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 December 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 February 7, 1996
------------------------------ -------------------------------
Common Stock, $0.625 Par Value 29,693,763
<PAGE>
MODINE MANUFACTURING COMPANY
INDEX
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Statements
Consolidated Balance Sheets -
December 26 and March 31, 1995 3
Consolidated Statements of Earnings -
For the Three Months Ended
December 26, 1995 and 1994
and the Nine Months Ended
December 26, 1995 and 1994 4
Consolidated Statements of Cash Flows -
For the Nine Months Ended December 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 17
Item 5. Other Events 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
<PAGE>
<TABLE>
MODINE MANUFACTURING COMPANY
CONSOLIDATED BALANCE SHEETS
December 26, 1995 and March 31, 1995
(In thousands, except per-share amounts)
(Unaudited)
<CAPTION>
December 26, 1995 March 31,1995
----------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 22,629 $ 32,691
Trade receivables, less allowance for
doubtful accounts of $6,276 and $6,424 147,101 145,231
Inventories 144,502 136,114
Deferred income taxes and other current
assets 26,594 26,346
-------- --------
Total current assets 340,826 340,382
-------- --------
Other assets:
Property, plant, and equipment - net 194,084 170,872
Investment in affiliates 6,194 8,016
Intangible assets, less accumulated
amortization of $10,003 and $7,564 68,682 34,090
Deferred charges and other noncurrent
assets 40,579 36,827
-------- --------
Total other assets 309,539 249,805
-------- --------
Total assets $650,365 $590,187
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
- ----------------------------------------
<S> <C> <C>
Current liabilities:
Short-term debt $ 14,806 $ 13,565
Long-term debt - current portion 12,775 10,853
Accounts payable 65,171 74,194
Accrued compensation and employee benefits 41,355 38,285
Income taxes 3,489 7,004
Accrued expenses and other current
liabilities 25,752 25,748
-------- --------
Total current liabilities 163,348 169,649
-------- --------
Other liabilities:
Long-term debt 89,355 62,220
Deferred income taxes 12,553 12,958
Other noncurrent liabilities 44,619 37,088
-------- --------
Total other liabilities 146,527 112,266
-------- --------
Total liabilities 309,875 281,915
-------- --------
<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 8,993 7,897
Retained earnings 330,487 296,614
Foreign currency translation adjustment 4,849 5,159
Treasury stock at cost: 671 and 642
shares, respectively (19,953) (16,669)
Restricted stock - unamortized value (2,850) (3,693)
-------- --------
Total shareholders' investment $340,490 $308,272
-------- --------
Total liabilities and shareholders'
investment $650,365 $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 December 26, 1995 and 1994
For the nine months ended December 26, 1995 and 1994
(In thousands, except per-share amounts)
(Unaudited)
<CAPTION>
Three months ended Nine months ended
----------------------- -----------------------
December 26 December 26
----------------------- -----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales $ 252,817 $ 240,505 $ 746,325 $ 670,701
Cost of sales 189,002 170,912 553,691 476,703
--------- --------- --------- ---------
Gross profit 63,815 69,593 192,634 193,998
Selling, general, and administrative expenses 42,387 39,894 119,036 112,828
--------- --------- --------- ---------
Income from operations 21,428 29,699 73,598 81,170
Non-operating income 5,639 1,619 10,350 5,782
Interest expense (1,660) (1,511) (5,166) (4,920)
Non-operating expense (1,145) (1,569) (3,341) (3,521)
--------- --------- --------- ---------
Earnings before income taxes 24,262 28,238 75,441 78,511
Provision for income taxes 9,407 10,825 27,867 29,467
--------- --------- --------- ---------
Net earnings $ 14,855 $ 17,413 $ 47,574 $ 49,044
========= ========= ========= =========
Net earnings per share of common stock* $0.49 $0.57 $1.56 $1.61
========= ========= ========= =========
Dividends per share $0.150 $0.130 $0.450 $0.390
========= ========= ========= =========
Average common shares and common share
equivalents outstanding 30,318 30,563 30,454 30,546
========= ========= ========= =========
<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 Nine Months Ended December 26, 1995 and 1994
(Unaudited)
<CAPTION>
Nine months ended December 26
-----------------------------
1995 1994
---------- ----------
<S> <C> <C>
Net cash provided by operating activities $ 66,503 $ 48,421
Cash flows from investing activities:
