Modine Manufacturing Company (MOD) 2020 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Modine Manufacturing Company's Third Quarter Fiscal 2020 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

各位女士、各位先生，早安，歡迎參加 Modine Manufacturing Company 2020 會計年度第三季財報電話會議。(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, Investor Relations and Tax.

現在我想把會議交給今天的主持人——Kathy Powers 女士，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 third quarter fiscal 2020 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 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.

早安，感謝各位參加我們的電話會議，一同討論 Modine 2020 會計年度第三季的業績。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 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 third quarter results for fiscal '20 and we'll provide an update to our outlook for the rest of the year. At the end of the call, there will be a question-and-answer session.

今天上午，Tom 與 Mick 將說明 20 會計年度第三季的業績，並更新我們對今年剩餘期間的展望。電話會議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 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財報新聞稿以及公司向美國證券交易委員會提交的文件所述。

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

接下來，很高興把電話會議交給 Tom Burke。

Thank you, Kathy, and good morning, everyone. Overall, third quarter sales were down $67.6 million or 12% from the prior year. These results were in line with our previous guidance.

謝謝你，Kathy，各位早安。整體而言，第三季銷售額較去年同期減少 6,760 萬美元，降幅 12%。這些結果符合我們先前的指引。

Third quarter adjusted operating income was $24 million, down $10.8 million or 31% from the prior year, primarily due to lower sales volume in our VTS and CIS segments. As reported last quarter, several of our end markets slowed significantly in the past few months, but conditions appear to be stabilizing.

第三季調整後營業利益為 2,400 萬美元，較去年同期減少 1,080 萬美元，降幅 31%，主要原因是我們 VTS 與 CIS 事業部的銷售量下滑。如同上季所提，過去幾個月我們的多個終端市場明顯放緩，但目前情況似乎正在趨於穩定。

As for other highlights during the quarter, I'm pleased to report that our free cash flow improved to $11.6 million this quarter, including auto separation and restructuring costs. We have also strengthened our balance sheet by terming out a portion of our short-term debt. Mick will cover this in more detail during his section.

至於本季其他重點，我很高興報告本季自由現金流改善至 1,160 萬美元，其中已包含汽車業務分離與重整成本。我們也透過將部分短期負債轉為期限較長的債務，強化了資產負債表。Mick 將在他的部分更詳細說明。

Our new CIS leadership team is keenly focused on identifying opportunities to enhance our margins and improve operational efficiencies. As mentioned last quarter, margins in this segment have fallen below our targets. We have plans in place to strengthen our coils business and grow our coolers business. In addition, we're making organizational and structural changes to how we manage our data center business. The volatility of our data center sales has created short-term challenges due to significant concentration with one customer, but the team is making good progress in diversifying our data center portfolio. I will cover more on this and on other strategic priorities during my segment review.

我們新的 CIS 領導團隊正專注於找出提升毛利率與改善營運效率的機會。如同上季所提，該事業部的毛利率已低於我們的目標。我們已制定計畫以強化線圈（coils）業務並擴大冷卻器（coolers）業務。此外，我們也正針對資料中心業務的管理方式進行組織與架構調整。由於資料中心銷售高度集中於單一客戶，造成短期波動與挑戰，但團隊在分散資料中心產品組合方面已取得良好進展。我將在事業部回顧中進一步說明此項進展及其他策略重點。

Before diving into our quarterly segment results, I would like to provide an update on our automotive exit strategy. We spent considerable time and investment separating the automotive business from the VTS segment and plan to start managing and reporting a separate auto segment in the first quarter of fiscal '21. While this has been time-consuming and costly, I believe it was a good and necessary investment and is now largely complete.

在深入說明本季各事業部業績之前，我想先更新我們退出汽車業務的策略。我們投入大量時間與資金，將汽車業務自 VTS 事業部分離，並計畫自 21 會計年度第一季起，開始以獨立的汽車事業部進行管理與揭露。雖然這項工作耗時且成本高，但我相信這是一項良好且必要的投資，目前也已大致完成。

Reporting this new segment will provide improved transparency going forward as we transition away from the automotive market. This work included physically separating manufacturing operations, setting up stand-alone IT systems and business processes and establishing new legal entities.

揭露這個新事業部將在未來提供更高的透明度，因為我們正逐步轉型、退出汽車市場。此項工作包括實體分離製造營運、建立獨立的 IT 系統與業務流程，以及設立新的法律實體。

We have named a seasoned leader, and management team is committed to successful separation and dedicated support of our automotive customers. The separation of the automotive business will allow us to showcase the new Modine, which we anticipate will generate higher margins, returns on capital and cash flows. I want to be clear, our primary strategy remains to exit Modine's automotive business as quickly and efficiently as possible. Through our previous efforts to sell the auto business, we determined that it would be more beneficial to divide the existing business to better align and appeal to strategic buyers. Specifically, we are marketing 2 separate components of our automotive business to different potential buyers. With this revised approach, we have been actively engaged with numerous interested parties. We're encouraged with the revised process so far. As we assess our options and their related timelines, there may be some remaining products locations that we will have to address. In these scenarios, our goal would be to complete the exit as quickly as possible when meeting or exceeding our customer commitments as we transition or phase out of certain product lines.

我們已任命一位經驗豐富的領導者，管理團隊也承諾確保分離作業成功，並全力支持我們的汽車客戶。汽車業務的分離將使我們得以展現全新的 Modine；我們預期其將帶來更高的毛利率、資本報酬率與現金流。我想說清楚：我們的主要策略仍是以最快且最有效率的方式退出 Modine 的汽車業務。透過先前出售汽車業務的努力，我們判斷將現有業務拆分，能更好地對齊並吸引策略買家，對公司更有利。具體而言，我們正將汽車業務的兩個獨立組成部分，分別推向不同的潛在買家進行行銷。在此修訂後的方法下，我們已與多家有興趣的對象積極接洽。目前我們對修訂後的流程進展感到鼓舞。在評估各項選擇及其相關時程時，可能仍有部分產品與據點需要我們處理。在這些情況下，我們的目標是在滿足或超越對客戶的承諾之同時，於轉移或逐步退出特定產品線時，盡可能快速完成退出。

Our objectives are clear. Separate the automotive business and run it to optimize earnings and cash flow, maximize the cash value by divesting the most valuable assets and exit the remaining business as rapidly as possible on a cash-neutral basis. Beginning in the first quarter of fiscal '21, we plan to report the financial results of the new auto segment separately from the remainder of the VTS segment, which will include our heavy-duty equipment business. We continue to believe that pursuing this path is the right long-term decision for the company and for our shareholders. We will lower our capital intensity, better focus management's attention on higher-margin, higher-growth businesses and improve our cash flows, opening up new opportunities for organic and inorganic investments.

我們的目標很明確。將汽車業務分離並以最佳化獲利與現金流的方式營運；透過處分最具價值的資產以最大化現金價值；並以現金中性（cash-neutral）的方式，盡可能快速退出剩餘業務。自 21 會計年度第一季起，我們計畫將新汽車事業部的財務結果與 VTS 事業部其餘部分分開揭露；VTS 其餘部分將包含我們的重型設備業務。我們仍相信走這條路對公司與股東而言是正確的長期決策。我們將降低資本密集度，使管理團隊能更聚焦於高毛利、高成長業務，並改善現金流，進而開啟更多有機與無機投資機會。

Now turning to our third quarter results on Page 4. As expected, we experienced a decline in sales across our vehicular markets. Sales for the VTS segment were down 16% from the prior year. As I previously mentioned, our key vehicular markets have slowed significantly in the recent months and continue to be soft. Overall sales to our commercial vehicle and off-highway customers were each down 26% and automotive sales were down 3%. These market declines have not been isolated to any particular region as we are seeing volume weakness across the globe.

接著看第 4 頁的第三季業績。如同預期，我們在車用相關市場的銷售出現下滑。VTS 事業部銷售額較去年同期下降 16%。如我先前提到，我們的主要車用市場近幾個月明顯放緩，且仍然疲弱。整體而言，對商用車與非道路（off-highway）客戶的銷售分別下滑 26%，汽車銷售則下滑 3%。這些市場下滑並非侷限於特定地區，因為我們看到全球各地的出貨量皆呈疲弱。

Sales to customers in the Americas region were down 18% from the prior year, with lower sales to automotive, commercial vehicle and off-highway customers. Sales in Europe were also down 18% from the prior year due primarily to a steep drop in commercial vehicle sales as certain programs wind down.

美洲地區客戶的銷售額較去年同期下降 18%，主要因對汽車、商用車與非道路客戶的銷售降低。歐洲地區銷售額也較去年同期下降 18%，主要因部分專案逐步結束，導致商用車銷售大幅下滑。

In Asia, sales were down 4% due to lower off-highway sales in China, Korea and India. This was partially offset by higher automotive sales in China. Adjusted operating income for the VTS segment was $5.1 million in the quarter, which is $9.9 million lower than the prior year.

