Modine Manufacturing Company (MOD) 2019 Q4 法說會逐字稿

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

各位女士、先生，早安，歡迎參加 Modine Manufacturing Company 2019 會計年度第四季財報電話會議。(接線員指示) 提醒各位，本次通話將被錄音。

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

現在我想將會議交給本次會議主持人——Kathy Powers 女士，她是副總裁、財務長、投資人關係與稅務主管。

Good morning, and thank you for joining our conference call to discuss Modine's fourth 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, modine.com.

各位早安，感謝各位參加我們的電話會議，一同討論 Modine 2019 會計年度第四季的業績結果。今天與我一同出席的有 Modine 總裁暨執行長 Tom Burke，以及我們的副總裁（財務）暨財務長 Mick Lucareli。我們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 modine.com 的投資人關係專區下載已張貼的 PDF 檔。

This morning, Tom and Mick will present our fourth quarter and full year results for fiscal '19 and will provide our outlook for Fiscal '20. At the end of the call, there will be a question-and-answer session.

今天上午，Tom 與 Mick 將報告 2019 會計年度第四季及全年業績，並提供 2020 會計年度展望。通話結束前將安排問答時間。

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提示。本次通話可能包含前瞻性陳述，其內容如同我們的財報新聞稿以及本公司向美國證券交易委員會（SEC）提交之文件中所述。

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

接下來，我很高興將電話交給 Tom Burke。

Thank you, Kathy, and good morning, everyone. We finished fiscal 2019 with a strong quarter in our industrial businesses, capping our second year in a row of record sales and earnings. As a matter of fact, since announcing our SDG strategy in fiscal 2016, sales have increased 63%, adjusted operating income increased 110%, and our industrial businesses now make up 40% of total sales. Further, we are focused on accelerating our transformation to become a higher-performing and more industrial company.

謝謝你，Kathy，各位早安。我們以工業事業強勁的一季結束 2019 會計年度，並連續第二年創下銷售與獲利的歷史新高。事實上，自我們在 2016 會計年度宣布 SDG 策略以來，銷售額成長 63%，調整後營業利益成長 110%，而我們的工業事業目前占總銷售額的 40%。此外，我們正專注於加速轉型，成為績效更高、且更偏向工業導向的公司。

Looking at the fourth quarter. Sales increased 3% on a constant currency basis, driven by strong growth in our Building HVAC segment. Our fourth quarter adjusted operating income was $35 million, fairly flat from the prior year. Strong performances in the CIS and Building HVAC segments were unfortunately offset by challenges in the VTS segment. Material costs have continued to have a negative impact on margins in our VTS segment due to the direct and indirect impact of tariffs on our raw material purchases.

先看第四季。以固定匯率計算，銷售額成長 3%，主要由 Building HVAC 事業群的強勁成長所帶動。第四季調整後營業利益為 3,500 萬美元，與去年同期大致持平。CIS 與 Building HVAC 事業群表現強勁，但不幸被 VTS 事業群的挑戰所抵銷。由於關稅對原物料採購的直接與間接影響，材料成本持續對 VTS 事業群的毛利率造成負面影響。

Overall, fiscal 2019 was a very successful year for Modine. We reported another solid year of revenue and earnings growth despite the significant headwinds resulting from the negative impact of tariffs on our vehicular business. Fiscal 2019 sales increased 7% on a constant currency basis, and adjusted operating income of $132 million increased 10% from the prior year.

整體而言，2019 會計年度對 Modine 來說是非常成功的一年。儘管關稅對我們的車用業務造成顯著逆風，我們仍繳出另一個營收與獲利穩健成長的年度。以固定匯率計算，2019 會計年度銷售額成長 7%，調整後營業利益為 1.32 億美元，較去年成長 10%。

Overall, I couldn't be happier with the industrial side of the business, and I'm excited about our future, especially as we complete the strategic review of our automotive business that was announced early in the fourth quarter. I'm pleased to report that we made significant progress and will provide additional details after Mick reviews our fourth quarter results and our outlook for fiscal 2020.

整體來看，我對工業端業務的表現非常滿意，也對未來感到振奮，尤其是在我們完成於第四季初宣布的車用業務策略檢討之際。我很高興報告，我們已取得重大進展；在 Mick 檢視第四季業績與 2020 會計年度展望之後，我們將提供更多細節。

Turning to Page 5. Sales for the VTS segment were down 5% from the prior year but were slightly higher on a constant currency basis. Growth in sales to commercial vehicle customers in the Americas region and higher sales to the off-highway and automotive customers in Asia were offset by lower automotive sales in the Americas and lower sales in Europe. Adjusted operating income from the VTS segment was $20 million for the quarter, which was $9 million lower than the prior year. Adjusted operating margin was down 210 basis points to 5.9%.

請看第 5 頁。VTS 事業群銷售額較去年下滑 5%，但以固定匯率計算則略為增加。美洲地區對商用車客戶的銷售成長，以及亞洲地區對非公路（off-highway）與車用客戶的銷售增加，被美洲地區較低的車用銷售與歐洲較低的銷售所抵銷。本季 VTS 事業群調整後營業利益為 2,000 萬美元，較去年同期減少 900 萬美元。調整後營業利益率下降 210 個基點至 5.9%。

Throughout fiscal 2019, the margins in our VTS segment were negatively impacted by the direct and indirect impact of tariffs on our raw material costs. As mentioned last quarter, some of our suppliers are leveraging the imbalance of supply and demand created by tariffs and have increased our fabrication costs by more than 20%. In one specific case, a major supplier decided to exit the heat exchanger business altogether. We worked diligently during the quarter to resource the supply in order to continue to meet our customer demand, which has increased our cost. We are also working to offset the direct cost of tariffs by negotiating cost-sharing agreements with our key customers. While it was hard to predict how quickly we can recover these costs, we did reach cost-sharing agreements with several customers this quarter and will be able to recover a portion of our costs moving forward. The situation remains somewhat fluid, but we're working diligently to service our customers and mitigate some of the supply chain volatility and cost pressure.

