SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
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Commission file number 1-1373
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MODINE MANUFACTURING COMPANY
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(Exact name of registrant as specified in its charter)
WISCONSIN 39-0482000
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 DeKoven Avenue, Racine, Wisconsin 53403
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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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Securities Registered pursuant to Section 12(g) of the Act:
Common Stock, $0.625 par value
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(Title of Class)
An Exhibit index appears at pages 20-27 herein.
Page 1 of
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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,
and (2) has been subject to such filing requirements for the past
90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Approximately 54% of the outstanding shares are held by non-
affiliates. The aggregate market value of these shares was
approximately $533,273,634 based on the market price of $33.3125
per share on June 15, 1998. The remaining outstanding shares are
owned or controlled by or for directors, officers, employees,
retired employees, and their families.
The number of shares outstanding of the registrant's Common
Stock, $0.625 par value, was 29,644,841 at June 15, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
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Portions of the following documents are incorporated by reference
into the parts of this Form 10-K designated to the right of the
document listed.
Incorporated Document Location in Form 10-K
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Annual Report to Shareholders for the
fiscal year ended March 31, 1998 Part I of Form 10-K
(Item 1)
Part II of Form 10-K
(Items 7, 8)
Part IV of Form 10-K
(Item 14)
1998 Definitive Proxy Statement dated
June 5, 1998 Part III of Form 10-K
(Items 10, 11, 12, 13)
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TABLE OF CONTENTS
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MODINE MANUFACTURING COMPANY - FORM 10-K
FOR THE YEAR ENDED MARCH 31, 1998
10-K Pages
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Cover
Table of Contents
Part I
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Item 1 - Business
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General, Foreign and Domestic Operations,
Competitive Position, Customer Dependence,
Backlog of Orders, Raw Materials, Patents,
Research and Development, Environmental
Matters, Employees, Seasonal Nature of
Business, Working Capital Items 5
Item 2 - Properties 13
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Item 3 - Legal Proceedings 14
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Item 4 - Submission of Matters To A Vote of
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Security Holders
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Part II
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Item 5 - Market for Registrant's Common Equity
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and Related Stockholder Matters 16
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Item 6 - Selected Financial Data 17
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Item 7 - Management's Discussion and Analysis of
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Financial Condition and Results of
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Operations 17
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Item 8 - Financial Statements & Supplementary Data 17
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10-K Pages
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Item 9 - Changes in and Disagreements with
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Accountants on Accounting and Financial
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Disclosure 18
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Part III
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Items 10 and 11 - Directors and Executive
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Officers of the Registrant; Executive
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Compensation 18
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Item 12 - Security Ownership of Certain Beneficial
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Owners and Management 19
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Item 13 - Certain Relationships and Related
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Transactions 19
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Part IV
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Item 14 - Exhibits, Financial Statement Schedules,
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and Reports on Form 8-K 20
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1) Financial Statements
2) Financial Statement Schedules
3) Consent of Independent Accountants
4) Exhibit Index
Signatures 28
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PART I
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ITEM 1. BUSINESS.
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General
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Throughout this Report, the terms "Modine," the "Company" and/or
the "Registrant" refer to Modine Manufacturing Company and
consolidated subsidiaries.
Modine was incorporated under the laws of the State of Wisconsin
on June 23, 1916.
Modine Manufacturing Company is an independent, worldwide leader
in heat-transfer and heat-storage technology serving vehicular,
industrial, commercial, and building-HVAC (heating, ventilating,
air-conditioning) markets. Modine develops, manufactures, and
markets heat exchangers and systems for use in various OEM
(original equipment manufacturer) applications and for sale to
the automotive aftermarket (as replacement parts) and to a wide
array of building markets. The principal markets consist of
automobile, truck and bus manufacturers, farm implement
manufacturers, heating and cooling equipment manufacturers,
construction equipment manufacturers, construction contractors,
wholesalers of plumbing and heating equipment, radiator repair
shops, and wholesalers of auto repair parts. The Company
distributes its products through company salespersons, through
independent manufacturer's representatives, independent warehouse
distributors, and mass merchandisers. No industry segment
information is required under Statement of Financial Accounting
Standards Board, Number 14 "Financial Reporting for Segments of a
Business Enterprise," since the Company operates predominantly in
a single industry.
Within this industry, the Company manufactures various products
as is demonstrated by the following table :
Years ended March 31
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1998 1997 1996 1995 1994
Radiators & Radiator Cores 40% 39% 41% 42% 45%
Vehicular Air Conditioning 20% 22% 18% 14% 12%
Oil Coolers 17% 16% 16% 16% 15%
Charge Air Coolers 12% 11% 12% 12% 11%
Building HVAC 8% 8% 8% 9% 11%
Miscellaneous 3% 4% 5% 7% 6%
A world trend has been consolidation to fewer but larger
suppliers in the markets the Company serves. To serve its global
markets, Modine has established manufacturing operations in North
America, Europe, and Asia/Pacific. The Company's significant
international operations are located in the following countries:
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North America
The Company maintains a Canadian subsidiary, Modine of Canada,
Ltd., an Ontario company, which manufactures cores for the
automotive aftermarket, and which owned 100% of The Radman
Corporation, Ltd., a Canadian federal company which licenses
certain trademarks to automotive radiator repair shops.
The Company operates a subsidiary, Modine Transferencia de Calor,
S.A. de C.V., a Mexican company which manufactures, assembles,
and exports to the U.S., heat exchangers for a variety of non-
vehicular applications.
The Company operates Manufacturera Mexicana de Partes de
Automoviles, S.A. ("Mexpar"), a Mexican producer of radiators and
other automotive components for original equipment manufacturers
and the automotive aftermarket. Mexpar's manufacturing
facilities are located in Mexico City.
Europe
The Company operates in Europe through subsidiaries organized
into three business groups and two support groups. The three
business groups are:
(1) An automotive business unit which the Company
operates primarily through its subsidiary, Modine
Holding GmbH located in Filderstadt-Bernhausen,
Germany. This unit includes (a) Langerer & Reich
Automobiltechnik GmbH located in Pliezhausen, Germany,
which manufactures aluminum heat exchangers for the
passenger car market; (b) Modine Uden B.V. located in
Uden, The Netherlands, which was reopened during 1996-
97 and converted to the production of transmission and
engine oil coolers and latent heat batteries; and (c)
Austria Warmetauscher GmbH located in Berndorf,
Austria, which manufactures aluminum air conditioning
condensers and oil coolers for a number of European
automakers.
Early in fiscal 1998, another facility for the
European automotive market, Modine Montage GmbH, began
assembly of automotive cooling modules in Wackersdorf,
Germany.
In April of 1998, Modine began construction of a
plant in Pontevico, Italy to produce heat-exchange
components for the automotive market.
(2) A heavy-duty business unit which the Company
operates through Modine Holding GmbH. This unit
includes (a) Langerer & Reich GmbH located in
Bernhausen, Germany, which manufactures heat exchangers
for the truck, bus and industrial markets, and also
includes research and development and administrative
facilities; (b) Modine GmbH located in Neuenkirchen,
Germany, which manufactures copper/brass sheet metal
radiators for the European industrial and agricultural
<PAGE>
market; and (c) Hungaro Langerer Gep. Kft., located in
Mezokovesd, Hungary.
Modine established a new aluminum-product plant in
Kirchentellinsfurt, Germany in fiscal 1998.
In addition, Modine will begin construction of a
new plant in Tubingen, Germany in fiscal 1999 that will
provide for lower-cost, more efficient production of
copper-brass radiators to serve the off-highway market.
(3) An aftermarket business unit which the Company
operates under the aegis of the automotive business
unit, but operates primarily through its subsidiary,
NRF B.V. This unit includes (a) NRF B.V. located in
Mill, The Netherlands, which produces replacement
radiator cores, sheet metal radiators, and industrial
and marine heat exchangers; and (b) Radiadores Montana
S.A. located in Granada, Spain, which manufactures and
distributes radiators, radiator cores, oil coolers,
heaters, and air conditioning condensers and
evaporators for the automotive aftermarket and for
industrial applications.
NRF also owns subsidiaries that export products
and distribute products throughout Europe.
The two support groups are: (1) European central research
group, that is similar to Modine's Research and Development
Department in Racine, Wisconsin; and (2) a European central
administration unit, that includes the functions of I/S
(Information Services); purchasing; quality environment; and
accounting.
The Company operates, through Modine Climate Systems Inc., Modine
Climate Systems GmbH located in Goch, Germany. Modine Climate
Systems GmbH is a supplier of climate-control systems and
components to the automotive, truck, and off-highway vehicle
markets in Europe.
In the third quarter of fiscal 1996-97, Modine purchased 41.3
percent of Constructions Mecaniques Mota, S.A. (CMM), based near
Marseilles, France, with other facilities in Aubagne, France, and
Lenta, Italy. CMM is a manufacturer of tube-bundle oil coolers
and charge-air coolers for trucks and marine engine markets,
which complements Modine's other European businesses.
The European operations are organized similarly to the way the
Company is organized in the United States, which allows Modine to
be able to better serve its markets in Europe with manufacturing
in Europe.
The Company maintains sales subsidiaries and/or offices in
Austria, England, France, Italy, Germany, The Netherlands, and
Sweden.
The Company also maintains stocks of goods in bulk warehouses in
Birmingham, England; Rotterdam, The Netherlands; and Bremen,
Germany as reserve inventory for certain European customers.
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Asia/Pacific
The Company participates (50% interest) in a joint venture with
Nippon Light Metal, Ltd., a Japanese company. The joint venture
company, Nikkei Heat Exchanger Company, Ltd., produces automotive
heat exchangers for sale to original equipment manufacturers in
the Japanese market.
The Company established a sales subsidiary in Japan, Modine Asia
K.K., in February, 1995.
In addition to normal business risks, operations outside of the
United States are subject to other risks including, but not
limited to, changing governmental laws and regulations, and
currency re-evaluations and market fluctuations.
Exports
In addition, the Company exports to foreign countries and
receives royalties from foreign licensees. Export sales as a
percentage of total sales were 12.6%, 11.8% and 12.9% for fiscal
years ended in 1998, 1997 and 1996, respectively. Estimated
after-tax earnings on export sales as a percentage of total net
earnings were 12.6%, 11.8% and 12.9% for fiscal years ended in
1998, 1997 and 1996, respectively. Royalties from foreign
licensees as a percentage of total earnings were 2.5%, 1.6% and
1.0% for the last three fiscal years, respectively.
Modine believes its international presence has positioned the
Company to profitably share in the anticipated long-term growth
of the global vehicular and industrial markets. Modine is
committed to increasing its involvement and investment in
international markets in the years ahead.
Foreign and Domestic Operations
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Financial information relating to the Company's foreign and
domestic operations, including export sales, is included in the
Company's 1997-1998 Annual Report to Shareholders and is
incorporated herein by reference at Note 19 on Page 32 therein.
Events subsequent to the End of the Quarter
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On June 5, 1998, the Company mailed its Annual Report to
Shareholders and released its sales forecast for the upcoming
year. See Current Reports on Form 8-K at page 27 herein for
further details.
The Company has signed a letter of intent to purchase 50 percent
of Radiadores Visconde Ltda., a Brazilian heat-transfer company.
Visconde's 1997 net sales were approximately $60 million, about
70 percent of which were for the aftermarket, both domestic and
export. The company has 750 employees and has ISO-9001
certification for aluminum radiators. Visconde makes heat-
exchanger components, assemblies, and modules that include
radiators, oil coolers, and charge-air coolers at facilities in
<PAGE>
Sao Paulo, Brazil. It serves the passenger-car aftermarket and
the truck, bus, engine, agricultural-tractor, hydraulic-system,
compressor, marine, construction-equipment, power-generated, and
industrial markets. The joint venture agreement is subject to
approval of the owners of Visconde.
On June 18, 1998, Modine formed a joint venture company with
Daikin Industries, Ltd., one of the largest air-conditioning
manufacturers in the world. The joint venture, called Daikin-
Modine, Inc., will manufacture a new line of packaged, rooftop,
air-conditioning products using state-of-the-art technology,
including Modine's patented PF (parallel flow) heat exchangers.
Daikin, based in Osaka, Japan, is the strongest commercial air-
conditioning manufacturer in Japan, with market strengths in Asia
and Europe. Daikin has state-of-the-art air-conditioning and
refrigeration technology, producing its own compressors, other
components, and refrigerants. Modine's gas-heating products are
manufactured in Virginia and the joint venture company will begin
operations in a Modine facility in Rockbridge County, near
Lexington, VA. Modine has an established distribution network in
the U.S. building-HVAC (heating, ventilating, air-conditioning)
market. Each partner owns 50 percent of Daikin-Modine.
Following changes to the Rockbridge facility, the joint venture
company will begin production of commercial, rooftop, air
conditioners in 1999.
Competitive Position
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The Company competes with several manufacturers of heat transfer
products, some of which are divisions of larger companies and
some of which are independent companies. The Company also
competes for business with parts manufacturing divisions of some
of its major customers. The markets for the Company's products
are increasingly competitive and have changed significantly in
the past few years as the Company's traditional OEM customers in
the United States, faced with dramatically increased
international competition, have expanded their worldwide sourcing
of parts to better compete with lower-cost imports. These market
changes have caused the Company to experience competition from
suppliers in other parts of the world which enjoy economic
advantages such as lower labor costs, lower health care costs,
and other factors.
Customer Dependence
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Ten customers accounted for approximately 42.4% of the Company's
sales in the fiscal year ended March 31, 1998. These customers,
listed alphabetically, were: BMW, Caterpillar, Chrysler, Cummins
Engine, Fiat, Ford, John Deere, Navistar International, Paccar
and Volkswagen. Goods are supplied to these customers on the
basis of individual purchase orders received from them. When it
is in the customer's and the Company's best interests, the
Company utilizes long-term supply agreements to minimize
investment risks and provide a proven source of competitively
priced products. There are no other relationships between the
Company and its customers.
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Backlog of Orders
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While the Company has a large backlog of orders, the backlog is
not deemed significant or material; backlog historically has had
little relation to shipments. Modine's products are produced
from readily available materials such as aluminum, copper, brass,
and steel and have a relatively short manufacturing cycle. The
Company's operating units maintain their own inventories and
production schedules. Current production capacity (including
additional capacity planned to become operational this year) is
capable of handling the sales volumes expected in fiscal 1998-99.
Raw Materials
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Aluminum, copper, brass, steel, and solder, all essential to the
business, are purchased regularly from several domestic and foreign
producers. In general, the Company does not rely on any one supplier
for these materials, which are for the most part available from
numerous sources in quantities required by the Company. The Company
normally does not experience material shortages within its operations
and believes that producers' supplies of these materials will be
adequate through the end of fiscal year 1999.
Patents
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The Company, and certain of its wholly-owned subsidiaries, own
outright or are licensed to produce products under a number of
patents and licenses. These patents and licenses, which have
been obtained over a period of years, will expire at various
times. Because the Company is involved with many product lines,
the Company believes that its business as a whole is not
materially dependent upon any particular patent or license, or
any particular group of patents or licenses. Modine considers
each of its patents, trademarks and licenses to be of value and
aggressively defends its rights throughout the world against
infringement. See also Item 3 - Legal Proceedings.
Research and Development
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Company-sponsored research activities relate to the development
of new products, processes, or services, or the improvement of
existing products, processes, and services. Expenditures in
fiscal 1998 amounted to $16,816,000; in fiscal 1997 amounted to
$16,804,000; and in fiscal 1996 amounted to approximately
$14,512,000. There were no significant expenditures on research
activities which were customer-sponsored. Over the course of the
last few years, the Company has become involved in a number of
industry or university sponsored research organizations. These
consortia conduct research and provide data on technical topics
deemed to be of interest to the Company for practical
applications in the markets the Company serves. The research and
data developed is generally shared among the member companies.
In addition, to achieve efficiencies and lower developmental
costs, Modine's research and engineering groups work closely with
Modine's customers on special projects and systems designs.
<PAGE>
Environmental Matters
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Modine has a long standing corporate environmental policy which
demonstrates the Company's commitment to the environment and
compliance with all environmental laws and regulations worldwide.
Modine continues to appraise environmental issues and regulatory
compliance with a proactive approach. The benefits realized from
the Company's environmental programs include conserved resources,
more efficient manufacturing processes, minimized liability exposure
and reduced operational costs. Modine evaluates the performance of
the Company's environmental programs through continuous monitoring,
auditing and accounting systems. The Company constantly examines
its operations and processes to minimize their impact on the
environment. In calendar 1996, the Company revised its corporate
waste minimization program, which originated in 1991, to encompass
all by-products of the manufacturing process. In calendar 1997,
the first year under the revised program, an 11.8% reduction in
by-product generation was experienced.
Modine accrues for environmental remediation activities relating
to past operations - including those under the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA),
often referred to as "Superfund", and under the Resource Conservation
and Recovery Act (RCRA)---when it is probable that a liability has
been incurred and reasonable estimates can be made. In addition, an
obligation may arise when a facility is closed or sold. These
expenditures most often relate to facilities and sites where past
operations followed practices and procedures that were considered
acceptable under then-existing regulations, but will now require
investigative and/or remedial work to ensure sufficient protection
to the environment.
Six of the Company's manufacturing facilities currently have been
identified as requiring soil and/or groundwater remediation.
Because of the joint and several liability of former landowners,
contractual obligations, and certain state programs that provide
for partial reimbursement of certain remediation costs, it is
unlikely these remediation efforts will have a material effect on
the Company's consolidated financial condition.
Although there are no currently known liabilities that might have
a material effect on the Company's consolidated net assets, the
Environmental Protection Agency ("EPA") has designated Modine as
a potentially responsible party ("PRP") for remediation of nine
waste disposal sites. These sites are not company owned and
allegedly contain wastes attributable to Modine from past
operations. For the nine sites currently known, the company's
potential liability will be significantly less than the total
site remediation because the percentage of material attributable
to Modine is relatively low ("de minimis"), there may be
insufficient documentation linking Modine to the site, and the
other PRPs have the financial resources to meet their obligations.
Recent environmental legislation will require significant capital
equipment expenditures over the next four to five years. For the
fiscal year ending March 31, 1998 capital expenditures related to
environmental projects were $0.7 million. These environmental
expenditures include capital outlays to retrofit existing
<PAGE>
facilities, as well as those associated with new facilities and
other compliance costs. Modine currently expects expenditures for
environmentally related capital projects to be about $2.8 million
in 1998-99. A major portion of these additional costs can be
attributed to wastewater treatment system upgrades at two Modine
manufacturing facilities. These upgrades are necessary to
accommodate for an increase in wastewater generation due to
expanded production and to insure compliance with wastewater
discharge permits.
Environmental expenses charged to current operations, including
remediation costs, totaled about $2.3 million for the fiscal year
ending March 31, 1998. These expenses include operation and
maintenance costs for solid waste treatment, storage, and disposal
and for costs incurred in conducting environmental compliance
activities; and for other matters. Operating expenses of some
facilities may increase during fiscal year 1998-99 because of
such charges but the competitive position of the company is not
expected to change materially.
Although environmental costs are substantial, the Company has no
reason to believe such costs vary significantly from similar
costs incurred by other companies engaged in similar businesses.
Employees
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The number of persons employed by the Company at March 31, 1998,
was approximately 8,400.
Seasonal Nature of Business
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In recent years the Company's business has become more continuous
and less seasonal. However, a degree of seasonality may still be
experienced since the aftermarket, heating and climate systems
domains are affected by weather patterns, constructions starts,
and other factors. Sales to original equipment manufacturers are
dependent upon the demand for new vehicles and equipment. The
following quarterly net sales detail illustrates the degree of
fluctuation for the past five years:
Fiscal Year Fiscal
Ended First Second Third Fourth Year
March 31 Quarter Quarter Quarter Quarter Total
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($ In Thousands)
1998 $256,923 $260,806 $267,699 $254,990 $1,040,418
1997 248,514 254,224 252,972 243,336 999,046
1996 239,216 254,292 252,817 244,168 990,493
1995 208,436 221,760 240,505 242,309 913,010
1994 147,171 156,964 172,351 193,067 669,553
Five-year $220,052 $229,609 $237,269 $235,574 $ 922,504
Average
Percent 24% 25% 26% 25% 100%
of Year
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Working Capital Items
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The Company's products for the original equipment market are
manufactured on an as ordered basis. Therefore, large
inventories of such products are not necessary, nor is the amount
of products returned significant. In the HVAC and aftermarket
areas, due to the distribution systems and seasonal sales
programs, varying levels of finished goods inventory are
necessary. This inventory is spread throughout the distribution
systems. In these areas, in general, the industry and the
Company make use of extended terms of payment for customers on a
limited and/or seasonal basis.
Year 2000
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In response to the Year 2000 issue, the Company initiated a
project in early 1997 to identify, evaluate and implement changes
to its existing computerized business systems. The Company is
addressing the issue through a combination of modifications to
existing programs and conversions to Year 2000 compliant
software. The total cost associated with the required
modifications is not expected to be material to the Company's
consolidated results of operations and financial position, and is
being expensed as incurred. In addition, the Company is
communicating with its customers, suppliers, and other service
providers to determine whether they are actively involved in
projects to ensure that their products and business systems will
be Year 2000 compliant. If modifications and conversions by the
Company and those it conducts business with are not made in a
timely manner, the Year 2000 issue could have a material adverse
effect on the Company's business, financial condition, and
results of operations.
ITEM 2. PROPERTIES.
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The Company's general offices, along with laboratory,
experimental and tooling facilities, are maintained in Racine,
Wisconsin. Additional technical support functions are located in
Harrodsburg, Kentucky and Bernhausen, Germany. Almost all of the
Company's manufacturing and larger distribution centers are owned
outright. A few manufacturing facilities and numerous regional
sales and service centers, distribution centers and offices are
occupied under various lease arrangements.
In December 1996, Modine announced its plans to expand its
existing testing capabilities in Racine, Wisconsin. The Company
is constructing a new technical center, which will include a
climatic vehicular wind tunnel, a test vehicle preparation site,
and incorporation of the existing vehicular wind tunnel into the
new structure. This project is on schedule and is planned to be
opened in the fall of 1998.
On June 18, 1998 Modine announced that it will invest $53 million
over the next five fiscal years in Europe to build a world-class
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technical center and new headquarters facilities for its Modine-
Europe operations. The technical center, to be built near Stuttgart,
Germany, will have all testing capabilities necessary and required
for product and process validation for the European operations. When
completed, it will include test laboratories for: structural tests
(thermal, pressure, vibration), component or system heat-transfer
tests (with several multi-fluid wind tunnels), corrosion tests (both
internal and external), and an engine-test cell that can evaluate
the thermal performance of engines, with and without transmissions.
It will also include prototype and sample shops, a tool room, R&D,
chemical and metallurgical laboratories, and manufacturing-machinery
design and production, making it a complete engineering center. The
technical center, without the wind tunnel, will be 131,600 sq. ft.
(12,200 sq. meters). Construction will begin in 1998 and is scheduled
to end by early 2000. Construction will start in mid-2000 on the
vehicular wind tunnel and will be completed 2002. The new head-
quarters building, comprising 93,000 sq. ft. (8,600 sq. meters), is
expected to be started in April 1999 and to be occupied by about
January 2001. It will consolidate all European divisional offices
and central administrative functions such as information services,
accounting, quality, purchasing, and human resources.
The Company's facilities, on a geographic basis, are as follows:
Type of North Asia/
Facility America Europe Pacific Total
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Manufacturing 21 13 -- 34
Distribution 3 1 -- 4
Sales & Service
Centers/Offices 16 19 1 36
Joint Ventures -- 3 1 4
Total 40 36 2 78
Total square footage of the 78 facilities is approximately
7,655,636 square feet.
The Company currently uses its facilities for the purposes as
noted above.
The Company's facilities, in general, are well maintained and
conform to the sales, distribution, or manufacturing operations
for which they are being used, and their productive capacity is,
from time to time, adjusted and expanded as necessitated by
product market considerations and customer growth.
ITEM 3. LEGAL PROCEEDINGS.
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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
<PAGE>
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 and Showa Litigation
-----------------------------------
In November 1991, the Company filed a lawsuit against Mitsubishi
Motor Sales of America, Inc. and Showa Aluminum Corporation,
alleging infringement of the Company's patent on parallel-flow
air-conditioning condensers. The suit seeks an injunction to
prohibit continued infringement, an 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 August 1997, the ITC issued an Order
excluding from U.S. import Showa condensers that infringe Modine
Manufacturing Company's parallel-flow patent. The ITC's Order
covers condensers, their parts, and certain products including
them, such as air-conditioning kits and systems. It directs the
U.S. Customs Service to exclude from importation into the United
States such products manufactured by Showa Aluminum Corporation of
Japan and Showa Aluminum Corporation of America. The decision is
based on a Modine U.S. patent covering condensers with tube
hydraulic diameters less than 0.04822 inches. The Showa companies
must certify to Customs officials that any condenser items imported
by them do not infringe Modine's parallel-flow patent. The Showa
companies must also file annual reports with the ITC regarding
their sales of Showa parallel-flow condensers in the United States.
The ITC Order has been appealed by Showa to the U.S. Court of
Appeals for the Federal Circuit. In July of 1994, Showa filed a
lawsuit against the Company alleging infringement by the Company
of Showa patents pertaining to condensers. 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 and Showa pertaining to a newly issued patent
on 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. In October of 1997, Modine
was issued a Japanese patent (in spite of opposition by many parties)
covering parallel-flow air-conditioning condensers having tube
hydraulic diameters less than 0.070 inches. A similar patent has
been issued to Modine by the European Patent Office and is currently
in the opposition stage. 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.
Under the rules of the Securities and Exchange Commission, certain
environmental proceedings are not deemed to be ordinary or routine
<PAGE>
proceedings incidental to the Company's business and are required
to be reported in the Company's annual and/or quarterly reports.
The Company is not currently a party to any such proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------ ---------------------------------------------------
Omitted as not applicable.
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
- ------ -------------------------------------------------
STOCKHOLDER MATTERS.
-------------------
The Company's Common Stock is quoted on the National Association
of Securities Dealers' Automated Quotation system ("NASDAQ") as a
National Market issue. The Company's trading symbol is "MODI." The
table below shows the range of high and low bid information for the
Company's Common Stock for fiscal years 1997-98 and 1996-97. As of
April 1, 1998, shareholders of record numbered approximately 6,236;
it is estimated that beneficial owners numbered about 13,000.
1997-98 1996-97
----------------------------- ----------------------------
Quarter High Low Dividends High Low Dividends
First $30.063 $24.750 $.19 $29.750 $24.500 $.17
Second 35.000 28.500 .19 28.000 25.000 .17
Third 36.000 33.125 .19 27.250 23.750 .17
Fourth 35.813 32.000 .19 29.750 24.500 .17
---- ----
TOTAL $.76 $.68
Certain of the Company's loan agreements limit the use of
retained earnings for the payment of cash dividends and the
acquisition of treasury stock. Under the most restrictive,
$165,700,000 was available for these purposes at March 31, 1998.
(However, these restricted payments may not exceed $30,000,000 in
any fiscal year.) Other loan agreements give certain existing
unsecured lenders security equal to any future secured borrowing.
In October 1986, the Company adopted a shareholder rights plan and
issued one right for each share of common stock. The rights are not
currently exercisable but will become exercisable 10 days after a
shareholder has acquired 20 percent or more, or commenced a tender
or exchange offer for 30 percent or more, of the Company's common
stock. Each right will initially entitle the holder to purchase a
unit of 1/100 Preferred Series A Participating Stock. During fiscal
1996-1997, the Company amended the Plan increasing the price from
$21.25 to $95.00 per unit. In the event of certain mergers, sales
of assets, or self-dealing transactions involving a 20 percent or
more shareholder, each right not owned by such 20 percent or more
shareholder will be modified so that it will then be exercisable
for common stock having a market value of twice the exercise price
<PAGE>
of the right. The rights are redeemable in whole by the Company,
at a price of $0.0125 per right, at any time before 20 percent or
more of the Company's common stock has been acquired. On January 18,
1995, the Board of Directors of the Company authorized an amendment
to the Rights Agreement by extending the final expiration date of
the Rights from October 27, 1996 to October 27, 2006. Accordingly,
the Rights expire on October 27, 2006, unless previously redeemed.
ITEM 6. SELECTED FINANCIAL DATA.
- ------ -----------------------
Fiscal Year ended March 31
1998 1997 1996 1995 1994
Sales (in thousands) $1,040,418 $999,046 $990,493 $913,010 $669,553
Net earnings (in
thousands) 72,471 63,763 61,399 68,442 43,990 **
Total assets (in
thousands) 759,024 694,955 671,836 590,187 509,981
Long-term debt (in
thousands) 89,587 85,197 87,809 62,220 77,646
Dividends per share* .76 .68 .60 .52 .46
Net earnings per share*
- Basic 2.44 2.14 2.07 2.31 1.49 **
- Assuming dilution 2.39 2.10 2.03 2.25 1.45 **
* Adjusted for stock splits and stock dividends.
** Includes recognition of an accounting change from the adoption
of FAS 109, resulting in a one-time after-tax benefit of $0.9
million, or $.03 per share.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------ -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS.
-----------------------------------
Certain information required hereunder is incorporated by reference
from the Company's 1997-98 Annual Report to Shareholders, pages 6, 9,
10, 13-20 and 22, attached as Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------ -------------------------------------------
The report of Coopers & Lybrand L.L.P. dated April 29, 1998, the
Consolidated Statements of Earnings, and the related Consolidated
Balance Sheets, Cash Flows, Shareholders' Investment, and Notes to
Consolidated Financial Statements, appearing on pages 19, 21, 23, 24,
and 25-33 of the Company's 1997-98 Annual Report to Shareholders are
incorporated herein by reference. With the exception of the
aforementioned information, no other data appearing in the 1997-98
Annual Report to Shareholders is deemed to be filed as part of this
Annual Report on Form 10-K. Individual financial statements of the
Registrant are omitted because the Registrant is primarily an
operating company, and the subsidiaries included in the
consolidated financial statements are wholly-owned.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ------ ------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE.
