Good day, ladies and gentlemen and welcome to the Q2 2013 Modine Manufacturing Company Earnings Conference Call. My name is Casey and I will be your operator for today. (Operator Instructions) As a reminder this call is being recorded for replay purposes. I would now like to turn the call over to Ms. Kathy Powers, Vice President, Treasurer and Investor Relations. Please proceed.
Thank you for joining us today for Modine’s Second 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 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 two, is an outline for today’s call. Tom and Mick will provide comments on our second quarter results and update our fiscal 2013 guidance. At the end of the call there will be a question-and-answer session.
On slide three is our noticed 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 filing with the Securities and Exchange Commission. With that it is my pleasure to turn the call over to Tom Burke.
Thank you, Kathy, and good morning everyone. We continue to see weakening in our markets during the quarter resulting in a 14% decrease in sales as compared to the prior year or 8% excluding currency effects. This includes the impact of volume declines in the commercial vehicle markets in North America, Europe and South America, and in the construction equipment market in Asia along with the planned wind down of automotive programs in Europe and Asia.
Although we cannot control the market conditions, we are doing all that we can to control costs and effectively manage our business through these challenging times. This includes implementing our restructuring plan in Europe, continuing to manage our manufacturing operations in a very efficient manner and minimizing all discretionary spending. Actions takes to date include shortening work weeks in certain manufacturing facilities leading to lower labor cost and energy cost; reducing or eliminating temporary staff and cutting travel and discretionary expenditure.
In short, we are running the business in a very frugal yet responsible manner and will continue to do so. Our earnings during the quarter included $18.1 million impairment and restructuring charges primarily related to the write-down of assets in Europe and North America. Excluding impairment and restructuring charges, we reported operating income of $11.3 million down 7.5% over the second quarter of last year. Also excluding charges, we reported earnings per share of $0.13, up $0.10 from last year.
Given the significant decline in our end markets, I am very pleased with our results for the quarter. Mick will provide some more details on our financial results in a few minutes but first I would like to comment briefly on our segment results.
Turning to page five, the North American market remains mixed with relative stability in the off-highway markets and a declining commercial vehicle market. We continue to see weakness in the U.S. truck market, particularly for Class 8, and we have lowered our volume forecast for the remainder of the year. On a positive note, we saw sales growth in the off-highway segment during the quarter including increased volume from program launches. This is an important market for us providing diversification to our product portfolio in our best performing vehicular segment.
As you know we completed the restructuring of our manufacturing footprint in North America late last year with the closure of the Camdenton, Missouri plant. This quarter we recorded $1 million in impairment charges during the quarter related to idle U.S. manufacturing facilities that were previously closed in conjunction with the successful North American restructuring program.
Our European segment remains focused on executing its restructuring plan. Implementing operational improvements and supporting our customers. At the international truck show in Hannover, Germany last month, we met with senior executives from the major global truck companies and emphasized our well recognized technical and operational capabilities and our ability to serve the truck market globally. It is clear that we are well on our way to achieve our strategic goal of increasing significantly our market share in the European truck market.
Unfortunately the outlook for the truck market in Europe continues to weaken impacting current revenues and future expectations. Our customers are cutting production levels and delaying launches particularly related to Euro 6 complaint commercial vehicles, resulting in reduced launch volumes for our Origami truck radiators. While launch volumes for our Origami automotive condensers are accelerating, we continue to be conservative in our volume planning for this product in light of anticipated customer production cuts.
We are focused on continually improving our manufacturing processes in Europe along with successfully implementing our restructuring plan in the region. We recorded $17 million of impairment and restructuring charges in this segment during the quarter, most of which were non-cash asset impairment charges. A component of our plan is to sell certain assets in the region and those plans are progressing.
Moving to South America on page six. Weak Brazilian market conditions continue to impact sales particularly in the commercial vehicle market. However, we believe that government incentives offering reduced interest rates and accelerated depreciation may moderately improve demand in the second half of our fiscal year. Our operational focus in this region has been on reducing inventory levels and lowering overhead costs. Since completing the plant rearrangement for the Euro 5 production requirements, we have seen improved plant performance. This is critical for the competiveness of this segment as more of our global competitors localize production in the region including Asian companies.