在整個 2019 會計年度期間，VTS 事業群的利潤率受到關稅對原物料成本之直接與間接影響而承壓。如同上季所提，部分供應商利用關稅造成的供需失衡，將我們的加工製造成本提高超過 20%。在一個特定案例中，一家主要供應商甚至決定全面退出熱交換器業務。我們在本季努力重新配置供應來源，以持續滿足客戶需求，但也因此提高了成本。我們也正透過與主要客戶協商成本分攤協議，來抵銷關稅的直接成本。雖然難以預測我們能多快回收這些成本，但本季我們已與數位客戶達成成本分攤協議，未來將可回收部分成本。目前情勢仍有一定程度的不確定性，但我們正持續努力服務客戶，並降低部分供應鏈波動與成本壓力。

Please turn to Page 6. Sales for our CIS segment decreased 2% from the prior year but increased 2% on a constant currency basis primarily due to a 9% increase in sales to data center customers. The segment reported adjusted operating income of $14 million, up 17% from the prior year. The adjusted operating margin was up 130 basis points year-over-year to 8%. This improvement was driven by higher sales volume and favorable mix. The sale of coolers into the data center market continues to drive benefit for our CIS segment. This has been a strong market for us this fiscal year, and we expect this market to remain strong in fiscal 2020.

請翻到第 6 頁。我們 CIS 事業群銷售額較去年下降 2%，但以固定匯率計算則成長 2%，主要因對資料中心客戶的銷售成長 9%。該事業群調整後營業利益為 1,400 萬美元，較去年成長 17%。調整後營業利益率年增 130 個基點至 8%。此改善主要由較高的銷售量與有利的產品組合所帶動。在資料中心市場銷售冷卻器持續為 CIS 事業群帶來效益。本會計年度這對我們而言是強勁的市場，我們預期 2020 會計年度該市場仍將維持強勁。

Please turn to Page 7. Sales for our Building HVAC segment increased 21% or 25% on a constant currency basis driven primarily by a very strong performance by our U.K. business. Adjusted operating income increased 79% from the prior year to $6 million, and adjusted operating margin increased 360 basis points to 11.2%. This increase was driven by higher sales volume and lower SG&A expenses.

請翻到第 7 頁。Building HVAC 事業群銷售額成長 21%，以固定匯率計算成長 25%，主要由英國業務非常強勁的表現所帶動。調整後營業利益較去年成長 79% 至 600 萬美元，調整後營業利益率增加 360 個基點至 11.2%。此增長主要由較高的銷售量與較低的銷售、一般及行政（SG&A）費用所驅動。

This was an exceptionally strong quarter for sales of air-conditioning products in our U.K. business. We have been winning significant new business for both precision cooling products and chillers in the U.K. and are new seeing the benefit of these wins in our results.

本季英國業務的空調產品銷售表現格外強勁。我們在英國的精密冷卻產品與冷水機（chillers）方面贏得了多項重要新業務，且我們現在正開始在業績中看到這些得標所帶來的效益。

With that, I'd like to turn over to Mick for an overview of our consolidated results and to provide our outlook for fiscal 2020.

接下來，我想把時間交給 Mick，請他概述我們的合併業績，並提供我們對 2020 會計年度的展望。

Thanks, Tom, and good morning, everyone.

謝謝你，Tom，各位早安。

Please turn to Slide 9. Fourth quarter sales decreased $10 million or 2% largely due to a negative FX impact of $25 million. On a constant currency basis, sales were up 3%. Gross profit of $92 million was slightly lower by 5%, resulting in a gross margin of 16.4%. CIS and Building HVAC had strong gross margins in the quarter. On the VTS side, we incurred a sizable decrease in gross margin due primarily to flat sales, combined with the negative impact of tariff and tariff-related costs. In addition, VTS experienced higher labor and warranty costs in the quarter compared to the prior year.

請翻到第 9 張投影片。第四季銷售額減少 1,000 萬美元或 2%，主要是因為外匯（FX）負面影響 2,500 萬美元。以固定匯率計算，銷售額成長 3%。毛利為 9,200 萬美元，略降 5%，毛利率為 16.4%。CIS 與 Building HVAC 在本季的毛利率表現強勁。在 VTS 方面，我們的毛利率出現顯著下滑，主要原因是銷售持平，加上關稅及關稅相關成本的負面影響。此外，VTS 本季的人工與保固成本較去年同期增加。

To help offset the volume and material cost challenges, we were extremely focused on SG&A costs, which were relatively flat in the quarter. The $64 million of SG&A costs included $6 million of consulting and advisory fees related to the automotive business review and $1 million for environmental charges. Excluding these items, SG&A was down significantly.

為了協助抵銷出貨量與材料成本的挑戰，我們高度聚焦於 SG&A 成本，使其在本季相對持平。6,400 萬美元的 SG&A 成本包含 600 萬美元與汽車業務檢討相關的顧問與諮詢費，以及 100 萬美元的環境相關費用。排除這些項目後，SG&A 顯著下降。

Adjusted operating income was $34.6 million, which was relatively flat to the prior year. As Tom reviewed, the earnings growth in CIS and Building HVAC was offset by the decline in VTS.