Expenditures for property, plant, and
equipment (39,066) (23,135)
Acquisitions, net of cash acquired (55,460) 0
Proceeds from sale of business 9,062 0
Investments in affiliates 0 1,500
Proceeds from dispositions of property,
plant, and equipment 2,143 198
Other - net 269 503
-------- --------
Net cash (used for) investing activities (83,052) (20,934)
Cash flows from financing activities:
Increase/(decrease) in short-term debt - net 347 (8,987)
Additions to long-term debt 54,331 887
Reductions of long-term debt (30,928) (11,479)
Issuance of common stock, including treasury
stock 2,115 4,407
Purchase of treasury stock (6,033) (4,885)
Cash dividends paid (13,345) (11,576)
-------- --------
Net cash provided by/(used for) financing
activities 6,487 (31,633)
-------- --------
Net (decrease) in cash and cash equivalents (10,062) (4,146)
Cash and cash equivalents at beginning of
period 32,691 38,523
-------- --------
Cash and cash equivalents at end of period $ 22,629 $ 34,377
======== ========
<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)
------------------------------------------------------------
December 26, 1995 March 31, 1995
------------------------------------------------------------
Raw materials $ 38,310 $ 37,279
Work in process 46,136 40,879
Finished goods 60,056 57,956
-------- --------
Total inventories $144,502 $136,114
======== ========
2. Property, plant, and equipment is composed of:
(In Thousands)
------------------------------------------------------------
December 26, 1995 March 31, 1995
------------------------------------------------------------
Gross, property,
plant & equipment $424,636 $386,518
Less accumulated
depreciation (230,552) (215,646)
-------- --------
Net property,
plant & equipment $194,084 $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
<PAGE>
extrusion business in Dowagiac, Michigan. On October 9,
1995, the Company announced the completion of the sale
effective following the close of business September 26,
1995. The Company, based upon current estimates, recognized
a pretax gain from the sale of approximately $3.5 million in
the third quarter.
5. In the first quarter of fiscal 1996, 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.
In 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 $36,780,000, 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
<PAGE>
the acquisitions have been accounted for using the purchase
method, whereby the purchase prices have been allocated to
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 $ 84,719,000
Liabilities assumed and created (26,779,000)
Equity investment in affiliate (2,480,000)
------------
Net cash paid for acquisitions $ 55,460,000
6. The following 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 disposal and acquisitions discussed in
Notes 4 and 5, respectively, 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 disposal and
acquisitions occurred on April 1, 1994, after giving effect
to certain adjustments.
Nine Months Ended
-------------------
December 26
-------------------
(In thousands, except per share amounts) 1995 1994
-------- --------
Net Sales $752,426 $719,334
Net Earnings $ 46,069 $ 46,648
Net Earnings Per Share:
Primary $1.51 $1.53
Fully Diluted $1.51 $1.53
7. In November 1995, the Company purchased the business and
certain assets of Emmett Radiator Supply, Inc., in El Paso,
Texas, and Emmett Radiator Supply, Inc., in Albuquerque, New
Mexico. Both sites have become additional sales branches in
the Aftermarket Division. The purchase price was not
material to the consolidated financial statements. The
results of operations did not have a material effect on the
consolidated results of operations and, accordingly, is not
included in the pro forma presentation above.
<PAGE>
8. 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.
9. 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 nine
months of fiscal 1996 are not necessarily indicative of the
results to be expected for the full year.
10. 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 Third Quarter of 1995-96 with the Third Quarter
- -----------------------------------------------------------------
of 1994-95
- ----------
Net sales for the third quarter of fiscal 1995-96 were a record
$252.8 million, up 5.1% from the $240.5 million reported in the
third quarter of last year. The Company's European operations'
generated over 80% of the sales increase, or approximately $10
million, with almost 60% of this growth arising from favorable
currency fluctuations compared to the same quarter, a year ago.
