SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 26, 1995
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-1373
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MODINE MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)
WISCONSIN 39-0482000
--------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1500 DeKoven Avenue, Racine, Wisconsin 53403-2552
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (414) 636-1200
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NOT APPLICABLE
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(Former name or former address, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ___
---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at November 8, 1995
------------------------------- -------------------------------
Common Stock, $0.625 Par Value 29,641,878
<PAGE>
MODINE MANUFACTURING COMPANY
INDEX
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Statements
Consolidated Balance Sheets -
September 26 and March 31, 1995 3
Consolidated Statements of Earnings -
For the Three Months Ended
September 26, 1995 and 1994
and the Six Months Ended
September 26, 1995 and 1994 4
Consolidated Statements of Cash Flows -
For the Six Months Ended September 26,
1995 and 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial
Condition 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 5. Other Events 17
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 20
<PAGE>
<TABLE>
MODINE MANUFACTURING COMPANY
CONSOLIDATED BALANCE SHEETS
September 26, 1995 and March 31, 1995
(In thousands, except per-share amounts)
(Unaudited)
<CAPTION>
September 26, 1995 March 31,1995
------------------ -------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 17,827 $ 32,691
Trade receivables, less allowance for
doubtful accounts of $6,369 and $6,424 153,453 145,231
Inventories 149,752 136,114
Deferred income taxes and other current
assets 24,091 26,346
-------- --------
Total current assets 345,123 340,382
-------- --------
Other assets:
Property, plant, and equipment - net 187,604 170,872
Investment in affiliates 6,341 8,016
Intangible assets, less accumulated
amortization of $8,726 and $7,564 69,097 34,090
Deferred charges and other noncurrent
assets 39,562 36,827
-------- --------
Total other assets 302,604 249,805
-------- --------
Total assets $647,727 $590,187
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
- ----------------------------------------
<S> <C> <C>
Current liabilities:
Short-term debt $ 26,676 $ 13,565
Long-term debt - current portion 40,184 10,853
Accounts payable 69,506 74,194
Accrued compensation and employee
benefits 40,888 38,285
Income taxes 3,869 7,004
Accrued expenses and other current
liabilities 26,462 25,748
-------- --------
Total current liabilities 207,585 169,649
-------- --------
Other liabilities:
Long-term debt 53,163 62,220
Deferred income taxes 12,581 12,958
Other noncurrent liabilities 44,005 37,088
-------- --------
Total other liabilities 109,749 112,266
-------- --------
Total liabilities 317,334 281,915
-------- --------
<PAGE>
Shareholders' investment:
Preferred stock, $0.025 par value,
authorized 16,000 shares,
issued - none - -
Common stock, $0.625 par value,
authorized 80,000 shares, issued
30,342 shares 18,964 18,964
Additional paid-in capital 8,852 7,897
Retained earnings 320,210 296,614
Foreign currency translation adjustment 5,906 5,159
Treasury stock at cost: 701 and 642
shares, respectively (20,399) (16,669)
Restricted stock - unamortized value (3,140) (3,693)
-------- --------
Total shareholders' investment $330,393 $308,272
-------- --------
Total liabilities and shareholders'
investment $647,727 $590,187
======== ========
<FN>
(See accompanying notes to consolidated financial statements.)
</TABLE>
<PAGE>
<TABLE>
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
For the three months ended September 26, 1995 and 1994
For the six months ended September 26, 1995 and 1994
(In thousands, except per-share amounts)
(Unaudited)
<CAPTION>
Three months ended Six months ended
--------------------- ---------------------
September 26 September 26
--------------------- ---------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales $254,292 $221,760 $493,508 $430,196
Cost of sales 186,355 155,844 364,689 305,791
-------- -------- -------- --------
Gross profit 67,937 65,916 128,819 124,405
Selling, general, and administrative expenses 41,182 38,677 76,649 72,934
-------- -------- -------- --------
Income from operations 26,755 27,239 52,170 51,471
Non-operating income 2,153 2,119 4,711 4,163
Interest expense (1,879) (1,640) (3,506) (3,409)
Non-operating expense (888) (988) (2,196) (1,952)
-------- -------- -------- --------
Earnings before income taxes 26,141 26,730 51,179 50,273
Provision for income taxes 9,405 9,929 18,460 18,642
-------- -------- -------- --------
Net earnings $ 16,736 $ 16,801 $ 32,719 $ 31,631
======== ======== ======== ========
Net earnings per share of common stock* $0.55 $0.55 $1.07 $1.04
======== ======== ======== ========
Dividends per share $0.15 $0.13 $0.30 $0.26
======== ======== ======== ========
Average common shares and common share
equivalents outstanding 30,453 30,541 30,510 30,533
======== ======== ======== ========
<FN>
(See accompanying notes to consolidated financial statements.)