-----------------------------------
There were no disagreements on accounting or financial
disclosures between the Company and its auditors.
PART III
--------
ITEMS 10 and 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE
- --------------- ---------------------------------------
REGISTRANT; EXECUTIVE COMPENSATION.
----------------------------------
The information about directors and executive officers and
executive compensation on pages 2 - 4 and pages 8, 9, 12, and 13,
of the Company's definitive Proxy Statement dated June 5, 1998
under the headings "Election of Directors", "Nominees to be
Elected," "Directors Continuing in Service," and "Executive
Compensation" attached to this report is incorporated herein by
reference, but excluding the Officer Nomination and Compensation
Committee Report on Executive Compensation and the Performance
Graph on pages 9 - 11.
Executive Officers of Registrant
Officer
Name Age Position Since
- ---- --- -------- -------
R. T. Savage* 59 Chairman 1981
D. R. Johnson* 56 President and Chief Executive
Officer 1988
D. B. Rayburn* 50 Executive Vice President, Original
Equipment 1991
W. E. Pavlick 64 Senior Vice President, General
Counsel and Secretary 1979
M. G. Baker 58 Group Vice President, Distributed 1987
Products
V. S. 62 Group Vice President, Off-Highway
Frangopoulos Products 1981
L. D. Howard 54 Group Vice President, Europe 1991
A. C. DeVuono 49 Vice President, Technical Services 1996
R. L. Hetrick 56 Vice President, Human Resources 1989
R. W. Possehl 53 Vice President, Administration 1985
A. D. Reid 56 Vice President, Finance and Chief
Financial Officer 1985
R. S. Bullmore 48 Corporate Controller 1983
G. A. Fahl 43 Environmental Compliance Officer 1998
D. R. Zakos 44 Associate General Counsel and
Assistant Secretary 1985
* Prior to March 31 and April 1, 1998: R. T. Savage was
Chairman, President and Chief Executive Officer (now retired);
D. R. Johnson was President and Chief Operating Officer; and
D. B. Rayburn was Group Vice President, Highway Products.
<PAGE>
There are no family relationships among the executive officers
and directors. All of the above officers have been employed by
Modine in various capacities during the last five years, except
A. C. DeVuono. Mr. DeVuono joined Modine on March 4, 1996, as
Director, Technical Services. He was promoted to Vice President
Technical Services in October, 1996. Before joining Modine, he was
a staff scientist at the Lawrence Berkeley National Laboratory of
the University of California. Prior to that, he spent 10 years
with Battelle Memorial Institute in Columbus, Ohio, as a principal
research scientist, and also has previous affiliations with the
teaching faculties of Ohio State University and the University of
Illinois. There are no arrangements or understandings between any of
the above officers and any other person pursuant to which he was
elected an officer of Modine. Officers are elected annually at the
first meeting of the Board of Directors after the Annual Meeting of
Shareholders. Mr. Johnson has an employment agreement with the
Company.
As of February 26, 1997, the Company entered into change-in-
control agreements (the "Change-in-Control Agreements") with
the executive officers and with other key employees (except
with Mr. Johnson). The Change-in-Control Agreements provide
a severance payment to the executive if the Company terminates
the executive's employment or the executive voluntarily
terminates the executive's employment within ninety days after
a "Pre-Condition" has occurred (as that term is defined in the
Change-in-Control Agreements). Each executive officer (except
Mr. Johnson) is eligible to receive twenty-four months' annual
base compensation and a bonus amount as defined in the Change-in-
Control Agreements, plus applicable benefits and credited service
for pension purposes for the twenty-four month period.
The Company's stock option and stock award plans contain certain
provisions relating to change-in-control or other specified
transactions that may, if authorized by the Officer Nomination
and Compensation Committee of the board, accelerate or otherwise
release shares granted or awarded under those plans.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
- ------- ---------------------------------------------------
MANAGEMENT.
----------
The information relating to stock ownership on pages 4 - 6 of the
Company's definitive Proxy Statement dated June 5, 1998 under the
headings "Principal Shareholders and Share Ownership of Directors
and Executive Officers, "Principal Shareholders," and "Securities
Owned by Management" attached to this report is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- ------- ----------------------------------------------
The information required by this item is incorporated by
reference from the Company's definitive Proxy Statement dated
June 5, 1998 on page 15 under the heading "Transactions" attached
to this Report.
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
- ------- ----------------------------------------------------
ON FORM 8-K.
-----------
(a) The following documents are filed as part of this Report:
Page in
Annual Report*
-------------
(1) Financial Statements:
Consolidated Statements of Earnings for the
years ended March 31, 1998, 1997, and 1996 19
Consolidated Balance Sheets at March 31, 1998
and 1997 21
Consolidated Statements of Cash Flows for the
years ended March 31, 1998, 1997, and 1996 23
Consolidated Statements of Shareholders' Investment
for the years ended March 31, 1998, 1997, and 1996 24
Notes to Consolidated Financial Statements 25 - 33
Independent Auditors' Report 33
* Incorporated by reference from the indicated pages
of the 1997-98 Annual Report to Shareholders
Page in
Form 10-K
---------
(2) Financial Statement Schedules:
Report of Independent Accountants on Financial
Statement Schedules for the three years ended
March 31, 1998 30
Schedule II - Valuation and Qualifying Accounts for
the years ended March 31, 1998, 1997 and 1996 122
(3) Consent of Independent Accountants 103
(4) Exhibit Index 20
(b) All other schedules have been omitted as they are not applicable,
not required, or because the required information is included in the
financial statements.
The following exhibits are attached for information only unless
specifically incorporated by reference in this Report:
<PAGE>
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
2 Not applicable.
3(a) Restated Articles of Incorporation (as
amended) (filed by reference to the
Registrant's Annual Report on Form 10-K
for the fiscal year ended March 31, 1994).
*3(b) Restated By-Laws (as amended). 31
*4(a) Specimen Uniform Denomination Stock
Certificate of the Registrant. 43
4(b) 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, 1997).
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).
4(b)(iii) Rights Agreement Amendment No. 3 dated as of
October 15, 1996, between the Registrant and
First Chicago Trust Company of New York (Rights
Agent) (filed by reference to the exhibit
contained within the Registrant's Quarterly
Report on Form 10-Q dated December 26, 1996).
4(b)(iv) Rights Agreement Amendment No. 4 dated as of
November 10, 1997 between the Registrant and
Norwest Bank Minnesota, N.A. (Rights Agent)
filed by reference to the exhibit contained
within the Registrant's Quarterly Report on
Form 10-Q dated December 26, 1997.
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
<PAGE>
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
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.
9 Not applicable.
10(a) Director Emeritus Retirement Plan (effective
April 1,1992) (filed by reference to the
Registrant's Annual Report on Form 10-K
for the fiscal year ended March 31, 1997).
*10(b) Retirement Agreement between the Registrant
and R. T. Savage. 48
10(c) Employment Agreement between the Registrant
and D. R. Johnson (filed by reference to the
Registrant's Quarterly Report on Form 10-Q
dated November 1, 1996).
10(d) 1985 Incentive Stock Plan (as amended)
(filed by reference to the Registrant's
Annual Report on Form 10-K for the fiscal
year ended March 31, 1997).
10(e) 1985 Stock Option Plan for Non-Employee
Directors (as amended) (filed by reference
to the Registrant's Annual Report on Form
10-K for the fiscal year ended March 31, 1994).
10(f) Pension and Disability Plan For Salaried
Employees of Modine Manufacturing Company
(as amended) (filed by reference to the
Registrant's Annual Report on Form 10-K
for the fiscal year ended March 31, 1994).
10(g) Executive Supplemental Retirement Plan (as
amended) (filed by reference to the
Registrant's Annual Report on Form 10-K
for the fiscal year ended March 31, 1995).
10(h) Modine Manufacturing Company Executive
Supplemental Stock Plan (as amended) (filed
by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year
ended March 31, 1994).
10(i) Director Emeritus Agreement between the
Registrant and Bernard H. Regenburg (filed
by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year
ended March 31, 1997).
<PAGE>
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
*10(j) 1993 Stock Award Plan [a part of the 1985
Incentive Stock Plan]. 53
10(k) 1994 Stock Award Plan [a part of the 1985
Incentive Stock Plan].
Note: The 1994 Plan is not materially
----
different from the 1993 Stock Award Plan
filed herewith.
10(l) 1994 Incentive Compensation Plan (as
amended) (filed by reference to the
Registrant's Annual Report on Form 10-K
for the fiscal year ended March 31, 1997).
10(m) 1994 Stock Option Plan for Non-Employee
Directors (as amended) (filed by reference
to the Registrant's Annual Report on Form
10-K for the fiscal year ended March 31,
1997).
10(n) 1995 Stock Award Plan [a part of the 1994
Incentive Compensation Plan] (filed by
reference to the exhibit contained within
the Registrant's Annual Report on Form 10-K
for the fiscal year 1995).
10(o) 1995 Stock Option Agreements (incentive and
non-qualified) [a part of the 1994 Incentive
Compensation Plan] (filed by reference to the
exhibit contained within the Registrant's
Annual Report on Form 10-K for the fiscal year
1995).
10(p) 1995 Stock Option Agreement [a part of the
1994 Stock Option Plan for Non-Employee
Directors] (filed by reference to the exhibit
contained within the Registrant's Annual
Report on Form 10-K for the fiscal year 1995).
10(q) 1996 Stock Award Plan [a part of the 1994
Incentive Compensation Plan] (filed by
reference to the exhibit contained within
the Registrant's Annual Report on Form 10-K
for the fiscal year 1996).
10(r) 1996 Stock Option Agreements (incentive and
non-qualified) [a part of the 1994 Incentive
Compensation Plan] (filed by reference to the
exhibit contained within the Registrant's
Annual Report on Form 10-K for the fiscal
year 1996).
<PAGE>
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
10(s) 1996 Stock Option Agreement [a part of
the 1994 Stock Option Plan for Non-Employee
Directors].
Note: The 1996 Stock Option Agreement
----
is not materially different from the 1995
Non-Employee Directors Stock Option
Agreement filed with the Registrant's
Annual Report on Form 10-K for the fiscal
year 1995.
10(t) 1997 Stock Award Plan [a part of the 1994
Incentive Compensation Plan].
Note: The 1997 Stock Award Plan is not
----
materially different from the 1996 Stock
Award Plan filed with the Registrant's
Annual Report on Form 10-K for the fiscal
year 1996.
10(u) 1997 Stock Option Agreements (incentive
and non-qualified) [a part of the 1994
Incentive Compensation Plan].
Note: The 1997 Stock Option Agreements are
----
not materially different from the 1996 Stock
Option Agreements filed with the Registrant's
Annual Report on Form 10-K for the fiscal
year 1996.
10(v) 1997 Stock Option Agreement [a part of the
1994 Stock Option Plan for Non-Employee
Directors].
Note: The 1997 Stock Option Agreement is not
----
materially different from the 1995 Non-Employee
Directors Stock Option Agreement filed with
the Registrant's Annual Report or Form 10-K
for the fiscal year 1995.
10(w) 1998 Stock Award Plan [a part of the 1994
Incentive Compensation Plan].
Note: The 1998 Stock Award Plan is not
----
materially different from the 1996 Stock
Award Plan filed with the Registrant's
Annual Report on Form 10-K for fiscal
year 1996.
<PAGE>
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
10(x) 1998 Stock Option Agreements (incentive
and non-qualified) [a part of the 1994
Incentive Compensation Plan].
Note: The 1998 Stock Option Agreements
----
are not materially different from the
1996 Stock Option Agreements filed with
the Registrant's Annual Report on Form
10-K for the fiscal year 1996.
10(y) 1998 Stock Option Agreement [a part of
the 1994 Stock Option Plan for Non-
Employee Directors].
Note: The 1998 Stock Option Agreement is
----
not materially different from the 1995 Non-
Employee Directors Stock Option Agreement
filed with the Registrant's Annual Report
on Form 10-K for the fiscal year 1995.
11 Not applicable.
12 Not applicable.
*13 1997-98 Annual Report to Shareholders.
Except for the portions of the Report
expressly incorporated by reference,
the Report is furnished solely for the
information of the Commission and is
not deemed "filed" as a part hereof. 59
16 Not applicable.
18 Not applicable.
*21 List of subsidiaries of the Registrant. 101
22 Not applicable.
*23 Consent of independent accountants. 103
24 Not applicable.
*27 Financial Data Schedules -- Fiscal 1998,
1997, 1996; 1st Qtr. - Fiscal 1997;
2nd Qtr. - Fiscal 1997; 3rd Qtr. - Fiscal
1997; 1st Qtr. - Fiscal 1998; 2nd Qtr. -
Fiscal 1998; and 3rd Qtr. - 1998
(electronic transmission only).
28 Not applicable.
<PAGE>
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
*99 Definitive Proxy Statement of the Registrant
dated June 5, 1998. Except for the portions
of the Proxy Statement expressly incorporated
by reference, the Proxy Statement is furnished
solely for the information of the Commission
and is not deemed "filed" as a part hereof. 104
None Appendix (filed pursuant to Item 304 of
Regulation S-T). 123
Note: All Exhibits filed herewith are current
----
to the end of the reporting period of the
Form 10-K (unless otherwise noted).
* Filed herewith.
Current Reports on Form 8-K:
- ---------------------------
A Current Report on Form 8-K, dated June 5, 1998, was filed by
the Company. This report, filed in connection with the Company's
mailing of its Annual Report to Shareholders and its sales
forecast for the upcoming year contained therein, includes as
exhibits (1) the news release containing the sales forecast and
(2) a statement of the important factors and assumptions
regarding forward-looking statements.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Date: June 17, 1998 By: D. R. JOHNSON
----------------------------------
D. R. Johnson, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities indicated.
R. T. SAVAGE June 17, 1998
- ------------------------------------ -------------
R. T. Savage, Chairman and Director Date
D. R. JOHNSON June 17, 1998
- ------------------------------------ -------------
D. R. Johnson, President and Date
Chief Executive Officer and Director
A. D. REID June 17, 1998
- ------------------------------------ -------------
A. D. Reid, Vice President, Finance Date
and Chief Financial Officer
W. E. PAVLICK June 17, 1998
- ------------------------------------ -------------
W. E. Pavlick, Senior Vice President, Date
General Counsel and Secretary
R. J. DOYLE June 17, 1998
- ------------------------------------ -------------
R. J. Doyle, Director Date
T. J. GUENDEL June 17, 1998
- ------------------------------------ -------------
T. J. Guendel, Director Date
F. W. JONES June 17, 1998
- ------------------------------------ -------------
F. W. Jones, Director Date
D. J. KUESTER June 17, 1998
- ------------------------------------ -------------
D. J. Kuester, Director Date
V. L. MARTIN June 17, 1998
- ------------------------------------ -------------
V. L. Martin, Director Date
<PAGE>
G. L. NEALE June 17, 1998
- ------------------------------------ -------------
G. L. Neale, Director Date
S. W. TISDALE June 17, 1998
- ------------------------------------ -------------
S. W. Tisdale, Director Date
M. T. YONKER June 17, 1998
- ------------------------------------ -------------
M. T. Yonker, Director Date
<PAGE>
Coopers
& Lybrand L.L.P.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Modine Manufacturing Company
Our report on the consolidated financial statements of Modine
Manufacturing Company and Subsidiaries has been incorporated by
reference in this Form 10-K from the 1998 annual report to
shareholders of Modine Manufacturing Company and Subsidiaries on
page 33 therein. In connection with our audits of such financial
statements, we have also audited the related financial statement
schedule listed in the index on page 20 of this Form 10-K.
In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
April 29, 1998
<PAGE>
EXHIBIT 3(b)
RESTATED
BY-LAWS
OF
MODINE MANUFACTURING COMPANY
(as adopted July 17, 1969)
(as amended September 17, 1970)
(as amended September 16, 1971)
(as amended May 4, 1972)
(as amended March 20, 1974)
(as amended September 18, 1974)
(as amended May 19, 1976)
(as amended July 21, 1976)
(as amended May 18, 1977)
(as amended July 20, 1977)
(as amended October 18, 1978)
(as amended May 16, 1979)
(as amended July 18, 1979)
(as amended October 17, 1979)
(as amended October 15, 1980)
(as amended May 1, 1981)
(as amended May 5, 1982 to be effective July 21, 1982)
(as amended August 17, 1982)
(as amended February 18, 1987)
(as amended March 18, 1987)
(as amended July 15, 1987)
(as amended February 15, 1989)
(as amended May 19, 1993)
(as amended October 20, 1993)
(as amended November 17, 1993)
(as amended March 16, 1994 to be effective July 20, 1994)
(as amended May 17, 1995 to be effective July 19, 1995)
(as amended October 16, 1996 to be effective
October 16, 1996)
(as amended December 17, 1997)
(as amended March 18, 1998 to be effective July 15, 1998)
ARTICLE I. STOCKHOLDERS
------------------------
1.01. Annual Meeting. The annual meeting of
--------------
stockholders of the Company shall be held each year at such time
and place, either within or without the State of Wisconsin, as
shall be determined by the Board of Directors at a meeting prior
to the date otherwise provided herein for such stockholders'
meeting; in the absence or failure of the Board to designate a
time and place, then at the principal office of the Company in
Racine, Wisconsin, on the third Wednesday in July, at 9:30
o'clock A.M., for the purpose of election of directors and for
the transaction of such other business as may properly come
before the meeting.
1.02. Special Meetings. Special meetings of the
----------------
stockholders may be called by the Chairman of the Board or the
<PAGE>
President and shall be called by the President, or Secretary at
the request in writing of a majority of the Board of Directors,
or at the request of stockholders owning Ten Percent (10%) or
more in amount of the entire capital stock of the Company issued
and outstanding and entitled to vote. Such request shall state
the purpose or purposes of the proposed meeting. Business
transacted at all special meetings shall be confined to the
purposes stated in the notice of meeting.
1.03. Notice of Meetings. The Company shall notify
------------------
each shareholder who is entitled to vote at the meeting, and any
other shareholder entitled to notice under ch. 180, of the date,
time, and place of each annual or special shareholders' meeting.
In the case of special meetings, the notice shall also state the
meeting's purpose. Unless otherwise required by ch. 180, the
meeting notice shall be given at least five (5) days before the
meeting date. Notice may be given orally or communicated in
person, by telephone, telegraph, teletype, facsimile, other form
of wire or wireless communication, private carrier, or in any
other manner provided by ch. 180. Written notice, if mailed, is
effective when mailed; and such notice may be addressed to the
shareholder's address shown in the Company's current record of
shareholders. Written notice provided in any other manner is
effective when received. Oral notice is effective when
communicated.
1.04. Quorum. A quorum at any meeting of the
------
stockholders shall consist of a majority of the voting stock of
the Company represented in person or by proxy. Unless otherwise
provided in the Articles of Incorporation, by these by-laws, or
by the Wisconsin Business Corporation Law, a majority of such
quorum shall decide any questions that may come before the
meeting. Though less than a quorum of the outstanding shares are
represented at a meeting, a majority of the shares so represented
may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
1.05. Order of Business. The order and conduct of
-----------------
business and matters of procedure at any meeting of stockholders
shall be determined by the Chairman.
1.06. List of Stockholders. The officer or agent
--------------------
having charge of the stock transfer books for shares of the
Company shall, before each meeting of stockholders, make a
complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, with the address of and the
number of shares held by each, which list shall be produced and
kept open at the time and place of the meeting and shall be
subject to the inspection of any stockholder during the whole
time of the meeting for the purposes of the meeting. The
original stock transfer books shall be prima facie evidence as to
the stockholders entitled to examine such list or transfer books
or to vote at any meeting of stockholders.
<PAGE>
1.07. Inspectors of Election. Two inspectors of
----------------------
election shall be appointed by the Board of Directors at or
before each stockholders' meeting at which an election of
directors shall take place; if no such appointment shall have
been made, or if the inspectors appointed by the Board shall
refuse to act, or fail to attend, then the appointment shall be
made by the Chairman at the meeting. The inspectors shall
receive and take in charge all proxies and ballots, and shall
decide all questions touching upon the qualification of voters,
and validity of proxies and the acceptance and rejection of
votes. In case of a tie vote by the inspectors on any questions,
the Chairman shall decide.
1.08. Voting of Shares. Each outstanding share shall
----------------
be entitled to one vote upon each matter submitted to a vote at a
meeting of stockholders, except to the extent that the voting
rights of the shares of any class or classes are enlarged,
limited or denied by the Wisconsin Business Corporation Law, the
Articles of Incorporation, or the resolution of the Board of
Directors creating such series of any class.
1.09. Proxies. At all meetings of stockholders, a
-------
stockholder entitled to vote may vote in person or by proxy
appointed in writing by the stockholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary
of the Company before or at the time of meeting. Unless
otherwise provided in the proxy, a proxy may be revoked at any
time before it is voted either by written notice filed with the
Secretary or the acting secretary of the meeting or by oral
notice given by the stockholder to the presiding officer during
the meeting. The presence of a stockholder who has filed his
proxy shall not of itself constitute a revocation. No proxy
shall be valid after eleven (11) months from the date of its
execution, unless otherwise provided in the proxy. The Board of
Directors shall have the power and authority to make rules
establishing presumptions as to the validity and sufficiency of
proxies.
ARTICLE II. DIRECTORS
----------------------
2.01. Number, Classification and Terms of Directors.
---------------------------------------------
The number of directors shall be nine. Directors need not be
stockholders.
The Board of Directors shall be divided into three
classes: each class consisting of three directors. The term of
office of a director shall be three years. The classes of
directors shall be staggered so that each expires in succeeding
years. At each annual meeting of stockholders, the number of
directors equal to the number of the class whose terms expire at
the time of such meeting shall be elected to hold office until
the third succeeding annual meeting and until their successors
shall have been elected.
<PAGE>
2.02. Annual Directors' Meetings. Annual meeting of
--------------------------
the Board of Directors shall be held immediately following the
annual meeting of stockholders. No notice of the annual meeting
of the Board of Directors shall be required.
2.03. Special Directors' Meetings. Special meetings
---------------------------
of the Board of Directors may be called by the Chairman of the
Board, the President, or Secretary on twenty-four (24) hours'
notice to each director.
2.04. Notice of Meetings; Waiver of Notice. Notice of
------------------------------------
each board of directors' meeting, except meetings pursuant to
Section 2.02 of these by-laws, shall be delivered to each
director at his or her business address or at such other address
as the director shall have designated in writing and filed with
the Secretary. Notice may be given orally or communicated in
person, by telephone, telegraph, teletype, facsimile, other form
of wire or wireless communication, private carrier, or in any
other manner provided by ch. 180. Written notice shall be deemed
given at the earlier of the time it is received or at the time it
is deposited with postage prepaid in the United States mail or
delivered to the private carrier. Oral notice is effective when
communicated. A director may waive notice required under this
section or by-law at any time, whether before or after the time
of the meeting. The waiver must be in writing, signed by the
director, and retained in the corporate record book. The
director's attendance at or participation in a meeting shall
constitute a waiver of notice of the meeting, unless the director
at the beginning of the meeting or promptly upon his or her
arrival objects to holding the meeting or transacting business at
the meeting and does not thereafter vote for or assent to action
taken at the meeting. Neither the business to be transacted at
nor the purpose of any regular or special board of directors
meeting need be specified in the notice or waiver of notice of
the meeting.
2.05. Regular Meetings. Regular meetings of the
----------------
directors may be held without notice at such place and times as
shall be determined from time to time by resolution of the Board
of Directors.
2.06. Quorum. A quorum at any meeting of the Board of
------
Directors shall consist of a majority of the entire membership of
the Board. Unless otherwise provided in the Articles of
Incorporation, these by-laws, or by law, a majority of such
quorum shall decide all questions that may come before the
meeting.
2.07. General Powers of Directors. The Board of
---------------------------
Directors shall manage the business and affairs of the Company
and subject to the restrictions imposed by law, by the Articles
of Incorporation, or by these by-laws, may exercise all the
powers, including specific powers, of the Company.
<PAGE>
2.08. Compensation of Directors. The Board of
-------------------------
Directors, by the affirmative vote of a majority of the directors
then in office, and irrespective of any personal interest of any
of its members, shall have authority to establish reasonable
compensation of all directors for services to the Company as
directors, officers or otherwise, or to delegate such authority
to an appropriate committee. The Board of Directors also shall
have authority to provide for or to delegate authority to an
appropriate committee to provide for reasonable pensions,
disability or death benefits, employee stock options, and other
benefits or payments, to directors, officers and employees and to
their estates, families, dependents or beneficiaries on account
of prior services rendered by such directors, officers and
employees to the Company.
2.09. Resignation and Removal for Cause. Any
---------------------------------
director, member of a committee or other officer may resign at
any time. Such resignation shall be made in writing, and shall
take effect at the time specified therein, and if no time be
specified, at the time of its receipt by the Chairman or
Secretary. The acceptance of a resignation shall not be
necessary to make it effective.
A director may be removed from office during the term
of such office but only upon a showing of good cause, such
removal to be by affirmative vote of a majority of the
outstanding shares entitled to vote for the election of such
director and which removal may only be taken at a special meeting
of stockholders called for that purpose.
A special meeting of the stockholders as herein
referred to may only be held after a hearing on the matter of
cause claimed to exist has been held by the full Board of
Directors of the Company at which hearing the director or
directors proposed for removal shall be given an adequate
opportunity for preparation and attendance in person (together
with representation by counsel); provided, however, that such
hearing shall be held only after written notice has been given to
said director or directors proposed for removal specifying the
matters of cause claimed to exist. The conclusions of said
hearing shall be reported by the Board of Directors in writing
accompanying the notice of the special stockholders' meeting sent
to each stockholder eligible to vote at said special meeting.
2.10. Increase or Decrease of Number of Directors.
-------------------------------------------
Increase or decrease of the number of directors and
classification of such directors, may only be made by amendment
of these by-laws at a regular or special meeting called for that
purpose, and a vacancy created by an increase in the number of
directors may be filled at such meeting.
2.11. Filling of Vacancies. If the office of any
--------------------
director, member of a committee or other officer becomes vacant
for any reason, including vacancies on the Board of Directors due
to removal for cause, the remaining directors in office, by a
<PAGE>
majority vote, may appoint any qualified person to fill such
vacancy, who shall hold office for the unexpired term and until
his successor shall be duly chosen.
2.12. Informal Action by Directors. Any action
----------------------------
required or permitted by the Articles of Incorporation, these by-
laws or other provision of law, which might be taken at a
meeting of the Board of Directors or of a lawfully constituted
committee thereof, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by
all the directors, or by all of the members of such committee, as
the case may be.
2.13. Retirement. Each Director shall be retired at
----------
the close of the term in which he attains the age of seventy (70)
years except that this provision shall not apply to any Director
who has been exempted from this provision by a resolution passed
by a two-thirds vote of the Board of Directors. Upon such
retirement a Director may take the status of a Director Emeritus.
A Director Emeritus shall receive the notice of meetings of
Directors, shall be invited to and welcome at all meetings of the
Board and of the stockholders, and shall receive such
compensation and such reimbursement for reasonable expenses, if
any, for attendance at meetings as the Board of Directors shall
determine, provided, however, that such compensation shall not
exceed that received by a Director. A Director Emeritus shall
attend the meetings of the Board in a consultive capacity but
shall not be entitled to vote or have any duties or powers of a
Director of the Company.
2.14. Committees. The Board of Directors may by
----------
resolution or resolutions, adopted by a majority of the total
number of directors, designate one or more committees, each such
committee to consist of three or more directors elected by the
Board of Directors which, to the extent provided in said
resolution or resolutions, shall have and may exercise the powers
of the Board of Directors in the management of the business and
affairs of the corporation. Such committees shall have such
names as may be determined from time to time by resolution
adopted by the Board of Directors. A majority of the members of
any such committee may determine its action unless the Board of
Directors shall otherwise provide. The Board of Directors shall
have power at any time to fill vacancies in, to change the
membership of, or to dissolve any such committee. The Board of
Directors may elect one or more of its members as alternate
members of any committee who may take the place of any absent
member or members at any meeting of such committee.
ARTICLE III. OFFICERS
----------------------
3.01. Number. The principal officers of the Company
------
shall be a Chairman of the Board of Directors, a President, such
number of Vice Presidents as the Board of Directors shall elect,
a Secretary, and a Treasurer, each of whom shall be elected by
<PAGE>
the Board of Directors. Such other officers and assistant
officers as may be deemed necessary may be elected or appointed
by the Board of Directors. Any two or more offices may be held
by the same person, except the offices of President and Secretary
and the offices of President and Vice President.
3.02. Election and Term of Office. The officers of
---------------------------
the Company to be elected by the Board of Directors shall be
elected annually by the Board of Directors at the first meeting
of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office at the
pleasure of the Board of Directors or until his successor shall
have been duly elected or until his prior death, resignation or
removal.
3.03. Removal. Any officer or agent may be removed by
-------
the Board of Directors whenever in its judgment the best
interests of the Company will be served thereby, but such removal
shall be without prejudice to the rights provided by written
contract, if any, of the person so removed. Election or
appointment shall not of itself create contract rights.
3.04. Vacancies. A vacancy in any principal office
---------
because of death, resignation, removal, disqualification or
otherwise, shall be filled by the Board of Directors for the
unexpired portion of the term.