在亞洲，銷售額下降 4%，原因是中國、韓國與印度的非道路銷售降低。其中一部分被中國較高的汽車銷售所抵銷。VTS 事業部本季調整後營業利益為 510 萬美元，較去年同期減少 990 萬美元。

Adjusted operating margin was down 270 basis points to 1.9%. We have quickly responded to the downturn in our markets by cutting structural costs in our business to align our plans -- operating plans with changing customer demand. In addition, we are highly focused on other factors we can control, such as SG&A reductions, improved operating efficiencies and accelerating procurement initiatives. This drives near-term margin improvements and increases our confidence for improved operating leverage when the markets pull out of a down cycle.

調整後營業利益率下降 270 個基點至 1.9%。我們已迅速因應市場下行，削減業務中的結構性成本，使我們的計畫——營運計畫——能與客戶需求變化相一致。此外，我們也高度聚焦於其他可控因素，例如降低 SG&A（銷售、一般及行政費用）、提升營運效率，以及加速採購相關措施。這將帶動短期毛利率改善，並在市場走出下行循環時，提升我們對營運槓桿改善的信心。

Our customer relationships are strong as we continue to deliver leading performance in critical elements like quality, delivery and cutting-edge technology, such as EV solutions for the bus and truck markets.

我們與客戶的關係依然穩固，因為我們持續在品質、交付與尖端技術等關鍵要素上提供領先表現，例如針對巴士與卡車市場的電動車（EV）解決方案。

And as we discussed last quarter, in talking with our key customers, we felt that industry volume declines could prove to be more substantial than many industry forecasts we're expecting. So while these year-over-year declines were steep, they were largely in line with our projections. The silver lining to the market weakening is that the rate of decline in these markets seems to have stabilized. We are not expecting any meaningful recovery in calendar 2020. There are some reasons to be optimistic with regards to the longer-term market outlook. We believe the off-highway and truck markets will be challenged for the next several quarters and then they'll begin to recover. Many are predicting an improvement beginning later in calendar 2020. On the auto side, we anticipate relatively stable volumes, which is key to our divestiture process.

正如我們在上一季所討論的，與我們的主要客戶交流後，我們認為產業出貨量下滑可能會比許多產業預測所預期的更為顯著。因此，儘管這些年對年下滑幅度很大，但大致符合我們的預測。市場走弱的好消息是，這些市場的下滑速度似乎已趨於穩定。我們不預期在2020曆年會出現任何有意義的復甦。就較長期的市場展望而言，仍有一些理由可以保持樂觀。我們認為非公路與卡車市場在接下來幾個季度仍將面臨挑戰，之後將開始復甦。許多人預測改善將在2020曆年稍晚開始。在汽車端，我們預期出貨量相對穩定，這對我們的剝離流程至關重要。

Please turn to Page 5. The largest challenge in our CIS segment was the decline in sales to one large data center customer. This accounted for more than half the revenue decline. Overall, CIS segment sales declined 12% from the prior year.

請翻到第5頁。我們CIS事業部門最大的挑戰，是對一家大型資料中心客戶的銷售下滑。這占了營收下滑的一半以上。整體而言，CIS事業部門銷售額較去年同期下滑12%。

Sales to data center customers were down 25% from the prior year. Within our served market in this segment, the strong growth in cooler sales that we saw last year was a result of strong capacity expansion in excess of market demand. The drop in sales this year is due to a temporary lull in customer investment and further capacity that is expected to continue into our next fiscal year. We are currently expecting very low volumes for this business in fiscal '21, with a strong recovery in fiscal '22.

對資料中心客戶的銷售較去年同期下滑25%。在本事業部門所服務的市場中，我們去年看到冷卻器銷售的強勁成長，主要是因為產能擴張強勁，且擴張幅度超過市場需求。今年銷售下滑是由於客戶投資出現短暫停歇，以及進一步的產能擴張，預期將延續到我們下一個會計年度。我們目前預期該業務在2021會計年度的出貨量將非常低，並在2022會計年度強勁復甦。

Sales to our commercial HVAC and refrigeration end markets were down as well. The majority of the sales decline was related to refrigeration customers, driven by market decline in refrigerated transport in the U.S. The segment reported adjusted operating income of $9 million, down 34% from the prior year. This decrease was primarily due to lower gross profit, driven by lower sales volume and negative sales mix. The new leadership team for this segment has been in place for over a quarter now, and the strategic priorities and related actions have been set.

我們在商用HVAC與冷凍終端市場的銷售也出現下滑。銷售下滑的大部分與冷凍客戶相關，主因是美國冷藏運輸市場下滑。該事業部門調整後營業利益為900萬美元，較去年同期下滑34%。此下降主要由毛利降低所致，原因是銷售量下降與不利的銷售組合。該事業部門的新領導團隊已上任超過一季，策略重點及相關行動也已確立。

As I mentioned last quarter, we are keenly focused on improving the profitability of our coils business. We have initiated an aggressive cost reduction program to vertically integrate certain high-cost components and to strengthen our manufacturing operations and business processes. We're also reviewing our product costing and pricing practices to make sure that our quotes have sufficient margin, particularly, on low-volume releases.

如我上一季提到的，我們高度聚焦於提升線圈（coils）業務的獲利能力。我們已啟動積極的成本削減計畫，將部分高成本零組件進行垂直整合，並強化我們的製造營運與業務流程。我們也在檢視產品成本核算與定價作法，以確保報價具有足夠的利潤，特別是在低出貨量的釋出（releases）上。

The team is working hard to take advantage of our data center growth opportunities and to diversify our customer base. This is being done in conjunction with our Building HVAC team, and I have decided to consolidate these efforts under one leader. I will cover this more in detail as part of the Building HVAC update.

團隊正努力把握我們在資料中心的成長機會，並使客戶基礎多元化。這將與我們的建築HVAC團隊協同進行，而我已決定將這些工作整合由一位主管統籌。我會在建築HVAC更新部分更詳細說明。

We are also leveraging new technology to reduce energy consumption and total cost of ownership in our cooler and coatings business, and are adding resources to our North American team in order to grow market share. In the upcoming year, we expect the market supporting our coils and coolers products to be relatively flat, with some continued weakness in our industrial markets.

我們也正運用新技術來降低冷卻器與塗層（coatings）業務的能源消耗與總持有成本，並為北美團隊增補資源以提升市占率。在接下來一年，我們預期支撐線圈與冷卻器產品的市場將相對持平，但工業市場仍會持續偏弱。

With regard to our largest data center customer, we are planning on very limited sales for the next several quarters based on recent communications with them. However, the long-term demand and projections are very encouraging with projected sales in calendar '21 potentially reaching new highs.

就我們最大的資料中心客戶而言，根據近期與其溝通的結果，我們規劃在接下來幾個季度僅有非常有限的銷售。然而，長期需求與預測相當令人鼓舞，預估在2021曆年的銷售可能創下新高。

Please turn to Page 6. Sales for our Building HVAC segment increased 1%, driven primarily by higher sales of school ventilation and heating products in North America, partially offset by lower ventilation and air conditioning sales in the U.K.

請翻到第6頁。我們建築HVAC事業部門的銷售成長1%，主要由北美學校通風與供暖產品銷售增加所帶動，但部分被英國通風與空調銷售下滑所抵銷。

Operating income increased 4% from the prior year to $13.5 million, and operating margin increased 50 basis points to 20.8%. This increase was largely driven by favorable sales mix and customer pricing. We continue to be encouraged by the strong performance and our competitive position in the segment. We expect the favorable growth trends in our markets to continue and remain focused on growing our data center business.

營業利益較去年同期成長4%至1,350萬美元，營業利益率提升50個基點至20.8%。此增幅主要由有利的銷售組合與客戶定價所帶動。我們持續對該事業部門的強勁表現與競爭地位感到鼓舞。我們預期市場中的有利成長趨勢將延續，並將持續聚焦於擴大資料中心業務。

In order to better capture opportunities in this growing market, we're developing a new single-focused approach to the data center market by combining the resources and capabilities of our Building HVAC and CIS teams. This new structure will allow us to leverage the products across both CIS and Building HVAC, providing a more seamless customer experience along with a more comprehensive solution offering. The end goal is to have greater customer diversification by reaching a broader segment of these markets by introducing new highly regarded products across new geographic regions. This change in strategy is showing early indications of success as we are growing and winning new business with other data center customers.

為了更好地掌握這個成長市場的機會，我們正透過整合建築HVAC與CIS團隊的資源與能力，為資料中心市場打造一個全新、單一聚焦的策略。這個新架構將使我們能夠在CIS與建築HVAC之間共享產品，提供更無縫的客戶體驗，以及更完整的解決方案組合。最終目標是透過在新的地理區域導入備受肯定的新產品，觸及更廣泛的市場區隔，以提升客戶多元化程度。這項策略變更已展現初步成功跡象，因為我們正與其他資料中心客戶擴張並贏得新業務。

For example, in the quarter, we secured our first order with a major cloud computing customer in Europe for shipment in fiscal '21. This is a key component of our growth strategy moving forward.

例如，在本季度，我們在歐洲取得一家大型雲端運算客戶的首筆訂單，預計於2021會計年度出貨。這是我們未來成長策略的重要組成部分。

Looking ahead, we see our market starting to pull back a little bit, but they will remain generally positive throughout the calendar year. Within that, we expect to see stronger growth in key markets as macro trends should remain strong.