The Company's most recent acquisition, Signet Systems,
contributed almost $20 million to the sales growth in the
quarter. The sale of the Company's copper-tubing business,
effective at the end of the second quarter, resulted in a sales
reduction of just over $8 million from the same quarter in the
prior year. The aftermarket and automotive divisions registered
lower sales due to competitive forces in the North American
aftermarket and a general softening of the U.S. economy.
Modine's quarterly sales, when including those from newly
acquired Signet Systems, increased to all but one of its major
markets. The largest percentage increases were to off-highway-
equipment customers and to original-equipment manufactures of
passenger cars and light trucks. 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 and by the copper-tubing business sale at the end of
the second quarter.
Gross margin declined 3.7%, as a percentage of sales, over the
third quarter of the previous year to 25.2% from 28.9%.
Contributing factors to the overall reduction in gross margin
were: higher raw material costs that were passed on to most
original-equipment customers without corresponding markups;
competitive pressures in the North American aftermarket; a higher
percentage of total sales by the Company's European operations
and the inclusion of three months operating results from the
newly acquired Signet Systems, which are both generally earning
lower gross margins than the overall Company average.
Selling, general and administrative expenses increased 6.2% over
last year's third quarter while remaining almost flat as a
percentage of sales. Excluding Signet Systems, acquired at the
<PAGE>
end of July, selling, general and administrative expenses
declined by $0.8 million or 2.0%.
Interest expense rose by 9.9% from the same quarter a year ago.
Increased borrowing relative to the Signet acquisition and higher
capital spending in Europe in order to prepare for expanding
business worldwide were the main factors contributing to higher
interest costs.
Net non-operating income increased by $4.0 million. The increase
is primarily the result of the $3.5 million gain recognized from
the sale of the Company's copper-tubing business.
The effective tax rate increased by 0.5% when compared to the
same period last year.
Net earnings for the third quarter were $14.9 million or $.49 per
share, down 14.7% from last year's $17.4 million, or $.57 per
share.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
RESULTS OF OPERATIONS
---------------------
Comparison of the First Nine Months of 1995-96 with the First
- -------------------------------------------------------------
Nine Months of 1994-95
- ----------------------
Net sales for the first nine months of fiscal 1995-96 were a
record $746.3 million, up 11.3% from the $670.7 million reported
in the first nine months of last year. The Company's European
operations generated 62% of the sales increase, or approximately
$47 million, with close to $26 million 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 over $30 million to the sales increase.
The sale of the Company's copper-tubing business at the end of
the second quarter resulted in a loss of approximately $8 million
of sales recorded in the third quarter last year.
Modine's worldwide shipments during the first nine 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 decline due to decreases in sales to
manufacturers of residential heating and air-conditioning
equipment The sale of the copper tubing business, effective at
the end of the second quarter, also contributed to the decline
registered in the building-HVAC market.
Gross margin decreased 3.1%, as a percent of sales, over the
first nine months of the previous year to 25.8% from 28.9%. Once
again the primary factors contributing to the decline were:
higher raw material costs that are being passed on to most
original-equipment customers without corresponding markups;
competitive pricing pressures in the North American aftermarket;
a higher percentage of total sales by the Company's European
operations and the inclusion of five months operating results
from the newly acquired Signet Systems, which are both generally
earning lower gross margins than the overall Company average.
Selling, general and administrative expenses increased 5.5% over
the first nine months last year while declining 0.9% as a
percentage of sales. The increase is primarily attributable to
the Signet Systems acquisition, which was included in the
consolidated results of operations beginning in August.
Average outstanding debt levels during the first nine months rose
by approximately $10.6 million, or 11.6%, over the same period a
year ago. Corresponding interest expense increased only 5.0% over
the same nine 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
<PAGE>
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 0.6% when compared to the
same period last year.
Net earnings for the nine months were $47.6 million, or $1.56 per
share, down 3.0% from last year's $49.0 million, or $1.61 per
share.
