Good day, ladies and gentlemen and welcome to the Modine Manufacturing Company Q4 2013 Earnings Call Presentation. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, today’s conference call is being recorded. I would now like to introduce your host, Ms. Kathy Powers, Vice President, Treasurer and Investor Relations. Ms. Powers, please begin.

Thank you. Thank you for joining us today for Modine’s fourth quarter fiscal 2013 Earnings Call. With me today are Modine’s President and CEO, Tom Burke; and Mick Lucareli, our Vice President, Finance and Chief Financial Officer. We will be using slides with today’s presentation. Those links are available through both the webcast link as well as a PDF file posted on the Investor Relations section of our Company’s website, modine.com. Also, should you need to exit the call prior to its conclusion; a replay will be available through our website beginning approximately two hours after the call concludes. On Slide 2 is an outline for today’s call. Tom and Mick will provide comments on our fourth quarter results and provide revenue and earnings guidance for fiscal 2014. At the end of the call, there will be a question-and-answer session. On Slide 3 is our notice regarding forward-looking statements. I want to remind you that this call may contain forward-looking statements as outlined in today’s earnings release as well as in our Company’s filings with the Securities and Exchange Commission. With that, it’s my pleasure to turn the call over to Tom Burke.

Thank you, Kathy, and good morning, everyone. Given current market conditions, I am pleased with Modine’s fourth quarter earnings, resulting in full year earnings per share before impairment and restructuring charges of $0.40. The fourth quarter was our strongest quarter of the year both in revenue and earnings despite weak end market demand in North America, Europe and Asia. Fortunately, we realized an increase in sales and margin in our South America segment excluding currency and we also had a solid quarter in our Commercial Products group led by heating sales in North America. Our revenues were down 7.5% in the fourth quarter compared to the prior year, and down 12.8% for the full year, largely driven by weak end markets and customer delays in program launches. Our outlook for fiscal 2014 is consistent with the market assumptions provided last quarter with continuing weakness in North American and European heavy commercial vehicle markets, an improvement expected later in calendar 2013. Please note that our financial results for the quarter include $10.5 million of impairment and restructuring charges primarily related to severance cost in Europe in conjunction with our European restructuring program. Excluding these charges, we reported earnings per share of $0.18, down $0.16 from a very strong fourth quarter last year. Mick will provide more details on our financial results in a few minutes, but first, I would like to comment briefly on our segment results and outlook. Turning to page five, revenue was down in North American segment primarily driven by lower sales to the commercial vehicle market and additional weakness in off-highway market. Looking forward, we expect mixed market conditions in North America in fiscal 2014 with heavy truck production remaining down, but improving later in the year. We also expect medium truck in off-highway production to improve…

Thanks, Tom. Good morning to everyone. Please turn to slide 11 and I’ll review the income statement. As Tom mentioned, we had our strongest quarter of the year in terms of revenue and underlying earnings. and given the end market conditions, revenue declined in our North America, Europe and Asia business segments. in addition, foreign exchange had a slight negative impact on year-over-year comparability; excluding foreign currency sales decrease $25 million or 6%. And Modine’s automotive sales were down 5% including the planned wind down at the BMW module business. Our commercial vehicle and off-highway sales were down 9% and 4% respectively. Throughout the year we have been focused on cost control. You can see SG&A decreased by $7 million year-over-year, representing a 14.5% decrease. And for the full year, SG&A was down $20 million. During the quarter, we recorded $10 million in impairment and restructuring charges, which I’ll cover in more detail on the next slide. The impact on EPS was $0.22. And excluding impairment and restructuring charges, EPS was $0.18 in the quarter and $0.40 for the full year in line with our expectations. There were also some unusual items in the tax line I want to point out. During the quarter we recognized the tax valuation allowance in our Asia segment negatively impacting earnings by $2 million or approximately $0.04 per share. And last year, we had a tax benefit of $4.4 million in the tax line, which related to a Hungarian tax credit. Turning to slide 12, we have the summary table that highlights our main restructuring cost incurred so far this year. As we said during the quarter, we recorded $9.7 million of cash restructuring charges and $800,000 of non-cash impairments. The cash restructuring charges related to the European equipment transfers and headcount reduction and…