Although we expect competition to grow, especially from companies producing outside of Brazil, we also believe we have a competitive advantage due to our long standing local manufacturing presence and excellent reputation in the region.
Now moving to Asia. The commercial vehicle and construction markets have experienced significant year-over-year declines. However, we are seeing signs that the markets are stabilizing and have started to see moderate increases in production order volumes. In the meantime, we are focused on diversifying our portfolio of products in the region. We have begun low volume production of aluminum oil coolers in our Shanghai plant and we are encouraged by our win rate on quote for this product. In India, we are in the process of launching our largest truck program in the region to date.
This has been a challenging year for our Asia segment due to the significant economic downturn, but we believe we have the right teams, the right leadership and the production assets in place to grow sales to breakeven levels and beyond. We are focused on winning new business and on having a right cost structure for the region.
In our commercial products segment, sales were down in our UK data center business which continues to be impacted by economic conditions. However, we are seeing signs of recovery in that market as order intake has improved since the summer slowdown caused by the London Olympics. We recently displayed our products and services at the Chillventa show in Nuremberg, Germany, highlighting our energy efficiency chiller products and our unique integrated controls platform.
Just prior to this show, our new DeltaChill FreeCool chiller was awarded the Air Conditioning Product Innovation of the Year award by Refrigeration and Air-conditioning Magazine in the UK. This is one of the most energy efficient chillers in the market, offering more than 95% of free cooling over the course of the year and saving more than 50% of the energy consumed by a conventional chiller.
In North America our heating and cooling sales were essentially flat from the prior year but we expect this to improve as we enter the winter heating season. Integration of our new Geofinity business is proceeding ahead of schedule with the consolidation of manufacturing operations in our West Kingston, Rhode Island facility expected to be completed by December. We are introducing Geofinity heat pumps to our distributors and are encouraged by the initial order levels. I am very pleased to have this important product added to our portfolio.
With that I would like to turn over to Mick for a full overview of our financial performance and guidance. Mick?
Good morning, everyone. During the quarter we clearly experienced further weakening in our end markets which coupled with the wind down of certain automotive programs, led to lower year-over-year revenues. In fact, all five business segments experienced flat to down revenues. Looking at slide seven, second quarter sales decreased $57 million or 14% and like many companies the stronger dollar is impacting the results of our foreign locations.
Excluding the FX impact, sales would have declined $33 million or 8%. Gross margin declined slightly by 20 basis points to 15.5%. On a positive note, we were able to limit our downside conversion to only 17% on the volume. Several items impacted our gross margin during the quarter. Negative impacts were the lower volumes and higher warranty expenses. And these were offset by a lower material cost, improved pricing and mix.
Our teams still remain focused on cost control. SG&A decreased by $9 million or 18% year-over-year. As a reminder our prior year results include a $6 million loss due to the foreign exchange translation on intercompany loans. Also I would like to point out that we recorded $18 million in impairment and restructuring charges during the quarter. This had a $0.39 impact on EPS. Excluding impairment and restructuring charges, EPS was $0.13 during the quarter compared to $0.03 last year.
Turning to slide eight. We have a summary table that highlights the main restructuring cost incurred so far this year. As you know we are in the process of shifting our European focus away from automotive module programs and towards heavy duty programs especially commercial vehicles. In the Q2 column you will see a $16.7 million non-cash impairment and $1.3 million of cash restructuring. During the quarter we made decisions to accelerate the sales or closure of certain facilities in Europe. These decisions resulted in non-cash impairment charges of $15.7 million to reduce the carrying value to their estimated market value.
In addition there was $1 million charge in North America relating to facilities that were closed during our now completed restructuring program. And then the $1.3 million of cash restructuring charges relates primarily to headcount reductions in our European regional headquarters. These actions taken in the last two quarters will result in future economic benefits through lower SG&A and fixed overhead cost, plus an overall lower asset base.
Moving on to slide nine. Let's take a quick look at the balance sheet and key cash flow metrics. In the second quarter we recorded free cash flow of $13 million and that was much improved. In the table you can see on a year-to-date we see significant improvement in our operating cash flow increasing by $24 million year-over-year. This was driven primarily by a lower investment in working capital. And then on a year-to-date basis, free cash flow improved by $35 million with capital spending $12 million lower than the prior year.