*See EXHIBIT 11 for computation of earnings per share.
</TABLE>
<PAGE>
<TABLE>
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Six Months Ended September 26, 1995 and 1994
(Unaudited)
<CAPTION>
Six months ended September 26
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Net cash provided by operating activities $ 46,027 $ 27,655
Cash flows from investing activities:
Expenditures for property, plant, and equipment (20,914) (14,972)
Acquisitions, net of cash acquired (55,460) -
Investments in affiliates - 1,500
Proceeds from dispositions of property, plant,
and equipment 1,556 238
Other - net 235 528
-------- --------
Net cash (used for) investing activities (74,583) (12,706)
Cash flows from financing activities:
Increase/(decrease) in short-term debt - net 12,405 (8,217)
Additions to long-term debt 24,736 -
Reductions of long-term debt (10,218) (2,667)
Issuance of common stock, including treasury
stock 1,076 3,281
Purchase of treasury stock (5,408) (2,502)
Cash dividends paid (8,899) (7,714)
-------- --------
Net cash provided by/(used for) financing
activities 13,692 (17,819)
-------- --------
Net (decrease) in cash and cash equivalents (14,864) (2,870)
Cash and cash equivalents at beginning of
period 32,691 38,523
-------- --------
Cash and cash equivalents at end of period $ 17,827 $ 35,653
======== ========
<FN>
(See accompanying notes to consolidated financial statements.)
</TABLE>
<PAGE>
MODINE MANUFACTURING COMPANY
----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
1. The amounts of raw material, work in process and finished
goods cannot be determined exactly except by physical
inventories. Based on partial interim physical inventories
and percentage relationships at the time of complete
physical inventories, Management believes the amounts shown
below are reasonable estimates of raw material, work in
process and finished goods.
(In Thousands)
----------------------------------------------------------------
September 26, 1995 March 31, 1995
----------------------------------------------------------------
Raw materials $ 40,308 $ 37,279
Work in process 46,088 40,879
Finished goods 63,356 57,956
-------- --------
Total inventories $149,752 $136,114
======== ========
2. Property, plant, and equipment is composed of:
(In Thousands)
----------------------------------------------------------------
September 26, 1995 March 31, 1995
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Gross, property,
plant & equipment $421,717 $386,518
Less accumulated
depreciation (234,113) (215,646)
-------- --------
Net property,
plant & equipment $187,604 $170,872
======== ========
3. Recent developments concerning legal proceedings reported in
the Company's Form 10-K report for the year ended March 31,
1995, are updated in Part II, Other Information, Item 1,
Legal Proceedings. While the outcome of these proceedings
is uncertain, in the opinion of the Company's Management,
any liabilities that may result from such proceedings are
not reasonably likely to have a material effect on the
Company's liquidity, financial condition, or results of
operations.
4. On May 3, 1995, the Company announced a letter of intent had
been signed with National Tube Holding Company, Inc. of
Birmingham, Alabama for the acquisition of Modine's copper
extrusion business in Dowagiac, Michigan. Subsequent to the
end of the second quarter, the sale was completed following
<PAGE>
the close of business September 26, 1995. Based upon
preliminary estimates, the Company currently expects to
recognize a pretax gain from the sale of approximately $2.0
million in the third quarter of the current fiscal year.