3.05. Chairman of the Board. The Chairman of the
---------------------
Board of Directors shall preside at all meetings of stockholders
and directors. In his absence, the Vice Chairman of the Board,
if there be one, otherwise the President, shall preside.
3.06. President. The President shall be the Chief
---------
Executive Officer of the Company, and subject to the control of the
Board of Directors, shall in general supervise and control all of
the business and affairs of the Company. He shall have authority,
subject to such rules as may be prescribed by the Board of Directors,
to appoint such agents and employees of the Company as he shall deem
necessary, to prescribe their powers, duties and compensation, and
to delegate authority to them. Such agents and employees shall hold
office at the discretion of the President. He shall have authority
to sign, execute and acknowledge, on behalf of the Company, all
deeds, mortgages, bonds, stock certificates, contracts, leases,
reports and all other documents or instruments necessary or proper
to be executed in the course of the Company's regular business, or
which shall be authorized by resolution of the Board of Directors;
and except as otherwise provided by law or the Board of Directors,
he may authorize any Vice President or other officer or agent of the
Company to sign, execute and acknowledge such documents or instruments
in his place and stead. In general he shall perform all duties
incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
<PAGE>
3.07. The Vice President. In the absence of the
------------------
President or in the event of his death, inability or refusal to
act, or in the event for any reason it shall be impracticable for
the President to act personally, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents
in the order designated by the Board of Directors, or in the
absence of any designation, then in the order of their election)
shall perform the duties of the President, and when so acting,
shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may sign,
with the Secretary or Assistant Secretary, certificates for
shares of the Company; and shall perform such other duties and
have such authority as from time to time may be delegated or
assigned to him by the Chairman, President or by the Board of
Directors. The execution of any instrument of the Company by any
Vice President shall be conclusive evidence, as to third parties,
of his authority to act in the stead of the President.
3.08. The Secretary. The Secretary shall: (a) keep
-------------
the minutes of the meetings of the stockholders and of the Board
of Directors in one or more books provided for that purpose; (b)
see that all notices are duly given in accordance with the
provisions of these by-laws or as required by law; (c) be
custodian of the corporate records and of the seal of the Company
and see that the seal of the Company is affixed to all documents
the execution of which on behalf of the Company under its seal is
duly authorized; (d) sign with the Chairman, President or a Vice
President, certificates for shares of the Company, the issuance
of which shall have been authorized by resolution of the Board of
Directors; and (e) in general perform all duties incident to the
office of Secretary as provided by the Wisconsin Business
Corporation Law and have such other duties and exercise such
authority as from time to time may be delegated or assigned to
him by the Chairman, President or by the Board of Directors.
3.09. The Treasurer. The Treasurer shall: (a) have
-------------
charge and custody of and be responsible for all funds and
securities of the Company; (b) receive and give receipts for
moneys due and payable to the Company from any source whatsoever,
and deposit all such moneys in the name of the Company in such
banks, trust companies or other depositaries as shall be selected
in accordance with the provisions of Section 6.07; and (c) in
general perform all of the duties incident to the office of
Treasurer and have such other duties and exercise such other
authority as from time to time may be delegated or assigned to
him by the Chairman, President or by the Board of Directors.
3.10. Assistant Secretaries and Assistant Treasurers.
----------------------------------------------
There shall be such number of Assistant Secretaries and Assistant
Treasurers as the Board of Directors may from time to time
authorize and designate. The Assistant Secretaries and Assistant
Treasurers, in general, shall perform such duties and have such
authority as shall from time to time be delegated or assigned to
them by the Secretary or the Treasurer, respectively, or by the
Chairman, President or the Board of Directors.
<PAGE>
3.11. Other Assistants and Acting Officers. The Board
------------------------------------
of Directors shall have the power to appoint any person to act as
assistant to any officer, or as agent for the Company in his
stead, or to perform the duties of such officer whenever for any
reason it is impracticable for such officer to act personally,
and such assistant or acting officer or other agent so appointed
by the Board of Directors shall have the power to perform all the
duties of the office to which he is so appointed to be assistant,
or as to which he is so appointed to act, except as such power
may be otherwise defined or restricted by the Board of Directors.
3.12. Salaries. The salaries of the principal officers
--------
shall be fixed from time to time by the Board of Directors or by a
duly authorized committee thereof, and no officer shall be prevented
from receiving such salary by reason of the fact that he is also a
director of the Company.
ARTICLE IV. INDEMNIFICATION BY THE COMPANY
-------------------------------------------
Any person made a party to or threatened with any civil,
criminal, administrative or investigative action, suit or proceeding
(other than an action by or in the right of the Company) by reason of
the fact that he, his testator or intestate, is or was a Director,
officer or employee of the Company or is or was serving at the request
of the Company as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
shall be indemnified by the Company against the reasonable expenses,
including attorneys' fees, judgments, fines, and amounts paid in
settlement, actually and necessarily incurred by him in connection
with such action, suit or proceeding, or in connection with any appeal
therein, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company,
and with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. Such right of indemnification
shall not be deemed exclusive of any other right to which such Director,
officer, employee or agent may otherwise be entitled.
ARTICLE V. CAPITAL STOCK
-------------------------
5.01 Certificates of Stock. Certificates of stock,
---------------------
numbered and with the seal of the Company affixed, signed by the
President, or a Vice President, and the Secretary or an Assistant
Secretary, shall be issued to each stockholder certifying the
number of shares owned by him in the Company. When such
certificates are countersigned by a transfer agent, or registered
by a registrar, the signatures of such officers may be
facsimiles. A facsimile or printed seal of the Company may be
affixed upon certificates of stock of the Company.
In case any officer who has signed, or whose facsimile
signature has been placed upon a certificate has ceased to be an
officer of the Company before such certificate has been issued,
such certificate may, nevertheless, be adopted and issued and
<PAGE>
delivered by the Company as though the officer who signed such
certificate or whose facsimile signature shall have been used
thereon, had not ceased to be such officer with the same effect
as if he were such office at the date of its issue.
5.02. Lost Certificates. A new certificate of stock
-----------------
may be issued in the place of any certificate theretofore issued
by the Company, alleged to have been lost or destroyed, and the
directors may, in their discretion, require the owner of the lost
or destroyed certificate, or his legal representative, to give the
Company a bond, in such sum as they may direct, not exceeding double
the value of the stock, to indemnify the Company against any claim
that may be made against it on account of the alleged loss of any
such certificate or the issuance of any such new certificate.
5.03. Transfer of Shares. Transfer of stock shall be
------------------
made only on the transfer books of the Company, kept at the
office of the Company or respective transfer agents designated to
transfer the stock, and before a new certificate is issued, the
old certificate shall be surrendered and cancelled.
5.04. Closing of Transfer Books. The Board of
-------------------------
Directors of the Company may provide that the stock transfer books
be closed for a period not to exceed, in any case, fifty (50) days
for the purpose of determining stockholders entitled to notice of
or to vote at any meeting of stockholders, or any adjournment
thereof, or entitled to receive payment of any dividend, or in
order to make a determination of stockholders for any other proper
purposes. If the stock transfer books shall be closed for the
purpose of determining stockholders entitled to notice of or to
vote at a meeting of stockholders, such books shall be closed for
at least ten (10) days immediately preceding such meeting. In lieu
of closing the stock transfer books, the Board of Directors may fix
in advance a date as the record date for any such determination of
stockholders, such date in any case to be not more than seventy
(70) days and, in case of a meeting of stockholders not less than
ten (10) days prior to the date on which the particular action,
requiring such determination of stockholders is to be taken. When
a determination of stockholder, entitled to vote at any meeting of
stockholders has been made as provided herein, such determination
shall be applied to any adjournment thereof except when the
determination has been made through the closing of the stock
transfer books and the stated period of closing has expired.
5.05. Dividends. The Board of Directors of the
---------
Company may, from time to time, declare and the Company may pay
dividends on its outstanding shares in cash, property, or its own
shares, as provided by law.
ARTICLE VI. MISCELLANEOUS
--------------------------
6.01. Corporate Seal. The corporate seal shall be a
--------------
round metallic disc, with the words "MODINE MANUFACTURING
<PAGE>
COMPANY, Wisconsin" around the circumference, and the words
"CORPORATE SEAL" in the center. If a facsimile or printed seal
is used on stock certificates, it shall be similar in content and
design to the above.
6.02. Fiscal Year. The fiscal year of the Company
-----------
shall begin on the first day of April in each year, and end on
the thirty-first day of March in the following year.
6.03. Contracts. The Board of Directors may authorize
---------
any officer or officers, agent or agents, to enter into any
contract or exercise or deliver any instrument in the name of and
on behalf of the Company, and such authorization may be general
or confined to specific instances. In the absence of other
designation, all deeds, mortgages, contracts, promissory notes,
and instruments of assignment or pledge made by the Company shall
be executed in the name of the Company by the Chairman, President
or one of the Vice Presidents and by the Secretary, an Assistant
Secretary, the Treasurer or an Assistant Treasurer; the Secretary
or an Assistant Secretary, when necessary or required, shall
affix the corporate seal thereto; and when so executed no other
party to such instrument or any third party shall be required to
make any inquiry into the authority of the signing officer or
officers.
6.04. Loans. No indebtedness for borrowed money shall
-----
be contracted on behalf of the Company and no evidence of such
indebtedness shall be issued in its name unless authorized by or
under the authority of a resolution of the Board of Directors.
Such authorization may be general or confined to specific instances.
6.05. Drafts, Checks, etc. All checks, drafts or
-------------------
other orders for the payment of money issued in the name of the
Company shall be signed by such employee or employees, agent or
agents, of the Company as are appointed by the Chairman or
President, and in such manner, including facsimile and printed
signatures, as may be designated by the Chairman or President.
In connection with the furnishing of authorizing resolution and
signature card forms needed by commercial banks, the corporate
Secretary, or any Assistant Secretary, is authorized to execute
and certify to such forms as he may deem appropriate as adopted
under the authority of this by-law and as binding upon the
Company in accordance therewith, thereby empowering employees or
agents appointed by the President to sign checks, drafts, or
other orders for the payment of money in the name of the Company.
6.06. Deposits. All funds of the Company not
--------
otherwise employed shall be deposited from time to time to the
credit of the Company in such banks, trust companies or other
depositaries as may be selected by or under the authority of the
Chairman or President. In connection with the furnishing of
authorizing resolution and signature card forms, needed by such
banks, trust companies or other depositaries, the corporate
Secretary, or any Assistant Secretary, is authorized to execute
<PAGE>
and certify to such forms as he may deem appropriate as adopted
under the authority of his by-law and as binding upon the Company
in accordance therewith, thereby designating such banks, trust
companies or other depositaries as may be selected by the
Chairman or President, for the deposit of Company funds.
6.07. Voting of Securities Owned by this Company.
------------------------------------------
Subject always to the specific directions of the Board of
Directors, (a) any shares or other securities issued by any other
corporation and owned or controlled by this Company may be voted
at any meeting of security holders of such other corporation by
the Chairman of this Company if he be present, or in his absence
by the President or any Vice President of this Company who may be
present, and (b) whenever, in the judgment of the Chairman, or in
his absence, of the President or any Vice President, it is
desirable for this Company to execute a proxy or written consent
in respect to any shares for other securities issued by any other
corporation and owned by this Company, such proxy or consent
shall be executed in the name of this Company by the Chairman,
President or one of the Vice Presidents of this Company, without
necessity of any authorization by the Board of Directors,
affixation of corporate seal or countersignature or attestation
by another officer. Any person or persons designated in the
manner above stated as the proxy or proxies of this Company shall
have full right, power and authority to vote the shares or other
securities issued by such other corporation and owned by this
Company the same as such shares or other securities might be
voted by this Company.
ARTICLE VII. AMENDMENTS
------------------------
These by-laws may be amended, repealed or altered in
whole or in part by the affirmative vote of not less than two-
third (2/3) of the shares of the Company entitled to vote
thereon, or by the affirmative vote of not less than two-thirds
(2/3) of the full Board of Directors of the Company, at any
regular meeting of the stockholders or of the Board of Directors,
or any special meeting of the stockholders or Bard of Directors,
provided that such action has been specified in the notice of any
such meeting.
<PAGE>
EXHIBIT 4(a)
SPECIMEN STOCK CERTIFICATE
SIZE - 8 1/2 X 11
COLOR - GOLD
FRONT SIDE OF CERTIFICATE
PAR VALUE
$0.625 PER SHARE
Photograph of
ARTHUR B. MODINE
NUMBER SHARES
CAPITAL STOCK CAPITAL STOCK
INCORPORATED UNDER THE LAWS OF THE STATE OF WISCONSIN
THIS CERTIFICATE IS SEE REVERSE FOR
TRANSFERABLE IN CERTAIN DEFINITIONS
MINNEAPOLIS, MN
OR NEW YORK, NY
MODINE MANUFACTURING COMPANY
THIS CERTIFIES THAT CUSIP 607828 10 0
IS THE OWNER OF
FULLY-PAID AND NON-ASSESSABLE SHARES OF CAPITAL STOCK
of Modine Manufacturing Company, transferable on the books of
the company by the holder hereof in person or by duly
authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned by
the Transfer Agent and registered by the Registrar.
Witness the seal of the company and the signatures of its
duly authorized officers affixed.
DATED:
s/Walter E. Pavlick s/D. R. Johnson
Secretary President
Countersigned and Registered:
NORWEST BANK MINNESOTA, N.A.
Transfer Agent and Registrar
BY:
Authorized Officer
<PAGE>
BACK SIDE OF CERTIFICATE
DOWN LEFT MARGIN THE FOLLOWING LEGEND:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between Modine
Manufacturing Company and Norwest Bank Minnesota, N.A. dated as of
October 15, 1986 and as amended (the "Rights Agreement"), the terms
of which are hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of Modine
Manufacturing Company. Under certain circumstances, as set forth
in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate.
Modine Manufacturing Company will mail to the holder of this
certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. Under certain circumstances,
Rights beneficially owned by Acquiring Persons (as defined in the
Rights Agreement), whether currently held by or on behalf of such
person or by a subsequent holder, may become null and void.
End of Legend
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written
out in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and
not as tenants in common
UNIF GIFT MIN ACT - Custodian
-------------- ----------------
(Cust) (Minor)
Under Uniform Gifts to Minors
Act
-------------------------
(State)
Additional abbreviations may also be used though not in
the above list.
For value received, hereby sell, assign and transfer unto
------
Please insert Social Security or
Other Identifying Number of Assignee
/ /
/ /
- -----------------------------------------------------------
(Please print or typewrite name and address, including zip
code of assignee)
- -----------------------------------------------------------
- -----------------------------------------------------------
<PAGE>
shares
- -------------------------------------------------
of the capital stock represented by the within Certificate, and
do hereby irrevocably constitute and appoint
Attorney
- -------------------------------------------------
to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated
----------------
Affix Medallion Signature X
Guarantee Imprint Below ------------------------------
(Signature)
X
------------------------------
(Signature)
-------------------------------
ABOVE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE
OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE
WHATEVER.
THE SIGNATURE(S) MUST BE
GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION SUCH AS A
SECURITIES BROKER/DEALER,
COMMERCIAL BANK & TRUST COMPANY,
SAVINGS AND LOAN ASSOCIATION OR A
CREDIT UNION PARTICIPATING IN A
MEDALLION PROGRAM APPROVED BY THE
SECURITIES TRANSFER ASSOCIATION,
INC.
<PAGE>
EXHIBT 10(b)
AGREEMENT
This Agreement made this 21st day of January, 1998 by and
between Modine Manufacturing Company, a Wisconsin corporation,
having its principal place of business in Racine, Wisconsin
(hereinafter called "Modine and/or Company"), and Richard T.
Savage (hereinafter called "Employee").
WITNESSETH THAT
WHEREAS on December 1, 1997 Employee notified the Company
of his intention to retire by the submission of his resignation
as an Employee of the Company effective March 31, 1998, while
continuing as Chairman of the Board of Directors of the Company, and
WHEREAS the Officer Nomination and Compensation Committee of
the Company and Employee have agreed upon compensation payable to
Employee for all services rendered to the Company through the
effective date of resignation on March 31, 1998, and desire to
place in writing the details of such agreement.
NOW THEREFORE, for and in consideration of Ten Dollars ($10.00),
receipt of which is hereby acknowledged, and the mutual covenants
herein exchanged, the parties hereto agree as follows:
1. Employee's employment with the Company shall be deemed
to have terminated at the end of the business day on March 31, 1998,
the last day of the Company's 1997-1998 fiscal year.
2. Company shall pay and the Employee shall accept within
sixty (60) days of the close of the Company's 1997-1998 fiscal year,
a Management Incentive payment calculated in accordance with the
Company's Management Incentive Plan in effect for fiscal 1997-1998.
3. With respect to previous grants to Employee under the
Company's Stock Award Plans approved by the Board of Directors and
shareholders of the Company in 1985 and 1994, the Officer Nomination
and Compensation Committee hereby consents to the early retirement of
Employee, (the Board of Directors at its meeting on December 17, 1997
consented to Employee's Early Retirement) so that Employee's previously
granted Stock Awards will vest to Employee and be free of any further
restrictions as of March 31, 1998.
4. Employee agrees to sell and Company agrees to buy on April 1,
1998, at the fair market value at the close of business on March 31,
1998, 39,000 shares of Restricted Stock owned by Employee; provided,
however, should Employee decide on or before April 1, 1998 to receive
such shares in kind rather than cash, all restrictions shall terminate
and the Company shall deliver unrestricted shares in that amount to
Employee on April 1, 1998.
5. Employee may continue to exercise, at his discretion, stock
options granted to him under the 1985 Incentive Stock Plan and the
1994 Incentive Compensation Plan. Employee rights as to stock options
and exercises will be governed by the relevant provisions of the stock
option grant agreements.
<PAGE>
6. Employee shall not participate in options granted by
the Company in January of 1998.
7. Pursuant to the Modine Manufacturing Company Executive
Supplemental Stock Plan the Company shall pay and the Employee shall
accept a cash payment on April 1, 1998 equal to the fair market value
of the phantom shares held by Employee in the Executive Supplemental
Stock Plan on the close of business March 31, 1998.
8. With respect to the Employee's holdings in the Modine
Contributory Employee Stock Ownership and Investment Plan (the MCSPP
and the MTS), Employee shall withdraw his accumulated shares of Modine
stock held for his account on or before November 1, 1999.
9. While Employee's access to the Mayo Clinic for an annual
physical examination as an Employee will cease, Employee will continue
to have access to the Mayo Clinic for an annual physical so long as he
remains a Director with the expenses therefor reimbursed by the Company.
10. Employee as a retiree of the Company shall be entitled to
the Modine Retiree Health Plan currently in existence on the date of
retirement subject to such changes as may be made by the Company from
time to time to the Health Care Plan for all retirees.
11. Employee shall be entitled to Company paid legal services for
calendar 1998 with respect to the Employee and his spouse for estate
planning services.
12. Employee shall be entitled to the continuance of the current
financial planning arrangement with AYCO for the calendar year 1998 at
the expense of the Company.
13. Employee shall be entitled to income tax services by the
attorney and/or accountant of his choice for the 1998 taxable year at
the expense of the Company.
14. Employee hereby elects to receive a one-time lump sum payment
of the benefit due Employee as of the close of business March 31, 1998,
under the Company's Executive Supplemental Retirement Plan. Company
shall pay such lump sum benefit to Employee on April 1, 1998 pursuant
to Employee's election.
15. With respect to each of the payments being made by Company to
Employee hereunder, Company shall withhold federal and state income
taxes as follows: Federal - 20%; State - 6.93%.
16. The Employee agrees not to disclose, (either while in the
Company's employ or at any time thereafter, to any person not employed
by the Company, or not engaged to render services to the Company,
except with the prior written consent of an officer authorized to
act in the matter by the Board of Directors of the Company), any
confidential information obtained by him while in the employ of
the Company, including, without limitation, information relating
to any of the Company's inventions, processes, formulae, plans,
devices, compilations of information, methods of distribution,
customers, client relationships, marketing strategies or trade
secrets; provided, however, that this provision shall not preclude
the Employee from use or disclosure of information known generally
to the public or of information not considered confidential by
<PAGE>
persons engaged in the business conducted by the Company or any
disclosure required by law or Court order. The Agreement herein made
in this paragraph shall be in addition to, and not in limitation or
derogation of, any obligations otherwise imposed by law upon the
Employee in respect of confidential information and trade secrets
of the Company, its subsidiaries and affiliates.
17. Employee agrees that until April 1, 2001 or three (3) years
after conclusion of his service as a Director of the Company, whichever
is later, Employee will not, directly or indirectly, own, manage,
operate, participate, nor be employed by or otherwise be connected
in any manner with any firm, person, corporation or enterprise which
is competitive with the business of the Company. Ownership of less
than five (5%) percent of the stock of any publicly traded company
shall not be considered a violation of the preceding.
18. In the event of a violation of either paragraphs 15 or 16,
the Company shall be entitled, in addition to remedies otherwise
available, to obtain and enforce injunctive relief, both preliminary
and final, enjoining and restraining any such violation or threatened
or intended violation.
19. Employee and the Company acknowledge that this Agreement
supersedes and replaces any other agreement between them concerning
the subject matter hereof including, but not limited to, that certain
employment agreement entered into between Employee and the Company
dated January 1, 1984 and any and all rights thereunder.
20. This Agreement is made in the State of Wisconsin and
shall be interpreted under the laws of Wisconsin. The provisions
of this Agreement are severable and independent, and if any provision
of this Agreement is found to be illegal or unenforceable for any
reason, such provisions will immediately become null and void,
leaving the remainder of this Agreement in full force and effect.
21. This agreement will be binding upon and inure to the
benefit of the parties and their respective heirs, representatives,
successors, and assigns.
IN WITNESS WHEREOF the parties have hereto executed this
Agreement the day and year above written.
MODINE MANUFACTURING COMPANY
BY: G. L. NEALE
----------------------------------
ATTEST: G. L. Neale
Chairman of the Officer Nomination
and Compensation Committee
W. E. PAVLICK
- ------------------------
W. E. Pavlick, Secretary
R. T. SAVAGE
------------------------------------
Richard T. Savage
<PAGE>
RTS BENEFITS ON RETIREMENT
MIP (assuming 84% payout) - $101,010
Stock Awards Vesting - 39,000 shares
Approximate value of 1998 of Financial,
Estate Planning, Tax and Legal Services - $13,500
Vesting of Phantom Shares in Stock Serp Plan - 14,252 shares
Pension Plan Serp - approximately $1.75 million
R. T. SAVAGE
-----------------------------
R. T. Savage
G. L. NEALE
-----------------------------
G. L. Neale
<PAGE>
EXHIBIT 10(j)
STOCK AWARD PLAN
1. PURPOSES OF PLAN. The purposes of the Stock Award
Plan of Modine Manufacturing Company ("Modine") are as follows:
A. To further the growth, success and interest of the
Company and its stockholders by enabling key
managerial employees of the Company, who have
responsibility for the administration of the affairs
of the Company, to acquire shares of Modine Common
Stock under the terms and conditions and in the
manner contemplated by this Plan, thereby increasing
their personal involvement in the fortunes of the
Company; and
B. To enable the Company to obtain and retain the
services of desirable key managerial employees by
providing such employees with an opportunity to
become owners of Modine Common Stock under the terms
and conditions and in the manner contemplated by this
Plan.
The term "Company" as used herein shall mean Modine and its
majority owned subsidiaries, including subsidiaries which may
be created or acquired during the period of this Plan.
2. ADMINISTRATION OF PLAN. This Plan shall be
administered by the Stock Option Committee consisting of three
or more directors appointed by the Board of Directors of
Modine, none of whom shall be employees of the Company. The
<PAGE>
Committee shall interpret the Plan and to the extent and in the
manner contemplated herein it shall exercise the discretion
granted to it as to the determination of who shall participate
in the Plan, and how many shares shall be awarded to each
participant. The Committee shall issue from time to time such
rules and interpretations as in its judgment are necessary or
appropriate in order to effectively administer the Plan.
3. ELIGIBLE EMPLOYEES. Employees including officers of
the Company who the Committee determines have and exercise
management functions and responsibilities shall be eligible for
participation under the Plan. However, no member of the Board
of Directors of the Company shall be eligible to participate
under the Plan unless he is also an employee of the Company,
and no member of the Committee shall be eligible to participate
under the Plan.
4. SHARES SUBJECT TO PLAN. The Board of Directors and
the shareholders of the Company in 1985 approved a broad
Incentive Stock Plan providing for an aggregate of 1,250,000
shares of the Common Stock, $0.625 par value of Modine for
various plans adopted by the Board of Directors under such
authority. The 1985 Incentive Stock Plan permitted the use of
either authorized but heretofore unissued shares or shares
reacquired by the Company, including shares purchased on the
open market. Inasmuch as the shares of this Plan are awarded
to employees without cost, Wisconsin State law requires that
heretofore unissued shares may not be used but only those
shares reacquired by the Company. If shares issued pursuant
<PAGE>
hereto shall have been forfeited and returned to Modine in
connection with the restrictions imposed upon such shares
pursuant to this Plan, such forfeited shares again shall become
available for issuance under the Plan prior to termination of
the Plan.
5. RESTRICTIONS. All shares awarded pursuant to this
Plan shall be subject to the following restrictions:
(a) The shares may not be sold or otherwise alienated or
hypothecated as long as they are subject to
forfeiture provided in this Section 5.
(b) In the event of termination with the Company of a
participant prior to the beginning of the third year
after shares are awarded to him hereunder, if such
termination is for any reason other than normal
retirement, death, total disability or early
retirement with the consent of Modine's Board of
Directors or the Committee, the shares shall be
forfeited and returned to the Company; and if such
employment so terminates for any reason other than
those described above more than two (2) years after
but prior to the beginning of the seventh (7) year
after the granting of such stock awards, the shares
which are at the date of such termination of
employment still subject to the restrictions imposed
hereunder shall be forfeited and returned to the
Company.
<PAGE>
(c) In the event a participant who has been awarded
shares hereunder terminates his employment with the
Company because of normal retirement, death, total
disability or early retirement with the consent of
Modine's Board of Directors or of the Committee, the
shares so awarded shall not be subject to forfeit and
shall vest with the employee, or his designated legal
representative in the event of death.
(d) Except as otherwise provided above, the restrictions
imposed upon shares awarded to each participant
hereunder shall be removed as to one-fifth of the
aggregate number of shares awarded to him at one time
upon the expiration of each of the second, third,
fourth, fifth, and sixth years after his award of
such shares hereunder.
(e) In the event at any time the Company is dissolved or
is a party to a merger or consolidation in which the
Company is not the surviving corporation, the
restrictions provided in this Section 5 shall
automatically cease as of the effective date of such
dissolution, merger or consolidation, as the case may
be.
(f) Notwithstanding any other terms or conditions
contained in this Plan, the restrictions provided in
this Section 5 shall automatically cease in the event
of a voluntary or involuntary termination with the
Company of a participant for any reason within a two-
<PAGE>
year period after the occurrence of a Pre-Condition
described below in this subparagraph:
"Pre-Condition" means that a person (as defined in
Section 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934, as amended), or a corporation or other
entity controlled by the person, has
(i) merged or consolidated with the Company,
(ii) acquired substantially all of the assets
of the Company, or
(iii) acquired securities of the Company having
at least 20% of the combined voting power
of the Company's then outstanding
securities,
except in the case of a merger of another entity with
the Company where the Company is the surviving
corporation, the merger solely involved an
acquisition by the Company of another business entity
in which the Company issued its authorized but
unissued or treasury stock to stockholders of the
acquired entity, and over 80% of the combined voting
power of the Company's stock after the merger is
owned of record by stockholders of the Company prior
to the merger.
6. OTHER RESTRICTIONS. The Committee may impose such
other restrictions on any shares awarded pursuant to the Plan
as it may deem advisable, including, without limitation,
restrictions under the Securities Act of 1933 or the Securities
<PAGE>
Exchange Act of 1934, as amended, under the requirements of any
stock exchange or any over-the-counter securities trading
market upon which such share or shares of the same class are
then listed and under any blue sky or securities laws
applicable to such shares.
7. ESCROW OR LEGEND. In order to enforce the
restrictions imposed upon shares issued hereunder, the
Committee may require any participant to enter into an Escrow
Agreement providing that the certificates representing shares
issued pursuant to this Plan shall remain in the physical
custody of an escrow holder until any or all of the
restrictions imposed pursuant to this Plan have terminated and
the Committee may cause a legend or legends to be placed on any
certificates representing shares issued pursuant to this Plan,
which legend or legends shall make appropriate reference to the
restrictions imposed hereunder.
8. AMENDMENTS. This Plan may be amended at any time by
the Board of Directors of Modine, provided that no such
amendment shall increase the maximum number of shares that may
be issued pursuant to the Plan except pursuant to Section 4
hereunder without the further approval of the stockholders of
Modine.
9. TERMINATION. This Plan shall terminate and no further
shares shall be awarded or issued hereunder on January 16, 1995 or
such earlier date as may be determined by the Committee. The
termination of this Plan, however, shall not affect any restrictions
previously imposed on shares issued pursuant to this Plan.
<PAGE>
EXHIBIT 13
Management's discussion and analysis of operations
- --------------------------------------------------
Modine Manufacturing Company set records for both sales and
earnings in the fiscal year ended March 31, 1998.
The company achieved a 13.7-percent increase in earnings on a
4.1-percent growth in sales and passed the billion-dollar sales
milestone for the first time in the company's 82-year history.
Modine has been growing at an accelerated rate recently, adding
a half-billion of sales in just six years.