We still remain comfortable with our balance sheet, net debt to capital at 30% and we have $30 million of cash.
Moving on to slide ten. Let's take a closer look at North America where second quarter sales were down 4%. Commercial vehicles sales were down nearly 3 million due to lower market demand. In addition, our military truck sales decreased 2 million as certain programs are winding down. You will see that overall operating income declined $4 million but there were two significant items which were unique to the quarter.
First, we made a $1.7 million warranty adjustment which negatively impacted the gross profit. Second, and as I already explained, we took a $1 million asset impairment charge to reduce the carrying value of two plants that are held for sale. Together, these two items accounted for nearly $3 million of the $4 million change in operating income. Since our last earnings update in July, we have lowered our outlook in all targeted markets. We anticipate the Class 8 market or the heavy duty truck market, will decline 6% year-over-year which is lower than our previous forecasted 7% growth.
We expect that medium duty market will show modest growth of 4% and our Ag and construction market forecast is now flat which is also lower from our previous forecast of 10% growth. As many of you know, truck order rates are significantly behind the production rates and this causing a lot of confusion and making projections very difficult. Obviously we are monitoring the heavy duty and medium duty markets closely going forward.
Moving on to slide 11, we have our European business segments. Second quarter sales were down 22% from the prior year including the negative impact of foreign currency. On a constant currency basis, sales would have been down only12%. Our primary challenge in the commercial vehicle market in our transformation in Europe is heavily dependent on strength of this market. Unfortunately, we continue to see a delay in launch activity as our customers adjust production to meet end market demand. And our sales into this market were down 14% versus the prior year.
Auto sales were down 12% and this includes $12 million impact from the wind down of the BMW business. And then a much smaller piece of the business, the off-highway area, sales were down 23% year-over-year. You will notice that the gross margin actually improved 160 basis points on lower volumes and this was due primarily to improve pricing and the lower material cost. I also want to point out that there was a onetime program pricing adjustment of $5 million, while this was a clear benefit for the quarter, it will not continue in future quarters.
SG&A declined by $1.4 million as a result of foreign currency translation and also some early impact from our restructuring actions. Looking ahead, we anticipate the continuation of weak markets for autos and commercial vehicles, given the current economic situation in Europe. And our outlook also reflects the $40 million euro reduction in BMW module business as that program continues to wind down.
Now turn to slide 12 and we look at our South American business segment. Sales declined as we continue to experience a slump after the pre-buy of commercial vehicles in the January 2012 change in emission standards. In addition, the weakening Brazilian real had a significant impact on sales. If you look at it on a constant currency basis, sales would have been down 11% rather than the 29% reported. Gross margin declined 150 basis points on lower sales but SG&A was significantly lower year-over-year.
SG&A was positively impacted by a number of items including the reversal of an acquisition related liability, lower environmental expenses and outbound freight expenses. Given the lower SG&A, operating income improved by $1.6 million or 58% year-over-year. As for the fiscal 2013 outlook, we see volumes in the commercial vehicle market remaining down and do not see a recovery until later this fiscal year. We are seeing a small improvement in agricultural equipment and the aftermarket business as our outlook now shows volumes increasing 4% and declining 1% respectively.
Now, turning to slide 13, we have our Asia business segments. Second quarter sales were down 31% from the prior year as order rates in China continued to decline sharply over the last four quarters. While we are continuing to launch new programs, these volumes cannot offset the weakness in the China excavator market which has declined over 45% this year.
Margins were down primarily as a result of the lower sales volumes. In its current volumes, this segment is unfortunately operating well below our breakeven point. Even though we have a solid book of business, the leadership team is working hard to lower his breakeven point. As many of you know, the economies in India and China have slowed significantly and we are watching them closely. The largest challenge remains our heavy reliance on the excavator sales in China given the current expectations for that market.
Now flipping to slide 14, we have our commercial products segment where second quarter sales were down 4% from prior year, primarily driven by lower sales in the UK as data center and chiller products were down 10% from the prior year. The decrease in our UK business was a result of general economic conditions plus the disruption to many businesses during the Olympics. Despite slightly lower sales, our gross margin improved 60 basis points and this was due to sales mix plus the positive impact of manufacturing cost savings initiatives in that business segment.