5. In the first quarter of fiscal 1995, the Company made
two small acquisitions. Effective April 1, the Company,
through its wholly owned subsidiary NRF Holding B.V.,
acquired Radiadores Montana S.A., a Spanish manufacturer
and distributor to the automotive aftermarket. Based in
Granada, Spain, Montana produces radiators and radiator
cores, oil coolers, heaters, and air-conditioning condensers
and evaporators for on- and off-highway vehicles and for
industrial applications. At the end of May, the Company
acquired its partner's 57-percent ownership in the joint
venture company Radinam S.A., which owns Mexpar (Manufacturera
Mexicana de Partes de Automoviles S.A. de C.V.), a radiator
manufacturer in Mexico City. Mexpar produces automotive
radiators primarily for the aftermarket. It addition, Mexpar
serves original equipment manufacturers of vehicles in Mexico.
The acquisitions were financed through a combination of
additional borrowing and cash provided by operations.
The Company acquired the business and assets of the Signet
Systems Division from The Equion Corporation following the
close of business on July 31. The Company also assumed
certain liabilities as part of the acquisition. The purchase
price was financed with available cash, a portion of a new
$25 million multicurrency unsecured revolving credit
arrangement through an international bank, and $5.0 million
in promissory notes with the seller. Signet is a full-
service supplier of climate-control systems and components
to the automotive, truck, and off-highway vehicle markets
both in North America and Europe. The acquisition includes
Signet's main plant in Harrodsburg, Kentucky; a recently
acquired operation in Goch, Germany; and a sales and
engineering office in Detroit, Michigan.
The Company intends to continue to use the plants, machinery
and equipment, and other assets obtained in the acquisitions
for the manufacture of heat-transfer products. The combined
purchase price of the three acquisitions, subject to further
adjustments, totaled approximately $57,483,000 in cash and
$5,000,000 in promissory notes to Equion Corporation.
Combined goodwill acquired, based upon preliminary
estimates, is $36,229,000, and is being amortized on a
straight line basis over 15 years.
The results of operations of the Signet Systems Division are
included in the consolidated financial statements since the
effective date of acquisition. The results of operations of
Radinam S.A. and Radiadores Montana S.A. are included in the
consolidated financial statements since the respective
effective dates of acquisition, using a one-month delay,
consistent with the Company's policy for reporting foreign
operations outside of the United States and Canada. All of
the acquisitions have been accounted for using the purchase
method, whereby the purchase prices have been allocated to
<PAGE>
the underlying assets and liabilities based upon their
estimated fair market values at the date of acquisition. The
allocation of the purchase price for Signet Systems has been
based upon preliminary estimates which may be revised at a
later date. The Company used the equity method to account
for its interest in Radinam S.A. prior to majority ownership.
Details of businesses acquired in purchase transactions,
subject to further adjustments, were as follows:
Value of assets acquired, including
intangibles, excluding cash acquired
of $2,023,000 $ 85,101,000
Liabilities assumed and created (26,862,000)
Equity investment in affiliate (2,779,000)
------------
Net cash paid for acquisitions $ 55,460,000
The pro forma financial information presented below is for
informational purposes only and does not necessarily reflect
the results of operations that would have occurred had the
acquisitions taken place on the date assumed below, nor are
those results necessarily indicative of the results of
future combined operations.
On a pro forma basis, the unaudited consolidated results of
operations would have been as follows had the acquisitions
occurred on April 1, 1994, after giving effect to certain
adjustments.
Six Months Ended
---------------------
September 26
---------------------
In thousands, except per share amounts 1995 1994
--------- --------
Net Sales $519,388 $477,893
Net Earnings $ 31,713 $ 31,425
Net Earnings Per Share:
Primary $1.04 $1.03
Fully Diluted $1.04 $1.03
7. In October of 1995, the Financial Accounting Standards Board
issued Statement No. 123, "Accounting for Stock-Based
Compensation." Under the accounting and disclosure
requirements promulgated in the statement, the Company must
adopt the provisions in its fiscal year beginning April 1,
1996. The Company is currently evaluating the accounting
and disclosure alternatives provided for under the
provisions of the statement. At this time, Management has
not selected the planned method of adoption and therefore
cannot reasonably estimate the probable impact, if any, on
the consolidated financial statements.