調整後營業利益為 3,460 萬美元，與去年同期大致持平。如 Tom 所回顧，CIS 與 Building HVAC 的獲利成長被 VTS 的下滑所抵銷。

The appendix includes an itemized list of adjustments and a full reconciliation to our U.S. GAAP results. These adjustments totaled $16.1 million and pertain to restructuring expenses, strategy consulting fees and environmental charges related to previously owned manufacturing facilities. The restructuring expenses are mostly severance costs at a European manufacturing location.

附錄包含調整項目的明細清單，以及與我們美國 GAAP 結果的完整調節表。這些調整合計 1,610 萬美元，主要與重整費用、策略顧問費，以及與先前擁有之製造設施相關的環境費用有關。重整費用多為歐洲一處製造據點的資遣費用。

I also want to point out that we recorded $4.2 million of income tax expense, which is significantly higher than the prior year. Our adjusted effective tax rate was 23% compared to 16% for the same period in the prior year. As we have previously discussed over last year, the lower adjusted tax rate in the prior year was due to a development credit in Hungary. Our adjusted earnings per share was $0.40, which is down $0.04 or 9% from the prior year due to the higher tax rate.

我也想指出，我們認列了 420 萬美元的所得稅費用，明顯高於去年同期。我們的調整後有效稅率為 23%，去年同期為 16%。如同我們在去年先前討論過的，去年較低的調整後稅率是因為匈牙利的開發抵減（development credit）。我們的調整後每股盈餘為 0.40 美元，因稅率較高，較去年同期減少 0.04 美元或 9%。

Turning to Slide 10. Fiscal '19 operating cash flow was $103 million, and our free cash flow was $29 million. As I explained in previous calls, this year's cash flow was negatively impacted by a number of items, including higher incentive compensation payments and working capital levels. In particular, we've been carrying higher inventory levels primarily due to program launches and the impact of tariffs on our domestic supply of materials along with preparing for potential Brexit issues. I would also like to note that our free cash flow of $29 million included the negative impact of about $17 million of cash payments, primarily related to restructuring activities.

接著看第 10 張投影片。2019 會計年度的營運現金流為 1.03 億美元，自由現金流為 2,900 萬美元。如我在先前電話會議中所說，今年的現金流受到多項因素的負面影響，包括較高的獎酬（incentive compensation）支付以及營運資金水位。特別是，我們維持較高的庫存水位，主要是因為專案啟動（program launches）、關稅對我們國內材料供應的影響，以及為潛在的英國脫歐（Brexit）問題預作準備。我也要補充，我們 2,900 萬美元的自由現金流包含約 1,700 萬美元現金支付的負面影響，主要與重整活動相關。

Finally, our net debt decreased $32 million during the year, and our leverage ratio was 2.1, which is within our target range of 1.5 to 2.5.

最後，我們的淨負債在年度內減少 3,200 萬美元，槓桿比率為 2.1，落在我們 1.5 至 2.5 的目標區間內。

Now let's turn to our fiscal 2020 guidance on Slide 11. I'm pleased to report that we're currently forecasting another year of earnings growth despite some challenging markets. To summarize our fiscal '20 guidance, we project sales to be flat to up 5%. First, we expect the strong growth to continue in our Building HVAC segment. Next, with regards to CIS, we're expecting a more moderate level of growth this year due to leveling off of data center sales combined with a negative foreign currency impact. Last, we anticipate lower growth in our VTS markets, and we expect sales will be flat to down versus the prior year. The largest challenge is in Europe due to a slowing automotive market and the continued wind-down of certain commercial vehicle programs. We expect continued growth in Asia and for the Americas region to be generally flat.

現在讓我們看第 11 張投影片的 2020 會計年度財測指引。我很高興報告，儘管部分市場具挑戰性，我們目前仍預期獲利將再成長一年。概括我們 2020 會計年度指引，我們預估銷售額將持平至成長 5%。首先，我們預期 Building HVAC 事業部門的強勁成長將持續。其次，就 CIS 而言，由於資料中心銷售趨於持平，加上外幣的負面影響，我們預期今年成長將較為溫和。最後，我們預期 VTS 市場的成長較低，銷售額相較去年將持平至下滑。最大的挑戰在歐洲，原因是汽車市場放緩，以及部分商用車專案持續收尾（wind-down）。我們預期亞洲將持續成長，而美洲地區整體大致持平。

We anticipate earnings growth in all 3 segments, with adjusted operating income to be in the range of $135 million to $145 million. This equates to a year-over-year growth rate of 2% to 10%. With regards to other key assumptions, we expect annual interest expense of approximately $21 million, and we expect our adjusted tax rate to be approximately 25% in fiscal '20 compared to 20% in fiscal '19. Based on the expected tax rate, we anticipate our adjusted EPS to be between $1.55 and $1.70.

我們預期三個事業部門皆將實現獲利成長，調整後營業利益預估介於 1.35 億至 1.45 億美元。這相當於年增率 2% 至 10%。就其他關鍵假設而言，我們預期年度利息費用約 2,100 萬美元，且預期 2020 會計年度的調整後稅率約為 25%，相較 2019 會計年度的 20% 提高。基於預期稅率，我們預估調整後每股盈餘（EPS）介於 1.55 至 1.70 美元。

Before wrapping up, I want to run through how we see quarterly earnings and the overall run rate for the year. With regards to the first half of the year, we're expecting some significant challenges, which will result in difficult comparisons, especially in the first quarter. One of the main drivers is that we're expecting a very weak first quarter on both the top and the bottom line from VTS as compared to the prior year. In addition to lower volumes, we expect the margins of this business to be in line with the most recent quarters, reflecting the significant impact of tariffs and the increase in our domestic fabrication costs that Tom mentioned earlier. We expect the CIS segment to have lower revenue year-over-year in the first half primarily due to very robust data center sales in fiscal 2019. The second half will be more favorable on easier comparisons and projections for orders ramping up later in the year.