Thanks, Mick. Please turn to page 20. Because of the condition of our primary end markets, this has been a challenging year for Modine with revenues down 12.8% or $200 million. We faced many headwinds this year in our markets and we met them head on. The reaction of our employees and the performance of this company speak for itself. The work done in prior years to restructure our North American manufacturing footprint proved its value this year as margins mostly held up when the volumes declined. In South America, in Commercial Products, we have strong businesses that are poised for growth in a new fiscal year. We still have work ahead of us in Europe and Asia. In Europe, our focus is on the commercial vehicle market program launches and on a restructuring program, where we are making significant progress towards our goals for this region. We have proven that we know how to restructure our operations to ensure cost competitiveness and we’re well down in that path for Modine Europe. In Asia, our challenge is to execute growth strategies that will allow us to bring our technical expertise to that market and to build a more diverse customer base. As Mick reviewed, we see mixed market dynamics, but anticipate further earnings improvement in fiscal 2014. Our longer term outlook remains quite positive. This includes significant net new booked business, which combined with expected market improvements and the benefit of our strategic business initiatives gives me great confidence in Modine’s future. Last year, I introduced our enduring goals, which drive the strategic decisions we are making today by keeping our team focused on long-term growth. By focusing daily on continuous improvement and our long-term strategies, we are building a stronger Modine, better able to quickly react and meet whatever challenges that come our way. And with that, we would like to take your questions.

Thank you. (Operator Instructions) Our first question comes from David Leiker of Baird. Please go ahead. David Leiker – Robert W. Baird & Co. Equity Capital Markets: Good morning, everyone.

Good morning, David. David Leiker – Robert W. Baird & Co. Equity Capital Markets: I guess a couple of things, I will start with Asia. If you look at March of 2012, your revenues there were $22 million and obviously a lot lower than that today. If you have the same type of end-market volumes as you had a year ago, yeah, I’m sure that you picked up some new business. is there anyway you can put some color or characterization in terms of what you might have grown that business excluding what the markets did there?

Good question, number one. number two, we’re contemplating. Yeah, clearly, a year ago at this time, the volumes per program were a lot higher and the new business wins that are coming in were right on track as far as program wins, so that part hasn’t changed. so really, adjusting for the market conditions to make an assessment, but it’s a good question. How would you answer that Mike?

Yeah. Dave, about $4 million or $4.5 million, I would estimate of the – to say it early, we picked up about; I’d say $1 million to $1.5 million of incremental new business and launches. The balance that took us down to the $5 million decline was about 20% to 22% decline in the end market and then we highlighted, there is another almost $2 million of frankly BMW – piece of BMW business that we already talked about in Europe is also winding down in Asia. So short answer to your question, without any of the BMW wind-down on our market conditions, we probably would have been up somewhere between $1 million or $2 million sales. David Leiker – Robert W. Baird & Co. Equity Capital Markets: Okay, great. And where are you in terms of being able to book business beyond your business today that’s predominately in the excavator market in Asia?

As you know we’ve put a lot of organic investment in to our automotive side of the oil coolers business, which we have strong positions both in Europe and North America and with a lot of the global customers that we’re servicing, we’re very pleased with the order intake rate that’s coming in with that business. In addition, we’re expanding beyond that with other opportunities along those same lines on engine products and also some other related off-highway business. So those are kind of the key diversification steps right now. Relationships is another key thing we’ve been working on in the last six months that our leadership team and bringing up some new capability into that team to help expand (inaudible) some relationship sales that we could pick up that way as well.

David, I would just add to that too. In the $225 million in net new business, there is obviously a piece of that that is Asia that we have been awarded and booked that’s going to launch that pieces of truck and – truck business in India, as Tom mentioned also automotive components launching in China. We do anticipate with those launches, we’re launching this fiscal year. So as I said, we see despite the market conditions, we have – we’re starting to launch that business. So we’re confident in our ability to grow the top line despite the tough excavator market. David Leiker – Robert W. Baird & Co. Equity Capital Markets: And then the second item here is on the SG&A. It’s fantastic work there. You’ve been focused on that for several years. Is there a room to take that further or is this the level that we stabilize that, do you think?