<PAGE>
8. The accompanying consolidated financial statements, which
have not been audited by independent certified public
accountants, were prepared in conformity with generally
accepted accounting principles and such principles were
applied on a basis consistent with the preparation of the
consolidated financial statements in the Company's March 31,
1995 Annual Report filed with the Securities and Exchange
Commission. The financial information furnished includes
all normal recurring accrual adjustments which are, in the
opinion of Management, necessary for a fair statement of
results for the interim period. Results for the first six
months of fiscal 1996 are not necessarily indicative of the
results to be expected for the full year.
9. Certain notes and other information have been condensed or
omitted from these interim financial statements which
consolidate both domestic and foreign wholly-owned
subsidiaries. Therefore, such statements should be read in
conjunction with the consolidated financial statements and
related notes contained in the Company's 1995 Annual Report
to stockholders which statements and notes were incorporated
by reference in the Company's Form 10-K Report for the year
ended March 31, 1995.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
---------------------------------------------
The following discussion and analysis provides information which
Management believes is relevant to an assessment and understanding
of the Company's consolidated results of operations and financial
condition. This discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
RESULTS OF OPERATIONS
- ---------------------
Comparison of the Second Quarter of 1995-96 with the Second
- -----------------------------------------------------------
Quarter of 1994-95
- ------------------
Net sales for the second quarter of fiscal 1995-96 were a record
$254.3 million, up 14.7% from the $221.8 million reported in the
second quarter of last year. The Company's European operations
accounted for approximately 50% of the sales increase, with
approximately half of this growth arising from favorable currency
fluctuations compared to the same quarter, a year ago. The Company's
latest acquisition, Signet Systems, accounted for 33% of the sales
growth during the quarter with the remaining increase coming from
the Company's other operating units.
Modine's quarterly sales increased to all but one of its major
markets. The largest gains were to original-equipment manufacturers
of off-highway vehicles and of passenger cars and light trucks.
Sales to the aftermarket also showed year over year gains during the
quarter, rebounding from unseasonably cool weather in the first
quarter of fiscal 1995-96. Sales to the building-HVAC market were
lower than the year before due to decreases in sales to manufacturers
of residential heating and air-conditioning equipment.
Gross margin declined 3.0%, as a percentage of sales, over the second
quarter of the previous year to 26.7% from 29.7%. Contributing factors
to the overall reduction in gross margin were: the higher costs of
copper, aluminum and other supplies in comparison to a year ago; a
higher percentage of total sales by the Company's European operations
and the inclusion of two months operating results from the newly
acquired Signet Systems, which are generally earning lower gross
margins than the overall Company average.
Selling, general and administrative expenses increased 6.5% over
last year's second quarter while declining 1.2% as a percentage of
sales. Signet Systems, acquired at the end of July, generated over
75% of the dollar increase shown.
Interest expense rose by 14.6% from the same quarter a year ago as
average debt levels increased by 15.6% during the same period. The
increase in debt levels can be attributed primarily to the additional
borrowing required to finance the Signet Systems acquisition. Net non-
operating income remained virtually unchanged.
<PAGE>
The effective tax rate decreased by 1.1% when compared to the same
period last year.
Net earnings for the second quarter were $16.7 million or $.55 per
share, essentially matching last year's $16.8 million, or $.55 per
share.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
RESULTS OF OPERATIONS
---------------------
Comparison of the First Six Months of 1995-96 with the First Six
- ----------------------------------------------------------------
Months of 1994-95
- -----------------
Net sales for the first six months of fiscal 1995-96 were a
record $493.5 million, up 14.7% from the $430.2 million reported
in the first six months of last year. The Company's European
operations generated 58% of the sales increase, with a little
over 50% of the increase in Europe arising from favorable
currency fluctuations over the same period, a year ago. Signet
Systems, the Company's newest acquisition, contributed 17% to the
sales increase, with other operating units responsible for the
remaining sales growth.
Modine's worldwide shipments during the first six months grew the
most in the passenger-car and light-truck market with the largest
sales growth to European customers. The second largest gain was
recorded in agricultural- and construction segments of the off-
highway market. The remaining markets demonstrated modest growth
with the exception of the building-HVAC market, which recorded a
small decline due to decreases in sales to manufacturers of
residential heating and air-conditioning equipment.