在結束之前，我想說明我們對季度獲利以及全年整體運行水準（run rate）的看法。就上半年而言，我們預期將面臨一些重大挑戰，導致比較基期不利，尤其是在第一季。主要原因之一是，我們預期 VTS 在營收與獲利兩端的第一季都將相較去年同期非常疲弱。除了出貨量較低之外，我們預期該業務的利潤率將與最近幾季一致，反映關稅的重大影響，以及 Tom 先前提到的國內製造加工成本上升。我們預期 CIS 事業部門在上半年將出現年減的營收，主要是因為 2019 會計年度資料中心銷售非常強勁。下半年在比較基期較容易，以及預期訂單於年內較晚時點放量（ramping up）的帶動下，將更為有利。

Lastly, I want to point out that our full year outlook fully includes our automotive business. If a transaction is completed this fiscal year, it will obviously have an impact on our fiscal '20 financial results. Once we have certainty regarding the outcome, deal, details and timing, we will address this further.

最後，我想指出，我們的全年展望已完整納入汽車業務。若本會計年度完成一項交易，顯然將對我們 2020 會計年度的財務結果造成影響。一旦我們對結果、交易、細節與時程有明確性，我們將進一步說明。

Before passing back to Tom, I would summarize by saying we're pleased to report another record year in fiscal '19 and anticipate additional growth in earnings and cash flow in fiscal '20. I look forward to reporting our results throughout fiscal 2020.

在把時間交回給 Tom 之前，我總結如下：我們很高興報告 2019 會計年度再創紀錄，並預期 2020 會計年度的獲利與現金流將進一步成長。我期待在 2020 會計年度期間持續向各位報告我們的業績。

With that, Tom, I'll turn it back to you.

那麼，Tom，我把話交回給你。

Thanks, Mick. Please turn to Slide 12. As I said at the beginning of the call, fiscal 2019 was another successful year for Modine. 3 years ago, we laid the groundwork for our Strengthen, Diversify and Grow strategy, which has led us to who we are today: a stronger, more diversified thermal management company. Although we have clearly made great progress, we are not at the end of this journey. We will continue to improve our business and our competitive position moving forward with strategic actions. This includes the strategic review of the automotive business that we announced early in the fourth quarter, which has progressed significantly.

謝謝，Mick。請翻到第12頁投影片。如同我在電話會議一開始所說，2019會計年度對Modine而言是另一個成功的一年。3年前，我們為「強化、多元化與成長」（Strengthen, Diversify and Grow）策略奠定基礎，這使我們成為今天的樣貌：一家更強大、更多元的熱管理公司。雖然我們顯然已取得很大進展，但這段旅程尚未結束。我們將持續透過策略性行動，進一步改善我們的業務與競爭地位。這包括我們在第四季初宣布的汽車業務策略檢討，目前已取得顯著進展。

The history of Modine is tied to the automobile. From supplying radiators for the Model T to providing battery chillers for electric vehicles, automotive sales have always been a significant portion of our business. However, this market has changed and is fundamentally different from our other vehicular end markets and from our industrial businesses. A level of capital investment required to remain competitive significantly hampers our returns in this segment. As I have discussed before, Modine's automotive business has a lot of positive aspects. We have a fantastic brand name and IP portfolio. In addition, we are a leader in engine cooling, leading to a lot of development work and new business on electric vehicles. However, in reviewing the market dynamics and our corporate strategy, we believe that the value of this business may be maximized through another owner.

Modine的歷史與汽車密不可分。從為Model T供應散熱器，到為電動車提供電池冷卻器，汽車銷售一直是我們業務的重要部分。然而，這個市場已經改變，且在本質上與我們其他車輛終端市場以及工業業務不同。為維持競爭力所需的資本投資水準，顯著壓抑了我們在此分部的報酬。如我先前所談，Modine的汽車業務有許多正面面向。我們擁有極佳的品牌名稱與智慧財產（IP）組合。此外，我們在引擎冷卻領域居於領先地位，帶來大量開發工作以及電動車的新業務。然而，在檢視市場動態與公司策略後，我們相信此業務的價值可能透過由其他所有者持有而達到最大化。

The automotive business is approximately 25% of our revenues, representing more than $500 million. Although we don't report margins by customer end market, the margins on total auto sales are lower than margins in the VTS segment as a whole. In addition, the automotive industry is significantly more capital-intensive than our other end markets. In fact, 40% to 50% of our total CapEx is generally spent on automotive programs in a given year.

汽車業務約占我們營收的25%，代表超過5億美元。雖然我們不按客戶終端市場揭露毛利率，但整體汽車銷售的利潤率低於VTS分部整體的利潤率。此外，汽車產業相較於我們其他終端市場，資本密集度顯著更高。事實上，在某一年度中，我們總資本支出（CapEx）的40%到50%通常用於汽車專案。

We have made significant progress on our strategic evaluation of our automotive business and are moving forward with the sale process. As you can imagine, the carveout and separation will be extremely complicated given the size and scale of the business. Although some of our manufacturing facilities are dedicated to automotive sales, others are commingled. In some cases, we have multiple buildings on our manufacturing campus where the automotive programs can be concentrated in one building. This separation will be complex, but our teams are working on a comprehensive plan. Currently, our VTS segment has 18 manufacturing locations, and we anticipate a separation of the auto business would include approximately 10 of these locations.