Yeah, good question and fair question. No, I think what we have built into our outlook for the next year in the $0.45 to $0.55 is actually an increase in SG&A and it’s really been us trying to manage cost as tightly as we can in the current environment. But we will start to see some SG&A increases in the next year. I don’t think the $165 million; $167 million range is the normal. It’s probably more in the $175 million, $180 million range. David Leiker – Robert W. Baird & Co. Equity Capital Markets: Great. And then the last item is on the backlog. If I remember correctly, a year ago that number was $250 million. You’re talking $225 million, I want to try and reconcile between – but you pull 2013 out of that, you chose 2016 into that adjustments for production in currency. But it looks like I got a net basis that went down pretty significantly in the out year.

The way we calculate it, Dave, and we can kind of compare how you’re looking at as we do it on a three-year rolling. So you’re right, it went down about to $22 million, $25 million. As we did some swing on it, about $10 million of that is just the change in the currency expectations from a year ago? And then market volumes really accounted for about $80 million. So we’ve picked up some more orders in the last year, the biggest negative impact frankly is then market expectations in heavily around the truck side. David Leiker – Robert W. Baird & Co. Equity Capital Markets: And is that the insurance – is there any color you can put in terms of the cadence side, you think that looks over each of the next three years?

Yeah. We’re very high level; you could think about it kind of a 30:40:30, the middle year, this year about a third of that we’re launching and then a bigger piece in year two and another third in year three, roughly speaking. David Leiker – Robert W. Baird & Co. Equity Capital Markets: Then how much of that Euro 6 truck do you think that, I mean, at one point I think you’re talking about something around $100 million plus.

Yeah. I don’t have the breakdown of the $225 million with me. but a significant piece of that would be Europe. David Leiker – Robert W. Baird & Co. Equity Capital Markets: Okay, great. Thank you very much.

Sure.

The next question comes from Ann Duignan of JPMorgan. Please go ahead. Michael D. Shlisky – JPMorgan Securities LLC: Hey guys, it’s Mike Shlisky, filling in for Ann this morning.

Hi, Mike.

Hi, Mike. Michael D. Shlisky – JPMorgan Securities LLC: Hey, so want to talk a few on your Asia business, kind of two-part question and help us not too soon. You guys mentioned, you’re also going to see some volume increases in Asia going forward. Is that going to be enough in the next fiscal year or so to get to a profitable level or is it too soon to be thinking that right now? And then part two of the question is kind of related is, you also mentioned that you have lowered your breakeven points in Asia. is that an incremental lowering since last earnings call, a few months back or is it still like you said around $90 million a year on the run rate?

Let me talk about top line now, so we need to make a way and talk about the dynamics that we’re dealing. We clearly are seeing – we’ve seen stabilization or base orders that we have in the off-highway excavator business in China with some slight indications of that improving in the back half of the year. :

Yeah, we won’t see enough growth at our current expectations, what Tom and I walked through with markets to move us in just this fiscal year to break-even like. But as Tom said, we do our launching programs this year and expecting top line growth. The new leadership team over there has really been pushing hard and we estimate that the break-even is hanging in around $85 million range and frankly, that is we’ve reached that capacity level with the business supporting India, the business supporting automotive in China, off-highway and potentially truck that we need a certain level of infrastructure. So that should hold where it’s at for a while and that’s why Tom has been emphasizing so much with the real play for us now is to make sure we move that as quickly as we can above the $80 million towards the $90 million. Michael D. Shlisky – JPMorgan Securities LLC: Okay, great. and then quickly on Europe, if you could maybe just update us, I know it’s a long-term restructuring process, but just to what inning might you be in over there in getting things as far as your cost structure right-sized?