Gross margin decreased 2.8%, as a percent of sales, over the
first six months of the previous year to 26.1% from 28.9%. Once
again the primary factors contributing to the decline were: the
higher costs of copper, aluminum and other supplies in comparison
to a year ago; a higher percentage of total sales by the
Company's European operations and the inclusion of two months
operating results from the newly acquired Signet Systems, which
are generally earning lower gross margins than the overall
Company average.
Selling, general and administrative expenses increased 5.1% over
the first six months last year while declining 1.5% as a
percentage of sales. The Signet Systems acquisition, which was
included in the consolidated results of operations beginning in
August, contributed to over 50% of the dollar increase recorded.
Average outstanding debt levels during the first six months rose
by approximately $8.0 million, or 8.3%, over the same period a
year ago. Corresponding interest expense increased only 2.8% over
the same six month period, a year ago. Interest expense grew at
a slower rate in part due to a continuing reduction in higher
rate domestic debt through normally scheduled repayments. More
favorable interest rates on outstanding domestic and foreign
variable rate debt also contributed to the slower growth rate of
interest expense when compared to average debt outstanding.
The effective tax rate decreased by 1.0% when compared to the
same period last year.
<PAGE>
Net earnings for the six months were $32.7 million, or $1.07 per
share, up 3.4% from last year's $31.6 million, or $1.04 per
share.
Outlook for the Remainder of the Year
- -------------------------------------
For the current fiscal year ending in March 1996, Modine
continues to forecast sales growth of 10 to 15 percent with a net
earnings increase in the 5- to 10-percent range over last year's
record results. Variables that will continue to influence
earnings for the remainder of the year include: raw material
costs, the level of improvement in the cost structures in some
European operations, foreign exchange rates, the impact of recent
acquisitions, and the underlying strength of the U.S. economy.
<PAGE>
FINANCIAL CONDITION
-------------------
Comparison between September 26, 1995 and March 31, 1995
- --------------------------------------------------------
Current Assets
- --------------
Cash and cash equivalents decreased by $14.9 million to a total
of $17.8 million. The Company's primary sources of liquidity and
capital resources were cash provided by operations and the use of
available borrowing facilities.
Net trade receivables increased $8.2 million, or 5.7%. Excluding
the recent Signet Systems acquisition, net trade receivables
declined by $2.3 million, or approximately 2%.
Overall inventory levels increased by $13.6 million. The
majority of the increase is attributable to the Signet Systems
acquisition which was included in the consolidated financial
statements beginning in August.
Deferred income taxes and other current assets decreased $2.3
million. The decrease occurred primarily in foreign currency
contracts used to hedge foreign denominated accounts receivable
from customers overseas and in non-trade receivables.
Working capital decreased approximately 19% to $137.5 million
from $170.7 million while the current ratio decreased to 1.7 to 1
from 2.0 to 1. A number of categories experienced changes, but
the largest item in the overall decrease was the reclassification
of a major long-term borrowing arrangement at a German subsidiary
as it moved to within one year of its maturity. Also
contributing to the decrease in working capital were acquisitions
during the first six months that were financed, in part, with
short-term borrowing and available cash.
Property, Plant and Equipment
- -----------------------------
Net property, plant and equipment increased $16.7 million to
$187.6 million. The majority of the increase occurred as a
result of the Signet Systems acquisition at the end of July.
Management currently anticipates that capital expenditures will
double in the current year to approximately $68 million to
prepare for expanded business worldwide. Outstanding material
commitments for capital expenditures were $17.6 million at
September 26, 1995, compared to $13.6 million at March 31, 1995.
About $7.2 million of these commitments cover facility
improvements and equipment upgrades at various European
subsidiaries. Most of the remaining commitments relate to new
and existing plant expansions, tooling for new products, and
process improvements. Domestically, these commitments will be
financed with cash generated by operations; while overseas, the
commitments will be financed with internally generated cash and
additional borrowing in Europe, as required.
<PAGE>
Investment in Affiliates
- ------------------------
Investment in affiliates declined by $1.7 million. The primary
reason for the decrease was the reclassification of the Company's
equity investment in Radinam, S.A. to an investment in wholly
owned affiliates. As mentioned in footnote 5, Modine acquired
its partner's 57% ownership in Radinam S.A. in May 1995.