Outlook for the Remainder of the Year
- -------------------------------------
In December, Modine adjusted its sales and earnings estimates for
the fiscal year ending March 31, 1996. The reduction was
primarily due to competitive forces in the North American
aftermarket and to a general softening of the U.S. economy, which
is affecting sales to original-equipment manufacturers of highway
vehicles. Business remains solid, but full-year sales are
likely to be up less than 10 percent from last year's record.
Continued pressures on margins worldwide, partially a reflection
of high material costs, will result in annual earnings that will
reach 90 to 95 percent of the prior year's record, ending with
the second-highest earnings year ever. This will include an
after-tax gain of approximately seven cents per share from the
sale of Modine's copper-tubing business in the third fiscal
quarter.
<PAGE>
FINANCIAL CONDITION
-------------------
Comparison between December 26, 1995 and March 31, 1995
- -------------------------------------------------------
Current Assets
- --------------
Cash and cash equivalents decreased by $10.1 million to a total
of $22.6 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 $1.9 million, or 1.3%. Excluding the
recent Signet Systems acquisition, net trade receivables declined by
$8.4 million, or approximately 5.8%. The reduction is partially the
result the sale of the company's copper-tubing business at the end of
the second quarter. Also contributing to the reduction were lower
sales to the North American aftermarket and original-equipment
manufacturers of highway vehicles in the third quarter.
Overall inventory levels increased by $8.4 million. The majority of
the increase is attributable to the Signet Systems acquisition and
other smaller acquisitions made in the current year. Offsetting part
of the increase from the acquisitions, is a reduction from the sale of
the Company's copper tubing business at the end of the second quarter.
Other smaller variations in inventory levels in the Company's operating
units accounted for the remaining increase.
Working capital increased approximately 4% to $177.5 million from $170.7
million while the current ratio increased to 2.1 to 1 from 2.0 to 1.
A number of categories experienced changes, but the largest items
contributing to the increase were higher inventories as a result of
acquisitions during the year and lower accounts payable due to normal
timing difference in the level of operating activity. These increases
were offset in part by a reduction in cash used to finance acquisitions
and capital expenditures that occurred in the first nine months.
Property, Plant and Equipment
- -----------------------------
Net property, plant and equipment increased $23.2 million to $194.1
million. A little over 50% of the increase occurred as a result of the
Signet Systems acquisition at the end of July. Management currently
anticipates that capital expenditures will rise to $50-60 million in the
current year to prepare for expanded business worldwide. Outstanding
material commitments for capital expenditures were $19.2 million at
December 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 $1.8 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 $34.6 million.
The increase is principally the result of goodwill recorded in
conjunction with the Signet Systems, Radinam S.A., Radiadores Montana S.A.
Deferred Charges and Other Assets
- ---------------------------------
Deferred charges and other assets increased $3.8 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 $5.9 million.
Excluding the Signet Systems acquisition, accounts payable and other
accrued expenses decreased $15.7 million. Normal timing differences in
the level of operating activity were responsible for the decline.
Accrued income taxes decreased $3.5 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 $30.3 million from March 31, 1995. Long-term
debt increased $29.1 million mainly in conjunction with the acquisitions
of Radiadores Montana S.A., Signet Systems, Inc., and Radinam S.A. At
December 26, the Company had used $14.8 million of its $25 million multi-
currency revolving unsecured credit facility. The borrowings were
denominated in U.S. dollars ($8.0), German marks (equivalent to $.9 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 equivalent of $27.7 million USD was renegotiated in
Germany to extend the maturities to fiscal years ending in 1997 and 1999.
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.
Short-term debt increased by $1.2 million at the company's European
subsidiaries. This overall change consisted of the equivalent of $2.4
million USD increase in Dutch guilders, and $2.0 million USD decrease in
Austrian schillings, with the balance of the activity at our German
subsidiaries. Available lines of credit were unchanged in total, with
$20.6 million available. The lines of credit available in the Netherlands
<PAGE>
decreased by $3.5 million. The lines of credit available in Germany and
Austria increased by $2.4 million and $1.1 million, respectively. Total
debt to equity increased to 34.3%.
