SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 26, 1998
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-1373
------
MODINE MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)
WISCONSIN 39-0482000
--------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1500 DeKoven Avenue, Racine, Wisconsin 53403-2552
----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (414) 636-1200
---------------
NOT APPLICABLE
----------------------------------------------------------------------
(Former name or former address, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at February 5, 1999
------------------------------ -------------------------------
Common Stock, $0.625 Par Value 29,509,029
<PAGE>
MODINE MANUFACTURING COMPANY
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
December 26 and March 31, 1998 3
Consolidated Statements of Earnings -
For the Three Months Ended
December 26, 1998 and 1997
and the Nine Months Ended
December 26, 1998 and 1997 4
Consolidated Statements of Cash Flows -
For the Nine Months Ended December 26,
1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial
Condition 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 21
<PAGE>
<TABLE>
MODINE MANUFACTURING COMPANY
CONSOLIDATED BALANCE SHEETS
December 26, 1998 and March 31, 1998
(In thousands, except per-share amounts)
(Unaudited)
<CAPTION>
December 26, 1998 March 31,1998
----------------- -------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 36,231 $ 36,410
Trade receivables, less allowance for
doubtful accounts of $3,994 and $4,585 174,548 162,177
Inventories 160,208 152,674
Deferred income taxes and other current
assets 39,859 41,922
-------- --------
Total current assets 410,846 393,183
-------- --------
Other assets:
Property, plant, and equipment -- net 296,659 248,253
Investment in affiliates 36,120 8,376
Goodwill and other intangible assets -- net 82,928 59,355
Deferred charges and other noncurrent assets 52,639 49,857
-------- --------
Total other assets 468,346 365,841
-------- --------
Total assets $879,192 $759,024
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
- ----------------------------------------
<S> <C> <C>
Current liabilities:
Short-term debt $ 44,269 $ 20,878
Long-term debt -- current portion 8,264 2,835
Accounts payable 79,700 84,345
Accrued compensation and employee benefits 47,611 48,081
Income taxes 15,843 10,073
Accrued expenses and other current
liabilities 28,068 26,516
-------- --------
Total current liabilities 223,755 192,728
-------- --------
Other liabilities:
Long-term debt 148,239 89,587
Deferred income taxes 13,732 14,258
Other noncurrent liabilities 41,758 39,976
-------- --------
Total other liabilities 203,729 143,821
-------- --------
Total liabilities 427,484 336,549
-------- --------
<PAGE>
Shareholders' investment:
Preferred stock, $0.025 par value,
authorized 16,000 shares, issued - none - -
Common stock, $0.625 par value, authorized
80,000 shares, issued 30,342 shares 18,964 18,964
Additional paid-in capital 13,318 12,384
Retained earnings 457,899 423,001
Foreign currency translation adjustment (6,614) (8,102)
Treasury stock at cost: 872 and 678 shares,
respectively (29,753) (20,977)
Restricted stock - unamortized value (2,106) (2,795)
-------- --------
Total shareholders' investment $451,708 $422,475
-------- --------
Total liabilities and shareholders' investment $879,192 $759,024
======== ========
<FN>
(See accompanying notes to consolidated financial statements.)
</TABLE>
<PAGE>
<TABLE>
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
For the three months ended December 26, 1998 and 1997
For the nine months ended December 26, 1998 and 1997
(In thousands, except per-share amounts)
(Unaudited)
<CAPTION>
Three months ended Nine months ended
-------------------- --------------------
December 26 December 26
-------------------- --------------------
1998 1997 1998 1997
-------------------- --------------------
<S> <C> <C> <C> <C>
Net Sales $284,355 $267,699 $830,420 $785,428
Cost of sales 207,242 192,114 598,891 559,513
-------- -------- -------- --------
Gross profit 77,113 75,585 231,529 225,915
Selling, general, and administrative expenses 51,020 45,015 145,022 135,839
-------- -------- -------- --------
Income from operations 26,093 30,570 86,507 90,076
Non-operating income 4,852 1,918 12,041 5,993
Interest expense (1,718) (842) (3,743) (2,950)
Non-operating expense (1,265) (1,634) (4,515) (4,859)
-------- -------- -------- --------
Earnings before income taxes 27,962 30,012 90,290 88,260
Provision for income taxes 10,621 12,176 33,788 34,010
-------- -------- -------- --------
Net earnings $ 17,341 $ 17,836 $ 56,502 $ 54,250
======== ======== ======== ========
Net earnings per share of common stock
- Basic $0.59 $0.60 $1.91 $1.82
- Assuming dilution $0.58 $0.59 $1.88 $1.79
======== ======== ======== ========
Dividends per share $0.21 $0.19 $0.63 $0.57
======== ======== ======== ========
Weighted average shares -- basic 29,548 29,720 29,603 29,762
Weighted average shares -- diluted 29,992 30,316 30,075 30,297
======== ======== ======== ========
<FN>
(See accompanying notes to consolidated financial statements.)