Intangible Assets
- -----------------
Intangible assets, net of accumulated amortization rose $35
million. The increase is principally the result of goodwill
recorded in conjunction with the Signet Systems, Radinam S.A.,
and Radiadores Montana S.A. acquisitions.
Deferred Charges and Other Assets
- ---------------------------------
Deferred charges and other assets increased $2.7 million. The
net increase is primarily the result of continuing recognition of
the surplus in the Company's overfunded pension plans.
Current Liabilities
- -------------------
Accounts payable and various accrued expenses decreased $1.4
million. Excluding the Signet Systems acquisition, accounts
payable and other accrued expenses decreased $12.1 million.
Normal timing differences in the level of operating activity were
responsible for the decline. Accrued income taxes decreased $3.1
million from normal timing differences in making estimated tax
payments and federal tax benefits resulting from the exercise of
stock options.
Debt
- ----
Outstanding debt increased by $33.4 million from March 31, 1995.
Long-term debt, and the related current portion thereof,
increased $20.3 million mainly in conjunction with the
acquisitions of Radiadores Montana S.A., Signet Systems, Inc.,
and Radinam S.A. At September 26, the Company had used $15.6
million of its $25 million multi-currency revolving unsecured
credit facility. The borrowings were denominated in U.S. dollars
($9.0), German marks (equivalent to $.7 million USD), and Japanese
yen (equivalent to $5.9 million USD). The German marks provided
working capital for the German subsidiary of our Signet acquisition.
The Japanese yen were borrowed as a hedge of our investment in our
Japanese joint venture. The current portion of long-term debt coming
due in Germany (equivalent to $27.3 million USD) moved to within one
year of maturity and is being renegotiated currently. The
Company also issued $5.0 million in promissory notes as partial
funding of the Signet Systems acquisition. Scheduled repayments
on fixed-rate domestic debt and currency fluctuations account for
the balance of the change in long-term debt.
<PAGE>
Short-term debt increased by $13.1 million. U.S. bank lines of
credit accounted for $5.5 million of the increase for working
capital purposes. In addition, the European subsidiaries
increased their short-term debt by $7.6 million. This consisted
of the equivalent of $6 million USD in German marks, and $3.1
million USD in Dutch guilders. Austrian schilling debt was
decreased by the equivalent of $1.5 million USD. Available lines
of credit decreased $9.0 million during the first six months,
with utilization increases in the U.S. and Netherlands.
Remaining unused bank lines of credit at September 26,1995 were
$11.7 million. Total debt to equity increased to 36.3%.
Shareholders' Investment
- ------------------------
Total shareholders' investment increased by $22.1 million to a
total of $330.4 million. The net increase resulted primarily
from net earnings of $32.7 million for the first six months.
Dividends paid to shareholders of $8.9 million, net treasury
stock purchases of $3.7 million, and other minor changes to the
capital accounts also contributed to the change.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In the normal course of business, the Company and its
subsidiaries are named as defendants in various lawsuits and
enforcement proceedings by private parties, the Occupational
Safety and Health Administration, the Environmental Protection
Agency, other governmental agencies, and others in which claims,
such as personal injury, property damage, or antitrust and trade
regulation issues, are asserted against the Company. While the
outcome of these proceedings is uncertain, in the opinion of the
Company's Management and counsel, any liabilities that may result
from such proceedings are not reasonably likely to have a
material effect on the Company's liquidity, financial condition
or results of operations. Many of the pending damage claims are
covered by insurance and, in addition, the Company from time to
time establishes reserves for uninsured liabilities.