Excluding the impact of the change in exchange rates, worldwide
consolidated sales would have been up by 8.7 percent, more than double
the reported sales increase. About one-third of Modine's annual sales
are in other than U.S. currency, therefore the stronger dollar had a
negative translation effect of approximately $45.5 million on fiscal-
1998 consolidated sales, compared with the prior year.
U.S. export sales of $131.5 million were up 11.5 percent compared
with the year before. Reported sales from nondomestic operations rose
1.5 percent, despite being expressed in the stronger U.S. dollar. In
total, 43.5 percent of Modine's annual sales were outside the United
States, unchanged from the prior year.
The company's 1997-98 revenues from its top ten customers were
42.4 percent of total sales, compared with 40.7 percent in the prior
year. Modine's largest customer represented less than seven percent
of total revenues in both fiscal 1998 and 1997, reflecting the company's
sustained efforts to assemble a portfolio of diversified customers and
markets. Diversification helps to protect Modine from the cycles of any
one economy, industry, or company.
In January 1998, Modine acquired the business and assets of a
small but respected company that manufactures infrared heaters for
commercial, industrial, and residential buildings. The integration
of this acquisition with Modine's business is expected to
significantly increase the acquired operation's $2 million in
annualized sales in future years.
Fiscal-year sales by market
- ---------------------------
OEM passenger-car and light-truck market: In fiscal 1998, 23.6
percent of Modine's sales were to worldwide original-equipment
manufacturers (OEMs) in the passenger-car and light-truck market.
Nearly two-thirds of these sales were to customers outside the
United States.
Unit volumes in the OEM passenger-car and light-truck market
were up year-over-year. However, reported fiscal-year sales were
down 6.8 percent, due to currency-translation effects. Several new
programs, both in Europe and North America, should significantly
boost revenues from this market over the next few years.
As in other markets, Modine is shifting from being a component
supplier to being a module or system supplier. This requires the
<PAGE>
company to assume more design responsibility as well. To better
serve its customer base, Modine has institutionalized the concept
of continuous improvement within its manufacturing operations and
established certified-quality systems. The result has been improved
productivity and throughput in Modine's plants.
Demand for improved products and systems continues to be strong
in the passenger-car and light-truck market. Need to reduce the
weight of products has driven customers to prefer aluminum over
steel, copper, and brass. Regulations for emissions and engine
efficiency have stimulated the need for fuel coolers, improved
engine-oil coolers, higher-performing transmission-cooler
designs, and a variety of alternative coolers; and Modine has a
broad offering of all of these products.
In April 1998, Modine began construction of a plant in
Pontevico, Italy, to produce heat-exchange components and
modules for the automotive market.
Modine's customer base continues to become more global in
nature. As customers increasingly expect suppliers to support
their global initiatives through local manufacturing
operations, Modine is carefully and strategically assessing the
need to expand geographical production into such areas as Latin
America and the Pacific Rim.
OEM medium- and heavy-truck market: The largest growth in
Modine's 1997-98 sales was to OEMs of medium and heavy trucks.
Revenues increased 19.5 percent over the prior year and
represented 17.7 percent of Modine's consolidated sales in
fiscal 1998. Strong growth resulted from favorable industry
dynamics in North America and Europe.
A changing industry dynamic that has potential for larger
rewards, with potential for larger risks, is the shift of
responsibility from the OEMs to suppliers for the design,
delivery, warranty, and management of complete systems.
Customer orders remain strong in North America, where the
OEMs are continuing to step up their line rates. The North
American market also is at the beginning of a shift to aluminum
radiators from copper/brass products in medium and heavy trucks.
Currently, there is little aluminum-radiator production for
North American large trucks. But this could change dramatically
within the next three to five years as additional testing is
concluded.
In contrast, virtually all large trucks in Europe are equipped
with aluminum radiators. Modine's new aluminum-product plant in
Kirchentellinsfurt, Germany, will bring greater efficiencies in
production and product flow, making the company more competitive
in that continent's truck market. The plant also gives Modine
additional capacity for larger market penetration in the future.
OEM off-highway market: In fiscal 1998, Modine's business with
off-highway-equipment manufacturers constituted the market with
the second-highest growth over the prior year and provided 14.2
percent of the year's revenues. The 16.6-percent annual sales
increase reflected agricultural- and construction-equipment
<PAGE>
market volumes that are at the highest level in the last decade.
Much of the growth and product-line expansion in the construction-
equipment market has been in small and light-size equipment.
The off-highway industry is becoming a more globalized business
as OEMs expand their presence off-shore. However, North America
remains a strong center due to worldwide competitiveness.
Emissions regulations are driving some of the growth here for
Modine, much as they did earlier for trucks. Tighter regulations
started in the U.S.A. in 1996 and become more stringent over a
five-year period. A similar situation will begin in Europe in 1999.
This favors Modine's higher-technology product line as it drives the
need for more charge-air coolers and more-efficient heat exchangers.
As in other OEM businesses, there is a trend toward
partnerships with customers. As a result, Modine will assume more
responsibility for system design. Modine's competitive advantages
include a full line of product offerings plus the engineering and
technical expertise to design and build complete systems.
During fiscal 1998, Modine converted the Camdenton, Missouri,
plant to an aluminum-products factory that primarily serves the
off-highway market. Continued growth compels Modine to address
additional capacity issues in the new fiscal year. In Europe,
Modine will begin construction of a new plant in Tubingen,
Germany, that will give the company some lower-cost, more-
efficient production of copper-brass radiators.
OEM industrial market: Sales to engine-manufacturing customers
provided the biggest impetus to an overall 6.6-percent revenue
growth in Modine's OEM industrial market, which made up 12.8
percent of fiscal 1998 sales. A portion of the engine
production goes to the truck industry, which, as mentioned
above, has been operating at high levels.
U.S. exports to engine manufacturers and to other industrial-
market customers also contributed to the sales increase, the
third-largest for Modine last year. The market includes a
diverse array of customers and industries whose products
include refrigeration equipment, compressors, generator sets,
lift trucks, and other applications.
Vehicle aftermarket: Modine's revenues from its worldwide
aftermarket business rose slightly, compared with the year
before. Aftermarket sales formed 22.2 percent of the company's
total last year.
Effects of the El Nino weather pattern were reported in the
industry, particularly in North America. It is generally believed
that the mild summer and winter resulted in lower demand for
aftermarket products such as radiators, which are affected by
temperature extremes. In addition, continued heavy competition
from Asian producers, where capacity normally going to original-
equipment markets has been redirected to the aftermarket, has kept
pressure on pricing. On the positive side, the Mexican aftermarket
has shown growth and the new fiscal year will also see expansion in
Central America.
<PAGE>
There will be a steady growth emphasis in the United States on
new market channels in order to increase the company's market
share. Growth in Europe will be boosted by the construction of a
new plant in Mill, The Netherlands, that will make aluminum heat
exchangers for the passenger-car aftermarket. Also, in fiscal 1998,
Modine added new sales and service centers in Switzerland and Italy
to serve the replacement-parts markets there.
Building-HVAC market: Modine's building-HVAC (heating,
ventilating, air-conditioning) sales in fiscal 1998 were flat,
compared with the previous year. As in the aftermarket,
relatively mild U.S. temperatures in recent years, during both
the summers and winters, held down the volume of business.
Modine began taking steps last year -- via product-line
expansion and more proactive, customer-focused programs -- to
more rapidly grow this business, which was 7.5 percent of total
sales. An "Indoor Air Solutions" theme and a changed market
identity make up the center of an aggressive marketing-
communications and ad campaign. "Indoor Air Solutions" refers to
systems that can move, filter, heat, cool, and control the humidity
of air in a building.
Customer training received renewed focus as Modine brought
sales representatives together for a number of training courses.
The newly developed Breeze brand of computerized selling and
training tools were developed to augment Modine's marketing
efforts. Several products from previously acquired businesses
were consolidated under the Modine brandname during fiscal 1998.
In the fourth fiscal quarter, Modine acquired Sun Technology
Corporation, which manufactures Ray-Tec infrared heaters for
commercial, industrial, and residential buildings. This
capacity to manufacture its own infrared heaters is expected
to favorably impact Modine's future sales and earnings. The
company is evaluating additional growth potential in the
building-HVAC market through both acquisitions and
associations with other global companies.
Sales by product line in fiscal 1998
- ------------------------------------
With increased customer demand for more modular assemblies and
complete heat-transfer systems, Modine's products are increasingly
designed together as a package. Additional business of this type
will result in the establishment of more plants to meet customers'
needs and in the company selling more content, from several product
lines, per application.
Radiators: At 39.7 percent of total revenues, radiators and
radiator cores remain the largest product-line category for
Modine. A little over half of these products are sold through
Modine's aftermarket operations in North America and Europe.
Slightly more than one-quarter of the total product category
is manufactured and sold by the company's overseas plants.
While aluminum radiators make up a significant portion of
European production, they constitute only a small but growing
portion in North America, mainly in the aftermarket.
<PAGE>
A trend of this product line in the aftermarket is the
continuing shift of customer preference for complete
replacement radiators at the expense of radiator cores, which
favors Modine's strength in the aftermarket.
On the OEM side, the newly-introduced Square-Wave serpentine-
fin radiator should prove popular with the makers of off-
highway equipment. The product is designed to have less
clogging and, therefore, less downtime on these big machines.
Charge-air coolers: Charge-air coolers recorded the greatest
annual sales growth of all product lines, rising 18.0 percent
in fiscal 1998 and constituting 12.1 percent of total sales.
Environmental factors have been driving the sales growth. U.S.
emissions regulations on big trucks sparked demand in the early
'90s, followed by similar regulations in Europe. In addition,
Modine supplies charge-air coolers for the European diesel-car
market. Growth of the total product line is expected to
continue because of emissions regulations in off-highway
markets.
Oil coolers: Sales of oil coolers grew 11.2 percent over the
prior year, representing the second-highest increase among
Modine's product lines. Oil coolers now make up 17.4 percent of
total sales. Sales growth from European operations fueled the
majority of the annual increase. An expanded plant in
Mezokovesd, Hungary, added capacity last year.
Vehicular air-conditioning: Revenues from air-conditioning
components and systems for vehicles were 20.1 percent of
Modine's total in fiscal 1998. Reported sales were down 3.9
percent from the year before, partly due to the translation
effects of a stronger U.S. dollar. There also were fewer sales
of dealer-installed kits in North America, where air-
conditioning is essentially standard equipment. The growth
potential is in Europe, where only an estimated 30 percent of
OEM cars will have these systems installed in 1998.
Building-HVAC: The building-HVAC product-line's sales,
constituting 7.5 percent of Modine's total, were essentially
flat year-over-year. As discussed earlier, management has
targeted this product line for increased growth in the future.
A small acquisition in January 1998 added a line of infrared
heaters. The new fiscal-year's sales should also be stimulated
by Modine's recently introduced Hot Dawg heater for residential
garages, a product that already has stirred interest in the
industry.
The use of Modine's patented PF (parallel flow) technology in
the building-HVAC market should grow in the future. For
example, Modine developed a unique, V-shaped evaporator using
the PF design. As part of a national field-test program, a
Florida company tested this product in residential air-
conditioning systems and found that it operates at higher
efficiency while providing significantly more dehumidification
than competing technologies. This is the reverse of what
typically happens, where dehumidification is usually sacrificed
for higher efficiency.
<PAGE>
Capital expenditures
- --------------------
Capital expenditures of $80.7 million in fiscal 1998 were 48.0-
percent higher than the prior year. Significant expenditures
included those for the Racine technical center, expansions of
Modine's European facilities, building-improvement projects at
domestic plant locations, process improvements, tooling for new
products, and the addition of processing equipment at a number of
facilities. Capital expenditures were financed primarily from cash
generated internally as well as from some external borrowings.
Outstanding commitments for capital expenditures at March 31,
1998, were approximately $48.1 million. Most of the commitments
relate to the Racine technical center, plant expansions and
conversions, process improvements, tooling for new products, and
various new equipment. A year earlier, there were outstanding
commitments of $27.0 million.
Research and development
- ------------------------
Modine's investment in research and development of $16.8 million
rose less than one percent in fiscal 1998 following 15.8- and 33.1-
percent increases in each of the two prior years, respectively.
A recent new product that has completed its first year of
production is the latent-heat battery, a heat-storage device that
currently is an option on a single "premium" car made in Europe.
The product stores engine heat for release upon startup of the
engine. It delivers immediate heating and defrosting, less engine
wear, and a reduction in emissions.
In another endeavor, Modine is a key player in a U.S. program
to develop fuel-cell technology. The company is working with several
other entities to develop practical fuel cells as possible
alternatives to the internal combustion engine. Each fuel-cell
system contains about a half-dozen heat exchangers, and Modine is
well positioned to be a major supplier for this technology.
To test new product designs at the extreme, Modine's R&D function,
for most of this decade, has been working with Roger Penske's racing
team for "Championship" cars. Modine supplies all of the heat
exchangers for these racing cars to study them under the most grueling
circumstances. Since Modine began this relationship, the products have
performed flawlessly and the company has gained valuable data and
experience that can be considered in more mundane applications.
The company's R&D efforts cover process technology as well as
new products. This results in many, more-efficient techniques
and equipment that are proprietary to Modine. Also, at the end
of fiscal 1998, Modine owned a total of 998 patents in various
countries, an 8.4-percent increase over the year before.
Employment and quality achievement
- ----------------------------------
Total worldwide employment at Modine was 8,375 on March 31,
1998, up 6.4 percent from the previous year. The number of
<PAGE>
corporate administrative staff remained the same as the
previous year.
In the march to improved quality systems, the employees at
14 Modine plants earned 20 quality awards from customers during
the fiscal year. Six plants also received seven recertifications
from their customers or regulatory agencies.
Six plants were registered to ISO-9002 during the year by
Lloyd's Register Quality Assurance. The International Organization
for Standardization (ISO) develops common manufacturing, trade, and
communications standards to facilitate the worldwide exchange of
goods and services. Modine plants in Clinton, Knoxville, and
Lawrenceburg, Tennessee; McHenry, Illinois; Richland County, South
Carolina; and Trenton, Missouri, joined three other Modine plants
registered to the standard. Modine's plant in Goch, Germany, became
registered to ISO-9001, which includes control of product design.
Seven sites upgraded their registrations to include the QS-9000
requirements developed by Chrysler, Ford, General Motors, and four
truck manufacturers. They include the Automotive, Truck, and Heavy
Duty and Industrial Divisions at corporate headquarters in Racine,
Wisconsin, and plants in Berndorf, Austria; Harrodsburg, Kentucky;
Joplin and Trenton, Missouri; Logansport, Indiana; and Richland
County, South Carolina. QS-9000 is a quality-system requirement,
based on ISO-9000, that includes other requirements specific to
the domestic automotive and heavy-truck industries. The Berndorf,
Austria, plant was also registered to VDA 6.1, the automotive
quality standard in Germany.
Modine plants and divisions continue to pursue registration to
ISO-9000, QS-9000, and VDA. Meeting these requirements helps
Modine to position itself to obtain new business as well as to
meet its customers' requirements at facilities worldwide.
Hedging and foreign-currency-exchange contracts
- -----------------------------------------------
On a limited basis, Modine enters into foreign-exchange options
and forward contracts on foreign currencies as hedges against the
impact of currency fluctuations. See Note 15 to the consolidated
financial statements.
Environmental matters
- ---------------------
Modine complies worldwide with laws relating to the protection
of the environment. Expenditures to comply with these increasingly
complex and stringent laws could be significant in future years but
are not expected to have a material impact on the company's
competitive or financial position. If new laws containing more
stringent requirements are enacted, expenditures may be higher
than the estimates of future environmental costs provided below.
About $0.7 million in capital expenditures related to
environmental projects were made in 1997-98. Modine currently
expects expenditures for environmentally related capital
projects to be about $2.8 million in 1998-99.
<PAGE>
Environmental expenses charged to current operations, including
remediation costs, totaled about $2.3 million in fiscal 1998. These
expenses include operating and maintenance costs: for solid-waste
treatment, storage, and disposal and for air- and water-pollution-
control facilities; for costs incurred in conducting environmental-
compliance activities; and for other matters.
Modine accrues for environmental remediation activities relating
to past operations -- including those under the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA),
often referred to as "Superfund," and under the Resource Conservation
and Recovery Act (RCRA) -- when it is probable that a liability has
been incurred and reasonable estimates can be made.
Modine from time to time receives notices from the Environmental
Protection Agency and state environmental agencies that the company
is a "potentially responsible party" (PRP) under CERCLA and state law.
These notices claim potential liability for remediation costs of
disposal sites that are not company-owned and allegedly contain
wastes attributable to Modine from past operations. Modine's share
of remediation costs at these sites cannot be accurately predicted
due to the large number of PRPs involved. For the 9 sites currently
known, the company's potential liability will be significantly less
than the total site remediation because the percentage of material
attributable to Modine is relatively low ("de minimus"), there may be
insufficient documentation linking Modine to the site, and the
other PRPs have the financial resources to meet their obligations.
It is likely that Modine will, in the future, incur additional
remediation charges, but such costs are unknown and not determinable
at this time. There are no currently known, unrecorded liabilities
that would have a material effect on the company's consolidated
financial position or results of operations.
European currencies and the Euro
- --------------------------------
Modine does business in a number of countries throughout Europe.
The company is preparing for the arrival of the Euro as a replacement
for many national currencies and will be able to conduct business in
the new currency beginning in January 1999.
Year 2000
- ---------
In response to the Year 2000 issue, Modine initiated a project
in early 1997 to identify, evaluate, and implement changes to its
existing computerized business systems. The company is addressing
the issue through a combination of modifications to existing
programs and of conversions to Year 2000 compliant software. The
total cost associated with the required modifications is not
expected to be material to Modine's consolidated results of
operations and financial position and is being expensed as
incurred.
In addition, the company is communicating with its customers,
suppliers, and other service providers to determine whether they
are actively involved in projects to ensure that their products
and business systems will be Year 2000 compliant.
<PAGE>
If modifications and conversions by Modine and those with whom
it conducts business are not made in a timely manner, the Year
2000 issue could have a material adverse effect on the company's
business, financial condition, and results of operations.
Forward-looking statements
- --------------------------
Other than historical matters or comparative results, the matters
discussed in this report, particularly the sales forecast and factors
affecting earnings, include forward-looking statements that involve
risks and uncertainties. These cautionary statements are being made
pursuant to the provisions of the Private Securities Litigation Reform
Act of 1995 and with the intention of obtaining the benefits of the
"safe harbor" provisions of the Act. Investors are cautioned that any
forward-looking statements made by Modine are not guarantees of future
performance and that actual results may differ materially from those
in the forward-looking statements as a result of various factors,
including: customers' integration of products currently being supplied
by the company; the success of Modine or its competitors in obtaining
the business of the customer base; the ability to pass on increased
costs to customers; variation in currency-exchange rates in view of
a large portion of the company's business being nondomestic; the
impact of Year 2000 compliance by the company or those entities with
which the company does business; labor relations at Modine, its
customers, and its suppliers, which may affect the continuous supply
of product; and the ability to improve acquisitions' operations.
In making statements about Modine's fiscal-1999 operating results,
management has assumed relatively stable economic conditions in the
United States and worldwide, no unanticipated swings in the business
cycles affecting customer industries, and a reasonable legislative
and regulatory climate in those countries where Modine does business.
Readers are cautioned not to place undue reliance on Modine's
forward-looking statements, which speak only as of the date of
this report's writing.
Management's discussion and analysis of results from operations
- ---------------------------------------------------------------
Sales
- -----
Sales for the year ended March 31, 1998, were $1.04 billion, up
$41.4 million or 4.1 percent from the prior year. Increases were
greatest in the medium- and heavy-truck markets, followed by the
off-highway-equipment market, partially offset by a slight decline
in the car and light-truck market due to currency-translation
effects. With about one-third of Modine's annual sales being in
other than U.S. currency, the stronger dollar again had a negative
translation effect of approximately $45.5 million on fiscal-1998
consolidated sales, compared with the prior year.
Fiscal-1997 sales were $999.0 million, up $8.6 million or
0.9 percent from the prior year. A full year of sales from a fiscal
1996 acquisition was partially offset by the mid-year sale of a
copper-tubing plant in Dowagiac, Michigan, in that same year.
Sales reductions included an unfavorable exchange-rate effect of
<PAGE>
approximately $22 million and a reduction in demand for passenger-
car and truck components.
Sales for fiscal 1996 were $990.5 million, up $77.5 million or
8.5 percent. European operations added $54.0 million to sales, with
just over half of that from exchange-rate gains. The acquisition of
the former Signet Systems business as of July 31, 1995, also added
$46.7 million. Declines occurred as a result of the sale of the
copper-tubing plant in October 1995, and in passenger-car and
residential-HVAC components.
Gross profit
- ------------
Gross profit was 28.9 percent of sales for fiscal 1998, 1.1
percentage points higher than 1997, primarily due to efficiency
improvements in Europe, the volume effect of the truck market,
and reduced material costs.
For fiscal 1997, gross profit was 27.8 percent of sales, 2.0
percentage points higher than the previous year, primarily due to
decreased material costs and to cost improvements mainly in Europe.
Gross profit in fiscal 1996 was 25.8 percent of sales, 2.7
percentage points lower than in fiscal 1995. The primary cause
was increased material costs. Also affecting the percentage were
higher sales by the European operations and an acquisition, both
of which were earning lower than company-average gross margins.
Selling, general, and administrative (SG&A) expenses
- ----------------------------------------------------
Primarily as a result of sales increases, SG&A expense for
fiscal 1998 increased by $6.8 million, or 3.8 percent, from the
prior year to $183.3 million. As a percent of sales, however,
SG&A decreased from 17.7 percent to 17.6 percent.
For fiscal 1997, SG&A expense totaled $176.6 million, up $15.5
million or 9.6 percent from the previous year. Major causes for
the increase were the inclusion of an acquisition for a full year
plus additional sales branches and distribution expenses in the
aftermarket.
In fiscal 1996, SG&A expense totaled $161.1 million, up $12.7
million or 8.5 percent from fiscal 1995. Included in the year
was the eight-month effect of the Signet Systems acquisition.
Income from operations
- ----------------------
In fiscal 1998, income from operations was $117.5 million,
up $16.6 million or 16.5 percent. European operations, strong
activity in the North American truck market, and lower material
costs account for the majority of this increase.
Fiscal-1997 income from operations was $100.9 million, up
$6.6 million or 7.0 percent. The improvement was primarily due
to reduction in material prices and to cost improvements.
<PAGE>
Income from operations in fiscal 1996 was $94.3 million,
down $17.8 million or 15.9 percent, primarily due to increases
in material prices.
Interest expense
- ----------------
Fiscal-1998 interest expense was $4.0 million, down $1.0
million or 19.3 percent from the prior year. Lower interest
rates caused this reduction.
Fiscal-1997 interest expense was $5.0 million, down $1.8
million or 27.2 percent from the prior year. Reduced debt
and lower interest rates allowed this decrease to occur.
Interest expense in fiscal 1996, at $6.8 million, was up $0.4
million or 6.9 percent as a result of borrowings related to the
Signet Systems acquisition. Interest rates were lower than the
previous year.
Other income, net
- -----------------
Other income for fiscal 1998 was $2.5 million, which was $0.6
million more than 1997. This increase was due, primarily, to
increases in royalty income.
For fiscal 1997, other income was $1.9 million, which was $9.8
million less than the prior year, primarily due to a gain of
$5.0 million in fiscal 1996 from the sale of the company's
copper-tubing plant and to gains on the sale of other equipment.
Other income in fiscal 1996, at $11.7 million, was $8.5 million
higher than the previous year, due mainly to the sale of assets
referred to above.
Provision for income taxes
- --------------------------
The effective tax rate for fiscal 1998 was 37.5 percent, up 2.7
percentage points from fiscal 1997, due primarily to higher tax
rates on increased foreign earnings. Also, use of tax losses
carried forward in prior years in certain European operations
resulted in an increased tax rate in fiscal 1998.
For fiscal 1997, the effective tax rate was 34.8 percent, down
3.3 percentage points from the prior year. The major cause for
this reduction was utilization of tax losses carried forward
from prior years in Modine's European operations.
The company had a slightly higher effective tax rate in fiscal
1996, at 38.1 percent versus 37.1 percent in the prior year.
Higher rates on certain foreign earnings were the primary factor.
Net earnings
- ------------
Net earnings in fiscal 1998 were $72.5 million, representing
7.0 percent of sales and a 17.9 percent return on average
shareholders' investment (ROE). This is an increase of $8.7
<PAGE>
million or 13.7 percentage points over fiscal 1997. Improved
European operations, higher North American truck-market sales,
and lower material costs were the major causes of this
improvement.
Fiscal-1997 net earnings of $63.8 million -- 6.4 percent of
sales and a 17.3-percent ROE -- were up 3.9 percent or $2.4
million from the previous fiscal year. Lower material costs and
other cost improvements were the primary causes of the
improvement. The prior fiscal year included $3.1 million, or
approximately 10 cents per diluted share, relating to a gain on
the sale of the copper-tubing business.
Net earnings in fiscal 1996 of $61.4 million -- 6.2 percent of
sales and an 18.7-percent ROE -- were down $7.0 million or 10.3
percent from fiscal 1995. The reduction was primarily due to
increased material costs.
<TABLE>
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per-share amounts)
<CAPTION>
- ------------------------------------------------------------------------------------------
For the years ended March 31 1998 1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $1,040,418 $999,046 $990,493
Cost of sales 739,619 721,626 735,120
---------- -------- --------
Gross Profit 300,799 277,420 255,373
Selling, General, and Administrative expenses 183,323 176,552 161,082
---------- -------- --------
Income from operations 117,476 100,868 94,291
Interest Expense (4,010) (4,972) (6,825)
Other income -- net 2,506 1,887 11,683
---------- -------- --------
Earnings before income taxes 115,972 97,783 99,149
Provision for income taxes 43,501 34,020 37,750
---------- -------- --------
Net earnings $ 72,471 $ 63,763 $ 61,399
========== ======== ========
Net earnings per share of common stock
Basic $2.44 $2.14 $2.07
Assuming dilution $2.39 $2.10 $2.03
<FN>
The notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
<PAGE>
Management's discussion of financial position
- ---------------------------------------------
Current assets
- --------------
Cash and cash equivalents increased by $1.6 million to $36.4
million. Refer to the sources and uses of funds detail in the
accompanying statement of cash flows.
Trade receivables, net of allowances for doubtful accounts, at
$162.2 million, were up $12.4 million due to increased sales
levels and an extended-payment-terms program in the North
American aftermarket.
Inventories increased by $10.6 million to $152.7 million to
support higher sales levels and from a slight decrease in
inventory turns.
Deferred income taxes and other current assets of $41.9 million
increased by $2.5 million due mainly to an increase in tooling
costs not yet billed to customers.
The current ratio decreased slightly to 2.0-to-1 from 2.2-to-1.
Noncurrent assets
- -----------------
Property, plant, and equipment increased by $38.1 million to
$248.3 million due to capital expenditures of $80.7 million,
primarily for production-facility expansion and the
construction of the new technical center in Racine.
Investment in affiliates decreased by $1.1 million, primarily
due to the dividends received from the company's joint venture
in Japan.
Intangible assets decreased by $3.6 million to $59.4 million,
mostly due to amortization of goodwill and to the effect of
foreign-exchange rates on the European portion of goodwill.
Deferred charges and other noncurrent assets increased by $3.6
million to $49.9 million, primarily due to continued recognition
of a surplus in the company's over-funded pension plans.
Current liabilities
- -------------------
Short-term debt and the current portion of long-term debt
increased in net by $6.7 million, mainly due to short-term
borrowing in Europe and North America for financing of
construction projects.
Accounts payable increased by $12.2 million to $84.3 million,
primarily from the effect of supporting a higher sales level.
Accrued compensation and employee benefits increased by $3.6
million due to increased workers' compensation reserves and the
timing of the final pay period relative to the year-end.
<PAGE>
Noncurrent liabilities
- ----------------------
Long-term debt increased by $4.4 million to $89.6 million at
yearend as a result of financing for capacity expansion.
As a percent of shareholders' investment, long-term debt was
21.2 percent. Total debt to equity was 26.8 percent, up 0.3
percentage points from fiscal 1997.
Shareholders' investment
- ------------------------
Total shareholders' investment increased by $36.8 million to
$422.5 million, the major change being retained earnings, which
benefited from net earnings of $72.5 million (less dividends
paid of $22.6 million).
The foreign-currency translation adjustment increased by $5.1
million as European currencies weakened against the dollar
during the year.
Additional paid-in capital was up $2.6 million as a result of
treasury-stock sales, while net purchases pushed up treasury
stock by $6.0 million.
During fiscal 1998, $17.0 million was expended to acquire an
additional 523,000 treasury shares; while 354,000 shares were
used to satisfy requirements for stock options, stock awards,
and employee stock-purchase plans.
During fiscal 1997, $6.8 million was expended to acquire an
additional 252,000 treasury shares; while 326,000 shares were
used to satisfy requirements for stock options, stock awards,
and employee stock-purchase plans.
During fiscal 1996, $8.7 million was expended to acquire an
additional 278,000 treasury shares; and 337,000 shares were
used to satisfy requirements for stock options, stock awards,
and employee stock-purchase plans.
Book value per share increased by $1.31 during the year to
$14.24, a 10.7-percent compound annual growth rate since fiscal
1988.