</TABLE>
<PAGE>
<TABLE>
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Nine Months Ended December 26, 1998 and 1997
(Unaudited)
<CAPTION>
Nine months ended December 26
-----------------------------
1998 1997
---------- ----------
<S> <C> <C>
Net cash provided by operating activities $ 89,925 $ 72,160
Cash flows from investing activities:
Expenditures for property, plant, and
equipment (68,988) (52,668)
Acquisitions, excluding cash acquired (19,826) -
Investments in affiliates (17,085) -
Proceeds from dispositions of property,
plant, and equipment 315 1,883
Other -- net (170) (91)
-------- --------
Net cash (used for) investing activities (105,754) (50,876)
Cash flows from financing activities:
Increase in short-term debt -- net 22,895 11,158
Additions to long-term debt 45,773 15,179
Reductions of long-term debt (22,631) (27,273)
Issuance of common stock, including
treasury stock 3,012 3,364
Purchase of treasury stock (14,765) (11,480)
Cash dividends paid (18,634) (16,960)
-------- --------
Net cash provided by/(used for)
financing activities 15,650 (26,012)
-------- --------
Net (decrease) in cash and cash equivalents (179) (4,728)
Cash and cash equivalents at beginning of
period 36,410 34,822
-------- --------
Cash and cash equivalents at end of period $ 36,231 $ 30,094
======== ========
<FN>
(See accompanying notes to consolidated financial statements.)
</TABLE>
<PAGE>
MODINE MANUFACTURING COMPANY
----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
1. The amounts of raw material, work in process and finished
goods cannot be determined exactly except by physical
inventories. Based on partial interim physical inventories
and percentage relationships at the time of complete
physical inventories, Management believes the amounts shown
below are reasonable estimates of raw material, work in
process and finished goods.
(In Thousands)
-------------------------------------------------------------
December 26, 1998 March 31, 1998
-------------------------------------------------------------
Raw materials $ 36,458 $ 41,164
Work in process 41,197 41,231
Finished goods 82,553 70,279
-------- --------
Total inventories $160,208 $152,674
======== ========
2. Property, plant, and equipment is composed of:
(In Thousands)
-------------------------------------------------------------
December 26, 1998 March 31, 1998
-------------------------------------------------------------
Gross property,
plant & equipment $586,225 $510,868
Less accumulated
depreciation (289,566) (262,615)
-------- --------
Net property,
plant & equipment $296,659 $248,253
======== ========
3. Intangible assets include:
(In Thousands)
-------------------------------------------------------------
December 26, 1998 March 31, 1998
Goodwill and other
intangible assets $106,114 $76,505
Less accumulated
amortization (23,186) (17,150)
-------- -------
Net goodwill and other
intangible assets $ 82,928 $59,355
======== =======
4. Recent developments concerning legal proceedings reported in
the Company's Form 10-K report for the year ended March 31,
1998, are updated in Part II, Other Information, Item 1,
<PAGE>
Legal Proceedings. While the outcome of these proceedings
is uncertain, in the opinion of the Company's management,
any liabilities that may result from such proceedings are
not reasonably likely to have a material effect on the
Company's liquidity, financial condition, or results of
operations.