In fiscal 2013, we maintained the same forecast of 2% to 5% market growth for our North American HVAC products. With regards to the UK and the current economic environment, we have the same expectations as last quarter, which is a 2% to 5% decline in the overall server market sales.
Now, let's turn to our fiscal 2013 guidance on slide 15. Heading into the fiscal year, we knew that first half would be difficult from a year-over-year perspective. This was due to lower market demand, currency and the wind down of certain automotive and military programs. Most broad market projections anticipated improvement later in the year and so did we. Unfortunately, this has not been the case. In fact, the markets have actually softened further and as a result we have lowered our end market forecast.
We are therefore lowering our guidance for fiscal 2013, and we now project revenue will be down 10% to 12%. Operating margin is expected to be in the range of 2.75% to 3.25%, and earnings per share is expected to be in the range of $0.40 to $0.50. Again, please note that all the numbers exclude impairment and restructuring charges for our project in Europe. And out of the two remaining quarters, Q4 will definitely be stronger than Q3.
As we have done over the past few quarters, we will continue to provide summaries of our European restructuring expenses and the progress on execution of our plans. And as Tom said, we are focused heavily on those areas of our business that we can control. You can see that we have reduced our variable production cost with the decline in volume. Our continuous improvement methodology or MOS is helping to reduce other operating costs and we are focused on the rapid completion of restructuring in Modine Europe.
We will continue to strike a balance by managing our cost structure through this downturn while preserving the long-term earnings potential for Modine. With that, Tom, I will just turn it back to you.
Thank, Mick. Please turn to page 16. Last quarter we outlined three significant headwinds that are impacting our business. First, lower sales volumes due to economic conditions in our major markets including commercial vehicles in Europe and Brazil, excavators in China and the data center cooling market in the UK.
This quarter we also saw the initial impact of lower commercial vehicle sales in North America. At this point we can't predict when those conditions will improve. Secondly, the planned wind down of automotive programs in Europe and China, which continues as anticipated. And third, the continuing impact of the stronger U.S. dollar on our revenues earnings which remains a challenge.
We told you last quarter that we expected these conditions to continue to impact our top line in the second quarter, and indeed they have. We have also expected to see market stabilization and an improvement in the second half of the year. Unfortunately though, market forecasts continue to be lower. As a result, and as Mick noted, we are lowering our full year guidance. As I said earlier, we recognize that we cannot control the impact of the global economic challenges are having on our end markets. However, there are things we can control and you can be assured we are doing just that.
We are taking actions to control costs and are aggressively working towards implementing our European restructuring program including turning idle or underutilized assets into cash where possible. And finally, our teams continue to focus on operational improvements and the many new program launches in all regions, so that we can meet our long-term targets. And with that we would like to take your questions?
(Operator Instructions) And your first question comes from the line of Ann Duignan from JPMorgan. Please go ahead.
Ann Duignan - JPMorgan
Just a couple of questions, really. You know you talked about, in Brazil, the aftermarket being weak. Could you expand on that? We know about pre-buy on the truck side but weakness in the aftermarket is a little bit surprising just given economic activity down there?
Yeah. No, it has been a little slower. I think there has been maybe some competition that’s come on a little bit but we are not seeing any significant changes. Nothing, if you look at the model closely and nothing that makes us worried about the long-term viability of that business. So we focus on all makes so it’s a matter of being able to get parts to points of use as fast as possible. That’s a key element in that market. And so we are concentrating on improving it and we don’t see an ongoing weakness. We think it’s a one quarter aberration actually.
Ann Duignan - JPMorgan
Okay. And then Europe, you know we got the order data for Germany this morning and it was extraordinarily weak. You know are you comfortable with the guidance you have given today on the back of what we are hearing out of places like Germany at this very moment in time.
Well, Ann, we know it’s weak and it’s a great question, one that we are watching very closely. We kind of have a double issue with us as we are launching Euro 6 compliant systems now for trucks going into our customers and our actual truck base is pretty small for Euro 5. So as we sales slowdown, you know the mix between Euro 5 and Euro 6 is a question we are watching very closely. So we are going to have to keep an eye on that and clearly we are hoping to see a smooth transition like Europe normally does between emission stages. And they will possibly, whatever they do to help incentive that, that would be a positive for us. But it’s a very good question and one we are looking at very seriously.