我們在汽車業務的策略評估上已取得重大進展，並正推進出售流程。如各位所能想像，鑑於該業務的規模與體量，切割與分離將極其複雜。雖然我們部分製造設施專供汽車銷售，但其他則是混合使用。在某些情況下，我們在製造園區內有多棟建築，可將汽車專案集中於其中一棟。這項分離將很複雜，但我們的團隊正在制定一套全面性的計畫。目前，我們的VTS分部有18個製造據點，我們預期汽車業務的分離將涵蓋其中約10個據點。

So far, we are pleased with the level of interest in this business and are confident in the process. We cannot guarantee any particular outcome but are committed to completing the process as quickly as possible while still taking the steps necessary to maximize value for our shareholders.

截至目前，我們對此業務的關注度感到滿意，並對流程充滿信心。我們無法保證任何特定結果，但我們承諾在仍採取必要步驟以為股東極大化價值的前提下，盡可能快速完成流程。

If the process is successful, Modine will look quite different. We will be temporarily smaller from a revenue standpoint but would have improved operating margins. Our overall capital expenditures would decrease, and free cash flow would increase significantly, resulting in higher return on capital. We will maintain a balanced approach to capital allocation. We will consider a number of options for the use of the proceeds. We'll continue to invest organically in our growing platforms, manage our balance sheet through the repayment of debt and opportunistically consider share repurchases or other ways to return cash to shareholders as appropriate.

若流程成功，Modine的樣貌將會大不相同。從營收角度來看，我們將在短期內變得更小，但營業利潤率將改善。我們整體資本支出將下降，自由現金流將顯著增加，進而帶來更高的資本報酬率。我們將維持均衡的資本配置方式。我們將考量多種資金用途選項。我們會持續在成長中的平台進行有機投資，透過償還債務管理資產負債表，並在適當時機機會性地考慮庫藏股或其他向股東返還現金的方式。

In addition, we will continue to look for accretive acquisitions that would further grow our industrial businesses in markets where Modine maintains industry-leading positions and/or other adjacent opportunities. We see this as a key component to future growth.

此外，我們將持續尋找具增益性的併購機會，以在Modine維持產業領先地位的市場中進一步擴大我們的工業業務，及／或其他相鄰機會。我們將此視為未來成長的關鍵組成。

It is clear that Modine's performance in our industrial markets, as well as our off-highway and commercial vehicle markets within VTS, are performing well. And the goal of our strategic review of the automotive business is to increase returns and drive shareholder value. We believe that a future focused on these markets is the best option for the company and our shareholders. Once complete, we expect Modine to emerge as even a stronger, more diversified industrial thermal management company.

很明顯，Modine在工業市場的表現，以及VTS分部中的非公路與商用車市場，均表現良好。而我們對汽車業務進行策略檢討的目標，是提升報酬並推動股東價值。我們相信，聚焦於這些市場的未來，是對公司與股東而言的最佳選擇。一旦完成，我們預期Modine將蛻變為一家更強大、更多元的工業熱管理公司。

Since announcing SDG platform in October of 2015, Modine's market cap has increased by 85%. We are confident and excited that even more shareholder value will be created with this next phase as we are further able to demonstrate the potential of our industrial businesses.

自2015年10月宣布SDG平台以來，Modine的市值已增加85%。我們充滿信心且感到振奮，隨著進入下一階段並能更進一步展現我們工業業務的潛力，將創造更多股東價值。

With that, we'd like to take your questions.

那麼，我們想開始回答各位的提問。

(Operator Instructions) And our first question is from the line of David Leiker from Baird.

(接線員指示) 我們的第一個問題來自Baird的David Leiker。

This is Joe Vruwink for David. I was wondering if we could do a bit of a retrospective on fiscal 2019. So you ended up generating $132 million in EBIT. Guidance started the year at $135 million to $145 million. But in thinking about bridging those 2 numbers, there was a much more substantial material cost headwind that arose as fiscal '19 went on. Can you quantify what that ultimately ended up being and then discuss some of the actions in Modine's control, operational actions that allowed you to mitigate that impact?

我是Joe Vruwink，代替David提問。我想知道我們是否可以稍微回顧一下2019會計年度。你們最終創造了1.32億美元的EBIT。年初的指引是1.35億到1.45億美元。但在思考這兩個數字之間的差異時，隨著2019會計年度進行，出現了更為顯著的材料成本逆風。你能量化最終的影響有多大，並談談一些在Modine可控範圍內、能夠緩解該影響的營運作為嗎？

Yes. It's Mick. I'll kind of take a stab at the material cost impacts and then let Tom comment on the operations side. So in fiscal '19, it was a combination, just as a reminder, of several items for us and, I think, others. The first was the direct impact to the tariffs, and net of any recovery that we got from customers, that was about $2 million approximately. In addition, the tariffs started to create some cost challenges and Tom has talked about in the past, particularly with 1 or 2 domestic suppliers that increased prices towards the end of the calendar year. That had a net impact of about another $1 million. And then while the LME was -- or the underlying metals were only up about 4% or 5% last year, the transaction premium on aluminum more than doubled. It was up about 115%, and that was about a $5 million impact. So from where we started the year and where we finished, at least $8 million of material cost increase that we needed to absorb or try to offset from the operation standpoint.

