despite the material issue.

我們對獲利轉換率不滿意，因為我們說，好吧，裡面有很多材料面的進進出出，我相信你會就此問一兩個問題。但請放心，我們的營運效率不彰——主要是由於我們兩座工廠的多項專案同時導入所致，一座在中國、一座在墨西哥——正在被處理。我對過去大約一個月我們所做的事情的方向非常滿意。我們現在正提前介入處理，但同樣地，儘管有材料面的問題，這仍使我們無法達到我所說的那種非常正面的季度表現。

On the profit conversion, so I understand lowering it by $5 million for the year isn't the hope for outcome, but at the same time, in thinking about some of the things that have impacted Modine over recent years, and particularly this Midwest premium, you've undertaken bigger hits to profit in the past. $5 million seems to actually be not that bad, and I'm just wondering does that reflect the improvements you've made from an organizational standpoint, from a procurement standpoint, from a footprint standpoint? Would that $5 million impact a few years ago have been $10 million, $15 million in this type of environment?

關於獲利轉換，我理解把全年下調 500 萬美元並不是你們希望的結果，但同時，回想近年來影響 Modine 的一些因素，特別是這個 Midwest premium，你們過去其實承受過更大的獲利衝擊。500 萬美元看起來其實不算太糟，我想問的是，這是否反映了你們在組織面、採購面、以及產能/據點布局（footprint）面所做的改善？在這種環境下，幾年前的 500 萬美元影響，是否可能會是 1,000 萬、1,500 萬美元？

Yes, Joe, it's Mick, and we're nodding; Tom and I are nodding, absolutely. And you touched on a few of them. You know the journey we've been on to create a global procurement group, so just on that side, our global procurement team is already looking at options and negotiating and resourcing for a price increase, as Tom mentioned, we don't anticipate happening until calendar '19.

是的，Joe，我是 Mick，我們在點頭；Tom 和我都在點頭，完全同意。而且你提到了其中幾點。你知道我們一路走來建立全球採購團隊，所以就這一面而言，我們的全球採購團隊已經在評估選項、進行談判並重新配置供應來源，以因應漲價；如 Tom 所提，我們預期要到 2019 年曆年才會發生。

And then when you look at the total Modine, to me, it completely aligns with the SDG strategy Tom laid out. If you go back to the Modine that was 90% vehicular, you can't get away from material swings and a lot of what we're seeing in the market now. We jump ahead and you saw a 40% increase in earnings in CIS and we've got a very strong backlog in Building HVAC and we expect ongoing data center growth. I think the other big piece of us having good discipline and procurement in operations on vehicular is just now Modine is truly becoming that more diversified industrial. And I see it in all of our metrics.

再來看整體 Modine，我認為這完全與 Tom 所闡述的 SDG 策略一致。如果回到那個 90% 都是車用的 Modine，你很難擺脫材料價格波動，以及我們現在在市場上看到的許多情況。我們往前跳一步，你看到 CIS 的獲利成長 40%，而且我們在 Building HVAC 有非常強勁的在手訂單（backlog），並且我們預期資料中心將持續成長。我認為另一個關鍵是，我們在車用業務的營運採購上保持良好紀律，而現在 Modine 也確實正在成為更為多元化的工業公司。我在我們所有的指標上都看得到這一點。

Joe, let me just add an echo to Mick's points. On a qualitative basis, we are much more focused as a strategic company delivering operational excellence. Procurement is a great example. We've brought in leadership from the outside that has put us at a, what I would say, a best-in-class kind of performance on how we manage our billion-dollar buy, okay? I'm really pleased with what that's driving strategically with our segments lined up the way they are now, and are driving strategic reviews. It's a lot easier in making sure we deploy globally the same strategy that can be applied to all markets.

Joe，我再補充呼應 Mick 的觀點。就質性而言，作為一家策略型公司，我們更聚焦於交付營運卓越。採購就是一個很好的例子。我們從外部引進了領導人才，使我們在如何管理我們十億美元規模的採購支出（billion-dollar buy）方面，達到我所說的同級最佳（best-in-class）表現，好嗎？我對這在策略上所帶動的成果非常滿意，因為我們的各事業部如今以這樣的方式對齊，並推動策略檢視。這也讓我們更容易確保在全球部署同一套可適用於所有市場的策略。

Sorry, the one thing I would add, Joe, is that in addition to all the work we're doing in procurement, the tariffs alone are a significant cost increase to Modine. That part is really going to get back to our ability to negotiate and deal with our customer base, where there's no way we can absorb all of the tariff, the LME portion, the transaction premium, you know well, and pass-throughs. But in addition on the vehicular side, probably the biggest challenge every supplier has is the tariffs are increasing cost and that's going to have to be a commercial --