Let’s step back a second and go ahead and ask your question. if you think about where we started, we’ve closed and sold one plant in Germany a couple of years ago. we’ve made the arrangement with our second plant on the – since we outsourcing of that business to a contract manufacturer to build responsibility for the – and we have to put option on selling down the road. so essentially two of our plants in Germany, we have a good plant moving forward. The third plant, we’re right in the middle of negotiation with our work council partners and over the hump as far as dividing this wind down approach and obviously, we’re taking a big charge this year to approach that next phase of the wind down. So we’ll continue with that plant. That leaves our plant, which is our focus high technology plant on the Euro 6 radiators that we’re supporting, which is a key plant for the future and this plant that we actually acquired some new business that we feel good about long-term high performance EGR business in Germany. So we’re approaching the later end, I would say, and feel very confident with the position we’re in. We moved some other product around between our plants to better utilize scales. So I’m very pleased with the team and the way they’ve really worked together and focus not only on the plant operations, but clearly on the overall business operations on SG&A, utilizing the asset base to the best within the headquarters of the technical center as well. So we’re definitely approaching a later innings here and feel positive that we’re on track to get 15% return on capital as we approach the end of this fiscal year. Michael D. Shlisky – JPMorgan Securities LLC: Nice. thank you so much guys.

The next question is from Walt Liptak of Global Hunter Securities. Please go ahead. Walter Liptak – Global Hunter Securities: Hi. Thanks, good morning.

Good morning, Walt.

Hi. Walter Liptak – Global Hunter Securities: Congratulations to on the SG&A reduction, the restructuring, it’s clearly a tough year. I wanted to try and get your view on where some of the restructuring is going to show up over the next 12 months. It sounds like there’s a little increase in SG&A. So is it gross margin or we would see the improvement if your revenue was flat?

Yeah, good question, Walt. Primarily, that’s what we would expect to see in a flat environment. They come through on the gross margin line. As I mentioned, I think we’ve got a little bit more year-over-year reduction full-year impact to some of the restructuring in Europe on SG&A, but globally with wage increases we’ve also had some other benefits this year that we won’t be able to continue to have in the following years. I think SG&A will go up. So it would be in the gross margin line. Walter Liptak – Global Hunter Securities: Okay. So when you do the math with the restructuring that’s already happened and just assume that flat top line, how many days once you’ve gathered gross margin improvement?

They way we’re looking at it right now from the European side is we are targeting to get them to a similar gross margin level to North America. They basically have nearly identical revenue run rate, similar customer, same products. So as you compare the North American margins in Europe, our primary goal with North America this year has been running almost 16%, and Europe is going to finish the year more in the 12%, 13% range. So that will – over the next couple of years, we see two to three points of margin improvement in Europe. Walter Liptak – Global Hunter Securities: Okay.

We look to next year, Walt, to just to saw your question; we should see some improvement in Asia in the gross margin. You saw some improvement, a big improvement in South America and we’d expect that to be next year. So we would have three of our five segments we would expect to show some margin improvement being Europe, South America and Asia, Commercial Products or HVAC business in North America to be more normal with volumes given all their profitability levels already currently pretty high. Walter Liptak – Global Hunter Securities: Okay. And I get the message with the guidance with the flat revenue and the headwinds. just looking at North America, two thirds of the businesses maybe in trucks, autos, which are the order activities than better in truck, especially auto is still good (inaudible) it’s growing a little bit. I wonder about the outlook, if you’re not just being too cautious on what some of the sales growth looks like over the next 12 months?

I think that when you’re banking on market recovery to really value to your expectation, you’ve got to be careful, right? This year sounds to maybe the last year. And so we are being cautious on heavy duty truck. We definitely agree that mediums are going to be stronger this year and (inaudible) will be down on a year-over-year basis. I think off-highway is going to be pretty flat. I think there is some upside on the ag side, that’s there. But as far as construction and mining, we see that as kind of challenge quite frankly with the things that are remaining in place. So we think it’s responsible to be, let’s say, cautious, okay, but yet we were planning for some upside. But we think we need to be cautions of how we’re approaching that. Walter Liptak – Global Hunter Securities: Okay. Are there any moving parts in your North American heavy truck business, mixed issues or customer programs that are changing for this year?