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
(In thousands, except per-share amounts)
<CAPTION>
- ------------------------------------------------------------------------------
March 31 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 36,410 $ 34,822
Trade receivables, less allowance for doubtful
accounts of $4,585 and $4,140 162,177 149,800
Inventories 152,674 142,115
Deferred income taxes and other current assets 41,922 39,405
--------- ---------
Total current assets 393,183 366,142
--------- ---------
Noncurrent assets:
Property, plant, and equipment - net 248,253 210,115
Investment in affiliates 8,376 9,497
Intangible assets - net 59,355 62,948
Deferred charges and other noncurrent assets 49,857 46,253
--------- ---------
Total noncurrent assets 365,841 328,813
--------- ---------
Total assets $ 759,024 $ 694,955
========= =========
Liabilities and shareholders' investment
Current liabilities:
Short-term debt $ 20,878 $ 2,962
Long-term debt _ current portion 2,835 14,061
Accounts payable 84,345 72,173
Accrued compensation and employee benefits 48,081 44,497
Income taxes 10,073 7,535
Accrued expenses and other current liabilities 26,516 28,771
--------- ---------
Total current liabilities 192,728 169,999
--------- ---------
Noncurrent liabilities:
Long-term debt 89,587 85,197
Deferred income taxes 14,258 13,331
Other noncurrent liabilities 39,976 40,740
--------- ---------
Total noncurrent liabilities 143,821 139,268
--------- ---------
Total liabilities 336,549 309,267
--------- ---------
<PAGE>
<S> <C> <C>
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 12,384 9,760
Retained earnings 423,001 378,740
Foreign currency translation adjustment (8,102) (3,016)
Treasury stock at cost: 678 and 509 common
shares (20,977) (14,949)
Restricted stock _ unamortized value (2,795) (3,811)
--------- ---------
Total shareholders' investment 422,475 385,688
--------- ---------
Total liabilities and shareholders'
investment $ 759,024 $ 694,955
========= =========
<FN>
The notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
Management's discussion of cash flows
- -------------------------------------
Net cash provided by operating activities
- -----------------------------------------
Net cash provided by operating activities in fiscal 1998 was
$102.9 million, up $2.7 million from the prior year mainly as a
result of higher earnings. Working-capital requirements grew as
a result of the increasing sales volume and its net effect on
receivables, inventory, and payables.
Net cash from operating activities in fiscal 1997 was $100.2
million, up $15.6 million from the prior year as a result of
higher earnings and significantly higher noncash adjustments,
which were impacted in the prior year by the gains on sales of
a business and other assets. Also, depreciation was higher and
earnings from affiliates, net of dividends received, were
lower. Working-capital demands were also lower than the prior
year.
Net cash from operating activities in fiscal 1996 was
$84.6 million, up $17.6 million from fiscal 1995. Lower working-
capital demands were the major reasons. A partial offset came
from lower earnings and noncash adjustments (including: gains
from sales of the extruded-copper-tubing business and other
fixed assets; and a reduction in allowance for doubtful
accounts).
Capital expenditures
- --------------------
Capital expenditures for fiscal 1998 were $80.7 million, $26.2
million higher than in fiscal 1997, reflecting: construction of
<PAGE>
the Racine technical center, upgrading and expanding European
facilities, and process improvements at the North American
plants.
Capital expenditures for fiscal 1997 were $54.5 million,
slightly lower than the prior year, and included significant
capital improvements and expansions, including a new facility
in South Carolina and several projects in Europe.
Capital expenditures for fiscal 1996 were $55.7 million, up
$21.6 million from the prior year, reflecting new facilities in
South Carolina and The Netherlands, plus other capacity expansions.
Acquisitions, divestiture, sales of assets, and investments in
- --------------------------------------------------------------
affiliates
- ----------
During fiscal 1998, Modine acquired 100 percent of the assets
of Sun Technology Corporation of Shelby Township, Michigan, a
manufacturer of infrared heaters. The cash cost of the acquisition
was $2.6 million, net of cash acquired and a promissory note to the
seller for $320,000. See Note 11 to the consolidated financial
statements for further detail.
In fiscal 1997, Modine acquired a 41.3-percent interest in
Constructions Mecaniques Mota, S.A., an oil-cooler manufacturer in
France, which has been treated as a nonconsolidated affiliate by
Modine. The cost of the investment was $4.2 million. See Note 11 to
the consolidated financial statements for further detail.
During fiscal 1996, Modine acquired 100 percent of the assets
of: Signet Systems, Inc., an air-conditioning systems business
located in Harrodsburg, Kentucky, and Goch, Germany; and
Radiadores Montana, a Spanish aftermarket company. Modine also
purchased the remaining 57-percent interest in Radinam S.A., a
joint-venture company in Mexico. The combined net cash price
of these acquisitions was $56.8 million. The company also
disposed of its extruded-copper-tubing plant in Dowagiac,
Michigan, for $9.1 million. See Note 11. Modine also sold, for
$3.9 million, other equipment that was no longer required.
Changes in debt: short- and long-term
- -------------------------------------
Overall, company debt increased by $17.1 million during fiscal
1998. New borrowings include short-term debt to provide financing
for construction projects in Europe and North America. Also, maturing
debt was refinanced with long-term borrowing.
During fiscal 1997, company debt increased by $1.9 million.
This increase included borrowings in French francs, for the equity
investment during the year, and some additional borrowings in Germany
and The Netherlands relative to facility expansion. These borrowings
were nearly offset by $15.7 million in repayments of long-term debt
and an $8.3-million repayment of short-term debt.
In fiscal 1996, the company made $10.6 million in scheduled and
$35.3 million in discretionary repayments of long-term debt. The
<PAGE>
company also added $70.0 million to long-term debt, partly due to
acquisitions and partly to replace certain portions of the long-term
debt that was repaid during the year.
Treasury stock
- --------------
Treasury stock activity is detailed in Management's discussion
of financial position, page 20.
Dividends paid
- --------------
Dividends for fiscal 1998 totaled $22.6 million or 76 cents per
share. An increase of 8 cents per share was declared, effective in
May 1997.
For fiscal 1997, dividends totaled $20.3 million, representing
a rate of 68 cents per share. An increase of 8 cents per share
was declared, effective in May 1996.
Dividends for fiscal 1996 were $17.8 million, representing a
rate of 60 cents per share. An increase of 8 cents per share
was declared, effective in May 1995.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
- ----------------------------------------------------------------------------------------
For the years ended March 31 1998 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 72,471 $ 63,763 $ 61,399
Adjustments to reconcile net earnings with
cash provided by operating activities:
Depreciation and amortization 41,767 41,504 39,641
Gain on sale of business - - (5,009)
Pensions (2,256) (2,275) (3,000)
Loss/(gain) from disposition of property,
plant, and equipment 837 1,038 (1,852)
Deferred income taxes (91) (1,452) (1,759)
Provision for losses on accounts receivable 497 (866) (1,477)
Undistributed earnings of affiliates,
net of dividends received 679 51 (1,202)
Other - net 2,884 1,184 1,421
--------------------------------
116,788 102,947 88,162
--------------------------------
Change in operating assets and liabilities
excluding acquisitions:
Trade receivables (16,526) (7,851) 12,303
Inventories (13,236) 3,889 (3,706)
Deferred income taxes and other current
assets (2,781) (2,725) (6,286)
Accounts payable 13,855 (1,819) (2,716)
Accrued compensation and employee benefits 3,724 2,611 1,447
Income taxes 3,081 (1,000) (1,996)
Accrued expenses and other current
liabilities (1,977) 4,178 (2,628)
--------------------------------
Net cash provided by operating activities 102,928 100,230 84,580
--------------------------------
Cash flows from investing activities:
Expenditures for property, plant, and
equipment (80,682) (54,529) (55,689)
Acquisitions, net of cash acquired (2,604) (1,629) (56,798)
Proceeds from sale of business - - 9,117
Proceeds from dispositions of assets 1,927 881 3,895
Investments in affiliates - (4,236) -
Increase in deferred charges and other
noncurrent assets (1,003) (1,805) (296)
Other - net (200) (62) 13
--------------------------------
Net cash (used for) investing activities (82,562) (61,380) (99,758)
--------------------------------
<PAGE>
<S> <C> <C> <C>
Cash flows from financing activities:
Increase/(decrease) in short-term
debt - net 18,597 (8,330) (2,007)
Additions to long-term debt 27,102 25,925 69,967
Reductions of long-term debt (28,607) (15,681) (45,861)
Issuance of common stock, including
treasury stock 4,567 4,265 5,275
Purchase of treasury stock (16,990) (6,832) (8,740)
Cash dividends paid (22,605) (20,292) (17,802)
Other - net - (347) (9)
--------------------------------
Net cash (used for)/provided by financing
activities (17,936) (21,292) 823
--------------------------------
Effect of exchange-rate changes on cash (842) (694) (378)
--------------------------------
Net increase/(decrease) in cash and cash
equivalents 1,588 16,864 (14,733)
Cash and cash equivalents at beginning of year 34,822 17,958 32,691
--------------------------------
Cash and cash equivalents at end of year $ 36,410 $ 34,822 $ 17,958
================================
Cash paid during the year for:
Interest, net of amounts capitalized $ 4,434 $ 5,035 $ 6,849
Income taxes $ 37,715 $ 34,428 $ 37,716
<FN>
The notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
(In thousands, except per-share amounts)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Foreign- Restricted
For the years Additional currency Treasury stock stock -
ended March 31, Common Stock paid-in Retained translation at cost unamortized
-------------- ------------------
1998, 1997, and 1996 shares amount capital earnings adjustment shares amount value
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1995 30,342 $18,964 $ 7,897 $296,614 $ 5,159 (642) $(16,669) $(3,693)
- -----------------------------------------------------------------------------------------------------------------------------
Net earnings -- -- -- 61,399 -- -- -- --
Cash dividends, $0.60 per share -- -- -- (17,802) -- -- --
Purchase of treasury stock -- -- -- -- -- (278) (8,740) --
Stock options and awards
including related tax benefits -- -- 879 (704) -- 191 4,005 (1,120)
Employee stock-purchase and
-ownership plans -- -- 367 (314) -- 146 3,797 --
Foreign-currency translation
adjustment -- -- -- -- (1,724) -- -- --
Amortization of deferred
compensation under
restricted stock plans -- -- -- -- -- -- -- 1,105
- -----------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1996 30,342 18,964 9,143 339,193 3,435 (583) (17,607) (3,708)
- -----------------------------------------------------------------------------------------------------------------------------
Net earnings -- -- -- 63,763 -- -- -- --
Cash dividends, $0.68 per share -- -- -- (20,292) -- -- -- --
Purchase of treasury stock -- -- -- -- -- (252) (6,832) --
Stock options and awards
including related tax benefits -- -- 603 (3,627) -- 214 6,299 (1,297)
Employee stock-purchase and
-ownership plans -- -- 14 (297) -- 112 3,191 --
Foreign-currency translation
adjustment -- -- -- -- (6,451) -- -- --
Amortization of deferred
compensation under
restricted stock plans -- -- -- -- -- -- 1,194 --
- -----------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1997 30,342 18,964 9,760 378,740 (3,016) (509) (14,949) (3,811)
- -----------------------------------------------------------------------------------------------------------------------------
<PAGE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net earnings -- -- -- 72,471 -- -- -- --
Cash dividends, $0.76 per share -- -- -- (22,605) -- -- -- --
Purchase of treasury stock -- -- -- -- -- (523) (16,990) --
Stock options and awards
including related tax benefits -- -- 2,583 (5,585) -- 346 10,736 (798)
Employee stock-purchase and
-ownership plans -- -- 41 (20) -- 8 226 --
Foreign-currency translation
adjustment -- -- -- -- (5,086) -- -- --
Amortization of deferred
compensation under
restricted stock plans -- -- -- -- -- -- 1,814
- -----------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1998 30,342 $18,964 $12,384 $423,001 $(8,102) (678) $(20,977) $(2,795)
- -----------------------------------------------------------------------------------------------------------------------------
<FN>
The notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 Significant accounting policies
-------------------------------
Basis of presentation: The financial statements are prepared in
---------------------
conformity with generally accepted accounting principles in the United
States. These principles require management to make certain estimates and
assumptions in determining the company's assets, liabilities, revenue,
expenses, and related disclosures. Actual amounts could differ from those
estimates.
Consolidation principles: The consolidated financial statements
------------------------
include the accounts of Modine Manufacturing Company and its majority-
owned subsidiaries. Material intercompany transactions and balances are
eliminated in consolidations. Operations of subsidiaries outside the
United States and Canada are included for periods ending one month prior
to the company's year end in order to ensure timely preparation of the
consolidated financial statements. Investments in affiliated companies
in which ownership exceeds 20 percent are accounted for by the equity
method. The investments are stated at cost plus a proportionate share of
the undistributed net income. The company's share of the affiliates' net
income is reflected in net earnings.
Translation of foreign currencies: Assets and liabilities of foreign
---------------------------------
subsidiaries and equity investments are translated into U.S. dollars at
year-end exchange rates, and income and expense items are translated at
the average exchange rates for the year. Resulting translation adjustments
are reported as a separate component of shareholders' investment.
Translation adjustments relating to countries with highly inflationary
economies and foreign-currency transaction gains or losses are included
in net earnings.
Financial instruments: Foreign-exchange options and forward contracts
---------------------
on foreign currencies are entered into by the company as hedges against the
impact of currency fluctuations on certain sales and purchase transactions
and are not used to engage in speculation. Gains and losses are recognized
when these instruments are settled.
Income taxes: Deferred tax liabilities and assets are determined based
------------
on the difference between the amounts reported in the financial statement
and the tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse.
Earnings per share: In fiscal 1998, the company adopted Statement of
------------------
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share."
Accordingly, basic earnings per share is calculated based on the weighted
average number of common shares outstanding during the year, while diluted
earnings per share is calculated based on the dilutive effect of common
shares that could be issued. All prior-period amounts have been restated
for comparable purposes. Also see Note 7.
<PAGE>
Cash equivalents: For purposes of the cash flows statement, the
----------------
company considers all highly liquid investments with a maturity of three
months or less to be cash equivalents.
Inventories: Inventories are valued at the lower of cost, on a
-----------
first-in, first-out basis, or market value.
Property, plant, and equipment: These assets are stated at cost.
------------------------------
Depreciation is provided using, principally, declining-balance methods
for machinery and equipment, and the straight-line method for buildings
and other assets over their expected useful lives. Maintenance and
repair costs are charged to earnings as incurred. Costs of improvements
are capitalized. Upon the sale or other disposition of an asset, the
cost and related accumulated depreciation are removed from the accounts
and the gain or loss is included in net earnings.
The company adopted SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," at
the beginning of fiscal 1997. This statement requires recognition of
impairment losses for long-lived assets whenever events or changes in
circumstances result in the carrying amount of the assets exceeding the
sum of the expected future cash flows associated with such assets. The
measurement of the impairment losses to be recognized is to be based on
the difference between the fair values and the carrying amounts of the
assets. The effect of the adoption of this policy on April 1, 1996,
was immaterial to the consolidated financial results of the company.
Intangible assets: The excess of cost over fair value of the
-----------------
net assets of businesses acquired is amortized using the straight-
line method primarily over a fifteen-year period. Costs of acquired
patents and product technology are amortized using the straight-line
method over the shorter of their estimated useful life or 15 years.
Environmental expenditures: Environmental expenditures related
--------------------------
to current operations that qualify as property, plant, and equipment
or that substantially increase the economic value or extend the useful
life of an asset are capitalized and all other expenditures are expensed
as incurred. Environmental expenditures that relate to an existing
condition caused by past operations are expensed. Liabilities are
recorded when environmental assessments and/or remedial efforts are
probable and the costs can be reasonably estimated.
Stock-based compensation: The company has elected to account for
------------------------
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly, compensation cost for stock options is
measured at the excess, if any, of the quoted market price of the company
stock at the date of the grant over the amount an employee must pay to
acquire the stock. Also see Note 18.
Accounting principles to be adopted: In 1997, the Financial
-----------------------------------
Accounting Standards Board (FASB) issued SFAS No. 130, "Reporting
<PAGE>
Comprehensive Income," and SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information," and, in 1998, issued SFAS
No. 132, "Employers' Disclosures About Pensions and Other Postretirement
Benefits." These standards, which the company will adopt in fiscal
1999, expand or modify disclosures and, accordingly, will not have
an effect on the company's liquidity, financial position, or results
of operations.
Reclassifications: Certain prior-year amounts have been reclassified
-----------------
to conform with the fiscal-1998 presentation.
2 Research and development costs
------------------------------
Research and development costs charged to operations totaled
$16,816,000 in fiscal 1998, $16,804,000 in fiscal 1997, and
$14,512,000 in fiscal 1996.
3 Pension plans
-------------
Domestic qualified defined-benefit plans: The company has several
----------------------------------------
noncontributory, defined-benefit, pension plans that cover most of its
domestic employees. The benefits provided are based primarily on years
of service and average compensation for the salaried plans and on that
same basis or a monthly retirement benefit amount for various hourly
plans. Funding policy for domestic qualified plans is to contribute
annually not less than the minimum required by applicable law and
regulation, nor more than the maximum amount that can be deducted
for federal income-tax purposes. Fiscal-1996 results include plans
of the company's Signet acquisition and the effects of the Dowagiac
divestiture.
Net pension credits, computed using the projected unit credit method,
include the following components:
(In thousands)
- ----------------------------------------------------------------------------
Years ended March 31 1998 1997 1996
- ----------------------------------------------------------------------------
Benefits earned during the year $ 4,638 $ 4,162 $ 4,035
Interest accrued on benefits
earned in prior years 8,403 7,317 6,720
Actual return on assets (29,206) (12,263) 2,941
Net amortization and deferral 14,653 (1,793) (16,982)
- ----------------------------------------------------------------------------
Net pension (credit) $ (1,512) $ (2,577) $ (3,286)
- ----------------------------------------------------------------------------
Actuarial assumptions:
Discount rate (to calculate
present value of future benefits) 7.5% 7.5% 7.5%
Average salary-growth rate 5.0% 5.5% 5.5%
Return on plan assets 9.0% 9.0% 9.0%
- ----------------------------------------------------------------------------
<PAGE>
Funded status of the plans at March 31, 1998 and 1997:
(In thousands)
- ----------------------------------------------------------------------------
Assets exceed Accumulated
accumulated benefits
March 31, 1998 benefits exceed assets
- ----------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested $ (83,376) $(544)
Nonvested (5,561) (301)
------------------------
Accumulated benefit obligation (88,937) (845)
Effect of projected salary increases (31,509) --
------------------------
Projected benefit obligation (120,446) (845)
Less: Plan assets at fair value 186,848 793
------------------------
Plan assets in excess of/(less than)
projected benefit obligation 66,402 (52)
Adjusted for items not yet recognized
in earnings:
Unrecognized net benefit (asset)/obligation
remaining from initial adoption
of FASB Statement No. 87 (366) (2)
Effect of benefit changes on
prior years' service cost 1,443 277
Remaining unrecognized net (gain)/loss (20,582) 114
Adjustment to recognize minimum liability -- (389)
- ----------------------------------------------------------------------------
Prepaid/(accrued) pension expense
included in the balance sheets $ 46,897 $ (52)
- ----------------------------------------------------------------------------
<PAGE>
(In thousands)
- ----------------------------------------------------------------------------
Assets exceed Accumulated
accumulated benefits
March 31, 1997 benefits exceed assets
- ----------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested $ (70,136) $(42)
Nonvested (4,808) --
-------------------------
Accumulated benefit obligation (74,944) (42)
Effect of projected salary increases (30,351) --
-------------------------
Projected benefit obligation (105,295) (42)
Less: Plan assets at fair value 160,290 36
-------------------------
Plan assets in excess of/(less than)
projected benefit obligation 54,995 (6)
Adjusted for items not yet recognized
in earnings:
Unrecognized net benefit (asset)/obligation
remaining from initial adoption
of FASB Statement No. 87 (440) --
Effect of benefit changes on
prior years' service cost 1,256 --
Remaining unrecognized net (gain)/loss (12,232) 13
Adjustment to recognize minimum liability -- (13)
-------------------------
Prepaid/(accrued) pension expense
included in the balance sheets $ 43,579 $ (6)
- ----------------------------------------------------------------------------
As of March 31, 1998 and 1997, the plans held 1,624,000 and
1,870,000 shares, respectively, of Modine common stock.
Defined-benefit plans of foreign subsidiaries: The company's
---------------------------------------------
foreign subsidiaries have defined-benefit plans and/or termination
indemnity plans covering substantially all of their eligible employees.
The benefits under these plans are based on years of service and final
average compensation levels. Funding is limited to statutory requirements.
(In thousands)
- ----------------------------------------------------------------------------
Years ended March 31 1998 1997
- ----------------------------------------------------------------------------
Expense recognized $ 1,150 $ 913
Accumulated benefit obligation 10,774 10,155
Projected benefit obligation 12,197 11,431
Fair value of plan assets 1,128 601
- ----------------------------------------------------------------------------
Actuarial assumptions:
Discount rate (to calculate present
value of future benefits) 5.5%-12.5% 7.5%-12.5%
Average salary-growth rate 3.0%-8.5% 3.0%-8.5%
- ----------------------------------------------------------------------------
<PAGE>
Domestic qualified defined-contribution plans: The company has
---------------------------------------------
several 401(k) and savings plans that cover most of its domestic
employees. These plans provide company matching under various
formulas. The cost of the company's contributions to the plans
(including stock purchase plans discussed in Note 18) for fiscal
1998, 1997, and 1996 were $6,666,000, $6,424,000, and $6,454,000,
respectively.
4 Postretirement benefits other than pensions
-------------------------------------------
The company and certain of its domestic subsidiaries provide
selected healthcare and life-insurance benefits for retired
employees. Designated employees may become eligible for those
benefits when they retire.
Postretirement benefit expense:
(In thousands)
- ----------------------------------------------------------------------------
Years ended March 31 1998 1997 1996
- ----------------------------------------------------------------------------
Service cost $ 310 $ 322 $ 293
Interest cost 1,624 1,653 1,525
Net amortization (560) (522) (582)
- ----------------------------------------------------------------------------
Net periodic postretirement
benefit cost $1,374 $1,453 $1,236
- ----------------------------------------------------------------------------
Postretirement benefit liability:
(In thousands)
- ---------------------------------------------------------------------------
March 31 1998 1997
- ---------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $17,055 $17,147
Fully eligible active plan participants 1,742 1,761
Other active plan participants 3,908 4,212
-----------------
Total accumulated postretirement benefit obligation 22,705 23,120
Net gains/(losses) 1,042 510
Unamortized net reduction in obligation 3,036 3,509
- ----------------------------------------------------------------------------
Accrued postretirement benefit obligation $26,783 $27,139
- ----------------------------------------------------------------------------
These plans are unfunded. The company periodically amends the plans
changing the contribution rate of retirees and the amounts and forms of
coverage. An annual limit on the company's liability (a "cap") was
established for most plans between fiscal 1994 and fiscal 1996 after
original recognition of the liability in fiscal 1993. It maximizes
future costs at 200 percent of the company's then current cost. These
changes reduced the accrued obligation and the reduction is being
amortized as a component of the benefit cost. The Signet acquisition
added to the fiscal 1996 obligation while the Dowagiac divestiture
reduced it.
<PAGE>
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.5 percent at both March 31, 1998 and 1997. The
projected healthcare costs trend rates used were 9 percent for both fiscal
1998 and 1997, and 10-11 percent for fiscal 1996, trending down gradually to
5 percent over several years. The effects of these assumption changes on
accrued postretirement benefit cost and related expense are being amortized.
The healthcare-cost trend-rate assumption can have a significant effect
on the amounts reported. Increasing the assumed healthcare-cost trend rates
by one percentage point in each year would have increased the accumulated
postretirement benefit obligation by $1,406,000 as of March 31, 1998, and
the net periodic postretirement benefit cost for fiscal 1998 by $110,000.
5 Leases
------
The company leases various facilities and equipment. Rental
expense under operating leases totaled $10,912,000 in fiscal 1998,
$11,876,000 in fiscal 1997, and $12,211,000 in fiscal 1996.
Future minimum rental commitments at March 31, 1998, under
noncancelable leases were:
(In thousands)
- ----------------------------------------------------------------------------
Years ending March 31
- ----------------------------------------------------------------------------
1999 $ 6,757 2002 $ 937
2000 4,788 2003 586
2001 3,008 2004 and beyond 2,550
- ----------------------------------------------------------------------------
Total future minimum rental commitments $18,626
- ----------------------------------------------------------------------------
6 Income taxes
------------
Income-tax expense attributable to income from operations consists of:
(In thousands)
- -----------------------------------------------------------------------------
Years ended March 31 1998 1997 1996
- -----------------------------------------------------------------------------
Federal:
Current $26,913 $25,171 $29,497
Deferred (55) 265 (930)
State:
Current 4,008 3,769 5,646
Deferred 22 134 (49)
Foreign:
Current 12,506 6,692 4,613
Deferred 107 (2,011) (1,027)
- ----------------------------------------------------------------------------
Totals charged to earnings $43,501 $34,020 $37,750
- ----------------------------------------------------------------------------
Income-tax expense attributable to income from operations
differed from the amounts computed by applying the statutory
U.S. federal income-tax rate as a result of the following:
<PAGE>
- ----------------------------------------------------------------------------
Years ended March 31 1998 1997 1996
- ----------------------------------------------------------------------------
Statutory federal tax 35.0% 35.0% 35.0%
State taxes, net of federal benefit 2.3 2.6 3.6
Taxes on non-U.S. earnings
and losses 0.2 (2.2) 0.7
Other -- (0.6) (1.2)
- ----------------------------------------------------------------------------
Effective tax rate 37.5% 34.8% 38.1%
- ----------------------------------------------------------------------------
The significant components of deferred income-tax expense
attributable to income from operations are as follows:
(In thousands)
- ----------------------------------------------------------------------------
Years ended March 31 1998 1997 1996
- ----------------------------------------------------------------------------
Pensions $ 1,617 $ 1,473 $ 1,790
Depreciation 1,201 627 (260)
Inventories 432 161 (812)
Employee benefits (1,357) (994) (727)
Other (1,819) (2,879) (1,997)
- ----------------------------------------------------------------------------
Totals charged to earnings $ 74 $(1,612) $(2,006)
- ----------------------------------------------------------------------------
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as
follows:
(In thousands)
- ----------------------------------------------------------------------------
March 31 1998 1997
- ----------------------------------------------------------------------------
Deferred tax assets:
Accounts receivable $ 1,421 $ 1,174
Inventories 3,401 3,815
Plant and equipment 1,127 552
Employee benefits 20,067 18,677
Net operating-loss and tax-credit carry-forwards 6,144 5,734
Other 7,380 7,590
-----------------------
Total gross deferred assets 39,540 37,542
Less valuation allowance 3,947 4,127
-----------------------
Net deferred tax assets 35,593 33,415
-----------------------
Deferred tax liabilities:
Pension 18,585 17,299
Plant and equipment 9,376 8,722
Other 1,497 1,098
-----------------------
Total gross deferred tax liabilities 29,458 27,119
- ----------------------------------------------------------------------------
Net deferred tax asset $ 6,135 $ 6,296
- ----------------------------------------------------------------------------
<PAGE>
The valuation allowance for deferred tax assets as of April 1, 1997, was
$4,127,000. The allowance decreased by $180,000 during the year and relates
primarily to certain, foreign, net-operating-loss carry-forward activities.
At March 31, 1998, the company had net foreign-tax-credit carry-forwards
of $96,000 that will expire in 1999. Tax-loss carry-forwards of $12,514,000
exist in jurisdictions outside the United States. If not utilized against
taxable income, $171,000 and $208,000 of tax losses will expire in 2001 and
2002 respectively. The remaining $12,135,000 of tax losses may be carried
forward indefinitely.
The undistributed earnings of certain foreign subsidiaries and joint-
venture companies totaled $70,016,000 as of March 31, 1998. The earnings
are considered permanently reinvested in foreign operations and, therefore,
no provision has been made for any U.S. taxes.
7 Earnings per share
------------------
The computational components of basic and diluted earnings per
share are as follows:
(In thousands except per-share amounts)
- ----------------------------------------------------------------------------
Years ended March 31 1998 1997 1996
- ----------------------------------------------------------------------------
Net earnings per share of common stock:
Basic $2.44 $2.14 $2.07
Assuming dilution 2.39 2.10 2.03
Numerator:
Income available to common
shareholders $72,471 $63,763 $61,399
Denominator:
Weighted average shares
outstanding - basic 29,726 29,833 29,670
Effect of dilutive securities -
options 563 520 596
---------------------------
Weighted average shares
outstanding - assuming dilution 30,289 30,353 30,266
There were outstanding options to purchase
common stock excluded from the dilutive
calculation because their prices exceeded
the average market price for the earnings
statement periods as follows:
Average market price per share $32.63 $26.27 $30.29
Number of shares 318 516 45
- ----------------------------------------------------------------------------
8 Cash and cash equivalents
-------------------------
Under the company's cash management system, certain cash balances
reflect credit balances to the extent that checks written have not yet
been presented for payment. These credit balances, included in accounts
payable, were approximately $10,002,000, $10,732,000, and $10,046,000 at
March 31, 1998, 1997, and 1996, respectively.
<PAGE>
All the short-term investments at March 31, 1998, 1997, and 1996, were
of a duration of less than three months and were treated as cash equivalents,
which approximate fair value.