展望未來，我們看到市場可能會稍微回落，但在整個曆年期間整體仍將維持正向。在此之中，我們預期關鍵市場將有更強勁的成長，因為總體趨勢應仍然強勁。

Our data centers strong growth continues in the co-location and cloud data center space. Given our strong presence in the U.K. markets, the increased certainty around Brexit should provide some stability into the general HVAC market. We anticipate U.K. banks to release capital funding for construction, opening the door to growth again.

我們的資料中心業務在共置（co-location）與雲端資料中心領域仍持續強勁成長。鑑於我們在英國市場的強勢布局，脫歐（Brexit）不確定性降低應可為整體HVAC市場帶來一些穩定性。我們預期英國銀行將釋出建設資本資金，為再度成長打開大門。

As I mentioned earlier, our newly engaged global data center team has solid plans to grow and diversify this business with new customers in fiscal '21. With that, I would like to turn it over to Mick for an overview of our consolidated results and an update to our outlook for fiscal 2020.

如我先前提到的，我們新近投入運作的全球資料中心團隊，已制定完善計畫，將在2021會計年度透過新客戶來成長並使該業務多元化。接下來，我想把時間交給Mick，請他概述我們的合併業績，並更新我們對2020會計年度的展望。

Good morning, everyone. Please turn to Slide 7. As we anticipated and detailed by Tom, market softness continued well through the quarter. VTS and CIS segments were the primary drivers of our revenue decline, which resulted in difficult year-over-year comparisons. As reported, third quarter sales declined $68 million or 12%. Of the $68 million decline, over $50 million was the result of declines in truck and off-highway sales along with a drop to our largest data center customer.

各位早安。請翻到投影片第7頁。如同我們所預期、且Tom已詳細說明的，市場疲弱在整個季度持續。VTS與CIS事業部門是營收下滑的主要驅動因素，導致年對年比較相當艱難。按報告口徑，第三季銷售額下滑6,800萬美元或12%。在這6,800萬美元的下滑中，超過5,000萬美元是由卡車與非公路銷售下滑，以及對我們最大資料中心客戶的出貨下降所造成。

Gross profit of $74 million declined 20%, resulting in a gross margin of 15.5%. The 27% downside conversion was in line with our expectations and based on standard fixed and variable cost structures.

毛利為7,400萬美元，下滑20%，毛利率為15.5%。27%的下行轉換率（downside conversion）符合我們的預期，並是基於標準的固定與變動成本結構。

Besides the lower sales volume, CIS was negatively impacted by sales mix resulting from the decline in data center sales. Also impacting gross profit was approximately $2 million of costs relating to the product and equipment transfers in support of our automotive exit strategy. Materials and metals had no impact on the quarter. And strength in Building HVAC continued with a gross margin improvement of 120 basis points.

除了銷售量較低之外，CIS也受到因資料中心銷售下滑所導致的銷售組合不利影響。另外影響毛利的，還包括約200萬美元的成本，與支援我們退出汽車業務策略所需的產品與設備移轉相關。原物料與金屬價格在本季度沒有影響。而建築HVAC的強勁表現持續，毛利率提升120個基點。

SG&A for the quarter was $64 million. There were two main drivers behind the SG&A numbers. First, we had lower compensation expenses this quarter and began seeing the benefits of our cost reduction plan. Second, we have the temporary costs related to our automotive exit strategy. Preparing to exit the automotive business is a complicated and expensive process, including all of the separation and program management work. To facilitate this process, we created a program management office to support all of the work streams necessary to support the business and transfer products to fully separate our plans.

本季度的SG&A（銷售、一般及行政費用）為6,400萬美元。SG&A數字背後有兩個主要驅動因素。第一，本季度我們的薪酬費用較低，並開始看到成本削減計畫帶來的效益。第二，與我們退出汽車業務策略相關的暫時性成本。準備退出汽車業務是一個複雜且昂貴的流程，包括所有分拆與專案管理工作。為了促進此流程，我們成立了一個專案管理辦公室，以支援所有必要的工作流，支援業務並移轉產品，以使我們的計畫能夠完全分離。

As discussed previously, the auto business needed to be separated and stood up as a standalone, fully functioning business. This required that we carve out 1/4 of the company that had been previously embedded within multiple locations throughout our global VTS segment. Last, our actual deal-related and transaction work streams, since launching a formal sales process, we incurred costs relating to seller due diligence, accounting, legal and other advisory services. During the quarter, we incurred $12.6 million of costs related to all of this work, including the separation and sale process. Approximately $3 million was primarily related to project management costs. Also, during the quarter, we incurred approximately $7 million of costs to separate the business. These costs included IT, human resources, accounting, tax, legal and audit fees.

如先前所討論，汽車業務需要被分離並建立為一個獨立且具備完整運作功能的事業體。這要求我們將先前嵌入於全球 VTS 事業部多個據點中的公司四分之一切割出來。最後，自啟動正式的出售流程以來，針對實際交易相關與交易執行的各項工作流程，我們產生了與賣方盡職調查、會計、法律及其他顧問服務相關的成本。本季我們因上述所有工作（包含分離與出售流程）而發生 1,260 萬美元的成本。其中約 300 萬美元主要與專案管理成本相關。此外，本季我們亦發生約 700 萬美元的業務分離成本。這些成本包含 IT、人力資源、會計、稅務、法律及審計費用。

Last, there were costs tied to sale process and related to seller due diligence, legal and other advisory costs. During the quarter, these costs were approximately $2 million. I'm encouraged that the vast majority of the separation costs are behind us, and most of the incremental expenses going forward will relate to an actual sale and/or disposition of the automotive business.

最後，還有與出售流程相關、以及與賣方盡職調查、法律及其他顧問成本相關的費用。本季這些成本約為 200 萬美元。令我感到鼓舞的是，絕大多數的分離成本已經在我們身後，未來大部分新增費用將與汽車業務的實際出售及／或處置相關。

Moving on to the rest of SG&A, we have some positive news to report. The balance of SG&A or the amount excluding any of the project-related costs decreased by $5 million or 9%. This was mainly due to lower compensation, including lower incentive compensation. This decrease also included initial benefits from cost savings measures that we detailed last quarter. With regards to reducing operational and SG&A cost structures, we recorded $2 million of severance expenses in Q3. Adjusted operating income of $24 million was down $11 million from the prior year. As previously mentioned, the decline was attributable to a difficult quarter for VTS and CIS. Lower compensation expenses and cost control initiatives led to lower SG&A, which helped offset the volume reductions. As usual, our appendix includes an itemized list of adjustments and a full reconciliation to our U.S. GAAP results. These adjustments totaled $15.8 million. Of this amount, $14 million relates to the automotive divestiture, including $12 million recorded in SG&A and the remainder in cost of sales. We also incurred $2.6 million of restructuring expenses, which consists of primarily of headcount reductions and plant consolidation activities. Finally, we sold the previously closed manufacturing facility in Germany during the quarter and recorded a gain of $800,000. Our adjusted income tax expense was 0 in the quarter and was largely attributable to tax incentives in Italy and a favorable GILTI impact on U.S. taxable income. Adjusted earnings per share was $0.37, down $0.05 from the prior year.

接著談其餘的 SG&A（銷售、一般及行政費用），我們有一些正面的消息可以報告。SG&A 的其餘部分，或排除任何專案相關成本後的金額，減少了 500 萬美元或 9%。這主要是由於薪酬降低，包括較低的獎勵性薪酬。此降幅亦包含我們在上季詳述之成本節約措施所帶來的初步效益。就降低營運與 SG&A 成本結構而言，我們在第三季認列了 200 萬美元的資遣費用。調整後營業利益為 2,400 萬美元，較去年同期減少 1,100 萬美元。如先前所提，該下滑歸因於 VTS 與 CIS 經歷了一個艱難的季度。較低的薪酬費用與成本控管措施使 SG&A 降低，有助於抵銷出貨量下滑的影響。如往常一樣，我們的附錄包含調整項目的明細清單，以及與美國 GAAP 結果的完整調節。這些調整合計為 1,580 萬美元。其中 1,400 萬美元與汽車業務剝離相關，包括在 SG&A 中認列的 1,200 萬美元，其餘則列於銷貨成本。我們亦發生 260 萬美元的重組費用，主要由人力精簡與工廠整併活動構成。最後，我們於本季出售先前已關閉的德國製造工廠，並認列 80 萬美元的處分利益。本季調整後所得稅費用為 0，主要歸因於義大利的稅務優惠，以及 GILTI 對美國應稅所得的有利影響。調整後每股盈餘為 0.37 美元，較去年同期下降 0.05 美元。

Turning to Slide 8. As anticipated, I'm pleased to report that cash flow improved during the quarter, and we expect that will continue in the fourth quarter. Third quarter free cash flow was $12 million, and net debt decreased $21 million. On a year-to-date basis, cash flow has been impacted by lower cash earnings plus higher working capital and costs related to the automotive exit strategy. As I covered in the SG&A costs, we needed to make some important and strategic investments to support our automotive strategy. The costs are comprised of program management, separation and deal-related costs. In general, these costs will hit the cash flow statement on a lag, usually a quarter or so.