No moving parts; we’ve got a lot of work going into supporting the programs we’re on and the customers are with, but everything is stable in that regard. Walter Liptak – Global Hunter Securities: Okay. Okay, thanks.

Next is a follow up from David Leiker of Baird. Please go ahead. David Leiker – Robert W. Baird & Co. Equity Capital Markets: Hi, again, just a couple of follow-ups. Did you – it’s kind of a mix, but you said you want to hit your Europe ROIC targets by the end of this fiscal year, did I hear that correctly?

We want to be on the run rate – going into fiscal 2015; we want to be on that 15% run rate. So this year is our year to start seeing that return on capital going up. So we come out of this fiscal year into next year that we’re at that 15% run rate. David Leiker – Robert W. Baird & Co. Equity Capital Markets: :

No – and just to add to what Tom’s saying, by the end of fiscal 2015 using the full year results, David, our target is a 15%. So it’s going to be sequential for holiday quarters even when we start next year at this time, we’ll still have some improvement to push out through the year, so think of the time in a quarter climb. David Leiker – Robert W. Baird & Co. Equity Capital Markets: Okay, and then…

I should say in a 15 – that averages out to hit our 15%. David Leiker – Robert W. Baird & Co. Equity Capital Markets: Okay. One of the things on Euro 6 launches, the market everyone is trying to get the arms around and it looks like that’s a bit of a [pre-rate] going on in the UK. Where are you in terms of launching programs that you’re in production with today? Now I think most of the European manufacturers you’re involved with have started producing those trucks, but obviously not in volume?

We are slowly ramping up with two of the three main customers on Euro 6 trucks that we’re on. So we got two underway. The third, we’ll start in the second half of this year, of this calendar year. So we’re seeing this thing, let’s call it two-thirds, one-third, first half of the year; Euro 5, Euro 6, they’ll start flipping over in the second half of the year as you get to the end of fiscal year requirement for all sales to be Euro 6 compliant. So we’re two-thirds the way into launching with our customers today and that will be complete and then corresponding, ramp up is going to go; start really accelerating in the second half of the year. David Leiker – Robert W. Baird & Co. Equity Capital Markets: Is that a September quarter ramp or is that a more of a December quarter?

Well, the question of ramp has been a big question all long here right, because what we were told last year, what we’re going to be is far less. David Leiker – Robert W. Baird & Co. Equity Capital Markets: Yeah.

Again, I think we’re being cautious on this one. So I’d say it’s going to be the later half of the second half, so yeah, probably start pushing in September, October kind of acceleration. David Leiker – Robert W. Baird & Co. Equity Capital Markets: So let’s assume for a moment that there is no pull it out of demand for Euro 6 at all. It’s generally going to be January 1, 2014. Is that, you started seeing your P&L as you ramp up production units in December time period or is that September, October time period?

I think we’ll start seeing it more in the October, mid-October, late-October range, the release is getting ready, because essentially sales have to be compliant. So they’re going to – so it will be tied to production in May. But they have orders they’re taking from Euro 6 too. So I’d say there’ll be a couple of month lead into that January. So I’m thinking October, we’d start seeing that. David Leiker – Robert W. Baird & Co. Equity Capital Markets: And then I think all the powertrain cooling opportunities there have been awarded outright. I mean there isn’t an opportunity there, is there?

I would say the big packages are all done. There are still some opportunities with components that go and support the remaining work that we’re on. But I think as far as good platform packages, you’re right. I think that’s going to lead. David Leiker – Robert W. Baird & Co. Equity Capital Markets: Okay. Great, that’s all I have. Thank you very much.

Thanks.

I’m showing no further questions in the queue. I would like to turn the conference back to Ms. Kathy Powers for any further remarks.

Thank you. This concludes today’s call. Thank you for joining us this morning and thank you for your interest in Modine. Good-bye.