Ann Duignan - JPMorgan
Yeah, because I was surprised you said that there was some delay in launching Euro 6 products, but it is a requirement. And I am curious, is that signaling to us that OEMs are anticipating a big pre-buy and then a significant slowdown or what do you think is going there, Tom?
Again, at the panel over the truck show it was a significant discussion point amongst all the producers. I know of the association, the trucking association in Germany was focused very much on making sure that those that were bringing new products to market early were not penalized because of pre-buy types of emotions or whatever there might be going on the market. So I think I have not seen anything to suggest that there is going to be a pre-buy. I think there is a natural humanistic that there could be. Again, we will have to wait and see how this plays out.
Ann Duignan - JPMorgan
Yeah. And switching gears a little bit to the more positive side. Heavy duty truck orders, somewhat of a positive surprise last week. What are you hearing from your OEM customers around that order numbers? Any increase in build rates for Q4? Are these orders for next year? Just you are closer to the market than we are so would be interested to get your insight.
Yeah, obviously we got about a -- you know we are looking at these things about a quarter at a time. Right now we don’t see anything going forward into our next fiscal year. Right now the orders seem stable through the end of the year, okay, which is one of the worries that we had. So I look at that as a positive, just to your point. We thought there might be some production drop -- drop production coming up, but with that data that came in earlier as you mentioned, very encouraging and we think we will see stability through the holiday periods, at least that’s our hope. So any further guidance forward, I have not picked anything up.
Ann Duignan - JPMorgan
Okay. And then I think you mentioned that you were seeing some green shoots in Asia. If you could just give us a little bit more color on that?
Yeah. 45% down from year-over-year is a pretty deep hole but giving stability was important for us to see. And we are starting to see that the things have flattened out and we are starting to see some indications of some orders dropping in. Again, nothing to say that the ramp up is going to be as fast the ramp down but we are hopeful that this indicates that possibly with the changes going on in China specifically, potentially added stimulus with the new leadership in place that we can see some -- see us gaining some ground over there with the markets coming back. But right now we are just happy to see stability and things that we can plan. As Mick pointed out, we have got a lot of work going in that region. Get ourselves our breakeven lowered so that we can take advantage of any volume coming up.
Ann Duignan - JPMorgan
Okay. And then finally, a quick follow-up on your SG&A. I mean you have done a great job of pulling cost out. Can you sustain the business at these absolute dollar levels of SG&A or at some point you are going to have to start to let that dwindle up?
Well, I am going to let Mick give you the specifics on that. I am going to say that we have done a very good job of holding our restructured plans since the recession of 2008-2009. We have taken over 20% of our cost structure out of the company and we have held on to that. We are very very diligent making sure the resources we had are there to return but, Mick, you might well add a perspective from your side on how that’s shaping out.
Yeah, I think it’s a great question and it’s a one we talk about nearly daily here. Clearly, the short answer to your question is, at the current run rate of volume for our company we can sustain this level of SG&A spending that we have been on. The balancing act is on the positive side we continue to get a lot of customer interest for us to work on new programs and products. And it’s trying to walk that balance between letting some SG&A back into the company for a long-term potential while clearly managing the expectations in the short-term.
Ann Duignan - JPMorgan
So at least over the course of the next couple of quarters we should be forecasting roughly flattish SG&A. Is that the way to think about this?
Yeah. I would say the run rate we had in Q1, Q2 was a little bit lower for a couple of items that I walked through. But I would say that 43 million to 44 million-ish run rate is about where we will sustain -- we can sustain it. And then we won't start investing more in SG&A until we see some light at the end of the tunnel with our end market volumes.
Ann Duignan - JPMorgan
Okay. And one of the warranty issue in North America, what was that? And then I will get back in line.
As an OE supplier we are very disciplined in managing our warranty obligations and we are seeing aggressive warranty recovery effort from some OEs. And if you get inside of our systems, they are very complicated, Ann, between subsystem and component responsibility and the like. In some cases we do find a commercial resolution that both parties deem to be a fair adjustment. But this was a specific accrual adjustment on a specific matter that we made adjustment. We review our exposure every quarter, in this case we had a specific item that came up that we took a charge. I can't give you any details on that at the moment but we feel as far as any material risk to that level, we feel very confident we are in the right position.