接著看第 8 張投影片。如預期，我很高興報告本季現金流有所改善，且我們預期第四季將持續改善。第三季自由現金流為 1,200 萬美元，淨負債減少 2,100 萬美元。以年初至今來看，現金流受到較低的現金獲利、較高的營運資金，以及與汽車退出策略相關成本的影響。如我在 SG&A 成本部分所提，我們需要進行一些重要且具策略性的投資以支持汽車策略。這些成本包含方案管理、分離以及交易相關成本。一般而言，這些成本反映在現金流量表上會有時間落後，通常約落後一季左右。

To repeat, I am encouraged that the vast majority of the separation costs are behind us. Most of any remaining costs should be directly linked to a sale process, and we anticipate that future cash flows will benefit from potential asset sales. Besides the improved cash flow, we made some additional balance sheet improvements during the quarter. As I mentioned, net debt declined and our leverage ratio was 2.3. Plus, we recently issued $100 million of senior notes, with the proceeds used to prepay notes coming due in August and repay short-term debt. This not only secured new long-term financing, but will also result in future interest savings. And as another benefit, we reclassified $100 million to long-term debt on our balance sheet.

再重申一次，我對於絕大多數分離成本已經過去感到鼓舞。任何剩餘成本大多應會與出售流程直接相關，我們也預期未來現金流將受益於潛在的資產出售。除了現金流改善之外，本季我們也對資產負債表做了一些額外改善。如我所提，淨負債下降，而我們的槓桿比率為 2.3。此外，我們近期發行了 1 億美元的優先票據，所得款項用於提前償還 8 月到期的票據並償還短期負債。這不僅確保了新的長期融資，也將帶來未來的利息節省。另外一項好處是，我們在資產負債表上將 1 億美元重新分類為長期負債。

Now let's turn to our fiscal '20 guidance on Slide 9. Based on our third quarter results and anticipated market trends, we are holding our guidance for sales and adjusted operating income. We are increasing our guidance on adjusted earnings per share with a range of $0.85 to $1 due to a lower tax assumption. Our estimated full year adjusted tax rate is now projected to be around 26%. While our guidance includes the automotive business, we remain focused on the separation and exit strategy. We look forward to moving that business into a separate segment or discontinued operations in the new fiscal year.

現在讓我們看第 9 張投影片中 2020 會計年度的指引。基於第三季的結果與預期的市場趨勢，我們維持對營收與調整後營業利益的指引不變。由於較低的稅率假設，我們上調調整後每股盈餘指引區間至 0.85 至 1.00 美元。我們目前預估全年調整後有效稅率約為 26%。雖然我們的指引包含汽車業務，但我們仍聚焦於分離與退出策略。我們期待在新的會計年度將該業務移至獨立的事業部門，或列為停業單位。

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

那麼，Tom，我把時間交還給你。

Thanks, Mick. There's a great deal of work ahead of us, but we are on the right path. Although the process of exiting the automotive business is taking longer than originally anticipated, we have a plan in place to achieve the best possible solution that will be in the best interest of our shareholders. Walling off the automotive business as a separate business segment will allow us to run it differently, selling those businesses and assets to logical buyers and transitioning in an orderly fashion to ensure there are no customer disruptions. The timing of the downturn in our end markets hasn't helped our process, but we now appear to have greater visibility to the state of our markets. We have clearly spent a significant time and money on exiting our auto business. While our core markets have softened, and we also experienced a large decline in sales to our largest data center customer, all these items had a significant impact on our results and cash flows this year.

謝謝，Mick。我們前方還有大量工作要做，但我們走在正確的道路上。雖然退出汽車業務的流程比原先預期花更長時間，但我們已有計畫，以達成最佳可行方案，並符合股東的最大利益。將汽車業務隔離為獨立的事業部門，將使我們能以不同方式經營，將這些事業與資產出售給合適的買家，並以有序方式進行移轉，以確保不會造成客戶中斷。終端市場下行的時點對我們的流程並無助益，但目前我們似乎對市場狀態有了更高的能見度。我們顯然已在退出汽車業務上投入了大量時間與金錢。在核心市場轉弱之際，我們對最大資料中心客戶的銷售也大幅下滑；所有這些事項都對我們今年的業績與現金流造成重大影響。

However, I am very encouraged about the opportunities in front of us. Modine will be a different company after the auto divestiture with a clear focus on improving our truck and off-highway business. The new CIS leadership team has a clear plan in place to improve the margin profile. And our new global data center approach is leading to new business opportunities. We're developing an operating plan to reflect these actions and others to achieve the savings targets we set last quarter. We will share our expectations for our next fiscal year when we report our fourth quarter earnings in May.

然而，我對眼前的機會感到非常振奮。在汽車業務剝離後，Modine 將成為一家不同的公司，並清楚聚焦於改善我們的卡車與非公路（off-highway）業務。新的 CIS 領導團隊已制定明確計畫以改善毛利結構。而我們新的全球資料中心策略正帶來新的業務機會。我們正在制定營運計畫，以反映這些行動及其他措施，並達成我們在上季設定的節省目標。當我們在 5 月公布第四季財報時，將分享對下一個會計年度的展望。

And with that, we'll take your questions.

接下來，我們開始回答各位的提問。

(Operator Instructions) Our first question comes from Mike Shlisky with Dougherty & Company.

(接線員指示) 我們的第一個問題來自 Dougherty & Company 的 Mike Shlisky。

Maybe I want to dive in first into CIS and kind of what's behind some of the downturn there in that business. I guess, can you give us -- maybe bucket some of this more thematically. I know there's one customer that's given you some challenges. But maybe is it -- do you know if the customer has just shut off investment? Is it a pricing problem? Are there other companies out there that are undercutting you on pricing? Are there any issues with your logistics?

我想先深入談談 CIS，以及該業務下滑背後的一些原因。我想，您能否把其中一些因素——也許用更主題式的方式——做個分類說明。我知道有一位客戶給你們帶來了一些挑戰。但也許是——你們是否知道該客戶只是停止投資了？是定價問題嗎？是否有其他公司在價格上削價競爭、壓低你們的價格？你們的物流是否有任何問題？

No.

不。

Just kind of other -- some more details on what's going on there?

只是想再多了解一些——那邊目前的情況細節是什麼？

Yes, great question. And let me just, kind of, give some color, starting with covering those points. First off, there is absolutely a great relationship with this customer, okay? Our teams have done a super job in supporting and servicing them. We're in constant communication. We have a dedicated program team that supports them on a weekly basis. We've always said from the beginning, this a lumpy business. And it comes in -- build-out of capacity for that customer. They -- we had a -- if you think back, we had a -- kind of, a peak year in fiscal '19 that lowered some in this fiscal year. What's happened is they're kind of low-end capacity build-out, which they've been clear with us on what that looks like. As I mentioned, we think that's going to have an impact in the next fiscal year for a while, and it's going to really come back strong following that.

是的，問得很好。我先就這些重點補充一些背景說明。首先，我們與這位客戶的關係絕對非常良好，好嗎？我們的團隊在支援與服務他們方面做得非常出色。我們保持持續溝通。我們有一個專責的專案團隊，每週都會支援他們。我們從一開始就說過，這是一門波動性很大的業務。而它的波動來自於——為該客戶擴建產能。他們——如果你回想一下，我們在2019財年有一個——算是高峰年，而在本財年則有所下降。目前發生的情況是，他們正處於較低端的產能擴建階段，而他們也已清楚告訴我們那會是什麼樣子。如我提到的，我們認為這在下一個財年會在一段時間內造成影響，而之後會強勁回升。

As far as the relationship commercially, no problems on pricing, service or support or new entrants coming in and undercutting us. It's not -- we have our established share with them, okay, and they've made that clear. So right now, we just anticipate this low-end capacity build-out on their behalf that they're waiting for their capacity be utilized further before they start adding more orders and more build-out for capacity.

就商業合作關係而言，在定價、服務或支援方面都沒有問題，也沒有新進者進來以更低價格搶單。並不是——我們在他們那裡有既定的市占，好嗎？而且他們也已明確表示如此。所以目前我們只是預期他們會進行這種較低端的產能擴建；他們在進一步利用現有產能之前，會先等待，之後才會開始增加更多訂單並進一步擴建產能。

Saying that, I'm very pleased, okay, that with this new single-year focus to the market with the organization structure which we're taking, we've brought the best of resources from CIS and Building HVAC, putting them together to service this customer and other customers broadly with the intent of not only growing, but diversifying more, and we did land an order this year, will be launched in the next fiscal year with another cloud provider that starts generating and improving that, that strategy is going to work from a diversification standpoint. So yes, there's nothing I'm concerned about other than the fact that we're just have to live with the lumpiness. But as we build and grow and diversify the customer base more, we're going to see less susceptibility to that.