好的。我是Mick。我先嘗試說明材料成本的影響，然後讓Tom評論營運面的部分。所以在2019會計年度，提醒一下，對我們以及我想對其他公司而言，是多項因素的組合。第一個是關稅的直接影響，扣除我們從客戶端取得的任何回收後，約為200萬美元左右。此外，關稅也開始造成一些成本挑戰，正如Tom過去提到的，特別是有1到2家國內供應商在曆年年底前後調高價格。其淨影響約再增加100萬美元。再者，雖然LME——或基礎金屬——去年僅上漲約4%到5%，但鋁的交易溢價卻增加到原來的兩倍以上。上漲約115%，影響約為500萬美元。因此，從年初到年末，至少有800萬美元的材料成本增加需要我們吸收，或從營運面嘗試加以抵銷。

Yes. And then from other actions, clearly, CIS and Building HVAC overperformed, okay, versus plan where we started the year. So again, demonstration of being -- that diversified focus that we could leverage that growth and convert that effectively. Our procurement team did a fantastic job of overperforming last year as well on beating our expectations or our budgeted amounts for procurement savings by a significant amount.

是的。然後從其他行動來看，很明顯，CIS 與建築 HVAC 的表現優於預期，好嗎，相較於我們年初的計畫。所以再次證明——我們的多元化布局讓我們能夠運用那樣的成長，並有效地將其轉化為成果。我們的採購團隊也做得非常出色，去年同樣超額達成，採購節省金額大幅超越我們的預期或預算數。

And then as you know, we dug ourselves into a hole coming into the year with the launches, specifically one plant in China, one plant in North America, where we had significant launch ramp-up activity, kind of 24/7 type of coverage that we had to offset as well at the beginning of the year. We made progress through the year, significant progress. I'm pleased to say that we're back nearly where we should be. Specifically in China, feel very strong where we are at our plant near Shanghai. It's operating at -- with KPIs at our expected level. And in North America, again, with a lot of changed focus and discipline, we've got the trend reversed there, going in the right direction.

然後如你所知，我們在年初因為新品導入把自己挖進了一個坑，特別是一座在中國的工廠、一座在北美的工廠，我們有大量的導入爬坡活動，某種程度上是 24/7 的支援覆蓋，年初也必須把這些成本抵消掉。我們在一年當中取得了進展，而且是顯著的進展。我很高興地說，我們幾乎回到應有的水準。特別是在中國，我們對上海附近那座工廠目前的狀況非常有信心。它的運作——各項 KPI 都在我們預期的水準。而在北美，同樣地，透過大量改變焦點與紀律管理，我們已經把趨勢扭轉，正朝正確方向前進。

So I'd say CIS, Building HVAC offsetting some of those challenges that Mick described, procurement, effectiveness, with what we've invested in with resource and talent and then turning -- starting to get the momentum turned around towards the end of the year that helped us get back as well.

所以我會說，CIS、建築 HVAC 抵消了 Mick 所描述的一些挑戰；採購的成效，以及我們在人力與人才資源上的投入所帶來的效果；再加上——在年底開始把動能扭轉回來，這也幫助我們回到應有水準。

And then -- that was helpful. Can we have a similar conversation just in terms of what's contemplated in the 2020 outlook? It sounds like vehicular operationally should be better in 2020 relative to 2019. Unfortunately, it seems like later in the year, we're going to see a receding in volumes from some of the commercial vehicle and off-highway markets really if that's a possibility, so maybe cyclically, you're dealing with new pressures in vehicular. Do you think that's pretty much contemplated? And could CIS and HVAC be the offset again, so you feel -- it's always tough to call, but you feel like the $135 million to $145 million range, ultimately, that includes some buffer in the projection?

然後——這很有幫助。我們能否就 2020 年展望中所考量的內容，做一個類似的討論？聽起來車用事業在 2020 年的營運表現應該會比 2019 年更好。不過不幸的是，看起來在今年稍晚，我們可能會看到部分商用車與非道路市場的量在回落——如果這種情況可能發生的話——所以從景氣循環角度，你們可能在車用端面臨新的壓力。你認為這基本上都已經納入考量了嗎？而 CIS 與 HVAC 是否又能再次抵消，所以你覺得——雖然總是很難判斷——但最終的 1.35 億到 1.45 億美元區間，預測裡面包含了一些緩衝？

Yes. And Joe, it's Mick. Yes, I think we'll run through that. There's a lot there you covered, but it's good to kind of lay it out as we see it. So back to VTS, yes, I think we see the same market dynamics you guys are seeing. The challenge, biggest challenge in the VTS area right now is not seeing that market lift from a volume standpoint. We do have the full year impact of the tariffs, the direct and indirect tariffs. So while operations is improving in a normal year, we'd like to see some margin improvement, and you'd expect to see that. The tariffs will be about an incremental $7 million-or-so cost to us as we go to a full year impact of the direct and indirect tariffs. The actual traditional metal exchange numbers are neutral to slightly positive for us this year. So the biggest headwind is the lower volume and the tariff impact.