9 Inventories
-----------
Inventories include:
(In thousands)
- ----------------------------------------------------------------------------
March 31 1998 1997
- ----------------------------------------------------------------------------
Raw materials $ 41,164 $ 41,592
Work in process 41,231 37,317
Finished goods 70,279 63,206
- ----------------------------------------------------------------------------
Total inventories $152,674 $142,115
- ----------------------------------------------------------------------------
10 Property, plant, and equipment
------------------------------
Property, plant, and equipment is composed of:
(In thousands)
- ----------------------------------------------------------------------------
March 31 Depreciable lives 1998 1997
- ----------------------------------------------------------------------------
Land --- $ 6,016 $ 7,306
Buildings and improvements 10-40 years 119,517 112,353
Machinery and equipment 3-12 years 268,157 251,655
Office equipment 5-14 years 36,584 37,360
Transportation equipment 3-7 years 17,181 17,007
Construction in progress --- 63,413 33,233
-------------------
510,868 458,914
Less accumulated depreciation 262,615 248,799
- ------------------------------------------------------------------------
Net property, plant, and equipment $248,253 $210,115
- ----------------------------------------------------------------------------
Depreciation expense was $35,192,000, $35,288,000, and $34,962,000
for the fiscal years ended 1998, 1997, and 1996, respectively.
11 Acquisitions and divestiture
----------------------------
Acquisitions: Effective January 1, 1998, the company acquired the
------------
business, assets, and certain liabilities of Sun Technology Corporation,
located in Shelby Township, Michigan. Sun Technology manufactures Ray-Tec
infrared heaters for commercial, industrial, and residential buildings.
The acquisition purchase price of $3,173,000 was paid for with cash and
a promissory note for $320,000. Goodwill created by the acquisition was
$2,226,000 and is being amortized over 15 years on a straight-line basis.
The investment is being accounted for by the purchase method. This
investment did not have a material effect on the consolidated results
of operations and, accordingly, pro-forma information is not presented.
<PAGE>
The results of operations are included in the consolidated financial
statements since the date of acquisition.
On October 31, 1996, the company, through its wholly owned
subsidiary, Modine GmbH, purchased 41.33 percent of Constructions
Mecaniques Mota, S.A. (CMM), based near Marseilles in Provence, France.
CMM produces tube-bundle oil coolers for truck, industrial, and marine
engines. Major European vehicle manufacturers are among its customers.
The purchase price of $4,236,000 was paid for by using an existing
unsecured revolving credit arrangement. Goodwill recorded as part of
the investment was $2,476,000 and is being amortized on a straight-line
basis over 15 years. The investment is being accounted for under the
equity method.
In the first quarter of fiscal 1996, the company made two small
acquisitions. Effective April 1, 1995, the company, through its wholly
owned subsidiary NRF Holding B.V., acquired Radiadores Montana S.A.
based in Granada, Spain. Montana is a manufacturer and distributor to
the automotive aftermarket, producing 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 1995, 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 and also serves original-
equipment manufacturers of vehicles in Mexico.
As of July 31, 1995, the company acquired the business, assets,
and certain liabilities of the Signet Systems Division from The Equion
Corporation. The acquisition included the main plant in Harrodsburg,
Kentucky, an operation in Goch, Germany, and a sales and engineering
office in Detroit, Michigan. Signet, now operating as Modine Climate
Systems Inc., is a full-service supplier of climate-control systems
and components to the automotive, truck, and off-highway vehicle
markets in North America and Europe.
The combined adjusted purchase price of all the fiscal-1996
acquisitions totaled $64,210,000 and was paid for with cash provided
by operations, with new and existing unsecured revolving credit
arrangements, and promissory notes to Equion Corporation totaling
$5,000,000. Combined goodwill and other intangibles created by the
acquisitions were $41,187,000 and $14,000 respectively. Goodwill is
being amortized on a straight-line basis over 15 years.
The results of operations are included in the consolidated
financial statements since the respective effective dates of
acquisition. The majority-owned foreign operations are reported
using a one-month delay, which is consistent with the company's
policy for reporting operations outside the United States and
Canada. All of the acquisitions made in fiscal 1996 have been
accounted for using the purchase method. The company had used
the equity method to account for its interest in Radinam S.A.
prior to majority ownership. The company continues to use the
plants, machinery and equipment, and other assets acquired in
these acquisitions for the manufacture of heat-transfer products.
Details of businesses acquired in purchase transactions were
as follows:
<PAGE>
(In thousands)
- --------------------------------------------------------------------------
Year ended March 31 1996
- --------------------------------------------------------------------------
Value of assets acquired, including intangibles,
excluding cash acquired of $2,412 $ 89,096
Liabilities assumed and created (29,036)
Equity investment in affiliates (3,262)
- --------------------------------------------------------------------------
Net cash paid for acquisitions $ 56,798
- --------------------------------------------------------------------------
Divestiture: In October 1995, the company completed the sale of
-----------
its copper-extrusion business in Dowagiac, Michigan, to National Tube
Holding Company, Inc., of Birmingham, Alabama. The company recognized
a pretax gain of $5,009,000, including $1,430,000 from the curtailment
and settlement of certain pension and benefit obligations, negotiated
subsequent to the sale.
On a pro-forma basis, the unaudited consolidated results of
operations would have been as follows had the acquisitions and disposal
made in fiscal 1996, occurred on April 1, 1994:
(Dollars in thousands, except per-share amounts)
- ----------------------------------------------------------------------------
Year ended March 31 (unaudited) 1996
- ----------------------------------------------------------------------------
Net sales $1,001,007
Net earnings 59,807
Net earnings per share:
Basic $2.02
Assuming dilution 1.98
- ----------------------------------------------------------------------------
The pro-forma financial information presented above is for informational
purposes only and does not necessarily reflect the results of operations that
would have occurred had the divestiture and acquisitions, completed in fiscal
1996, taken place on the date assumed above, nor are those results necessarily
indicative of the results of future combined operations.
12 Intangible assets
-----------------
Intangibles include:
(In thousands)
- ----------------------------------------------------------------------------
March 31 1998 1997
- ----------------------------------------------------------------------------
Goodwill $67,020 $66,644
Patents and product technology 8,389 8,389
Other intangibles 1,096 800
---------------------
76,505 75,833
Less accumulated amortization 17,150 12,885
- ----------------------------------------------------------------------------
Net intangible assets $59,355 $62,948
- ----------------------------------------------------------------------------
<PAGE>
Amortization expense for intangible assets was $4,761,000, $5,022,000,
and $3,574,000 for the fiscal years ended 1998, 1997, and 1996, respectively.
13 Deferred charges and other noncurrent assets
--------------------------------------------
Deferred charges and other noncurrent assets include:
(In thousands)
- ----------------------------------------------------------------------------
March 31 1998 1997
- ----------------------------------------------------------------------------
Prepaid pension costs - qualified and
nonqualified plans $48,086 $44,539
Other noncurrent assets 1,771 1,714
- ----------------------------------------------------------------------------
Total deferred charges and other
noncurrent assets $49,857 $46,253
- ----------------------------------------------------------------------------
14 Indebtedness
------------
Long-term debt at March 31, 1998 and 1997, includes:
(Dollars in thousands)
- ------------------------------------------------------------------------------
Fiscal
Interest rate at year of
Type of issue March 31, 1998 maturity 1998 1997
- ------------------------------------------------------------------------------
Denominated in U.S. dollars:
Fixed rate -
Notes -- $ 9,600
Revenue bonds 7.50% 2003 $ 1,450 1,800
Variable rate -
Notes 6.92-8.50% 1999-2000 1,870 4,000
Weighted average
interest rate 7.23%
Revenue bonds 3.55%-3.75% 2008-2016 5,940 5,940
Weighted average
interest rate 3.65%
Denominated in foreign currency:
Fixed rate -
Notes and other debt 3.50%-11.00% 2004-2006 1,901 2,051
Weighted average
interest rate 3.90%
Variable rate -
Notes and other debt 1.01%-7.00% 2000-2004 81,261 75,865
Weighted average
interest rate 3.95%
----------------
92,422 99,256
Capital lease obligation -- 2
----------------
92,422 99,258
Less current portion 2,835 14,061
- -----------------------------------------------------------------------------
Total $89,587 $85,197
- -----------------------------------------------------------------------------
<PAGE>
Certain of the company's loan agreements limit the use of retained
earnings for the payment of cash dividends and the acquisition of treasury
stock. Under the most restrictive, $165,700,000 was available for these
purposes at March 31, 1998. (However, these restricted payments may not
exceed $30,000,000 in any fiscal year.) Other loan agreements give certain
existing unsecured lenders security equal to any future secured borrowing.
At March 31, 1998, the carrying value of the company's long-term debt
approximates fair value.
Long-term debt matures as follows:
(In thousands)
- ----------------------------------------------------------------------------
Years ending March 31
- ----------------------------------------------------------------------------
1999 $ 2,835 2002 $ 661
2000 24,549 2003 22,160
2001 14,560 2004 and beyond 27,657
- ----------------------------------------------------------------------------
The company maintains credit agreements with banks in the United
States and abroad. The foreign unused lines of credit at March 31, 1998,
were approximately $10,688,000, while the parent company had approximately
$3,294,000 available under a domestic multi-currency revolving credit
agreement. A maximum of $20,500,000 in short-term bank borrowings were
outstanding during the year ended March 31, 1998. The weighted average
interest rate on short-term borrowings was 5.60 percent at March 31, 1998,
and 3.55 percent at March 31, 1997.
Interest expense charged to earnings was as follows:
(In thousands)
- ----------------------------------------------------------------------------
Years ended March 31 1998 1997 1996
- ----------------------------------------------------------------------------
Gross interest cost $4,687 $5,483 $7,116
Capitalized interest on major
construction projects (677) (511) (291)
- ----------------------------------------------------------------------------
Interest expense $4,010 $4,972 $6,825
- ----------------------------------------------------------------------------
15 Foreign-exchange contracts/derivatives
--------------------------------------
The company uses derivative financial instruments in a limited
way as a tool to manage the company's financial risk. Their use
is restricted primarily to hedging assets and obligations
already held by the company and they are used to protect cash
of the company rather than generate income or engage in
speculative activity. Leveraged derivatives are prohibited by
company policy.
The company from time to time enters into foreign-currency-
exchange contracts, generally with terms of 90 days or less, to
hedge specific foreign-currency-denominated transactions. The
effect of this practice is to minimize the impact of foreign-
exchange-rate movements on the company's operating income. The
<PAGE>
company's foreign-currency-exchange contracts do not subject the
company to risk due to exchange-rate movements because gains and
losses on these contracts offset gains and losses on the assets
and liabilities being hedged.
As of March 31, 1998 and 1997, the parent company had
approximately $2,819,000 and $3,498,000, respectively, in
outstanding forward foreign-exchange contracts denominated in
French francs. The difference between these contracts' values
and the fair value of these instruments in the aggregate was not
material. Certain subsidiaries have transactions in currencies
other than their functional currencies and, from time to time,
enter into forward and option contracts to hedge the purchase of
inventory or to sell nonfunctional currency receipts. Non-U.S.
dollar financing transactions through intercompany loans or local
borrowings in the corresponding currency generally are effective
as hedges of long-term investments. See also Note 14.
16 Other noncurrent liabilities
----------------------------
Other noncurrent liabilities include:
(In thousands)
- --------------------------------------------------------------------------
March 31 1998 1997
- --------------------------------------------------------------------------
Postretirement benefits other
than pensions $25,272 $25,718
Pensions 12,186 12,558
Other 2,518 2,464
- --------------------------------------------------------------------------
Total other noncurrent liabilities $39,976 $40,740
- --------------------------------------------------------------------------
17 Shareholder rights plan
-----------------------
The company has a shareholder rights plan to protect against
coercive takeover tactics. Under the plan, each share of the company's
common stock carries one right that entitles the holder to purchase a
unit of 1/100 Preferred Series A Participating Stock at $95.00 per unit.
The rights are not currently exercisable but will become exercisable
10 days after a shareholder has acquired 20 percent or more, or has
commenced a tender or exchange offer for 30 percent or more, of the
company's common stock. In the event of certain mergers, sales of assets,
or self-dealing transactions involving a 20-percent-or-more shareholder,
each right not owned by such 20-percent-or-more holder will be modified
so that it will then be exercisable for common stock having a market
value of twice the exercise price of the right. The rights are redeemable
in whole by the company, at a price of $0.0125 per right, at any time
before 20 percent or more of the company's common stock has been acquired.
The rights expire on October 27, 2006, unless previously redeemed.
18 Stock option, award, and purchase plans
---------------------------------------
Stock option and award plans: In July of 1985 and 1994,
shareholders approved plans providing for the granting of options to
<PAGE>
officers, other key employees, and to non-employee directors to
purchase common stock of the company. Options granted under the plans,
which vest immediately, are either nonqualified or incentive stock
options and carry a price equal to the market price on the date of
grant. Both incentive stock options and nonqualified stock options
terminate 10 years after date of grant.
The 1985 and 1994 Incentive Stock Plans also provide for the
granting of stock awards. Restricted stock awards were granted
for 25,000, 52,000, and 50,000 shares in fiscal 1998, 1997, and
1996, respectively. Shares are awarded at no cost to the
employee and are placed in escrow until certain employment
restrictions lapse. The value of shares awarded is amortized
over the seven-year restriction period. The amounts charged to
operations in fiscal 1998, 1997, and 1996 were $1,814,000,
$1,194,000, and $1,105,000, respectively.
Following is a summary of incentive and nonqualified option
activity under the plans.
- ---------------------------------------------------------------------------
Shares Weighted-average
(in thousands) exercise price per share
- ---------------------------------------------------------------------------
Outstanding March 31, 1995 1,766 $16.74
- ---------------------------------------------------------------------------
Granted 313 24.28
Exercised (143) 9.93
- ---------------------------------------------------------------------------
Outstanding March 31, 1996 1,936 18.46
- ---------------------------------------------------------------------------
Granted 312 25.33
Exercised (163) 8.35
- ---------------------------------------------------------------------------
Outstanding March 31, 1997 2,085 20.27
- ---------------------------------------------------------------------------
Granted 318 33.56
Exercised (323) 13.33
- ---------------------------------------------------------------------------
Outstanding March 31, 1998 2,080 $23.38
- ---------------------------------------------------------------------------
Options outstanding and exercisable as of March 31, 1998:
- -----------------------------------------------------------------------------
Weighted- Weighted-
average average exercise Shares
Range of exercise prices remaining life price per share (in thousands)
- -----------------------------------------------------------------------------
$7.875 - 14.99 2.75 $10.59 393
15.00 - 24.99 6.00 20.18 566
25.00 - 34.99 8.00 29.49 1,121
- -----------------------------------------------------------------------------
Total outstanding and exercisable $23.38 2,080
- -----------------------------------------------------------------------------
A further 2,177,000 shares were available for the granting of
additional options or awards at March 31, 1998.
<PAGE>
The company has elected to continue to measure compensation
cost using the intrinsic value method of accounting prescribed
by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." Accordingly, no compensation cost
has been recognized related to its stock option plans. If the
fair-value based method of accounting for the 1998, 1997, and
1996 stock option grants had been applied in accordance with
SFAS No. 123, "Accounting for Stock-Based Compensation," the
company's net earnings and net earnings per share would have
been reduced as summarized below:
(Dollars in thousands, except per share amounts)
- ----------------------------------------------------------------------------
Years ended March 31 1998 1997 1996
- ----------------------------------------------------------------------------
Net earnings as reported $72,471 $63,763 $61,399
Net earnings pro forma 69,597 61,375 59,205
Net earnings per share (basic)
as reported $2.44 $2.14 $2.07
Net earnings per share (basic)
pro forma 2.34 2.06 2.00
- ----------------------------------------------------------------------------
The following assumptions were used to compute the fair value
of the option grants in fiscal 1998, 1997, and 1996 using the
Black-Scholes option-pricing model: a risk-free interest rate
of 5.43 percent, 6.26 percent, and 5.41 percent, respectively;
stock volatility of 27.0 percent, 30.0 percent, and 31.0 percent,
respectively; a dividend yield of 2.2 percent, 2.2 percent, and
2.4 percent, respectively; and, for each of the three years,
expected option lives of five years.
Stock purchase plans: The company also has adopted several
--------------------
defined-contribution stock purchase plans. The plans permit
employees to make monthly investments at current market prices
based on a specified percentage of compensation. The company
matches a portion of the employees' contribution.
Activity in the plans for fiscal 1998, 1997, and 1996 resulted
in the purchase of 577,000, 670,000, and 590,000 shares of company
stock, respectively. These purchases were made from the employee
pension plan trusts, private purchases, and treasury shares. It is
anticipated that future purchases will be made from all three
sources at the discretion of the plans' administrative committees.
Costs of the company's contributions to the plans for fiscal 1998,
1997, and 1996 were $6,179,000, $5,930,000, and $6,110,000,
respectively.
19 Segment and geographic area information
---------------------------------------
The company operates predominantly in a single industry, the
production and sale of heat-transfer equipment. Information
about the company by geographic operating area is presented
below:
<PAGE>
(In thousands)
- ----------------------------------------------------------------------------
Years ended March 31 1998 1997 1996
- ----------------------------------------------------------------------------
Sales to unaffiliated customers from
company facilities located in:
United States $ 719,221 $682,533 $684,289
Europe 290,915 291,945 285,800
Canada and Latin America 30,282 24,568 20,404
- ----------------------------------------------------------------------------
Net sales $1,040,418 $999,046 $990,493
- ----------------------------------------------------------------------------
Sales between geographic areas:
United States $ 10,774 $ 8,359 $ 4,615
Europe 349 367 125
Canada and Latin America 11,710 6,208 4,021
- ----------------------------------------------------------------------------
Total inter-area sales $ 22,833 $ 14,934 $ 8,761
- ----------------------------------------------------------------------------
Operating profit or loss:
United States $ 91,096 $ 90,251 $ 97,113
Europe 32,169 15,998 8,861
Canada and Latin America 5,284 2,775 917
Corporate, eliminations,
and other (12,577) (11,241) (7,742)
- ----------------------------------------------------------------------------
Earnings before income taxes $ 115,972 $ 97,783 $ 99,149
- ----------------------------------------------------------------------------
Identifiable assets:
United States $ 530,181 $479,821 $476,390
Europe 192,863 177,990 169,211
Canada and Latin America 30,405 22,294 24,932
Corporate, eliminations,
and other 5,575 14,850 1,303
- ----------------------------------------------------------------------------
Total assets $ 759,024 $694,955 $671,836
- ----------------------------------------------------------------------------
Included in the United States sales to unaffiliated customers
are export sales of $131,504,000, $117,906,000, and $127,335,000, in
fiscal 1998, 1997, and 1996, respectively, the majority to customers
in Europe. During the last three fiscal years, no single customer has
accounted for more than 10 percent of revenues.
20 Contingencies and litigation
----------------------------
In the normal course of business, the company and its subsidiaries
have been named as defendants in various lawsuits and enforcement
proceedings in which claims are asserted against the company by
private parties, the Occupational Safety and Health Administration,
the Environmental Protection Agency, other governmental agencies,
and others. The company is also subject to other liabilities that
arise in the ordinary course of its business. Based on the information
available, the company does not expect that any unrecorded liability
related to these matters would have a material effect on the
consolidated financial statements.
<PAGE>
In November 1991, the company filed a lawsuit against Mitsubishi
Motor Sales of America, Inc., and Showa Aluminum Corporation, alleging
infringement of the company's patent on parallel-flow air-conditioning
condensers. The suit seeks an injunction to prohibit continued
infringement, an accounting for damages, a trebling of such damages
for willful infringement, and reimbursement of attorneys' fees. In
December 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 August 1997, the ITC issued an Order
excluding from U.S. import Showa condensers that infringe Modine
Manufacturing Company's parallel-flow patent. The ITC's Order covers
condensers, their parts, and certain products including them, such as
air-conditioning kits and systems. It directs the U.S. Customs Service
to exclude from importation into the United States such products
manufactured by Showa Aluminum Corporation of Japan and Showa Aluminum
Corporation of America. The decision is based on a Modine U.S. patent
covering condensers with tube hydraulic diameters less than 0.04822
inches. The Showa companies must certify to Customs officials that
any condenser items imported by them do not infringe Modine's parallel-
flow patent. The Showa companies must also file annual reports with the
ITC regarding their sales of Showa parallel-flow condensers in the United
States. The ITC Order has been appealed by Showa to the U.S. Court of
Appeals for the Federal Circuit. In July of 1994, Showa filed a lawsuit
against the company alleging infringement by the company of certain Showa
patents pertaining to condensers. 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 and Showa pertaining
to a newly issued patent on 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. In October of 1997,
Modine was issued a Japanese patent (in spite of opposition by many
parties) covering parallel-flow air-conditioning condensers having tube
hydraulic diameters less than 0.070 inches. A similar patent has been
issued to Modine by the European Patent Office and is currently in the
opposition stage. All legal and court costs associated with these
cases have been expensed as they were incurred.
21 Quarterly financial data (unaudited)
------------------------------------
Quarterly financial data are summarized below:
(In thousands, except per-share amounts)
- ----------------------------------------------------------------------------
Fiscal 1998 quarters ended June Sept. Dec. March
- ----------------------------------------------------------------------------
Net sales $256,923 $260,806 $267,699 $254,990
Gross profit 75,041 75,289 75,585 74,884
Net earnings 18,185 18,229 17,836 18,221
Net earnings per share
of common stock:
Basic $0.61 $0.61 $0.60 $0.62
Assuming dilution 0.60 0.60 0.59 0.60
- ----------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------
Fiscal 1997 quarters ended June Sept. Dec. March
- ----------------------------------------------------------------------------
Net sales $248,514 $254,224 $252,972 $243,336
Gross profit 67,351 69,115 71,104 69,850
Net earnings 16,390 15,654 15,402 16,317
Net earnings per share
of common stock:
Basic $0.55 $0.52 $0.52 $0.55
Assuming dilution 0.54 0.52 0.51 0.53
- ----------------------------------------------------------------------------
<PAGE>
Independent auditors' report
To the Shareholders and Board of Directors
Modine Manufacturing Company
Racine, Wisconsin
We have audited the accompanying consolidated balance sheets
of Modine Manufacturing Company and Subsidiaries as of March 31,
1998 and 1997, and the related consolidated statements of earnings,
shareholders' investment, and cash flows for each of the three years
in the period ended March 31, 1998. These financial statements are
the responsibility of the company's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Modine Manufacturing Company and Subsidiaries
as of March 31, 1998, and 1997, and the consolidated results of
their operations and their cash flows for each of the three years
in the period ended March 31, 1998, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND LLP
Coopers & Lybrand L.L.P.
Chicago, Illinois
April 29, 1998
<PAGE>
EXHIBIT 21
Subsidiaries of the Registrant
The table below indicates each of the Registrant's subsidiaries, each
subsidiary's jurisdiction of incorporation, and the percentage of its
voting securities owned by the Registrant or its subsidiaries.
State or
country of Percentage
incorporation of voting
Subsidiaries: or organization securities Owned by
- ------------ --------------- ----------- --------
Austria Warmetauscher GmbH Austria 100% Registrant
Industrial Airsystems, Inc. Minnesota 100% Registrant
Manufacturera Mexicana de
Partes de Automoviles,
S.A. ("Mexpar") Mexico 100% Registrant<F1>
Modine, Inc. Delaware 100% Registrant
Modine Aftermarket Holdings,
Inc. North Carolina 100% Registrant
Modine Asia K.K. Japan 100% Registrant
Modine of Canada, Ltd. Ontario, Canada 100% Registrant
Modine Climate Systems Inc.<F2> Kentucky 100% Registrant
Modine Export Sales Corp. Barbados 100% Registrant
Modine Foundation, Inc. Wisconsin 100% Registrant
Modine Manufacturing Company
Foundation, Inc. Wisconsin 100% Registrant
Modine of Puerto Rico, Inc. Delaware 100% Registrant
Radman, Inc. Michigan 100% Registrant
TRT Heating Products, Inc. Rhode Island 100% Registrant
Modine Holding GmbH Germany 100% Modine, Inc.
Modine Transferencia de Calor,
SA de CV Mexico 99.6% Modine, Inc.<F3>
NRF BV ("NRF") The Netherlands 100% Modine, Inc.
NRF AS Denmark 100% NRF
NRF BvbA Belgium 100% NRF
NRF Deutschland GmbH Germany 100% NRF
NRF France SarL France 100% NRF
NRF GmbH Austria 100% NRF
NRF Italia Italy 100% NRF
NRF Ltd. England 100% NRF
NRF SP ZOO Poland 100% NRF
NRF Switzerland AG Switzerland 100% NRF
Radiadores Montana S.A. Spain 100% NRF
Skopimex BV The Netherlands 100% NRF
Hungaro Langerer Gep. Kft. Hungary 100% Modine Holding
GmbH
Langerer & Reich GmbH ("L&R") Germany 100% Modine Holding
GmbH
Langerer & Reich
Automobiltechnik GmbH Germany 100% Modine Holding
GmbH
- -----------------------------
<F1> One share certificate of Mexpar is held by Modine, Inc.
<F2> Formerly known as Signet Systems, Inc.
<F3> Balance of voting securities held by the Registrant.
<PAGE>
Exhibit 21 continued
Modine GmbH Germany 100% Modine Holding
GmbH
Modine Aluminiumkuhler-
systeme GmbH Germany 100% Modine Holding
GmbH
Modine Kirchentellinsfurt
GmbH Germany 100% Modine Holding
GmbH
Modine Montage GmbH Germany 100% Modine Holding
GmbH
Modine S.r.l. Italy 100% Modine Holding
GmbH
Modine Uden B.V. The Netherlands 100% Modine Holding
GmbH
Modine Climate Systems
GmbH<F4> Germany 100% Modine Climate
Systems Inc.
- ----------------------------
<F4> Formerly known as Signet Systems GmbH
<PAGE>
EXHIBIT 23
Coopers
& Lybrand L.L.P.
Consent of Independent Accountants
We consent to the incorporation by reference in the registration
statement of Modine Manufacturing Company and Subsidiaries on Form S-8
(File Numbers 2-63714, 2-86984, 2-87299, 2-86985, 33-1764, 33-58544,
2-55398, 33-66436, 33-66438, 33-66442, 33-66440, 33-54719, 33-54721,
33-54723, 33-54725, 333-29789, and 333-52639) of our reports dated
April 28, 1998 on our audits of the consolidated financial statements
and financial statement schedule of Modine Manufacturing Company and
Subsidiaries as of March 31, 1998 and 1997, and for each of the three
years in the period ended March 31, 1998, which reports are
incorporated by reference in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
June 17, 1998
<PAGE>
<TABLE> <S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-1-1997
<PERIOD-END> MAR-31-1998
<CASH> 36,410
<SECURITIES> 0
<RECEIVABLES> 166,762
<ALLOWANCES> 4,585
<INVENTORY> 152,674
<CURRENT-ASSETS> 393,183
<PP&E> 510,868
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0
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<COMMON> 18,964
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<SALES> 1,040,418
<TOTAL-REVENUES> 1,040,418
<CGS> 739,619
<TOTAL-COSTS> 739,619
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,029
<INTEREST-EXPENSE> 4,010
<INCOME-PRETAX> 115,972
<INCOME-TAX> 43,501
<INCOME-CONTINUING> 72,471
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,471
<EPS-PRIMARY> 2.44<F1>
<EPS-DILUTED> 2.39
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<F1>BASIC EPS -- TO REFLECT ADOPTION OF FASB 128.
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<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-1-1995
<PERIOD-END> MAR-31-1996
<CASH> 17,958
<SECURITIES> 0
<RECEIVABLES> 153,015
<ALLOWANCES> 5,052
<INVENTORY> 150,000
<CURRENT-ASSETS> 351,335
<PP&E> 433,881
<DEPRECIATION> 232,540
<TOTAL-ASSETS> 671,836
<CURRENT-LIABILITIES> 181,031
<BONDS> 87,809
0
0
<COMMON> 18,964
<OTHER-SE> 330,456
<TOTAL-LIABILITY-AND-EQUITY> 671,836
<SALES> 990,493
<TOTAL-REVENUES> 990,493
<CGS> 735,120
<TOTAL-COSTS> 735,120
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (860)
<INTEREST-EXPENSE> 6,825
<INCOME-PRETAX> 99,149
<INCOME-TAX> 37,750
<INCOME-CONTINUING> 61,399
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,399
<EPS-PRIMARY> 2.07<F1>
<EPS-DILUTED> 2.03
<FN>
<F1>BASIC EPS -- TO REFLECT ADOPTION OF FASB 128.
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</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-1-1996
<PERIOD-END> MAR-31-1997
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<SECURITIES> 0
<RECEIVABLES> 153,940
<ALLOWANCES> 4,140
<INVENTORY> 142,115
<CURRENT-ASSETS> 366,142
<PP&E> 458,914
<DEPRECIATION> 248,799
<TOTAL-ASSETS> 694,955
<CURRENT-LIABILITIES> 169,999
<BONDS> 85,197
0
0
<COMMON> 18,964
<OTHER-SE> 366,724
<TOTAL-LIABILITY-AND-EQUITY> 694,955
<SALES> 999,046
<TOTAL-REVENUES> 999,046
<CGS> 721,626
<TOTAL-COSTS> 721,626
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (209)
<INTEREST-EXPENSE> 4,972
<INCOME-PRETAX> 97,783
<INCOME-TAX> 34,020
<INCOME-CONTINUING> 63,763
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,763
<EPS-PRIMARY> 2.14<F1>
<EPS-DILUTED> 2.10
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<F1>BASIC EPS -- TO REFLECT ADOPTION OF FASB 128.
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<RESTATED>
<MULTIPLIER> 1,000
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<FISCAL-YEAR-END> MAR-31-1997
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<RECEIVABLES> 164,193
<ALLOWANCES> 4,975
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<CURRENT-ASSETS> 356,548
<PP&E> 446,571
<DEPRECIATION> 240,029
<TOTAL-ASSETS> 680,864
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0
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<TOTAL-LIABILITY-AND-EQUITY> 680,864
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<TOTAL-REVENUES> 248,514
<CGS> 180,937
<TOTAL-COSTS> 180,937
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (69)
<INTEREST-EXPENSE> 1,302
<INCOME-PRETAX> 25,190
<INCOME-TAX> 8,800
<INCOME-CONTINUING> 16,390
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,390
<EPS-PRIMARY> 0.55<F1>
<EPS-DILUTED> 0.54
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<F1>BASIC EPS -- TO REFLECT ADOPTION OF FASB 128.