The Mitsubishi Litigation
-------------------------
In November 1991, the Company filed a lawsuit in the Federal
District Court in Milwaukee, Wisconsin against Mitsubishi Motor
Sales of America, Inc. and Showa Aluminum Corporation, alleging
infringement of the Company's Patent No. 4,998,580 on parallel-
flow air-conditioning condensers. The suit seeks an injunction
to prohibit continued infringement and accounting for damages, a
trebling of such damages for willful infringement, and
reimbursement of attorneys' fees. In December of 1991, the
Company submitted a complaint to the U. S. International Trade
Commission (ITC) requesting that the ITC ban the import and sale
of parallel-flow air-conditioning condensers and systems or
vehicles that contain them, which are the subject of the
aforementioned lawsuit. In July 1993, the ITC reversed an
earlier ruling by a hearing officer and upheld, as valid and
enforceable, the Company's 4,998,580 patent on parallel-flow air-
conditioning condensers. The ITC also ruled that specific
condensers from the two Japanese companies did not infringe the
Company's patent. Each of the parties appealed to the U.S. Court
of Appeals for the Federal Circuit the portion of the ITC opinion
adverse to them. In July of 1994, Showa filed a lawsuit against
the Company in the Federal District Court in Columbus, Ohio
alleging infringement by the Company of Showa's patents
pertaining to double circuit condensers and baffles therefor (In
June, 1995, the Company filed a motion for partial summary
judgment against such lawsuit). In December of 1994, the Company
filed another lawsuit against Mitsubishi Motor Sales of America,
Inc. and Showa Aluminum Corporation in the Federal District Court
in Milwaukee, Wisconsin pertaining to the Company's newly-issued
Patent No. 5,372,188 also pertaining to parallel-flow air-
conditioning condensers. All legal and court costs associated
with these cases have been expensed as they were incurred.
The McHenry EPA Litigation
--------------------------
In June 1991, the U.S. Department of Justice, acting at the
request of the federal Environmental Protection Agency (EPA),
<PAGE>
filed suit against the Company in the U.S. District Court for
the Northern District of Illinois. The complaint alleged
violations of the federal Clean Water Act at a manufacturing
facility owned by the Company in McHenry, Illinois. The alleged
violations consisted of effluent discharges in excess of
permitted amounts and noncompliance with reporting and
monitoring requirements. Settlement negotiations have resulted
in an agreement whereby the company has paid a fine of $750,000
and agreed to change the effluent discharge system. Full
reserves were established in fiscal 1993 for the fine and the
$1,300,000 necessary for pond sludge removal. All legal and
court costs associated with the case have been expensed as they
were incurred.
Other previously reported legal proceedings have been settled or
the issues resolved so as to not merit further reporting.
Item 5. Other Events.
The Company completed the acquisition of the Signet Systems
Division, effective at the close of business July 31, 1995. The
cash purchase from The Equion Corporation was valued at
approximately $55 million, subject to possible further post-
closing adjustments. The Company also assumed certain
liabilities as part of the acquisition. A total of 418 Signet
employees are located at its main plant in Harrodsburg,
Kentucky; at a recently acquired operation in Goch, Germany; and
at a sales and engineering office in Detroit, Michigan. Signet
is a full-service supplier of climate-control systems and
components to the automotive, truck, and off-highway vehicle
markets both in North America and Europe.
The Company purchased in August, 1995 an existing, new building
in the Northpoint Industrial Park, in Richland County, South
Carolina, near Columbia. The 103,000-sq. ft. building, on a 20-
acre parcel, will be equipped to manufacture PF (parallel-flow)
oil coolers for vehicles. The plant is scheduled to begin
production in mid- 1996 and will employ about 100 people within
a year after startup. The new plant will enable Modine to
eliminate excessive production loads and the related premium
costs at current U.S. plants that make PF products. In
addition, it will give Modine the ability to support the
expanding use of PF products in more applications and by more
customers.
On October 9, 1995, the Company sold the business and assets of
its extruded copper-tubing business to National Tube Holding
Company, Inc. of Birmingham, Alabama. The sale was effective
following the close of business September 26. Modine and
National Tube announced a letter of intent for this transaction
May 3. The business is located in Dowagiac, Michigan. It was
acquired in 1990 when Modine purchased the Heat Transfer
Division of Sundstrand Corporation.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
--------
The following exhibits are included for information only unless
specifically incorporated by reference in this report:
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
4(a) Rights Agreement dated as of October 16, 1986
between the Registrant and First Chicago Trust
Company of New York (Rights Agent) (filed by
reference to the Registrant's Annual Report
on Form 10-K for the fiscal year ended
March 31, 1992).