抱歉，Joe，我還要補充一點：除了我們在採購上所做的所有工作之外，僅關稅本身就對 Modine 造成顯著的成本增加。這部分真的會回到我們與客戶群談判與應對的能力——我們不可能吸收所有關稅、LME 的部分、你很清楚的交易溢價（transaction premium），以及各種轉嫁（pass-throughs）。但另外在車用端，可能每一家供應商最大的挑戰是：關稅正在推升成本，而這將必須是一個商務上的——

Yes, and so we -- to quantify that more, we have 5 customers that are about 90% of the challenge we have with the tariffs both indirect and direct. Our teams have done a great job of laying that out, getting it into the piece-price, invoicing it, as I mentioned. The reception from our customers have been varied, but typically, there's more questions they have that they need answered, like what are all the alternatives? Can you find me another source? So we're going through all the motions there we need to go through, but it is going to come down to discussions that I personally will engage myself in these discussions because I'm not going to be sitting here taking on -- absorbing issues that, quite frankly, need to be passed through. So I feel very confident that we're taking the right approach and I think we'll see improved results because of it.

是的，所以我們——更量化地說，我們有 5 個客戶占了我們在關稅（間接與直接）方面挑戰的大約 90%。我們的團隊在把這些內容梳理清楚、納入單件價格（piece-price）、並如我提到的進行開票（invoicing）方面做得很好。客戶的反應不一，但通常他們會有更多需要我們回答的問題，例如有哪些替代方案？你能不能幫我找到另一個來源？所以我們正在走完所有必要的流程，但最後還是會回到討論；我會親自參與這些討論，因為我不會坐在這裡承擔——吸收那些坦白說必須轉嫁出去的問題。因此我非常有信心我們採取了正確的方法，而且我認為我們會因此看到改善的結果。

Okay. That's good color. If I can switch over to CIS, where does Luvata stand relative to your plan at the time of the acquisition? It would seem to be running ahead of schedule in terms of profit contribution, but I guess the question is how far ahead of schedule might it be at this point?

好的。這些補充很有幫助。如果我可以轉到 CIS，Luvata 相對於你們在收購時的計畫目前處於什麼位置？看起來在獲利貢獻方面進度超前，但我想問的是，到目前為止大概超前了多少？

I'll leave -- Joe, I'll leave it with it's ahead of schedule and to be fully transparent, whenever we do acquisitions, you have a range of assumptions and models. And we were lucky enough, when we acquired Luvata, Tom and I felt like we acquired it right, meaning you don't -- we had the discipline not to build everything into the purchase.

Joe，我先說結論——它確實超前進度；而且完全透明地說，每當我們做併購時，都會有一個假設與模型的區間。我們很幸運，當我們收購 Luvata 時，Tom 和我覺得我們買得很到位，也就是說你不會——我們有紀律地沒有把所有東西都納入收購價格之中。

We've exceeded the synergies, I'd say, by $3 million to $5 million. And the margins are moving up faster than we have planned -- not everything. There's also challenges across that business. In certain markets, the data center is clearly a tailwind. I think we'd all tell you there's a heavy focus also just on operational improvements, delivery times, backlog, that kind of thing. But overall, I think we couldn't be more happy, both what's in our control and some favorable market dynamics is that we're ahead of plan.

我會說，我們超出協同效益約300萬到500萬美元。而且利潤率上升的速度比我們原先規劃的更快——當然不是所有項目都是如此。那項業務也仍面臨一些挑戰。在某些市場，資料中心顯然是一股順風。我想我們都會告訴你，我們也非常專注在營運改善、交付時間、積壓訂單等這類事情上。但整體而言，我想我們再滿意不過了；無論是我們可控的部分，或是一些有利的市場動態，都讓我們走在計畫之前。

Yes, and let me just kind of qualify that by saying integration of a $600 million carve-out into Modine was a big challenge. We stepped up; we did that right. But that's happened right because of both sides of the equation were working together. I couldn't be happier with the cultural integration of the two businesses and how that's worked out. And the leadership team that was Luvata that's integrated itself is now CIS Modine, has done so very well.