是的。Joe，我是 Mick。是的，我想我們可以把這些跑一遍。你提到的內容很多，但把我們看到的情況攤開來講是好的。回到 VTS，是的，我想我們看到的市場動態跟你們看到的一樣。目前 VTS 領域最大的挑戰，是從出貨量角度看不到市場的拉升。我們確實會承受關稅的全年影響，包括直接與間接關稅。所以雖然營運在改善，在正常年份我們會希望看到一些毛利率改善，也會預期看到那樣的改善。隨著直接與間接關稅進入全年影響，關稅對我們而言大約會是額外增加 700 萬美元左右的成本。今年傳統的金屬交易所價格數據對我們而言是持平到略為正面。所以最大的逆風是較低的出貨量以及關稅影響。

And then from the other side, we'll continue -- we ended Q4 obviously really strong on the Building HVAC side and across all of our markets. The indications are we're off to a really strong start, and we feel good about the run rate heading into the year on Building HVAC, both in the U.S. and in the U.K. and in Europe. From a CIS standpoint, we've got, first half of the year, probably a little bit more difficult comps. We had record-level sales of data center business last year. We're expecting the second half and good indications from our markets and customers about some pickup in the second half of the year from a CIS standpoint.

然後從另一面來看，我們會持續——我們在第四季顯然在建築 HVAC 端以及所有市場都表現得非常強勁。各項跡象顯示我們開局非常強，我們對建築 HVAC 進入今年的運行水準（run rate）感到樂觀，無論是在美國、英國或歐洲。從 CIS 的角度來看，上半年可能會面臨比較困難的比較基期。我們去年資料中心業務的銷售創下紀錄水準。我們預期下半年，並且從市場與客戶端得到良好訊號，CIS 方面在下半年會有一些回升。

So I guess before I turn it back to Tom, the way I'm thinking about it is a little bit tougher comps from the CIS standpoint, but we still like the dynamics in the markets there and data centers globally. Building HVAC seems to have a tailwind as we head into this year. When you think about whether it's cushion or just comfort, that's feeling good. And then biggest challenge we have is more flat markets on VTS combined with tariffs that we need to find a way to offset.

所以在我把話題交回 Tom 之前，我的想法是：CIS 端的比較基期會稍微更具挑戰，但我們仍然看好那邊市場的動態，以及全球資料中心的趨勢。建築 HVAC 看起來在我們進入今年時有順風。至於你說這是緩衝還是只是更安心，那確實讓人感覺更踏實。而我們最大的挑戰，是 VTS 市場較為持平，再加上關稅，我們需要想辦法把這些抵消掉。

Tom, would you add anything?

Tom，你要補充什麼嗎？

Yes. No, I think you said it right. About $180 million, maybe even a little bit higher, of our sales now are directly tied to data centers. That's with the whole megatrend on digitalization. Really pleased that we have some really good engagement both in North America and out of the U.K. with those 2 businesses that we want to make sure that we take advantage of and grow. And we see good indications, as Mick said, in both regions of that continuing this year. We will continue to focus on our procurement efficiency, which, again, I'm very pleased with. And I expect productivity to be gaining in VTS significantly this year, so -- to be an offset to some of those challenges that Mick laid out. So I think that's the best summary we can put together for that.

是的。不，我覺得你說得很對。我們現在大約有 1.8 億美元，甚至可能略高一些的銷售額，是直接與資料中心相關。這與數位化這個大趨勢一致。我們非常高興在北美以及英國，這兩個我們希望確保能把握並成長的業務，都有非常好的互動與合作。而且如 Mick 所說，我們在兩個地區都看到今年會持續的良好跡象。我們會持續聚焦於採購效率，這點我同樣非常滿意。我預期今年 VTS 的生產力會顯著提升，所以——可以用來抵消 Mick 所列出的部分挑戰。所以我想這就是我們能給出的最佳總結。

Okay. Great. Specifically, on HVAC, based on a lot of your commentary, it seems like the share gains that took place in fiscal '19, that's sticking based on the order book, and you're maybe continuing to grow market share. Is that a fair characterization of what's happening in that business?

好的。很好。具體來說，在 HVAC 方面，根據你們很多評論，似乎 2019 財年取得的市占提升，從訂單簿來看是能維持的，而且你們可能還在持續擴大市占。這樣描述那個業務正在發生的情況，算是合理嗎？

Yes. We definitely gained market share in fiscal '19 over '18, which was also a strong year specifically on heating. And we're really seeing it pick up on the U.K. from a precision cooling and chiller standpoint as well, where we're gaining share in those regions with the data center business and related products there.

是的。我們在 2019 財年相較於 2018 財年確實提升了市占，而 2018 財年本身也是很強的一年，特別是在供暖方面。而且我們也看到英國端在精密冷卻與冷水機（chiller）方面的動能正在上升；在那些地區，我們透過資料中心業務及相關產品也正在提升市占。

So moving forward, we have a heavy focus on continuing with that, on concentrating on regions where we see share gain possible North America, as well as capitalizing on potential transatlantic opportunities that may develop from chiller and chiller sales from the U.K. needed in the U.S. by certain customers.

因此展望未來，我們將持續高度聚焦於延續這項策略，專注於我們認為有機會提升市占的地區——北美；同時把握可能出現的跨大西洋機會，例如因特定客戶需求，將英國的冷水機與冷卻器銷售導入美國。

So again, really good momentum across all segments within -- or all subsegments within Building HVAC.

所以再次強調，建築 HVAC 內的所有細分領域——或建築 HVAC 的所有子細分領域——動能都非常強勁。

And so in thinking of the trend for that business when you start to compare against 15%, 20% revenue growth in the second half of 2020, if you're maintaining that market share, even though, of course, there's probably growth moderation, would you expect to be down year-on-year? It doesn't sound like if you maintain market share and you're continuing to grow, you would necessarily be down.