4(b)(i) Rights Agreement Amendment No. 1 dated as of
January 18, 1995 between the Registrant and
First Chicago Trust Company of New York (Rights
Agent) (filed by reference to the exhibit
contained within the Registrant's Current
Report on Form 8-K dated January 13, 1995.)
4(b)(ii) Rights Agreement Amendment No. 2 dated as of
January 18, 1995 between the Registrant and
First Chicago Trust Company of New York (Rights
Agent) (filed by reference to the exhibit
contained within the Registrant's Current
Report on Form 8-K dated January 13, 1995.)
Note: The amount of long-term debt
----
authorized under any instrument defining the
rights of holders of long-term debt of the
Registrant, other than as noted above, does
not exceed ten percent of the total assets
of the Registrant and its subsidiaries on a
consolidated basis. Therefore, no such
instruments are required to be filed as
exhibits to this Form 10-K. The Registrant
agrees to furnish copies of such instruments
to the Commission upon request.
11* Computation of per share earnings 21
27* Financial Data Schedule (electronic
transmission only)
*Filed herewith.
<PAGE>
(b) Reports on Form 8-K:
-------------------
The Company filed one report on Form 8-K/A amending the Form 8-K
dated July 31, 1995 regarding the Signet Systems acquisition.
The Form 8-K/A, dated September 29, 1995, included the filing of
pro forma financial information with respect to acquisitions made
by the Company in the current fiscal year.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MODINE MANUFACTURING COMPANY
(Registrant)
By: A. D. REID
------------------------------------
A. D. Reid, Vice President, Finance
and Chief Financial Officer
(Principal Financial Officer)
Date: November 8, 1995 By: W. E. PAVLICK
------------------------------------
W. E. Pavlick, Senior Vice President,
General Counsel and Secretary
<PAGE>
<TABLE>
EXHIBIT 11
MODINE MANUFACTURING COMPANY
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share amounts)
<CAPTION>
Three months ended Six months ended
------------------- -------------------
September 26 September 26
-------------------- ------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary
- -------
Weighted average shares outstanding 29,647 29,676 29,663 29,656
Share equivalents for period prior to
exercise (options exercised) 1 12 15 27
Net shares issuable, assuming exercise
of options using average market price
and employing the treasury stock method. 805 853 832 850
------- ------- ------- -------
Average common share and common
share equivalents 30,453 30,541 30,510 30,533
======= ======= ======= =======
Net earnings for the period $16,736 $16,801 $32,719 $31,631
======= ======= ======= =======
Net earnings per share of common stock $0.55 $0.55 $1.07 $1.04
======= ======= ======= =======
Fully Diluted
- -------------
Weighted average shares outstanding 29,647 29,676 29,663 29,656
Share equivalents for period prior to
exercise (options exercised) 1 13 15 28
Net shares issuable, assuming exercise
of options using ending market price
(unless antidilutive) and employing
the treasury stock method 805 853 832 850
------- ------- ------- -------
Average common share and common
share equivalents 30,453 30,542 30,510 30,534
======= ======= ======= =======
Net earnings for the period $16,736 $16,801 $32,719 $31,631
======= ======= ======= =======
Net earnings per share of common stock $0.55 $0.55 $1.07 $1.04
======= ======= ======= =======
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND
CONSOLIDATED STATEMENT OF EARNINGS FOR THE PERIOD ENDING
9/26/95 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> SEP-26-1995
<CASH> 17,827
<SECURITIES> 0
<RECEIVABLES> 159,822
<ALLOWANCES> 6,369
<INVENTORY> 149,752
<CURRENT-ASSETS> 345,123
<PP&E> 421,717
<DEPRECIATION> 234,113
<TOTAL-ASSETS> 647,727
<CURRENT-LIABILITIES> 207,585
<BONDS> 53,163
<COMMON> 18,964
0
0
<OTHER-SE> 311,429
<TOTAL-LIABILITY-AND-EQUITY> 647,727
<SALES> 493,508
<TOTAL-REVENUES> 493,508
<CGS> 364,689
<TOTAL-COSTS> 364,689
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,506
<INCOME-PRETAX> 51,179
<INCOME-TAX> 18,460
<INCOME-CONTINUING> 32,719
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,719
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.07
</TABLE>
