When we use the terms "Modine," "we," "us," the "Company," or "our" in this
report, we are referring to
Recent Announcement
On
As a result of terminating the sale agreement, we expect that the liquid-cooled automotive business will no longer meet the requirements to be classified as held for sale during the third quarter of fiscal 2022. Accordingly, we expect to adjust the underlying asset groups to the lower of their (i) carrying value, as if held for sale classification had not been met, or (ii) fair value. At this time, we are unable to quantify or predict any adjustments to the carrying value of the liquid-cooled automotive business's long-lived assets to be recorded during the third quarter of fiscal 2022.
Air-cooled Automotive Business
On
COVID-19
As the COVID-19 pandemic continues, both the health and overall well-being of our employees and delivering quality products and services to our customers remain our top priorities.
The COVID-19 pandemic has broadly impacted the global economy and our key end markets, which were most severely impacted during the first quarter of fiscal 2021. In an effort to mitigate the negative impacts of COVID-19 on our financial results, we implemented cost-saving actions starting in the first quarter of fiscal 2021 that primarily impacted selling, general and administrative ("SG&A") expenses and capital expenditures. While we remain focused on controlling expenses, we withdrew most of the cost-saving actions in the third quarter of fiscal 2021 as production returned to more normal levels as markets recovered. As a result and as anticipated, compensation-related expenses, particularly SG&A expenses, were higher in the first half of fiscal 2022 compared with the prior year.
The full extent of the impacts of COVID-19, which will largely depend on the length and severity of the pandemic and the resulting impact on the global economy, could have a material adverse effect on our business, results of operations, and cash flows.
Second Quarter Highlights
Net sales in the second quarter of fiscal 2022 increased
26 -------------------------------------------------------------------------------- Table of Contents Year-to-date Highlights Net sales in the first six months of fiscal 2022 increased$164.3 million , or 20 percent, from the same period last year, primarily due to higher sales in our HDE, CIS and BHVAC segments, partially offset by lower sales in our Automotive segment. Cost of sales increased$151.7 million , or 22 percent, from the same period last year, primarily due to higher sales volume and higher raw material prices. Gross profit increased$12.6 million and gross margin declined 140 basis points to 14.3 percent. SG&A expenses increased$15.8 million , primarily due to higher compensation-related expenses, as the prior-year benefitted from cost-saving measures implemented in response to COVID-19. Operating income of$19.2 million during the first six months of fiscal 2022 decreased$6.1 million from the same period in the prior-year, primarily due to the$6.6 million loss from the sale of the air-cooled automotive business and lower earnings in our Automotive and BHVAC segments, partially offset by the higher earnings in our CIS and HDE segments.
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