Ann Duignan - JPMorgan
Okay. And you are not worried about any other OEMs coming back
No, we are not worried about any OEMs and it’s just something that we do is very much part of our standard work, is making sure that terms and conditions are well understood with our customers and that we understand what we are responsible for and pay attention closely to how our components are performing inside our customers’ vehicles and subsystems.
Yeah. Ann, as Tom said, there is no broad -- we have no concern about a broad-based warranty issue. This was specific. Just, as Tom said, the OEs are clearly getting very aggressive any time anything goes wrong with a system. They are clearly leaning on all suppliers more than we have ever seen. So we will defend our products and our position as aggressively as possibly.
Ann Duignan - JPMorgan
Okay. That’s good color. I am surprised that they could get any more aggressive than they already were and so good luck with that. I will get back in line in the interest of everybody else who is on the call. Thanks.
Your next question comes from the line of David Leiker from Baird. Please go ahead David.
This is [Joe] on the line for David. If I can just focus on calendar 2013 in Europe. We have been hearing kind of really the expectations that first half maybe down double-digits volumes and then second half up double-digits for roughly a flat volume environment. Is that directionally the way you see the market now consistent with maybe what you are planning for?
No, I think that we can't really go further into next calendar year. Right now we would say that double-digit down in the first half of the year corresponds to what we are seeing in our releases. Any further than that right now, I can't give you any color.
And then with the Origami launch, I mean is there some matter in -- I guess it’s not surprising with that one in those times of economic duress the OEMs will try to delay their new technology launches, their new platforms. Is that kind of what you are seeing or maybe the end of your fiscal year you don’t really see the original volume you are expecting on Origami but in 9 to 12 months that volume is going to come through.
Well, I have no doubt. I think in 9 to 12 months the volumes would have come through. I think you have major launches on major new truck platforms that’s going on which is dynamic. Then you have a market that has -- the compliance requirement is until January 2014. You have got a mix of whose got Euro 5, Euro 6, so there could be some hesitation on people jumping into Euro 6 right away, compliant trucks. So there is all sort of dynamics. And that was -- I know David was picking that up very well when he was in Hannover at the truck show. Lots of discussion as to how that dynamics could play out between the conversion, the economy and the split in the market on who has got compliant trucks and who doesn’t.
Yeah, Joe, just with regards to our guidance. Nothing has changed with the business as a program so we have been awarded from our July call, the real changes in the market as you guys well know, people are still expecting a 280,000 plus Class 8 market which has clearly dropped to the 260. And then also you nailed it, the European truck market expectations and productions have declined. So those were the two primary drivers for us with our volumes. As Tom said, those programs are still there. They will still launch and it’s just the timing of when they well get to mature volumes.
Okay. That’s makes a lot of sense. Just switching to some margin questions. As I look at it I think the margin performance was pretty strong given everything you saw on the top lines. So with that context I unfortunately have to ask a negative question. Just looking at North America, with the relative performance there versus the declines you saw in Europe and South America, are there any odd items going on that the margin would have been as well as it was. I may be thinking about customer mix and volume declines you may have seen at one of our larger medium-duty customers during the quarter.
Yeah. It’s Mick. And you might have hopped on during part of our introductory comments that in North America there was a onetime warranty adjustment. A $1.7 million in North America, if you adjust for that I think you would find both the downside conversion was pretty good and also the gross margin held up.
Okay. So you are right on this one. And then there was a $5 million item in Europe I believe, so are those the two kind of one-off but recurring items that are still on the numbers?
Yeah. So on the positive side we actually had a huge increase in gross profit in Europe and we want to make sure that you guys understand that was good news for Modine and that was a cash pricing settlement. And that won’t -- part of that won’t continue, part will go forward going forward but about $5 million was one time in the quarter. And then on the negative in North America unfortunately we had the warranty adjustment of $1.7 million that artificially pulled down North America.
(Operator Instructions) We appear to have no questions in the queue and therefore I would like to turn it back over to Kathy Powers for closing remarks. Please go ahead, Kathy.
Thank you. This concludes today's call. Thank you for joining us this morning and thanks for your interest in Modine. Good bye.
Thank you all for participation in today's conference. This concludes the presentation. You many now disconnect. Good day.
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