</FN>
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<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 9/26/96 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-1-1996
<PERIOD-END> SEP-26-1996
<CASH> 24,581
<SECURITIES> 0
<RECEIVABLES> 161,137
<ALLOWANCES> 4,742
<INVENTORY> 142,516
<CURRENT-ASSETS> 352,854
<PP&E> 456,473
<DEPRECIATION> 245,978
<TOTAL-ASSETS> 681,269
<CURRENT-LIABILITIES> 179,483
<BONDS> 74,259
0
0
<COMMON> 18,964
<OTHER-SE> 353,639
<TOTAL-LIABILITY-AND-EQUITY> 681,269
<SALES> 502,738
<TOTAL-REVENUES> 502,738
<CGS> 365,821
<TOTAL-COSTS> 365,821
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (204)
<INTEREST-EXPENSE> 2,864
<INCOME-PRETAX> 48,819
<INCOME-TAX> 16,775
<INCOME-CONTINUING> 32,044
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,044
<EPS-PRIMARY> 1.07<F1>
<EPS-DILUTED> 1.06
<FN>
<F1>BASIC EPS - TO REFLECT ADOPTION OF FASB 128.
</FN>
</TABLE>
<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 12/26/96 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-1-1996
<PERIOD-END> DEC-26-1996
<CASH> 31,488
<SECURITIES> 0
<RECEIVABLES> 151,764
<ALLOWANCES> 4,803
<INVENTORY> 137,591
<CURRENT-ASSETS> 349,150
<PP&E> 460,370
<DEPRECIATION> 252,545
<TOTAL-ASSETS> 677,762
<CURRENT-LIABILITIES> 155,771
<BONDS> 86,161
0
0
<COMMON> 18,964
<OTHER-SE> 361,814
<TOTAL-LIABILITY-AND-EQUITY> 677,762
<SALES> 755,710
<TOTAL-REVENUES> 755,710
<CGS> 547,563
<TOTAL-COSTS> 547,563
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (68)
<INTEREST-EXPENSE> 4,021
<INCOME-PRETAX> 73,273
<INCOME-TAX> 25,827
<INCOME-CONTINUING> 47,446
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,446
<EPS-PRIMARY> 1.59<F1>
<EPS-DILUTED> 1.57
<FN>
<F1>BASIC EPS -- TO REFLECT ADOPTION OF FASB 128.
</FN>
</TABLE>
<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 6/26/97 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-1-1997
<PERIOD-END> JUN-26-1997
<CASH> 37,380
<SECURITIES> 0
<RECEIVABLES> 169,432
<ALLOWANCES> 4,526
<INVENTORY> 144,024
<CURRENT-ASSETS> 384,163
<PP&E> 472,371
<DEPRECIATION> 257,559
<TOTAL-ASSETS> 716,066
<CURRENT-LIABILITIES> 180,535
<BONDS> 85,872
0
0
<COMMON> 18,964
<OTHER-SE> 377,084
<TOTAL-LIABILITY-AND-EQUITY> 717,066
<SALES> 256,923
<TOTAL-REVENUES> 256,923
<CGS> 181,882
<TOTAL-COSTS> 181,882
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 359
<INTEREST-EXPENSE> 1,135
<INCOME-PRETAX> 29,820
<INCOME-TAX> 11,635
<INCOME-CONTINUING> 18,185
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,185
<EPS-PRIMARY> 0.61<F1>
<EPS-DILUTED> 0.60
<FN>
<F1>BASIC EPS -- TO REFELCT ADOPTION OF FASB 128.
</FN>
</TABLE>
<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 9/26/97 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-1-1997
<PERIOD-END> SEP-26-1997
<CASH> 37,380
<SECURITIES> 0
<RECEIVABLES> 170,040
<ALLOWANCES> 4,690
<INVENTORY> 140,016
<CURRENT-ASSETS> 372,775
<PP&E> 478,400
<DEPRECIATION> 260,197
<TOTAL-ASSETS> 707,610
<CURRENT-LIABILITIES> 170,169
<BONDS> 79,743
0
0
<COMMON> 18,964
<OTHER-SE> 384,377
<TOTAL-LIABILITY-AND-EQUITY> 707,610
<SALES> 517,729
<TOTAL-REVENUES> 517,729
<CGS> 367,399
<TOTAL-COSTS> 367,399
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 622
<INTEREST-EXPENSE> 2,108
<INCOME-PRETAX> 58,248
<INCOME-TAX> 21,834
<INCOME-CONTINUING> 36,414
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,414
<EPS-PRIMARY> 1.22<F1>
<EPS-DILUTED> 1.20
<FN>
<F1>BASIC EPS -- TO REFLECT ADOPTION OF FASB 128.
</FN>
</TABLE>
<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 12/26/97 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-1-1997
<PERIOD-END> DEC-26-1997
<CASH> 30,094
<SECURITIES> 0
<RECEIVABLES> 167,762
<ALLOWANCES> 5,050
<INVENTORY> 141,894
<CURRENT-ASSETS> 374,870
<PP&E> 494,764
<DEPRECIATION> 265,270
<TOTAL-ASSETS> 720,605
<CURRENT-LIABILITIES> 169,635
<BONDS> 81,182
0
0
<COMMON> 18,964
<OTHER-SE> 395,381
<TOTAL-LIABILITY-AND-EQUITY> 720,605
<SALES> 785,428
<TOTAL-REVENUES> 785,428
<CGS> 559,513
<TOTAL-COSTS> 559,513
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 950
<INTEREST-EXPENSE> 2,950
<INCOME-PRETAX> 88,260
<INCOME-TAX> 34,010
<INCOME-CONTINUING> 54,250
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,250
<EPS-PRIMARY> 1.82<F1>
<EPS-DILUTED> 1.79
<FN>
<F1>BASIC EPS -- TO REFLECT ADOPTION OF FASB 128.
</FN>
</TABLE>
EXHIBIT 99
notice
of meeting
and proxy
statement
annual meeting
1998
of shareholders
M O D I N E
<PAGE>
M O D I N E
- -------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS, JULY 15, 1998
TO THE SHAREHOLDERS:
The Annual Meeting of the Shareholders of Modine Manufacturing Company
will be held at the offices of the Company, 1500 DeKoven Avenue, Racine,
Wisconsin, on Wednesday, July 15, 1998, at 9:30 a.m. for the following
purposes:
1. To elect three directors to serve until the Annual Meeting
in 2001.
2. To transact any other business that may properly come before
the meeting or any adjournment thereof.
The transfer books of the Company will not be closed, but only
shareholders of record at the close of business on May 26, 1998, are
entitled to notice of and to vote at this meeting.
In order that your stock may be represented at the meeting, in case
you are not personally present, PLEASE SIGN THE ENCLOSED PROXY AND RETURN
IT IN THE ENCLOSED ENVELOPE.
By order of the Board of Directors
W. E. PAVLICK
W. E. PAVLICK, Secretary
June 5, 1998
YOUR VOTE IS IMPORTANT!
Please date, sign, and return
the enclosed Proxy immediately.
PROXY STATEMENT
<PAGE>
Annual Shareholders' Meeting of Modine Manufacturing Company--1998
- ---------------------------------------------------------------------
GENERAL INFORMATION
The solicitation of the enclosed proxy is made by and on
behalf of the Board of Directors of Modine Manufacturing Company,
1500 DeKoven Avenue, Racine, Wisconsin 53403 (hereinafter called
the "Company") for use at the Annual Meeting of Shareholders of
the Company to be held on July 15, 1998, or at any adjournment
thereof.
A person giving the proxy has the power to revoke it at any
time prior to the exercise thereof by giving notice in writing to
the Secretary of the shareholders' meeting or by oral notice to
the presiding officer during the meeting. Unless revoked,
properly executed proxies will be voted in accordance with the
instructions of the shareholder. If no specific instructions are
given, the shares represented by the proxy will be voted FOR the
election of directors.
With regard to the election of directors, votes may be cast
in favor or withheld; votes that are withheld will be excluded
entirely from the vote and will have no effect.
In their discretion, the proxies are authorized to vote upon
such other business as may come before the meeting. Holders of
record at the close of business on May 26, 1998, are entitled to
one vote for each share of stock held. It is intended that these
proxy materials will be sent to shareholders on or about June 5,
1998. The total number of shares of Common Stock outstanding and
entitled to vote at the meeting is 29,669,543 shares; no
Preferred Stock is currently outstanding. The holders of Common
Stock of the Company do not have cumulative voting rights.
1. ELECTION OF DIRECTORS
The Board of Directors currently consists of ten members.
Pursuant to the By-Laws, Thomas J. Guendel is retiring from
the Board and is not a nominee for election in 1998.
By Board of Directors' action in March, 1998, effective as
of July 15, 1998, the authorized number of directors will be
fixed at nine. The Restated By-Laws of the Company, as amended
in March, 1998, effective as of July 15, 1998, will classify the
Board of Directors into three classes each consisting of three
directors, with each class of directors serving three-year terms
of office. Each class of directors is staggered so that each
expires in succeeding years. This year, the terms of Gary L.
Neale, Richard J. Doyle, and Donald R. Johnson (who was elected
for the first time to the Board of Directors in December, 1997)
expire at the 1998 Annual Meeting of Shareholders and each of
them has been nominated for a new three-year term expiring at the
Annual Meeting in 2001.
Each of these nominees has indicated his willingness to
serve if elected. While it is not anticipated that any of the
<PAGE>
nominees will be unable to take office, if such is the case,
proxies will be voted in favor of such other person or persons as
the Board of Directors may propose to fill the three
directorships. In accordance with the Restated By-Laws, a
director shall hold office until the Annual Meeting for the year
in which his term expires and until his successor shall be
elected and qualify; subject, however, to prior death,
resignation, retirement, disqualification, or removal from
office. Vacancies may be filled by the remaining directors.
The nominees for the Board of Directors, the directors whose
terms will continue, their ages, other directorships, and their
tenure and expiration dates of their terms are set forth on the
following pages:
Nominees to be Elected
- ----------------------
DONALD R. JOHNSON Director since 1997
Mr. Johnson, 56, is President and Chief Executive Officer of
the Company. He is also a director of Grede Foundaries,
Inc. Term to expire in 2001.
GARY L. NEALE Director since 1977
Mr. Neale, 58, is Chairman, President, Chief Executive
Officer, and a director of NIPSCO Industries, Inc.,
Hammond, Indiana, a holding company for gas and electric
utilities and other energy-related subsidiaries. He is also
a director of Chicago Bridge & Iron. Term to expire in 2001.
RICHARD J. DOYLE Director since 1987
Mr. Doyle, 66, is retired. Prior to April 30, 1998, he was
Chief Executive Officer and a director of three private
electrical contracting corporations. Prior to January 1, 1989,
Mr. Doyle was a Vice President of Borg-Warner Corporation,
Chicago, Illinois, a diversified manufacturing and services
company, and President and Chief Executive Officer of
Borg-Warner Automotive, Inc., Troy, Michigan, a subsidiary
of Borg-Warner Corporation. Term to expire in 2001.
Directors Continuing in Service
- -------------------------------
FRANK W. JONES Director since 1982
Mr. Jones, 58, is an independent management consultant,
Tucson, Arizona. He is also a director of Jason
Incorporated, D. T. Industries, Inc., Ingersoll Milling
<PAGE>
Machine Co., Star Cutter Co., Gardner Publications, Inc.,
and General Tool Co. Term to expire in 2000.
DENNIS J. KUESTER Director since 1993
Mr. Kuester, 56, is President of Marshall & Ilsley Corporation
and of M&I Marshall & Ilsley Bank, and Chairman of M&I Data
Services, Inc., a Milwaukee, Wisconsin, bank holding company,
bank, and banking services company, respectively. He is also
a director of M&I Data Services, Inc., M&I Marshall & Ilsley Bank,
Marshall & Ilsley Corporation, Super Steel Products Corp., TYME
Corporation, and Krueger International. Term to expire in 2000.
MICHAEL T. YONKER Director since 1993
Mr. Yonker, 55, is President and Chief Executive Officer of
Portec, Inc., Lake Forest, Illinois, a manufacturer of
material handling equipment. He is also a director of
Woodward Governor Company. Term to expire in 2000.
STUART W. TISDALE Director since 1987
Mr. Tisdale, 69, is the retired Chairman, Chief Executive
Officer, and a director of WICOR, Inc., Milwaukee,
Wisconsin, a holding company whose primary subsidiaries are
Wisconsin Gas Company, a public utility, Sta-Rite
Industries, a manufacturer of pumps and fluid handling
systems, and SHURflow Pump Manufacturing Company, a
manufacturer of small high-performance pumps, valves, motors
and systems. He is also a director of M&I Marshall & Ilsley
Bank, Marshall & Ilsley Corporation, and Twin Disc, Inc.
Term to expire in 1999.
VINCENT L. MARTIN Director since 1992
Mr. Martin, 58, is Chairman, Chief Executive Officer, and a
director of Jason Incorporated, a diversified manufacturing
company based in Milwaukee, Wisconsin. He is also a
director of Crane Manufacturing & Service. Term to expire
in 1999.
RICHARD T. SAVAGE Director since 1989
Mr. Savage, 59, is Chairman of the Board of the Company. He
is also a director of Twin Disc, Inc. and M&I Marshall &
Ilsley Bank. Term to expire in 1999.
<PAGE>
PRINCIPAL SHAREHOLDERS AND SHARE OWNERSHIP OF DIRECTORS AND
EXECUTIVE OFFICERS
Principal Shareholders
- ----------------------
The following table sets forth information based upon the
records of the Company and filings with the Securities and
Exchange Commission ("SEC") as of March 31, 1998, with respect to
each person known to be the beneficial owner of more than five
percent (5%) of any class of the Company's voting securities.
Title Name and Address of Amount and Nature of Percent
of Class Beneficial Ownership Beneficial Ownership of Class
- -------- ---------------------------- ------------------------ --------
Common Administrative Committee of 5,639,249 Power to vote 19.01%
Modine Contributory Employee Plans' stock
Stock Ownership & Investment not voted by
Plans, 1500 DeKoven Avenue, employees
Racine, Wisconsin 53403-2552 owning it
Members: R. L. Hetrick and
D. R. Zakos*
Common Investment Committee of 1,624,021 Power to vote 5.47%
Modine Manufacturing Company and dispose of
Employees' Retirement Trusts, Trusts' stock
1500 DeKoven Avenue, Racine,
Wisconsin 53403-2552.
Members: D. R. Johnson, V. S.
Frangopoulos, A. D. Reid and
W. E. Pavlick*
Common Gabelli Funds, Inc. and 3,118,720 Sole or shared 10.50%
affiliates voting and/or
One Corporate Center power to
Rye, New York 10580-1434** dispose of
stock
- ------------------------------------------------------------------------------
* M&I Marshall and Ilsley Bank is trustee and holder of
record of the Modine Contributory Employee Stock
Ownership and Investment Plans' and Retirement Trusts'
stock and is the escrow agent for participants' stock
under the 1993 through 1998 Stock Award Plans. D. J.
Kuester is president of Marshall & Ilsley Corporation
and of M&I Marshall & Ilsley Bank. M&I Marshall &
Ilsley Corporation and its subsidiaries specifically
disclaim beneficial ownership of stock held by these
plans and trusts.
** Based on a Schedule 13G filed as of March 12, 1998, by
Gabelli Funds, Inc. and affiliates.
The Company knows of no other person or group which is a
beneficial owner of five percent (5%) or more of the Company's
Common Stock.
<PAGE>
Securities Owned by Management
- ------------------------------
The table below reflects, as of March 31, 1998, the number
of shares of Common Stock beneficially owned by each of the
directors of the Company, each of the executive officers named in
the Summary Compensation Table, and the number of shares
beneficially owned by all directors and executive officers of the
Company as a group.
Title Name of Amount and Nature of Percent
of Class Beneficial Owner Beneficial Ownership of Class
- -------- ------------------ -------------------- --------
Common R. J. Doyle* 37,000(a) **
Common T. J. Guendel* 78,808(b) **
Common F. W. Jones* 86,050(a) **
Common D. J. Kuester* 36,000(c) **
Common V. L. Martin* 37,500(d) **
Common G. L. Neale* 48,153(a) **
Common S. W. Tisdale* 51,252(a) **
Common M. T. Yonker* 36,000(a) **
Common R. T. Savage 354,325(e) 1.19%
Common D. R. Johnson 242,959(e)(f) **
Common V. S. Frangopoulos 330,229(e)(f) 1.11%
Common M. G. Baker 244,004(e) **
Common D. B. Rayburn 116,009(e) **
Common All executive officers
and directors as a
group (23 persons) 2,815,095(g) 9.49%
* Non-employee directors have the right to acquire
additional shares of Common Stock (not listed in the
above table) through the exercise of options
automatically granted upon re-election pursuant to the
1994 Stock Option Plan for Non-Employee Directors
discussed on Page 9.
** Denotes less than one percent of shares outstanding.
(a) The 37,000 shares listed for Mr. Doyle include options to
acquire 30,000 shares; the 86,050 shares listed for Mr.
Jones include options to acquire 45,000 shares; the 48,153
<PAGE>
shares listed for Mr. Neale include options to acquire
30,000 shares; the 51,252 shares listed for Mr. Tisdale
include options to acquire 45,000 shares; and the 36,000
shares listed for Mr. Yonker include options to acquire
35,000 shares.
(b) The 78,808 shares listed for Mr. Guendel include options to
acquire 45,000 shares. This number includes 15,308 shares
held by Mr. Guendel's wife.
(c) The 36,000 shares listed for Mr. Kuester exclude shares held
of record by M&I Marshall & Ilsley Bank. See footnote to
the Five Percent Stock Ownership table on Page 6. This
number includes options to acquire 35,000 shares.
(d) The 37,500 shares listed for Mr. Martin include options to
acquire 35,000 shares and include 500 shares held in trusts
for his children with Mr. Martin as trustee.
(e) The 354,325 shares listed for Mr. Savage include options to
acquire 139,126 shares; the 242,959 shares listed for Mr.
Johnson include 2,288 shares held by Mr. Johnson's wife,
options to acquire 145,000 shares, and 31,000 restricted
shares awarded to Mr. Johnson; the 330,229 shares listed for
Mr. Frangopoulos include options to acquire 133,126 shares,
and 17,400 restricted shares awarded to Mr. Frangopoulos;
the 244,004 shares listed for Mr. Baker include options to
acquire 138,698 shares, and 14,280 restricted shares awarded
to Mr. Baker; the 116,009 shares listed for Mr. Rayburn
include options to acquire 86,375 shares, and 17,580
restricted shares awarded to Mr. Rayburn.
All awards listed are pursuant to the 1993 through 1998
Stock Award Plan grants but subject to restrictions that
lapse annually in fifths over a period commencing at the end
of the second year from the date of grant.
(f) In addition to the beneficial ownership listed, D. R.
Johnson, V. S. Frangopoulos, A. D. Reid, and W. E. Pavlick
comprise the Investment Committee of the Modine Pension
Plans appointed by the Board of Directors. The Committee
exercises investment and voting control over the assets,
including Modine Common Stock, held of record by the Modine
Pension Trusts of which M&I Marshall & Ilsley Bank is
trustee as described above.
(g) This number includes 1,116,806 shares held by officers
(other than the five named executive officers) as a group
(10 persons) and includes options to acquire 529,850 shares,
and 34,580 shares awarded pursuant to the 1993 through 1998
Stock Award Plan grants but subject to restrictions that
lapse annually in fifths over a period commencing at the end
of the second year from the date of grant.
Approximately forty-six percent (46%) of all outstanding
shares are owned or controlled by or for directors, officers,
employees, retired employees, and their families.
<PAGE>
BOARD MEETINGS, COMMITTEES AND COMPENSATION
The Board of Directors held eight regular meetings during the
fiscal year ended March 31, 1998. An additional eight meetings
were held by the standing Committees of the Board to assist the
Board in carrying out its responsibilities. A description of
these committees and their functions is set forth below.
The Audit Committee consists of six outside directors. Current
members are R. J. Doyle, Chairman, F. W. Jones, D. J. Kuester, V. L.
Martin, G. L. Neale, and S. W. Tisdale. The Audit Committee
recommends to the Board of Directors the engagement of the
independent auditors. Before the audit, the Committee meets with
the independent auditors to discuss the plan and scope of the
audit engagement. At the completion of the audit, the Committee
meets with the independent auditors to review the results of the
audit, the effectiveness of the Company's internal auditing
procedures, and the adequacy of the Company's internal accounting
controls. The Committee also reviews and approves the budget for
each non-audit service, the audit and non-audit fees, and their
effect on the independence of the auditors. The Audit Committee met
a total of three times during the fiscal year ended March 31, 1998.
The Officer Nomination and Compensation Committee consists of
five outside directors. Current members of this Committee re G. L.
Neale, Chairman, T. J. Guendel, V. L. Martin, S. W. Tisdale, and
M. T. Yonker. This Committee reviews candidates for positions as
Company officers and makes recommendations to the Board on such
candidates, makes recommendations to the Board on compensation for
the Company's officers, and administers the Company's 1994 Incentive
Compensation Plan. The Officer Nomination and Compensation Committee
met three times during the last fiscal year.
The Pension Committee consists of five outside directors.
Current members of this Committee are T. J. Guendel, Chairman, R. J.
Doyle, F. W. Jones, D. J. Kuester, and M. T. Yonker. This Committee
provides oversight with respect to the investments of the Company's
Pension Plan. The Pension Committee met two times during the last
fiscal year.
The Board of Directors does not have a committee that nominates
directors since nomination and review of director candidates is a
function of the full Board. In addition, shareholders who wish to
nominate candidates for election to the Board may do so.
Generally, if a shareholder intends to propose business or
make a nomination for the election of directors at an annual
meeting, or make a nomination for the election of directors at a
special meeting of shareholders, the Company must receive written
notice of such intention. The deadline for shareholder
nominations for directors and proposals at the 1998 Annual
Meeting of Shareholders was February 7, 1998.
Compensation of Directors
- -------------------------
Directors of the Company who are not employees were paid a
retainer fee of $6,000 per quarter. In addition, directors
<PAGE>
received a fee of $1,000 for each Board meeting attended and
$1,000 for each Committee meeting attended with the Chairman of
the Audit Committee eligible for a fee of $2,000. Commencing
April 1, 1998, in lieu of all other Board compensation, the
Chairman of the Board receives a retainer fee of $12,000 per
quarter. Directors who are officers do not receive any fees in
addition to their remuneration as officers. The Company also
reimburses its directors for travel, lodging, and related
expenses incurred in attending Board and Committee meetings, and
it provides each director with travel-accident and director and
officer liability insurance.
Directors of the Company who are not employees are eligible
to participate in the 1994 Stock Option Plan for Non-Employee
Directors (the "Directors' Plan") which is authorized to grant
non-qualified stock options through July 20, 2004, on up to
500,000 shares of the Company's Common Stock. These options are
granted at one hundred percent of the fair market value on the
date of the grant and will expire no later than ten years after
the date they are granted and will terminate no later than three
years after termination of director status for any reason other
than death. Within 30 days after election or re-election to the
Board, each director so elected or re-elected is automatically
granted an option for that number of shares equal to the multiple
of 5,000 and the number of years in the term to which such
director has been so elected or re-elected. The Directors' Plan
may be administered by the Board or by a committee of two or more
directors of the Company if deemed necessary or advisable in
order to comply with the exemptive rules promulgated pursuant to
Section 16(b) of the Securities Exchange Act of 1934, as amended.
The Board or any such committee shall have no authority to
administer the Directors' Plan with respect to the selection of
participants under the plan or the timing, pricing, or amounts of
any grants.
The Board of Directors has adopted the Modine Manufacturing
Company Director Emeritus Retirement Plan (the "Director Emeritus
Retirement Plan") whereby any person (employee or non-employee)
who is or becomes a director of Modine on or after April 1, 1992,
and who retires from the Board will be paid a retirement benefit
equal to the annualized rate at which directors are being paid
for their services to the Company as directors (including Board
meeting attendance fees but excluding any applicable committee
attendance fees) as in effect at the time such director ceases
his service as a director. The retirement benefit will continue
until the period of time the retirement benefit paid equals the
period of time of the director's Board services. If a director
dies before or after retirement, his spouse or other beneficiary
will receive the applicable retirement benefit. In the event of
a change in control (as defined in the Plan) of Modine, each
eligible director, or his spouse or other beneficiary entitled to
receive a retirement benefit through him, would be entitled to
receive a lump-sum payment equal to the present value of the total
of all benefit payments which would otherwise be payable under the
Director Emeritus Retirement Plan. The retirement benefit is not
payable if the director directly or indirectly competes with the
Company or if the director is convicted of fraud or a felony and
such fraud or felony is determined by disinterested members of
the Board of Directors to have damaged Modine.
<PAGE>
One former director (who retired prior to April 1, 1992) has
an agreement with the Company whereby, as a Director Emeritus, he
is entitled to receive retainer fees and monthly meeting fees
equal to the fees paid at the time he retired from the Board for
a period continuing until his death.
EXECUTIVE COMPENSATION
Summary Compensation Table
- --------------------------
The following table sets forth compensation awarded to, earned
by, or paid to the Company's Chief Executive Officer and the four
most highly compensated executive officers other than the Chief
Executive Officer who were serving as executive officers at March 31,
1998, for services rendered to the Company and its subsidiaries during
fiscal 1997-1998. Also included is salary, bonus, restricted Common
Stock awards, and stock option information for fiscal years ended
March 31, 1997, and March 31, 1996.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation (1) Long-Term Compensation
----------------------- -----------------------------------
Restricted Stock All Other
Year Name Principal Position Salary Bonus Stock (2) Options(3) Comp. (4)
- -------- --------------- ---------------------- ------ ----- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1997/98* R. T. Savage* Chairman $364,000 $305,760 N/A* N/A* $27,146
1996/97 Chairman & Chief 348,500 268,345 $378,750 30,000 26,138
Executive Officer
1995/96 President & Chief 348,500 317,135 398,125 32,000 25,997
Executive Officer
1997/98* D. R. Johnson* President and Chief $326,250 $219,240 $254,531 30,000 $24,160
Executive Officer
1996/97 President and Chief 282,500 174,020 252,500 25,000 20,969
Operating Officer
1995/96 Executive Vice 236,000 171,808 170,625 25,000 17,298
President, Operations
1997/98* D. B. Rayburn* Executive Vice President, $205,000 $120,540 $152,719 15,000 $15,277
Original Equipment
1996/97 Group Vice President, 192,500 103,758 126,250 15,000 14,370
1995/96 Highway Products 171,000 108,927 113,750 15,000 13,025
1997/98 V. S. Frangopoulos Group Vice President, $210,000 $123,480 $101,813 15,000 $15,664
1996/97 Off-Highway Products 202,000 124,432 101,000 15,000 15,128
1995/96 195,000 141,960 91,000 15,000 14,549
1997/98 M. G. Baker Group Vice President, $200,500 $117,894 $101,813 15,000 $14,955
1996/97 Distributed Products 192,500 103,758 101,000 15,000 14,392
1995/96 178,000 113,386 91,000 15,000 13,279
* Prior to March 31 and April 1, 1998: R. T. Savage was
Chairman, President and Chief Executive Officer (now
<PAGE>
retired); D. R. Johnson was President and Chief Operating
Officer; and D. B. Rayburn was Group Vice President, Highway
Products.
<FN>
(1) Excludes "Other Annual Compensation" under Securities and
Exchange Commission regulations since such does not exceed
the lesser of $50,000 or 10% of each individual's combined
salary and bonus.
(2) The total number of restricted shares and the aggregate
market value at March 31, 1998, were: Mr. Johnson - 31,000
shares valued at $1,077,250; Mr. Rayburn - 17,580 shares
valued at $610,905; Mr. Frangopoulos - 17,400 shares valued
at $604,650; and Mr. Baker - 14,280 shares valued at
$496,230. Dividends are paid on the restricted shares at
the same time and the same rate as dividends paid to
shareholders of unrestricted shares. Aggregate market value
is based on a fair market value of $34.75 at March 31, 1998.
Restricted stock is awarded to an employee at no cost and
placed in escrow until the beginning of the third, fourth,
fifth, sixth, and seventh years, respectively, at which time
one-fifth of the shares are released to the employee. In the
event of retirement or a takeover of the Company, the shares
may, if authorized by the Officer Nomination and Compensation
Committee of the Board, be released at an earlier date.
(3) The 1994 Incentive Compensation Plan authorized the Officer
Nomination and Compensation Committee of the Board to grant
stock options (incentive stock options and non-qualified
stock options) and other stock-based rights through July 20,
2004, on up to 3,000,000 shares of the Company's Common
Stock. Incentive stock options and non-qualified stock
options granted are at one hundred percent of the fair market
value on the date of the grant and will expire no later than
ten years after the date of the grant. Grants pursuant to
the Plan may be made to such officers or certain other
employees as shall be determined by the Committee.
Upon the exercise of the option, the optionee may pay the
purchase price in cash, stock, optioned stock, or a
combination thereof. The optionee may also satisfy any tax
withholding obligation by using optioned stock. In the event
of a sale, merger, consolidation, or other specified
transaction involving the Company, the optionee will have the
right to receive (regardless of whether or to what extent the
option would then have been exercisable) the difference
between the exercise price and the fair market value of the
stock.