話雖如此，我非常高興，好嗎？因為透過我們正在採取的組織架構，以新的單一年度市場聚焦方式，我們把CIS與Building HVAC最好的資源整合在一起，來服務這位客戶以及更廣泛的其他客戶，目的不僅是成長，也要進一步多元化；而且我們今年確實拿下一筆訂單，將在下一個財年啟動，與另一家雲端服務供應商合作，開始帶來貢獻並改善表現，這也證明從多元化角度來看，這個策略會奏效。所以是的，除了我們必須接受這種波動性之外，沒有其他讓我擔心的。但隨著我們建立、成長並讓客戶基礎更加多元化，我們對這種波動的敏感度會降低。

Okay. I wanted to also ask about the various cost reductions, as you mentioned last quarter and have certainly come into action this past quarter. Now that you're a few months into it, can you give us some sense as to the timing of and when those might be incurred and when their benefits might hit? And whether you can, maybe, give us some sense as to what might be in COGS and what might be in SG&A?

好的。我也想問一下各項成本削減措施，正如你上季提到的，而且在這一季確實已經開始執行。現在你們推行了幾個月了，能否讓我們了解一下：這些成本大概會在什麼時間點發生、以及效益大概何時會反映出來？另外，是否也能大概說明哪些會反映在COGS，哪些會反映在SG&A？

Yes, let me -- I'll start and let Mick take it from here. Yes, we've been very aggressive as we stated last quarter that focusing on making sure that we adjust our cost basis to adapt to what we see going forward in some of the pressure that we've seen in these markets. So we've had significant reduction in force across businesses to anticipating that and plus other things in procurement that I mentioned in logistics that we're driving cost focus to meet our target of $25 million to $30 million. I'll let Mick, kind of, give you more color on it in detail and how we see that rolling out?

好的，我先——我先開頭，接著交給Mick補充。是的，我們如同上季所說一直非常積極，重點是確保我們調整成本基礎，以因應我們對未來的展望，以及我們在這些市場看到的一些壓力。因此，我們在各事業部進行了顯著的人力縮減，以提前因應；此外還有我提到的採購與物流等其他項目，我們正推動成本聚焦，以達成2,500萬至3,000萬美元的目標。我讓Mick再更詳細補充一些背景，說明我們如何看待這些措施的推進與落地？

Yes, out of the total savings that Tom referenced, Mike, we were targeting about $15 million in people cost savings. And we began our reductions in January, and so far, run rate savings are right around $13 million. So we're well on our way on that savings run rate. We talked about a $2 million to $3 million cost -- severance cost to do that. And in the quarter here, we had about $2 million of severance charges. And then the run rate of $13 million, it's fairly evenly split between cost of goods and SG&A.

是的，在Tom提到的總節省金額中，Mike，我們原本目標約有1,500萬美元來自人員成本節省。我們在1月開始進行縮編，到目前為止，按年化基礎計算的節省金額大約是1,300萬美元。所以我們在達成該節省的年化水準方面進展順利。我們也提到為了做到這點，會有200萬到300萬美元的成本——資遣費用。而在本季，我們認列了約200萬美元的資遣費用。另外，這1,300萬美元的年化節省，約略平均分布在銷貨成本與SG&A之間。

Okay, great. I wanted to get a couple of more clarifications also on the auto separation real quick. A few things that you had mentioned in your prepared remarks. First, did you say that you were -- you're currently pursuing 2 separate sales in the auto -- of 2 different parts of the auto business? Or are you going to sell one and then wind down the other? I also wanted to ask, secondly, if you've completed most of the process of separating the business, can you give us some sense as to the EBITDA results or some earnings number of that business? And maybe third, it sounds like because you're going to be putting this into your fiscal 2021 numbers, I kind of wanted to clarify -- I'm curious, how close you are to actually selling this business? It sounds like this might be a few more quarters that it'll be in your portfolio at the very least, if not more than that. It's going to be officially in your SEC financials starting this fiscal 2021.

好的，很好。我也想就汽車業務分拆再快速釐清幾點。有幾件你在事先準備的講稿中提到的事情。第一，你是說你們目前正在推進汽車業務中兩個不同部分的兩個獨立出售案嗎？還是你們會先出售其中一個，然後把另一個逐步結束？第二，如果你們已完成大部分分拆流程，能否讓我們了解一下該業務的EBITDA表現或某個獲利數字？第三，聽起來因為你們會把它納入2021財年的數字，我想再確認一下——我很好奇，你們距離實際出售這項業務還有多近？聽起來至少還會有幾個季度它仍會在你們的投資組合中，甚至可能更久。它將從2021財年開始正式出現在你們提交給SEC的財務報表中。

Okay. So we've got 3 questions there. I'll take 1 and 3, and turn 2 over to Mick as far as EBITDA run rate. But yes, so just backing up, the process we announced a year ago in January, was to sell the complete auto business. And that is everything -- globally, everything that's automotive, roughly $600 million. Through the process and the challenges that we found, some of that because market concerns and some because concerns that there are different elements in that business -- that some value more than others. We decided when we got to the end was to pull the plug, and we were looking how to come back out because our strategy is still the same, right? Our focus -- strategic, long term, we want to sell the automotive business and leave that segment. So we've been looking at the perimeter. And we brought it back. There's really 2 natural kinds of groups inside of auto. And not to go in too much technical detail, but there's, what we call, liquid cooled or engine-related products business, and there's an air cooled business, which is typically, think of the powertrain cooling module in front of the car. Our potential buyers have interest in either way. So we decided splitting that and selling -- and we're looking at divesting those in separate processes. So we have a process in place for one of those right now, okay, I'd call it the higher-valued portion of that, the way we split that business. That process is underway. And we feel positive with the engagement, as I mentioned, of potential buyers that we're dealing with.

好的。所以你這裡有三個問題。我回答第1和第3個，至於EBITDA的年化水準，第2個我交給Mick。不過是的，先回到背景：我們在一年前的1月宣布的流程，是要出售完整的汽車業務。也就是所有——全球所有汽車相關業務，約6億美元規模。在推進過程中，因為我們遇到一些挑戰，其中一部分是市場疑慮，另一部分是因為該業務內部有不同組成——有些部分的價值高於其他部分。我們在接近尾聲時決定先按下暫停鍵，並思考如何重新啟動，因為我們的策略仍然相同，對吧？我們的焦點——從長期策略來看，我們希望出售汽車業務並退出該事業部門。因此我們一直在檢視範圍邊界。然後我們把它重新拿出來規劃。汽車業務內部其實自然可分成兩大類。不想講得太技術，但一類是我們所稱的液冷或與引擎相關的產品業務；另一類是氣冷業務，通常你可以把它想成車頭前方的動力總成冷卻模組。我們的潛在買家對其中任一類都有興趣。因此我們決定把它拆開來出售——並以兩個獨立流程來進行處分。所以我們目前已針對其中一個部分啟動流程，好嗎？就我們拆分的方式而言，我會稱它為價值較高的那一部分。該流程正在進行中。而且如我所提到的，對於我們正在接觸的潛在買家，我們對其參與度感到正面。

And then the other segment, we're looking at a separate process approach of divesting that business. And that is with the separate set of potential buyers that we're engaged with as well.

至於另一個事業部分，我們也在評估以另一個獨立流程來處分該業務。而這部分我們同樣也正與另一組潛在買家接洽。

Timeline, we're on a time line to focus on the liquid cooled, the first part that I mentioned that we expect that to be active going through the process in the next couple of months, okay, to see that where we come on it. But we're not putting a time line out there and a finish line. We want to make sure that this is a quality approach and we engage all the buyers in a high-quality fashion and have an opportunity to maximize proceeds from that. But that will take the next couple, several months to complete that.

就時間表而言，我們正依時間軸聚焦於液冷部分，也就是我提到的第一部分；我們預期在接下來幾個月內，會在流程推進中開始啟動，好嗎，以便看看我們在這件事上的進展。但我們不會對外給出一個時間表或終點線。我們要確保這是一個高品質的方法，並以高品質的方式與所有買方互動，並有機會將處分所得最大化。但完成這件事將需要接下來幾個月、甚至數個月的時間。

On the other side, we're working with buyers potentially to engage with in what we're communicating on how that moves forward from there. So again, that's the general picture of where we are, and I'll let Mick, kind of, handle the EBITDA question.

另一方面，我們也在與潛在買方合作，可能會就我們所溝通的內容進一步接洽，並推動後續如何往前進。所以再次說明，這就是我們目前的大致情況；至於 EBITDA 的問題，我會讓 Mick 來處理。

Yes, from a margin standpoint, Mike, we haven't disclosed specific numbers, but what we can share. And I think it's helpful, we look -- probably the easiest is use last fiscal year, VTS EBITDA was around 9%. And we said the auto business in totality is significantly below the VTS average. Auto in total is more of a mid-single-digit EBITDA business. And within there, as Tom broke down, there's a pretty broad spectrum of margins. And there, I'll leave it, but there are margins significantly higher within auto, and then there are more challenged margins. But auto as a total within the VTS segment is well below the VTS segment total margin and has been our largest user of capital and the largest requirer, I guess, I'd say, of restructuring costs over the last 5 years. So not only we see a margin improvement post the auto divestiture, but less capital intensity and needs for that business going forward. And Tom, I don't know if you want to add on it.