是的，我再補充說明一下：把一個6億美元的剝離資產整合進Modine，是一項很大的挑戰。我們挺身而出；而且我們做對了。之所以能做對，是因為等式兩端都在一起合作。我對兩個事業的文化整合以及目前的成果感到非常滿意。而原本在Luvata、如今已整合為CIS Modine的領導團隊，也做得非常出色。

Standard practices that we worked on every day to drive whether it's procurement operational improvements, all those quality systems, have really worked well together, so a very positive thing that gives us encouragement. As I mentioned in my comments, about moving forward with additional bolt-ons or acquisitions to go with that, we feel very confident about it.

我們每天推動的標準作法，不論是採購、營運改善、各種品質系統，都確實很順利地整合運作，因此這是一件非常正面的事，也讓我們更有信心。如同我在評論中提到的，展望未來若要再搭配更多補強型併購或收購，我們對此非常有信心。

And then maybe my last question still on CIS -- when you look at the order book you put together within the quarter, and I'm thinking on some of these markets like data center can be really volatile quarter-to-quarter, do you have an order book entering FQ3 where you at least feel confidence about maybe sustaining this really high rate of growth?

那我最後一個問題還是關於CIS——當你看本季累積的訂單簿時，我想到像資料中心這些市場可能會在季度之間非常波動；你們在進入FQ3時是否有一個訂單簿，讓你們至少對於能否維持這麼高的成長率有信心？

So from my side, when you look at forecasts and we talk to the team, Joel (sic), I think if you go by market, Joe, the answer is kind of different. So I would say what we've learned on the data centers is it tends to be cyclical, so we've -- you guys, we've all seen the industry go through a downturn. I think that lasted a year or more. All expectations from multiple sources and our customers is we expect data centers to continue the strength well into calendar '19 and that's good news for us. So we'd probably call that -- it can be lumpy over longer periods of time. We would fully expect at some point that market will go into another year of slowdown, but we're not seeing that.

就我這邊來看，當你看預測並和團隊討論時，Joel（原文如此），我想如果按市場來看，Joe，答案會有點不同。所以我會說，我們從資料中心學到的是它往往具有週期性；我們——你們、我們大家——都看過這個產業經歷下行。我認為那次下行持續了一年或更久。來自多方來源以及我們客戶的所有預期都顯示，我們預期資料中心的強勁態勢會一路延續到2019曆年，這對我們是好消息。所以我們大概會說——在較長的時間尺度上，它可能會呈現不均勻的波動。我們完全預期在某個時間點，該市場會再進入另一段為期一年的放緩，但我們目前還沒有看到那樣的跡象。

The rest of that business, of CIS business, is really a very short window, visibility only out maybe 1 or 2 months. So we really rely on trends and what the teams are telling us at that point. But we knew that at the time, if you recall, and we also remind everybody that a large portion of that business is also replacement product. So we look at it as kind of a nice counterbalance to the rest of Modine.

CIS業務的其餘部分，能見度其實非常短，可能只看得到未來1到2個月。因此我們很依賴趨勢，以及團隊在當下告訴我們的情況。但如果你還記得，我們當時就知道這一點；我們也提醒大家，該業務很大一部分其實是替換型產品。所以我們把它視為對Modine其他業務的一個不錯的平衡力量。

And I would just add, Joe, that the CIS element is what makes us great. On the Building HVAC side, with data center cooling, we're also seeing -- although this past quarter wasn't that dynamic, we're seeing in the order book, strong, strong sales coming in; as a matter of fact, one of our largest orders ever coming in that's now just being placed for data center improvements that'll drive chiller and precision unit -- precision air conditioning unit sales as well. So this is a clear mega-trend we're seeing that we're being -- benefiting from.

我再補充一下，Joe，CIS這個要素正是讓我們出色的原因。在建築HVAC端、以資料中心冷卻為例，我們也看到——雖然本季沒有那麼明顯——在訂單簿中有非常、非常強勁的銷售進來；事實上，我們史上最大的一筆訂單之一正在進來，現在才剛下單，用於資料中心改善，這也將帶動冷水機與精密機組——精密空調機組——的銷售。因此，這是一個我們正在看到的明確巨型趨勢，而我們也正從中受益。

That's great. I'll leave it there. Congrats on the quarter. Thanks, guys.

太好了。我就先到這裡。恭喜本季表現。謝謝各位。

Thank you. And I'm not showing any further questions at this time. I would now like to turn the conference back to Kathy Powers.

謝謝。目前我這邊沒有看到其他問題。現在我想把電話會議交回給Kathy Powers。

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

謝謝，也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, thank you for your participation in today's conference. This does conclude your program and you may all disconnect. Everyone have a great day.

各位女士、先生，感謝各位參與今天的會議。本次節目到此結束，大家可以掛線。祝各位有美好的一天。