(4) Includes employer matching contributions to the Company Tax
Saver (401(k)) Plan, Stock Purchase Plan, and Supplemental
Stock Plan. The Company has a program (the "Executive
Supplemental Stock Plan") to pay, out of general assets, an
amount substantially equal to the difference between the
amount that would have been allocated to a participant's
account as Company matching contributions, in the absence of
legislation limiting such allocations, and the amount
actually allocated under the plans. Payment of this amount
<PAGE>
and appreciation thereon is deferred until termination of
service or retirement. Because the Company's contributions
to the Supplemental Executive Retirement Plan are actuarially
based and are not allocated to the individual named executive
officers' accounts until retirement, such contributions are
not readily ascertainable and are not included in this
column. See Page 13 herein regarding the Pension Plan Table
for additional information.
</TABLE>
Officer Nomination and Compensation Committee Report on Executive
- -----------------------------------------------------------------
Compensation
- ------------
The Officer Nomination and Compensation Committee has provided
the following report on Executive Compensation:
Compensation Philosophy
-----------------------
The Company's executive compensation philosophy is designed to
address the needs of the Company, its executives, and its shareholders.
The specific factors underlying the Committee's decision with
respect to compensation for each of the named executives for the
last fiscal year are two-fold:
1. The first factor is the ability to accomplish the Company's
goal of preserving and enhancing the shareholders'
investment over the long-term without bearing undue risk in
the process. The Committee recognizes that there will be short-
term fluctuations in the Company's business and is of the opinion
that incentive compensation should be based primarily upon
attainment of the Company's goals over a longer period of time.
It is the Committee's intention to compensate its executive
officers appropriately for superior performance; however,
inherent in attaining the Company's goal is the premise that
shareholder assets will not be wasted by the payment of
excessive compensation.
2. The second factor underlying the Committee's compensation
decision is that achieving the foregoing Company goals
can only be accomplished by the retention of competent,
highly skilled people. Accordingly, the design of the
compensation package must include sufficient tools to
assure retention of key individuals.
Numerous other criteria are considered in the compensation
decision, including high ethical standards, concern for employees,
regard for the environment, and commitment to the highest levels of
product quality and customer service. Each of these criteria is an
intrinsic part of attaining the Company's long-term goals.
Total Annual Compensation
-------------------------
The Company's executive compensation program is composed of
an annual cash component, consisting of salary and a bonus based
<PAGE>
on the financial performance of the Company, and a long-term
incentive component, currently consisting of stock awards and
stock options.
For fiscal 1997-98, the Company used a formula bonus program
that does not commence payout until a pre-tax return of 15
percent on shareholders' investment is earned for the shareholders.
Thereafter, Company executives can earn a cash bonus that increases
at a linear rate with Company earnings and is proportional with the
executive's level of management responsibility, including the Chief
Executive Officer ("CEO"), who could earn a cash bonus of up to 100%
of his base salary (the maximum payout under the program) in fiscal
1997-98. All other incentive awards are calculated as a job-slotted
percentage of the CEO's percent of earned award. By so doing, the
entire management team shares the risks and rewards of overall Company
performance.
For fiscal 1998-99, the Committee determined that several
changes were appropriate, including base pay adjustments for
certain named executive officers to industry medians, revisions
to the formula bonus plan to provide for more up-side potential
if exceptional performance is attained with an increase in the
maximum payout under the plan to 120%, and the introduction of an
incentive feature for the restricted stock awards so that such
awards are made contingent upon earnings per share growth and
sales growth in the fiscal year over the prior fiscal year.
Long-Term Compensation
----------------------
To further align the Company executives' interests with those
of the shareholder, the Compensation Committee utilizes long-term
stock based incentives in the form of stock options and stock
awards. Individual stock option grants are determined based on a
subjective assessment of individual performance, contribution,
and potential. Beginning in fiscal 1998-99 revised individual
stock awards will be provided to the named executives and certain
other officers. The Committee may consider previous stock option
and stock award grants when determining annual stock option and
stock award grants under these programs.
The stock options currently granted are at market value and
are exercisable within ten years of date of grant. The options
may be rescinded at any time up until two years after exercise
should the individual be terminated for cause, compete in any way
against the Company, not fully comply with applicable laws and
government regulations, fail to maintain high ethical standards,
or breach the Company's policies such as Guidelines for Business
Conduct, Antitrust Compliance, or confidentiality of proprietary
technology and information.
Currently, stock awards are grants of Company stock to a
limited number of top executives as indicated above, at no cost.
These awards vest only at the rate of 20 percent per year commencing
at the end of the second year after grant, acting thereby as both a
retention tool and involving the executive in a longer-term stake in
the Company. Stock awards not previously vested are terminated
should the executive cease to be employed by the Company for any
reason other than retirement or a takeover.
<PAGE>
Beginning with the 1998-99 fiscal year, stock awards will be
provided on the basis of meeting specified targets and will vest
20 percent per year commencing at the end of the first year.
Achievement is measured based on the fiscal year's performance of
specified percentages of sales growth and earnings per share
growth over the prior year's results. The sales growth and
earnings per share growth achievements are calculated separately
and carry equal weight. Target achievement for each element will
earn half of the target awards so that full target awards are
earned if both goals are achieved. Each element has a minimum,
target, and maximum goal.
For the 1998-99 fiscal year, the determination of the CEO's
target shares was based on compensation data used to determine
the CEO's base pay. The target stock award is set at the stock
equivalent of a designated percentage of the CEO comparator group
base pay. This amount is then divided by the stock price and
rounded up to the nearest 500 share equivalent.
At minimum achievement of the goal, the plan pays 50% of the
target awards for that goal. At maximum achievement, the plan
will pay 150% of the target awards for that goal. Participants
other than the CEO receive awards based on a specified percentage
of the CEO's awards.
Consequently, each of the named executive officers is
compensated over the long-term, through both the stock option and
stock award programs as the Company sales and earnings per share
and the Company stock price increases, which will also benefit
the shareholders.
Chief Executive Officer Compensation
------------------------------------
The Committee recognizes that effective management of the
Company is a team effort, led by the CEO. The CEO and the named
officers must possess the difficult-to-define qualities of
leadership, ability to instill confidence in their actions, and
the ability to inspire others to even greater effort. These
qualities can only be determined through observation over a
longer period of time and through the ultimate results attained.
Accordingly, the CEO's and senior executive officers' team
compensation decisions were not based solely on fiscal 1997-98
annual financial results but were based on the compensation
policies referenced above and on the Company's favorable return on
shareholders' investment over the longer term and on the Committee's
subjective assessment of the performance of the management team.
Other Executive Officer Compensation
------------------------------------
Since, as stated above, we believe that corporate management is a
team effort, we also believe that it is appropriate for the CEO to
select his team members and make a substantial contribution to the
compensation decision for each of such team members. Accordingly,
upon detailed consultation with the CEO, assessment of the experience,
capabilities, and performance of each of the named executives toward
attaining Company goals, and the policies and plans referenced above,
compensation decisions were made. As a background for such decisions,
<PAGE>
the Compensation Committee reviewed several major compensation consultant
data bases with respect to compensation. The compensation consultant
data bases and the comparator group of companies used in the performance
graph are both large data bases of industrial companies which the
Committee believes appropriately reflect the broad labor market for
Modine executives. Within a range of acceptable total compensation
for each individual, compensation is determined as described above.
Compliance with Internal Revenue Code Section 162(m)
----------------------------------------------------
Section 162(m) of the Internal Revenue Code, enacted in 1993,
generally disallows a tax deduction to public companies for
compensation over one million dollars paid to the Company's CEO
and four other most highly compensated executive officers.
Qualifying performance-based compensation will not be subject to
the deduction limit if certain requirements are met. The
compensation of the Company's CEO and the four other most highly
compensated executive officers currently does not approach the
disqualifying threshold. In the future, in the event the
disqualifying threshold becomes an issue, the Committee will
weigh all the facts and circumstances in existence at the time.
G. L. Neale, Chairman
T. J. Guendel
V. L. Martin
S. W. Tisdale
M. T. Yonker
Performance Graph
- -----------------
The following graph shows the cumulative total stockholder return
on the Company's Common Stock over the last five fiscal years as
compared with the returns of the Standard & Poor's 500 Stock Index and
the NASDAQ Industrials Stock Index (non-financial index). The NASDAQ
Industrials Stock Index consists of approximately 3,000 industrial
companies (including Modine), and includes a broad range of
manufacturers. The Company believes, because of the diversity of its
business, that comparison with this broader index is appropriate. The
graph assumes $100 was invested on March 31, 1993, in the Company's
Common Stock, the S&P 500 Stock Index, and the NASDAQ Industrials
Stock Index and assumes reinvestment of dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
Measurement Period
(Fiscal Year Covered) Modine NASDAQ S&P 500
- --------------------- ------ ------ -------
Measurement Pt. 4/1/93 100 100 100
FYE 94 133 110 101
FYE 95 176 120 117
FYE 96 142 162 155
FYE 97 135 175 185
FYE 98 196 263 273
<PAGE>
Options Granted
- ---------------
The following table sets forth information about stock
option grants during the last fiscal year for the five executive
officers named in the Summary Compensation Table.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Appreciation -
Individual Grants Appreciation for Option Term(1)(2)(3)
------------------------------------------------ ---------------------------------------
% of Total
Options
Options Granted to Exercise Expiration
Name Granted Employees Price Date 0% 5% 10%
- ------------------ ------- ----------- -------- ---------- --- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. T. Savage* N/A* N/A* N/A* N/A* N/A* N/A* N/A*
D. R. Johnson 30,000 10.99% $33.9375 1/21/2008 $0 $ 641,419 $ 1,618,819
V. S. Frangopoulos 15,000 5.49% $33.9375 1/21/2008 $0 320,709 809,409
M. G. Baker 15,000 5.49% $33.9375 1/21/2008 $0 320,709 809,409
D. B. Rayburn 15,000 5.49% $33.9375 1/21/2008 $0 320,709 809,409
All Optionees 273,000 100% $33.9375 1/21/2008 $0 5,836,911 14,731,251
All Shareholders N/A N/A N/A N/A $0 $634,237,917 $1,600,695,696
* Mr. Savage retired as the Chief Executive Officer effective March 31, 1998.
<FN>
(1) All options granted are immediately exercisable. Holders may use
shares previously owned or received upon exercise of options to
exercise options. The Company may accept shares to cover
withholding or other employee taxes.
(2) The dollar amounts under these columns are the result of
calculations at zero percent and at the five-percent and ten-
percent rates set by the Securities and Exchange Commission
and, therefore, are not intended to forecast possible future
appreciation, if any, of the Company's stock price.
(3) No gain to the optionee is possible without stock price
appreciation, which will benefit all shareholders
commensurately. A zero percent gain in stock price appreciation
will result in zero dollars for the optionee.
</TABLE>
<PAGE>
Option Exercises and Fiscal Year-End Values
- -------------------------------------------
The following table sets forth information with respect to
the five executive officers named in the Summary Compensation
Table concerning the number of option exercises and value of
options outstanding at the end of the last fiscal year.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<CAPTION>
Total Value of
Total Number Unexercised
Number of of Unexercised In-the-Money
Shares Options Held Options Held at
Acquired on Value at Fiscal Year End (1) Fiscal Year End (1)
Name Exercise Realized Exercisable (2) Exercisable (2)
- ------------------ ----------- ---------- ---------------------- -------------------
<S> <C> <C> <C>
R. T. Savage 79,874 $1,543,238 139,126 $1,399,607
D. R. Johnson 48,000 $1,118,250 145,000 $1,206,125
V. S. Frangopoulos 19,874 $ 323,303 133,126 $1,687,544
M. G. Baker 9,302 $ 257,549 138,698 $2,018,446
D. B. Rayburn 7,625 $ 171,469 86,375 $ 812,281
<FN>
(1) All options granted are immediately exercisable.
(2) Granted at fair market value on the date of Grant. Total
value of outstanding options is based on a fair market value
of Company stock of $34.75 as of March 31, 1998.
</TABLE>
Pension Plan Table
- ------------------
The following table sets forth the estimated annual benefits
payable upon retirement at normal retirement age for the years of
service indicated under the Company's defined pension plan at the
indicated remuneration levels (average of five years' earnings).
- ----------------------------------------------------------------------------
Average Annual Representative Years of Service
Earnings 15 Years 20 Years 25 Years 30 Years 35 Years
-------------- -------- -------- -------- -------- --------
$125,000 $ 29,188 $ 38,918 $ 48,647 $ 58,377 $ 68,106
200,000 48,032 64,043 80,054 96,064 112,075
275,000 66,876 89,168 111,460 133,752 156,044
350,000 85,720 114,293 142,866 171,439 200,012
425,000 104,563 139,418 174,272 209,127 243,981
500,000 123,407 164,543 205,679 246,814 287,950
- ----------------------------------------------------------------------------
<PAGE>
The five executive officers named in the Summary Compensation
Table participate on the same basis as other salaried employees in
the non-contributory Modine Pension and Disability Plan for Salaried
Employees. Because the Company's contributions to the plan are
actuarially based on all eligible salaried employees and are not
allocated to individual employee accounts, expenses for a specific
person cannot readily be separately or individually calculated.
Retirement benefits are based on an employee's earnings for the
five highest consecutive of the last ten calendar years preceding
retirement and on years of service. Applicable earnings include
salary, bonuses, and any deferred amount under the Modine Tax Saver
(401(k)) Plan. They are approximately the same as cash compensation
reported in the Summary Compensation Table, but on a calendar year
rather than a fiscal year basis. A minimum of five years of service
is required for eligibility. The principal benefit under the plan is
a lifetime monthly benefit for the joint lives of participants and
their spouses based on the employee's earnings and period of employment,
and is not subject to offset by Social Security benefits. Employees can
retire with unreduced early retirement benefits at age sixty-two or may
be eligible for disability, deferred, or other early retirement benefits
depending on age and years of service upon retirement or termination.
In addition, an employee who has reached age sixty-two and who has
accumulated thirty or more years of eligible service may request that
the accrued benefit be paid immediately in a lump-sum amount, even if
not retired at the time of election.
Assuming continued employment until age sixty-five, the estimated
credited years of service under the plan for Messrs. Johnson, Frangopoulos,
Baker, and Rayburn are twenty-eight, twenty-eight, twenty-five, and twenty-
two years, respectively.
Pension benefits under the plan are subject to possible limitations
imposed by the Employee Retirement Income Security Act of 1974 and
subsequent amendments thereto. To the extent that an individual
employee's retirement benefit exceeds these limits, the excess will be
paid from general operating funds of the Company.
Employees, including officers, may also qualify for long-term
disability payments of approximately sixty percent of their base salary,
up to a maximum of $8,000 per month, if they become disabled.
Employment Agreements, Termination and Change of Control Arrangements
- ---------------------------------------------------------------------
On January 21, 1998, the Company and Richard T. Savage entered
into an agreement related to Mr. Savage's retirement as the Chief
Executive Officer of the Company effective as of March 31, 1998.
Mr. Savage remains as the Chairman of the Board of Directors of the
Company. Mr. Savage received, in accordance with the Management
Incentive Plan, the final payment due him for the 1997-1998 fiscal
year of $101,010; immediate vesting of all unvested stock awards under
the Company's stock award plan which the Company purchased from Mr.
Savage at their fair market value on March 31, 1998; continuation for
calendar year 1998 of certain legal, financial, estate planning and
tax consulting services; the sum of $498,044, which amount was equal
to the fair market value on March 31, 1998, of the phantom shares
held by Mr. Savage pursuant to the Company's Executive Supplemental
Stock Plan; and the sum of $1.625 million, which was a one-time
lump-sum payment of the benefit due him under the Company's Executive
Supplemental Retirement Plan. Mr. Savage may continue to exercise,
at his discretion, stock options granted to him under the 1985
Incentive Stock Plan and the 1994 Incentive Compensation Plan
according to the provisions of those plans. Mr. Savage may also
request distribution, in accordance with the provisions of the Modine
Contributory Stock Ownership and Investment Plan, of the shares of
stock in his accounts on or before November 1, 1999. He is eligible
to participate on the same basis as other retired salaried employees
in the Modine Pension and Disability Plan for Salaried Employees.
Mr. Savage agreed to refrain from competition with the Company for
a period of three years after the conclusion of his service as a
Director of the Company.
The Company entered into an employment contract effective
October 16, 1996, with Mr. Johnson covering his employment for a
two-year term. The contract is automatically extended annually
for an additional year so that the remaining contract term is
between one and two years, unless notice is given by either party
to the contrary. This contract provides for a minimum annual
<PAGE>
salary equal to that paid the past fiscal year to Mr. Johnson
plus bonus participation. Mr. Johnson will continue to receive
all employee benefits, plus supplements to his retirement pension
and 401(k) benefits designed to provide him with benefits which
otherwise are reduced by statutory limitations on qualified
benefit plans. In the event of disability, salary continuation
is provided at a level of one hundred percent for the first
twelve months and up to sixty percent thereafter with no maximum
dollar amount. In the event of termination of the contract by
the Company other than for cause, death, or disability, or by Mr.
Johnson upon a failure to be re-elected as an officer and/or a
director, a significant change in authority, a breach of the
contract by the Company, or a liquidation or merger of the
Company where the contract is not assumed, Mr. Johnson would
receive annually, for the remainder of the contract term,
compensation equal to the average of the five highest of the last
ten years. Mr. Johnson agrees to refrain from competition with
the Company during the length of the Agreement and for a period
of two years after such Agreement is terminated, except if such
termination occurs after a change in control of the Company.
As of February 26, 1997, the Company entered into change-in-
control agreements (the "Change-in-Control Agreements") with
the named executive officers (except with Messrs. Savage and
Johnson) and certain other key employees. The Change-in-Control
Agreements provide a severance payment to the executive if the
Company terminates the executive's employment or the executive
voluntarily terminates the executive's employment within ninety
days after a "Pre-Condition" has occurred (as that term is defined
in the Change-in-Control Agreements). Each named executive officer
(except Messrs. Savage and Johnson) is eligible to receive twenty-
four months' annual base compensation and a bonus amount as defined
in the Change-in-Control Agreements, plus applicable benefits and
credited service for pension purposes for the twenty-four month
period. The actual amounts of the named executive officers'
salaries and bonuses are as set forth in the table on page 11.
Mr. Johnson's severance benefits are set forth in his employment
agreement described above.
The Company's stock option and stock award plans contain
certain provisions relating to change-in-control or other specified
transactions that may, if authorized by the Officer Nomination and
Compensation Committee of the Board, accelerate or otherwise release
shares granted or awarded under those plans. See footnotes (2) and
(3) to the Summary Compensation Table herein.
TRANSACTIONS
In the regular course of business since April 1, 1997, the
Company has had transactions with corporations or other firms of
which certain non-employee directors are executive officers or
otherwise principally involved. Such transactions were in the
ordinary course of business and at competitive prices and terms.
The Company does not consider the amounts involved to be material.
The Company anticipates that similar transactions will occur in
fiscal 1998-99.
<PAGE>
OTHER INFORMATION
Independent Auditors
- --------------------
Coopers & Lybrand have been the independent certified public
accountants since 1935 and were selected as the Company's
auditors for the fiscal year ended March 31, 1998. They are
appointed by the Board of Directors of the Company and report to
the Audit Committee. A representative of Coopers & Lybrand will
not be attending the 1998 Annual Meeting of Shareholders.
Expenses of Solicitation
- ------------------------
The cost of soliciting proxies is being borne by the
Company. In addition to solicitation by mail, arrangements have
been made with brokerage houses, nominees, and other custodians
and fiduciaries to send proxy material to their principals and
the Company will reimburse them for their expenses in doing so.
Proxies also may be solicited personally or by telephone or other
means of electronic communication by directors, officers, and a
few regular employees of the Company in addition to their usual
duties. They will not be specially compensated for these
services.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc. Officers,
directors, and greater than ten percent shareholders are required
by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished
to the Company, the Company believes that, during the period
April 1, 1997, to March 31, 1998, all Section 16(a) filing
requirements applicable to its officers, directors, and greater
than ten percent beneficial owners were complied with.
ADDITIONAL MATTERS
The Board of Directors does not know of any other business
that may be presented for consideration at the Annual Meeting
other than a shareholder proposal relating to the establishment
of a Board Committee to develop a corporate code of conduct
guaranteeing the right of employees to organize and maintain
unions and affirming the principles of collective bargaining that
has been omitted from this Proxy Statement in accordance with the
rules of the Securities and Exchange Commission. If this
shareholder proposal or any other business should properly come
before the Meeting, the shares represented by the proxies and
<PAGE>
voting instructions solicited thereby may be discretionarily
voted on such business in accordance with the best judgment of
the proxy holders.
SHAREHOLDER PROPOSALS FOR 1999
If a shareholder wishes to present a proposal for
consideration at next year's Annual Meeting of Shareholders, such
proposal must be received at Modine's offices on or before
February 6, 1999.
ANNUAL REPORT
The Annual Report of the Company, including financial
statements for the fiscal year ended March 31, 1998, is enclosed.
W. E. PAVLICK, Secretary
<PAGE>
APPENDIX
<TABLE>
<CAPTION>
This proxy, when properly executed, will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR Item 1.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD USING THE
ENCLOSED ENVELOPE.
<S> <C> <C> <C>
1. Election of Directors: Richard J. Doyle / / FOR all nominees listed (except / / WITHHOLD
Gary L. Neale as marked to the contrary below) AUTHORITY
Donald R. Johnson
-----------------------------
(INSTRUCTION: To withhold authority to vote for any indicated nominee, / /
write the name(s) of the nominee(s) in the box provided to the right.) / /
-----------------------------
2. To consider and act upon such other matters as may properly come before the meeting
or any adjournments thereof.
Address Change? Mark Box / / Plan to Attend the Meeting / /
Indicate changes below:
Date , 1998
------------------
----------------------------------
/ /
/ /
----------------------------------
Signature(s) in Box
This Proxy Card must be Signed Exactly
as Name Appears Thereon. When shares
are held by joint tenants, both should
sign. When signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such. If a corporation,
please sign in full corporate name by
president or other authorized officer. If
a partnership, please sign in partnership
name by authorized person.
</TABLE>
<PAGE>
MODINE MANUFACTURING COMPANY PROXY
1500 DeKoven Avenue
Racine, WI 53403
- -----------------------------------------------------------------------------
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints D. R. Johnson and W. E. Pavlick, or either of
them, with full power of substitution to each, as attorneys and proxies to
represent the undersigned at the Annual Meeting of Stockholders of Modine
Manufacturing Company to be held at the corporate offices of Modine
Manufacturing Company, 1500 DeKoven Avenue, Racine, Wisconsin 53403-2252 on
the 15th day of July, 1998 at 9:30 a.m. CDT, and at any adjournment(s) thereof,
and to vote all shares of Common Stock which the undersigned may be entitled
to vote at said meeting as directed below with respect to the proposals as
set forth in the Proxy Statement. The Board of Directors does not know of
any other business that may be presented for consideration at the Annual
Meeting. If any other business should properly come before the Meeting,
the shares represented by the proxies and voting instructions solicited
thereby may be discretionarily voted on such business in accordance with
the best judgment of the proxy holders.
You are encouraged to specify your choices by marking the appropriate boxes
on the reverse side, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations except that shares
held in employee benefit plans for which a proxy is not received will be
voted by the trustee in the same proportion as votes actually cast by plan
participants. The tabulator cannot vote your shares unless you sign, date
and return this proxy card.
<PAGE>
MODINE MANUFACTURING COMPANY AND SUBSIDIARIES
(A Wisconsin Corporation)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years ended March 31, 1998, 1997 and 1996
($ In Thousands)
Col. A Col. B Col. C Col. D Col. E
- ------ ------ ------ ------ ------
Additions
(1) (2)
Balance at Balance
Beginning Charged to Charged to at
of Costs and Other End of
Description Period Expenses Accounts Deductions Period
- ----------- ---------- ---------- ---------- ---------- -------
1998:
Intangible
Assets-
Accumulated
Amortization $12,885 $4,760 $(495)(B) $ 0(C) $17,150
------- ------ --------- --------- -------
Allowance for
Doubtful Accounts $ 4,140 $1,029 $ (70)(B) $ 514(A) $ 4,585
------- ------ --------- --------- -------
1997:
Intangible
Assets-
Accumulated
Amortization $ 8,689 $4,937 $(741)(B) $ 0(C) $12,885
------- ------ --------- --------- -------
Allowance for
Doubtful Accounts $ 5,052 $ (117) $(168)(B) $ 627(A) $ 4,140
------- ------- --------- --------- -------
1996:
Intangible
Assets-
Accumulated
Amortization $ 7,564 $3,575 $ 276(B) $2,726(C) $ 8,689
------- ------ -------- --------- -------
Allowance for
Doubtful Accounts $ 6,424 $ (965) $ 127(B) $ 534(A) $ 5,052
------- ------- -------- --------- -------
Notes:
(A) Bad debts charged off during the year.
(B) Balance acquired in acquisitions plus translation and
other adjustments.
(C) Retirement of fully amortized intangibles.
<PAGE>
APPENDIX
Pursuant to Item 304 of Regulation S-T, the following is a narrative
description of graphic or image material incorporated by reference
from the Company's 1997-98 Annual Report to Shareholders at Item 7.
Management's Discussions and Analysis of Financial Condition and
Results of Operations. Some pages contain illustrations of Modine
products, customers and employees.
Page 18 of Annual Report
<TABLE>
Net earnings by quarter
excluding accounting changes
Dollars in millions
<CAPTION>
Measurement Period
(Fiscal Year Covered) 1ST QTR 2ND QTR 3RD QTR 4TH QTR
------- ------- ------- -------
<S> <C> <C> <C> <C>
FYE 1994 9,875 11,636 10,626 10,954
FYE 1995 14,830 16,801 17,413 19,398
FYE 1996 15,983 16,736 14,855 13,825
FYE 1997 16,390 15,654 15,402 16,317
FYE 1998 18,185 18,229 17,836 18,221
</TABLE>
<TABLE>
Net sales by quarter
Dollars in millions
<CAPTION>
Measurement Period
(Fiscal Year Covered) 1ST QTR 2ND QTR 3RD QTR 4TH QTR
------- ------- ------- -------
<S> <C> <C> <C> <C>
FYE 1994 147,171 156,964 172,351 193,067
FYE 1995 208,436 221,760 240,505 242,309
FYE 1996 239,216 254,292 252,817 244,168
FYE 1997 248,514 254,224 252,972 243,336
FYE 1998 256,923 260,806 267,699 254,990
</TABLE>
<PAGE>
Page 9 of Annual Report
<TABLE>
Shipments by market
Dollars in millions
<CAPTION>
FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aftermarket $137 $135 $156 $165 $169 $193 $220 $229 $229 $231
Off-highway equipment 48 56 58 48 48 55 94 120 127 147
Industrial 57 58 69 68 77 96 112 117 125 134
Heavy & med. trucks 54 64 50 51 86 107 158 168 154 184
Cars & light trucks 80 63 64 89 93 119 202 245 263 245
Miscellaneous 12 13 18 25 20 26 44 35 23 21
Building HVAC 36 47 67 81 78 74 83 76 78 78
FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aftermarket 32% 31% 32% 31% 30% 29% 24% 23% 23% 22%
Off-highway equipment 11 13 12 9 8 8 10 12 13 14
Industrial 13 13 14 13 13 14 12 12 13 13
Heavy & med. trucks 13 15 11 10 15 16 18 17 15 18
Cars & light trucks 19 14 13 17 16 18 22 25 26 24
Miscellaneous 3 3 4 5 4 4 5 3 2 1
Building HVAC 9 11 14 15 14 11 9 8 8 8
</TABLE>
Page 17 of Annual Report
<TABLE>
Sales dollar distribution
<CAPTION>
FYE 97-98 FYE 96-97
--------- ---------
<S> <C> <C>
Material cost 38.7% 39.5%
Employee salaries, wages, and
fringe benefits 30.7% 31.2%
All taxes (except payroll taxes) 4.5% 3.7%
Wear and exhaustion of facilities 3.4% 3.5%
All other costs 15.7% 15.7%
Dividends paid to shareholders 2.2% 2.0%
Earnings retained in the business 4.8% 4.4%
</TABLE>
<PAGE>
Page 13 of Annual Report
<TABLE>
Shipments by product
Dollars in millions
<CAPTION>
FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Building HVAC $ 36 $ 47 $ 67 $ 81 $ 78 $ 74 $ 83 $ 76 $ 78 $ 78
Miscellaneous 33 24 30 36 35 39 66 54 39 33
Charge-air coolers 21 25 31 39 59 73 107 118 107 126
Air conditioning 63 48 47 66 67 83 129 177 217 209
Oil coolers 57 62 65 67 74 99 145 155 163 181
Radiators 214 230 242 238 258 302 383 410 395 413
FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Building HVAC 8% 11% 14% 15% 14% 11% 9% 8% 8% 8%
Miscellaneous 8 5 6 7 6 6 7 5 4 3
Charge-air Coolers 5 6 6 7 10 11 12 12 11 12
Air conditioning 15 11 10 13 12 12 14 18 22 20
Oil Coolers 13 14 13 13 13 15 16 16 16 17
Radiators 51 53 51 45 45 45 42 41 39 40
</TABLE>
Page 20 of Annual Report
<TABLE>
Book value per share
<CAPTION>
Measurement Period
(Fiscal Year Covered) Book value/share
- --------------------- ----------------
<S> <C>
FYE 94 8.50
FYE 95 10.38
FYE 96 11.74
FYE 97 12.93
FYE 98 14.24
</TABLE>
<PAGE>