是的，就毛利率/利潤率的角度來看，Mike，我們尚未揭露具體數字，但我們可以分享的是：我認為這樣說會有幫助——最簡單的方式可能是用上一個會計年度來看，VTS 的 EBITDA 約為 9%。而我們也說過，汽車業務整體顯著低於 VTS 的平均水準。汽車業務整體更像是 EBITDA 中個位數中段（mid-single-digit）的業務。而在其中，如 Tom 所拆解的，利潤率的範圍其實相當廣。我就先說到這裡，但汽車業務內部確實有顯著更高的利潤率，也有較具挑戰的利潤率。但汽車業務作為 VTS 事業部的一部分，其整體利潤率遠低於 VTS 事業部的總體利潤率，而且在過去 5 年一直是我們資本使用量最大、以及（我想可以這麼說）重整成本需求最大的業務。因此，我們不僅預期在處分汽車業務後利潤率會改善，也會降低資本密集度，以及未來該業務的資本需求。Tom，我不確定你是否要補充。

Yes. I think it's important, and I mentioned that -- and we -- I used the term that walled off as far as the segment reporting and this starting next year, it's important that we have that enhanced transparency that we can demonstrate during the exit period that allows us to show what Modine will look like post divestiture. I think it's really important element of our strategy. We want to be very transparent to shareholders to say, this is walled off. This is what we're looking at divesting. We'll keep our shareholders informed on that process, but you can kind of have show a, call it a, semi pro forma basis, what the company is going to look like when we're done with that divestiture processes.

是的。我認為這點很重要，我也提到過——我們使用「隔離（walled off）」這個詞，指的是就事業部揭露而言，從明年開始，我們必須有更高的透明度，讓我們能在退出期間展示，處分完成後 Modine 會是什麼樣子。我認為這是我們策略中非常重要的一環。我們希望對股東非常透明地說：這部分是隔離的。這就是我們打算處分的部分。我們會在這個流程中持續向股東更新，但你們可以在某種程度上、可稱為半備考（semi pro forma）的基礎上，看到當我們完成該處分流程後，公司會呈現什麼樣貌。

Next question comes from Matt Summerville with D.A. Davidson.

下一個問題來自 D.A. Davidson 的 Matt Summerville。

Just a follow-up on the CIS business. You sort of talked through the data center piece. I'm more curious to see how you feel the business is performing on the commercial HVAC&R side relative to underlying markets? And I guess the genesis of the question is, you've had some operational, executional challenges. Do you feel your market share in that business has stabilized? Or is that still yet to come?

我想追問一下 CIS 業務。你剛才大致談過資料中心那一塊。我更好奇的是，在商用 HVAC&R 端，相較於底層市場，你覺得業務表現如何？我之所以這麼問，是因為你們曾有一些營運與執行上的挑戰。你覺得該業務的市占率已經穩定了嗎？還是這仍有待後續改善？

No. I feel it's definitely stabilized. It's a good question. We have a whole new focus on that business with bringing key leadership in both the -- running the overall business and the key positions inside of the operating and customer-facing side. So what we're finding is that besides the operational efficiencies that we're focused on delivery and timing, and which is very important to those customers. And our team has met with all key customers, both large and small. And with our distributors -- representatives, excuse me, on how we're going to attack this both on the performance side, on cost performance and delivery but also on the market-facing side on executing on timing, delivery and pricing. So I feel that we've definitely had -- our share position is holding and expect margins to improve by implementing all these actions.

不。我覺得它確實已經穩定了。這是個好問題。我們為這項業務帶來了全新的聚焦，導入關鍵領導人，包含負責整體業務運作，以及營運端與面向客戶端的關鍵職位。因此我們發現，除了我們聚焦於交付與時程的營運效率之外——這對那些客戶非常重要——我們的團隊也已與所有關鍵客戶（不論大型或小型）會面。並且也與我們的經銷商——更正，是代表商（representatives）——討論我們將如何從績效面著手，包括成本績效與交付，同時也從市場端著手，在時程、交付與定價上落實執行。所以我認為我們的市占地位確實已經守住，並且預期透過落實這些行動，利潤率會改善。

Our focus, again, as I mentioned, we're targeting 200 to 300 basis point improvement in the next 2 years, okay, to kind of quantify and give you a target what we're shooting for. And of course, a lot of that will include the bounce back in the fiscal '22 time frame with stronger customer orders from that large data center customer, plus we anticipate growing sales with other customers in that business.

我們的重點，如我提到的，是在未來 2 年鎖定提升 200 到 300 個基點，好嗎，用以量化並給你一個我們努力的目標。當然，其中很大一部分將包括在 2022 會計年度期間，來自那家大型資料中心客戶更強勁的訂單回升，此外我們也預期在該業務中與其他客戶的銷售成長。

The other thing that has really impacted us, Matt, this -- the last couple of quarters in that broader category has been sales, specifically in the transportation, refrigeration side and also on the RV side. So it's a broad category, and I know a lot of people look at broad HVAC industry statistics, but we've got 2 key customers, in particular, that we don't see that as a share loss. But -- and then on top of it, very specifically, we have some nichey business in transportation, refrigeration and RV.

另外一件對我們影響很大的事，Matt，是在這個更廣泛類別中，過去幾個季度的銷售表現——特別是在運輸冷凍（transportation refrigeration）端，以及 RV 端。所以這是一個很廣的類別，我知道很多人會看整體 HVAC 產業的統計數據，但我們有兩個關鍵客戶，尤其是，我們不認為那是市占流失。但——此外，非常具體地說，我們在運輸冷凍與 RV 也有一些利基型（nichey）的業務。

Yes, and that's just purely driven by market demand right now. It's similar as truck capacity that goes right along in hand with the refrigerated capacity needs for transportation of refrigerated goods.

是的，而這完全是目前市場需求所驅動。這與卡車運能的情況類似，而卡車運能又與運輸冷藏貨品所需的冷凍運能需求密切相關。

And then just to get back to the pricing comment. You made a comment just a moment ago and in your prepared remarks. Historically speaking, what has -- and this is just on the commercial HVAC&R side, what has been the historical price practice, the historical, maybe, lack of discipline in that business? And what should the expectation be going forward? How important is price in order to get that 200 to 300 bps of margin improvement you're looking for?

另外回到你對定價的評論。你剛才以及在事先準備的講稿中提到了一點。從歷史角度來看——而且這只針對商用 HVAC&R 端——過去的定價做法是什麼？過去在這項業務中，可能缺乏紀律的歷史情況是什麼？未來的預期應該是什麼？要達成你們所尋求的 200 到 300 個基點的利潤率改善，價格有多重要？

Yes. I mean it's a portion of it. I think our discipline needs to improve. Right now, we sell a good portion of that business through representatives that represent us on an exclusive basis. And we've had discussions with those on the discipline that we're going to follow and the -- and kind of the rules-based approach towards bidding new business. So I think you're going to see some improvement directly. It's a portion of that 200 to 300. I don't want to say how much, but clearly, all together with the other factors I talked about is what we're gunning for. But there is a portion of that, that we want to hold pricing discipline. And to that point, a key part of holding pricing is making sure we deliver on time, on quality, okay? That's -- sort of the 2 go hand-in-hand, which I think, so we'll -- as we fix one, will help improve the other one as well, besides a discipline on pricing that we're setting.

是的。我的意思是，這是其中一部分。我認為我們的紀律需要提升。目前，我們相當一部分的業務是透過以獨家方式代表我們的代表商來銷售。我們已與他們討論我們將遵循的紀律，以及——以及某種以規則為基礎（rules-based）的方式來對新業務投標。所以我認為你會直接看到一些改善。這是那 200 到 300 個基點中的一部分。我不想說占比多少，但很明顯，與我談到的其他因素一起，這就是我們要達成的目標。但其中確實有一部分，是我們希望維持定價紀律。而就維持定價這點而言，關鍵的一部分是確保我們能準時交付、品質到位，好嗎？這兩者是相輔相成的；我認為當我們把其中一項修正好，也會有助於改善另一項，此外還有我們正在建立的定價紀律。

And then as a follow-up to the cost-out question, I think, Mick, you mentioned $15 million of people-related savings embedded in the $25 million to $30 million. Can you maybe talk about what the other major buckets are that sort of get you there. And then out of the $25 million to $30 million, how much is being realized in your fiscal '20 versus how much should be realized in fiscal '21?

另外，作為對成本削減問題的追問，我想 Mick 你提到在 2,500 萬到 3,000 萬美元中，包含 1,500 萬美元與人員相關的節省。你能否談談其他能讓你達到該目標的主要類別（buckets）是什麼？另外，在 2,500 萬到 3,000 萬美元之中，有多少會在你們 2020 會計年度實現，還有多少應該會在 2021 會計年度實現？

Yes. Yes, great questions. So out of the balance, call it, $10-plus-million, we've got 2 major buckets and then kind of a catch-all of other. The largest would be procurement. And there's a number of new initiatives on our procurement team, specifically focused on some VAV activities, VAVE activities and indirect spend. There is then some -- targeted manufacturing process improvements. Tom mentioned a little bit in pricing. And then there's just a catch-all. The biggest basket of the balance would be on the procurement side, heavily into next year. Then to your question about this year, we should, out of the $25 million to $30 million, we're targeting to have about $4 million to $5 million in this fiscal year. And then obviously, the balance -- majority of the balance flowing into next fiscal year.