那麼在思考該業務的趨勢時，當你開始拿它與 2020 年下半年 15%、20% 的營收成長相比，如果你維持那個市占，即使當然可能會有成長放緩，你會預期年對年會下滑嗎？聽起來如果你維持市占且仍在成長，未必會下滑。

Yes. No, we think we'll be up slightly, maybe not quite the jump that we had last year, to your point, because of the share gain. And we have that same look forward, but we expect to be up.

是的。不，我們認為會小幅成長，可能不會像去年那樣大幅跳升，正如你所說，因為去年有市占提升的因素。我們對未來的看法也是如此，但我們預期會成長。

Okay. Great. And then my last question, more of a housekeeping item. How much of commercial vehicle business is still left to roll off in Europe?

好的。很好。然後我最後一個問題，比較偏行政性問題。歐洲的商用車業務還剩多少會逐步退出（roll off）？

Yes. Europe, and there's a little bit in the U.S. on service, approximately $40 million, Joe, in fiscal '20.

是的。歐洲，另外在美國服務端也有一點，大約 4,000 萬美元，Joe，於 2020 財年。

Joe, we're launching...

Joe，我們正在推出……

And then is the...

那麼是否……

Yes, go ahead.

是的，你先請。

All right. No sorry. Go ahead, Tom.

好的。不，抱歉。你先說，Tom。

I was just going to say, and of course, we have some new model launches that are starting to prepare for in North America with recent business wins and good quote activity still going on with European customers. So I -- yes, this is going to be a roll-off year this year yet, net roll-off but yet with gains coming in behind it.

我只是想說，當然，我們在北美也有一些新車型的導入正在開始準備，近期也拿到一些新業務，且與歐洲客戶之間仍有良好的報價活動在進行。所以我——是的，今年仍會是逐步退出的一年，淨額來看是退出，但同時後面也會有新增的成長進來。

Joe, you're actually, I think, the only one in queue right now. So if you have other questions, why don't you keep going?

Joe，其實我想你現在是隊列中唯一的一位。所以如果你還有其他問題，不妨繼續問？

Okay. If you humor me with one more, my true last question. On the automotive business, so you've obviously communicated this to the market. I'd imagine you're having conversations with customers. What has been the feedback on the decision? Is it having any ramifications on bookings activity that might influence ultimately the value you're able to get for the business? And then any spillover effects to what Modine ultimately intends to retain in the VTS segment?

好的。如果你願意再讓我多問一個，我真正的最後一個問題。關於汽車業務，你們顯然已經向市場傳達了這件事。我想你們也在和客戶溝通。對這項決定的回饋是什麼？它是否對接單（bookings）活動造成任何影響，進而最終影響你們能為該業務取得的價值？另外，對 Modine 最終打算在 VTS 部門保留的部分，是否有任何外溢影響？

Well, let me handle the first part. I want to make sure I understand the second part later. So the first part is, yes, we're in discussion with customers, and obviously, they're very curious as to how this is going to proceed. Clearly, they are staying close. Nobody is necessarily taking us off any supplier platforms. But I would say we're kind of in close watch. It will -- and we think that there's prospective buyers that could add value with this valuable asset that we have as they think of subsystem integration and being able to put that together with maybe people who are thinking of diving into thermal management. So I think it's just like a close watch and not really being -- and not hampering us at the moment but one that we stay in close contact with customers.

好，我先處理第一部分。我想確保我稍後能理解第二部分。第一部分是，是的，我們正在與客戶討論，顯然他們對這將如何推進非常好奇。很明顯，他們都保持密切關注。目前沒有人一定要把我們從任何供應商平台上移除。但我會說，我們正處於被密切觀察的狀態。而且我們認為，對於我們這項有價值的資產，可能會有潛在買家能夠增加其價值，因為他們在思考子系統整合，以及如何把它與可能想要切入熱管理領域的人結合起來。所以我認為這就像是被密切觀察，但目前並沒有——也沒有在此刻妨礙我們；不過我們會與客戶保持緊密聯繫。

And what was your second part of the question, Joe?

Joe，你問題的第二部分是什麼？

I think -- yes, I think you've been very transparent and explicit about what you intend to retain in VTS and the fact that you're fully committed to commercial vehicle, off-highway.

我想——是的，我認為你們對於打算在 VTS 保留什麼已經非常透明且明確，而且你們也完全承諾於商用車、非公路（off-highway）。

Great point. Yes, I was thinking clearly from an automotive customer standpoint. On the commercial vehicle, off-highway side, very positive feedback from customers. I personally visited several and make sure it's clear that our focus is to be able to do this, to give us more resource capability, whether it's capital or human resource, to focus in on not just the industrial portion of the business, but we think the off-highway, commercial vehicle tucks in very nicely within industrial business and want to make sure they saw that as a long-term strategy we have. So very positive feedback from truck and off-highway customers.

說得很好。是的，我剛才想的是更偏向汽車客戶的角度。在商用車、非公路那一側，客戶回饋非常正面。我本人拜訪了好幾位客戶，並確保他們清楚我們的重點是能夠這麼做，讓我們有更多資源能力——不論是資本或人力資源——去聚焦不只是工業業務的部分；同時我們也認為非公路、商用車與工業業務非常契合，並希望他們把這視為我們的長期策略。因此來自卡車與非公路客戶的回饋非常正面。

(Operator Instructions) And I am showing no further questions at this time. I'd now like to turn the conference back to Kathy Powers.

（接線員指示）目前顯示沒有其他提問。現在我想把電話會議交回給 Kathy Powers。

Thank you, and 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.

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。

This concludes today's conference. You may now disconnect.

今天的電話會議到此結束。您現在可以掛線。