Shareholders' Investment
- ------------------------
Total shareholders' investment increased by $32.2 million to a total of
$340.5 million. The net increase resulted primarily from net earnings of
$47.6 million for the first nine months. Dividends paid to shareholders of
$13.3 million, net treasury stock purchases of $3.3 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 February 1996, the U.S. Court of Appeals for the
Federal Circuit, upheld the patent as valid and enforceable and remanded
the case back to the ITC for a determination with respect to Showa
infringement. 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. Both 1994
suits have been stayed pending the outcome of re-examination in the U. S.
Patent Office of the patents involved. All legal and court costs associated
with these cases 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.
As previously reported, in May of 1986, the Board of Directors authorized
the Company to acquire up to 10% per year of the issued and outstanding
<PAGE>
shares of the common stock of the Company. Pursuant to this authorization,
the Company purchases shares of its common stock from time to time as such
shares become available on the open market or in private transactions for
resale to the employee stock purchase plans and for other corporate purposes.
Since December 31, 1994, the Company has purchased at market price a total of
338,245 shares, 167,836 shares of which were purchased during the fourth
fiscal quarter of 1994-95, and 170,409 shares of which were purchased from
April 1, 1995 through December 31, 1995. The Company currently has
648,401 shares (as of February 6, 1996) in its Treasury.
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.
<PAGE>
Reference Number
per Item 601 of
Regulation S-K Page
- -------------- ----
11* Computation of per share earnings 21
27* Financial Data Schedule (electronic
transmission only)
*Filed herewith.
(b) Reports on Form 8-K:
-------------------
The Company filed no reports on Form 8-K during this third fiscal
quarter.
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: February 8, 1996 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 Nine months ended
---------------------- ----------------------
December 26 December 26
---------------------- ----------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary
Weighted average shares outstanding 29,641 29,702 29,655 29,672
Share equivalents for period prior to
exercise (options exercised) 12 18 26 50
Net shares issuable, assuming exercise
of options using average market price
and employing the treasury stock method. 665 843 773 824
------- ------- ------- -------
Average common share and common
share equivalents 30,318 30,563 30,454 30,546
======= ======= ======= =======
Net earnings for the period $14,855 $17,413 $47,574 $49,044
======= ======= ======= =======
Net earnings per share of common stock $0.49 $0.57 $1.56 $1.61
======= ======= ======= =======
Fully Diluted
Weighted average shares outstanding 29,641 29,702 29,655 29,672
Share equivalents for period prior to
exercise (options exercised) 12 18 26 53
Net shares issuable, assuming exercise
of options using ending market price
(unless antidilutive) and employing
the treasury stock method 665 844 773 824
------- ------- ------- -------
Average common share and common
share equivalents 30,318 30,564 30,454 30,549
======= ======= ======= =======
Net earnings for the period $14,855 $17,413 $47,574 $49,044
======= ======= ======= =======
Net earnings per share of common stock $0.49 $0.57 $1.56 $1.61
======= ======= ======= =======
</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 12/26/95 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-1-1995
<PERIOD-END> DEC-26-1995
<CASH> 22,629
<SECURITIES> 0
<RECEIVABLES> 153,377
<ALLOWANCES> 6,276
<INVENTORY> 144,502
<CURRENT-ASSETS> 340,826
<PP&E> 424,636
<DEPRECIATION> 230,552
<TOTAL-ASSETS> 650,365
<CURRENT-LIABILITIES> 163,348
<BONDS> 89,355
0
0
<COMMON> 18,964
<OTHER-SE> 321,526
<TOTAL-LIABILITY-AND-EQUITY> 650,365
<SALES> 746,325
<TOTAL-REVENUES> 746,325
<CGS> 553,691
<TOTAL-COSTS> 553,691
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,166
<INCOME-PRETAX> 75,441
<INCOME-TAX> 27,867
<INCOME-CONTINUING> 47,574
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,574
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.56
</TABLE>