是的。是的，很好的問題。所以就這個餘額來看，姑且稱之為1,000多萬美元，我們有兩個主要項目，另外還有一些其他雜項。最大的一塊會是採購。我們的採購團隊正在推動多項新計畫，特別聚焦於一些VAV活動、VAVE活動以及間接支出。接著還有一些——有針對性的製造流程改善。Tom在定價方面也稍微提到了一點。然後還有一些雜項。在這個餘額中，最大的一籃子會在採購端，而且會大量延伸到明年。至於你問到今年的部分，在2,500萬到3,000萬美元之中，我們的目標是在本會計年度實現約400萬到500萬美元。然後很明顯，其餘——大部分的餘額會流入下一個會計年度。

Next question comes from David Leiker with Baird.

下一個問題來自Baird的David Leiker。

This is Erin Welcenbach on for David. So my first question is related to, kind of, the continued downward revisions we've seen in the commercial vehicle markets. In terms of build schedules, it seems like your guidance hasn't changed. So that was perhaps communicated well via your customers schedules last quarter. But just wondering, kind of, what you're seeing in that market there? And if the continued downward revisions in that build process, maybe, causes a need for any additional restructuring actions?

我是代替David的Erin Welcenbach。我的第一個問題與我們在商用車市場看到的持續下修有關。就生產排程而言，看起來你們的指引沒有改變。所以這可能在上季已透過客戶的排程溝通得很清楚。但想請教你們在那個市場目前看到的是什麼情況？以及如果生產排程持續下修，是否可能需要採取任何額外的重整措施？

Well, we've studied this backwards and forwards as far as where it's going, both from market data, our customer feedback and the analytics that the team is going through. We feel that we've got underneath this thing with what we've projected last call. We feel that going forward, we think we'll be pretty stable to those projections, but the market outlook for '20, we see overall as far as conditions, what we're expecting is North America mediums being down about 8%, heavies down 23% in Europe, down -- truck market being about 15% down. So we think it's going to stay depressed, as I mentioned in my opening comments. Maybe the back half of calendar '20 we'll start seeing some improvements. But we think we've got ourselves positioned at the right run rate that we're sitting at now that we prepared for.

我們已經就其走向做了反覆研究，包含市場數據、客戶回饋，以及團隊正在進行的分析。我們認為，針對上次電話會議所做的預測，我們已經把這件事掌握住了。我們認為往後應該會相對穩定地符合那些預測；但就2020年的市場展望而言，整體狀況我們預期北美中型車約下滑8%，歐洲重型車下滑23%，以及——卡車市場約下滑15%。所以我們認為它會維持低迷，正如我在開場所提到的。也許到2020曆年的下半年，我們會開始看到一些改善。但我們認為，我們已把自己定位在目前這個正確的運行水準（run rate），也就是我們所準備的水準。

Okay. That's helpful. And then I guess just switching to, kind of, this combination of leadership between the Building HVAC and CIS segments. I guess, why is now the right time to, kind of, make this leadership transition? Any color you can share on that

好的。這很有幫助。接著我想切換到Building HVAC與CIS部門之間這種領導整合。我想問的是，為什麼現在是進行這項領導交接的合適時機？你能否分享一些背景？

Yes, it's a great question, one we've been contemplating since we acquired the asset of CIS a couple of years ago. The concentration on CIS has been really focused directly around one major cloud provider that they did a great job with winning that business, and our teams have brought that business forward and established a great relationship. But the CIS team really wasn't set up to provide other sales and support in the region or globally besides supporting that one customer. The Building HVAC team, on the other hand, has a dedicated data center business centered out of the U.K. but a very deep technical competency that's there, winning business both in cloud, which I announced just the previous comments, and then, of course, with the co-location customers with what we announced with CyrusOne earlier. So bringing those 2 teams together under one leader provides us an opportunity to service both the U.K./Europe base and now the North American team that we want to grow geographically with the competency that sits in the U.K. to augment and support the resources and capability that we have in North America, which, again, is a great team but singularly focused on one customer. So we're looking at switching resources and bringing key U.K. talent from the U.K. to North America to provide that capability, and we're going to have it under one leader, which is our Vice President of the Building HVAC business that has majority of that technical competency under his control today. But again, we'll be servicing the customers of CIS the same way. So there's not any loss of -- or transition or inconsistency in making that transition. So -- and we review that with the customer, and it's received very well. So I'm very excited about the growth opportunity this is going to generate.

是的，這是個很好的問題；自從我們在幾年前收購CIS的資產以來，我們就一直在思考這件事。CIS的重點一直非常集中在一家主要的雲端服務供應商；他們在贏得該業務方面做得非常出色，而我們的團隊也把這項業務延續並建立了很好的合作關係。但CIS團隊的架構並不是為了在該區域或全球提供其他銷售與支援，而是主要支援那一位客戶。另一方面，Building HVAC團隊有一個以英國為中心的專職資料中心業務，並具備非常深厚的技術能力；他們在雲端領域贏得業務（我在前面剛提到），當然也包括與共置（co-location）客戶的合作，例如我們先前宣布與CyrusOne的合作。因此，將這兩個團隊整合在同一位領導之下，讓我們有機會同時服務英國/歐洲的客戶基礎，以及我們希望在地理上擴張的北美團隊；並運用英國的專業能力來補強與支援我們在北美的資源與能力——北美團隊同樣很優秀，但目前主要聚焦於單一客戶。所以我們計畫調整資源，並把英國的關鍵人才從英國調到北美來提供這項能力；而且會由同一位領導統籌，也就是目前掌握大部分技術能力的Building HVAC事業部副總裁。但再次強調，我們仍會以相同方式服務CIS的客戶。因此在這個轉換過程中，不會有任何損失——也不會出現交接或不一致的情況。我們也已與客戶檢視過這件事，反應非常正面。所以我對這將帶來的成長機會感到非常興奮。

Okay. And then my last question, can you just frame what the typical pursuit or kind of sales conversion cycle looks like when you are trying to win an additional cloud customer?

好的。那我最後一個問題是：當你們嘗試贏得另一家雲端客戶時，典型的開發（pursuit）或銷售轉換週期大概是什麼樣子？

The pursuit, could you just clarify a little more?

你說的開發（pursuit），可以再多澄清一點嗎？

Yes, so I guess, really, the question is, in terms of identifying or kind of going after additional customer opportunities, what is the timeline in terms of initial conversations to actually converting that into revenue?

是的，我想問的是：在辨識或爭取額外客戶機會時，從初步對話到實際轉換成營收，時間軸大概是多久？

Yes, that's a great question. So I think that from my experience with this new approach, where we're looking at building new customer base in the U.S. that can happen fairly quickly. I mean they project, kind of, a couple of years out where they want to go, bringing people in and the quote to job 1 is probably within a 12- to 18-month cycle, I would say. So it's nothing like, let's say, the automotive or commercial vehicle side. There's a quicker cycle of order to production. And the pursuit in front of that is clearly the message we received loud and clear is, you have the capability both to support the sales and engineering front and the manufacturing front, and you've proven that. We will consider you. So we're leveraging that CIS capability in North America,with the broader global teams that Building HVAC support is bringing new opportunities quickly. So am I answering your question? I really want to make sure that I get this. So I think...

是的，這是個很好的問題。以我對這個新做法的經驗來看，我們在美國建立新的客戶基礎，可能可以相當快地發生。我的意思是，他們會把未來幾年想達到的方向做出規劃；引進人員，從報價到Job 1（量產首件/首批）我認為大概是在12到18個月的週期內。所以這不像汽車或商用車那一端。從接單到投產的週期更快。而在此之前的開發過程中，我們收到非常明確的訊息是：你們具備支援銷售與工程端、以及製造端的能力，而且你們已經證明了。我們會考慮你們。因此我們正把北美的CIS能力，結合Building HVAC所帶來的更廣泛全球團隊支援，以更快地帶來新機會。所以我有回答到你的問題嗎？我真的想確保我理解正確。所以我認為……

Yes, that was exactly what I was looking for.

是的，這正是我想了解的。

Great, okay.

很好，好的。

(Operator Instructions) We have a question from Mike Shlisky with Dougherty & Company.

(接線員指示) 我們有一個問題來自Dougherty & Company的Mike Shlisky。

Okay. Just a couple of quick ones here. First, it was announced last week that one of your major customers has made an offer to buy the other in the on-highway world. So I was wondering if you could tell us a little bit about, do you view combining Volkswagen's truck business and Navistar truck business as an opportunity for you? Or do you already feel pretty well entrenched with both of them, and it might be kind of business, as usual, once -- if and when they combine?

好的。我這裡有幾個簡短的問題。上週宣布你們的一位主要客戶已提出收購另一位主要客戶的要約，發生在公路用車（on-highway）領域。所以我想請教一下，你們是否把Volkswagen的卡車業務與Navistar卡車業務的合併視為你們的機會？或者你們已經在兩者之中都相當根深蒂固，因此一旦——如果他們合併，可能就只是照常營運（business as usual）？

Yes. No. That's a great question and one that we feel very good about because you answered it. Your point was exactly the answer. We have good relationships and significant business with both groups now, engaged very deeply in -- they announced the procurement initiative first, which is some time ago, which we've been engaged with that and with pursuing business with both groups. So I feel that we're in a good position, established in their supplier panel. We've -- last year, we were announced a Diamond award winner in -- at Navistar, and that's leading to other engagements. And I'm very pleased to hear about from our team. So we think this is an opportunity to help demonstrate as a global a company that supplies and established with both groups that we can expect a positive impact from that.

是的。不是。這是個很好的問題，而且我們對此感到非常有信心，因為你已經回答了它。你的觀點正是答案。我們目前與這兩個集團都維持良好關係並有相當可觀的業務往來，也都非常深入地參與其中——他們先前宣布了採購倡議，那是一些時間以前的事了，我們從那時起就一直參與，並同時與兩個集團洽談與爭取業務。因此我認為我們處於有利位置，已在他們的供應商名單中站穩腳步。我們——去年在 Navistar 被評為鑽石獎得主，這也帶動了其他合作。而且我很高興從我們團隊那裡聽到相關進展。所以我們認為，這是一個機會，能夠以一家全球性公司之姿展現：我們同時向兩個集團供應並已建立合作關係，因此可望從中獲得正面影響。

Okay. And then what I mentioned, it's kind of one of the topics of the month. Can you maybe comment on your operation in China and in Asia with respect to the coronavirus? Has there been any changes or disruptions or issues that you've seen so far?

好的。接著我提到的，這算是本月的熱門話題之一。你能否就新冠病毒對你們在中國及亞洲的營運影響做些評論？到目前為止，你們是否看到任何變化、干擾或問題？

Yes. We have not seen any disruption thus far. That's important. And I think what I'll mention is what we're doing is risk mitigation to that. Anticipation of some disruption is our procurement and supply chain leadership has gone through all potential materials that could be impacted by supplier, by partner and we're looking at where we sit, both in inventory today with kind of a timeline out that we think we -- can we have continuity to get through most of our fiscal year. And so we're assessing that, looking at what options do we have if we do see disruption. So look at second source opportunities and working with customers. We sent letters to both our customers and suppliers with this information that we're -- our process approach and risk mitigation. So I think we're well set-up to manage what may come our way. On the ground, okay, what is happening physically in our plants, as you know, pretty much things are shut down until February 10 by the Chinese government. And we're waiting for the post-Chinese New Year holiday for people to return to work. So that's going to be a big portion to see, well, how many people get to work on Monday, okay? And so we're anticipating that we'll be up and running to what degree. And then, of course, what -- how much of our customer base is up and running as well. So I think next week, they will start demonstrating just how much of an impact there is. But right now, I think that we've got people working from home and our, let's say, our leadership team in China, set up to make sure that if they can't get to work right now because of restrictions that they have their laptops on, and we're operating seamlessly that way. But the question is how much of our workforce shows up on Monday and to our customers on Monday as we look forward. So I feel we've done all the work to prepare for that. And we're in a -- let's be prepared for wherever may come at us as it develops.

是的。到目前為止我們尚未看到任何中斷。這點很重要。我想補充的是，我們正在做的是風險緩解。針對可能出現的中斷，我們的採購與供應鏈領導團隊已盤點所有可能受供應商、合作夥伴影響的材料，並檢視我們目前的庫存狀況，以及往後的時間軸，評估我們是否能維持供應連續性、支撐度過我們大部分的會計年度。因此我們正在評估這些，並思考若真的出現中斷，我們有哪些選項。例如尋找第二來源的機會，並與客戶合作。我們已向客戶與供應商寄出信函，說明我們的流程作法與風險緩解措施。所以我認為我們已做好準備來管理未來可能發生的情況。至於現場，也就是我們工廠實際運作的狀況，如你所知，中國政府基本上已要求停工至 2 月 10 日。我們正在等待農曆新年假期後人員返工。因此很大一部分要看的是，週一到底有多少人能到工廠上班，對吧？所以我們在預期屆時能在多大程度上恢復運轉。當然也要看我們的客戶群有多少也同樣恢復運作。我想下週就會開始顯示影響程度到底有多大。但目前，我認為我們已安排人員在家工作；而且我們在中國的領導團隊也已就位，確保若因限制無法到工廠，他們也能使用筆電，讓我們以這種方式無縫運作。但問題在於，週一我們有多少員工到場，以及我們的客戶週一有多少能恢復運作，這是我們接下來要觀察的。所以我覺得我們已完成所有準備工作。我們會——隨著情勢發展，為任何可能發生的狀況做好準備。

Okay. If I can just throw in one last one here on data centers. I guess, as you're pursuing new customers in that world, are you trying to, kind of, leverage on the current large customer and that product design or -- are those designs protected by IP, and you can't really sell them to other folks. And I guess the broader question is then, do you have to bring on a lot of extra engineering cost to get these new data center customers or potentially have to bid quite low to get that business, at least at the outset here?

好的。如果可以的話，我想再補問最後一題，關於資料中心。我想，當你們在那個領域開發新客戶時，你們是否試圖利用目前的大型客戶以及其產品設計來延伸——還是說那些設計受到智慧財產權保護，你們其實不能賣給其他客戶？更廣泛的問題是，那麼你們是否必須投入大量額外的工程成本來取得這些新的資料中心客戶，或是可能必須以相當低的價格投標才能拿到業務，至少在一開始是如此？

Well, first, I'd say we're pleased with the margins. So I'll start with the last and work forward. It's a large market we're targeting. It's about a $2 billion market, and we look at it, it's kind of broken into 3 categories: cloud, co-location and an enterprise, enterprise being the smallest. And so we're focusing on the cloud and co-location, specifically. As far as and to add to the earlier question from the Baird representative is that upfront proven capability demonstrate you have wide resources and capacity in place is important. So I think that we're well positioned, as I just pointed out, by one example, we won new business in U.K. with a new cloud provider. So that demonstrates the, kind of, the capacity capability we have to do that. As far as technology, and what's walled up or what's not it depends by customer. Of course, some customers will may be engaged in a very direct development work with them, and that's their IP, and we'll support that. In other cases, we'll leverage the IP we have to support that. So engineering capacity we have a deep technical competency base in the U.K., supported by the teams in the U.S. both in CIS and Building HVAC in North America. So we think we can leverage the leadership. We are transferring a key leader over that's self-build at established cloud computing, co-location computing capability in the U.K. to the U.S. and to help build the relationships. He has strong -- the key here is strong relationships both at specifying engineers that support these customers, they depend on specifying firms that develop that for them and we have very good capability at that level. And that's a key, kind of, what I would say, market advantage that we have to leverage this. They're global companies that we can leverage that relationship around the world.

嗯，首先我要說，我們對毛利率感到滿意。所以我先從最後一個問題回答，再往前說。我們鎖定的是一個很大的市場。市場規模約 20 億美元，我們看它大致可分為三類：雲端、共置（co-location）以及企業端，其中企業端是最小的。因此我們特別聚焦在雲端與共置。另外，呼應先前 Baird 代表的提問：一開始就能證明自身能力、展現你具備充足資源與產能，這點很重要。所以我認為我們的定位很好；正如我剛才舉的一個例子，我們在英國與一家新的雲端供應商贏得了新業務。這就證明了我們具備相應的產能與能力來做到這點。至於技術，以及哪些被隔離保護、哪些不是，會因客戶而異。當然，有些客戶可能會與我們進行非常直接的共同開發工作，那些就是他們的智慧財產權，我們會予以支持。在其他情況下，我們會運用我們自身的智慧財產來提供支援。在工程能力方面，我們在英國擁有深厚的技術能力基礎，並由美國團隊支援，包括北美的 CIS 與建築 HVAC 團隊。因此我們認為可以善用這些領導與資源。我們正把一位關鍵領導者調任過來——他在英國建立了自建（self-build）的雲端運算與共置運算能力——將其調到美國，以協助建立關係。他具備很強的——關鍵在於與指定工程師（specifying engineers）之間的強大關係；這些客戶仰賴指定設計公司為他們開發方案，而我們在這個層級具備非常好的能力。這是我會說的關鍵——也是我們可以用來槓桿的市場優勢。他們是全球性公司，我們可以在全球各地運用這些關係。

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

我目前看不到其他問題。現在我想把電話會議交回給 Kathy Powers。

Thank you. Thanks for joining us this morning. A replay of this call will be available through our website in a couple of hours. I hope everybody has a great day.

謝謝。感謝各位今天早上加入我們。本次電話會議的重播將在幾個小時後於我們的網站提供。祝大家有美好的一天。

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

各位女士、先生，今天的電話會議到此結束。感謝各位參與。您現在可以掛線。