5. The computation of basic and diluted earnings per share is
as follows:
(In thousands, except per-share amounts)
----------------------------------------------------------------------
Three months Nine months
ended ended
December 26 December 26
----------------------------------------------------------------------
1998 1997 1998 1997
----------------------------------------------------------------------
Net earnings per share of
-------------------------
common stock:
------------
- Basic $0.59 $0.60 $1.91 $1.82
- Assuming dilution $0.58 $0.59 $1.88 $1.79
Numerator:
----------
Income available to
common shareholders $17,341 $17,836 $56,502 $54,250
Denominator:
------------
Weighted average shares
outstanding - Basic 29,548 29,720 29,603 29,762
Effect of dilutive
securities - options* 444 596 472 535
------- ------- ------- -------
Weighted average shares
outstanding - Assuming
dilution 29,992 30,316 30,075 30,297
* There were outstanding options to purchase common
stock at prices that exceeded the average market
price for the income statement period as follows:
Average market
price per share $33.68 $34.42 $33.61 $31.81
Number of shares 297 None 297 45
6. On August 6, 1998, the Company completed the acquisition of
a 50% interest in Radiadores (Visconde) Ltda., a Brazilian
heat transfer company. The investment included cash and a
promissory note. The investment is accounted for using the
equity method. The company's share of the results of
operations is currently included in the consolidated
financial statements using a two-month delay. The Company
anticipates that the results will be reported using a one-
month delay by the end of the fourth quarter.
<PAGE>
Visconde employs approximately 750 people at facilities in
San Paulo. It produces heat-exchanger components,
assemblies, and modules primarily for the aftermarket, but
also for sale to original-equipment customers in the truck,
engine, agricultural-tractor, hydraulic-system, compressor,
marine, construction-equipment, power-generator, and
industrial markets.
On October 8, 1998, the Company completed the acquisition
of Core Holdings, Inc. of Orlando, Florida, an aftermarket
wholesale distributor specializing in complete lines of
vehicular engine-cooling and air-conditioning systems
products. The acquisition purchase price was $24.3 million.
The transaction was financed with cash, existing short-term
borrowing facilities and $3.9 million of promissory notes to
the seller. The investment is accounted for using the
purchase method. Goodwill created by the acquisition is
$22.5 million and is being amortized on a straight-line
basis over 15 years. The results of operations are included
in the consolidated financial statements for the quarter
since the effective date of the acquisition.
Core Holdings had sales of $54.1 million in 1997. Its 350
employees operate out of more than 50 locations throughout
the southeastern United States. Core Holdings also ships
its full line of air-conditioning parts to warehouse
distributors in other geographic markets. It distributes
primarily to radiator shops, air-conditioning shops,
specialty repair shops and garages. In addition, it
manufactures air-conditioning parts at a plant in Texas.
The investments do not have a material effect on the
consolidated results of operations and, accordingly, pro-
forma financial information is not presented.
7. On April 1, 1998, the Company adopted Financial Accounting
Standards Board Statement No. 130, "Reporting Comprehensive
Income," which became effective for interim and annual financial
statement periods in fiscal years beginning after December 15,
1997. This pronouncement established new standards for reporting
comprehensive income and its components; however, the adoption of
SFAS No. 130 has had no impact on the Company's net income or
shareholders' equity. For the Company, the difference between
net income as historically reported in the statements of
consolidated income, and comprehensive income, is foreign
currency translation recorded in shareholders' equity.
Comprehensive earnings for the periods ended December 26, 1998
and 1997, respectively, were $19,459 thousand and $17,765
thousand for the three months and $57,990 thousand and $50,765
thousand for the nine months.
8. On June 15, 1998, the Financial Accounting Standards Board
issued SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The statement requires companies
to recognize all derivatives as either assets or
liabilities, with the instruments measured at fair value.
The accounting for changes in fair value, gains or losses,
depends on the intended use of the derivative and its
resulting designation. The statement is effective for all
<PAGE>
fiscal quarters of fiscal years beginning after June 15,
1999. The Company will adopt SFAS 133 beginning April 1,
2000. Adoption of this statement is not expected to have a
material effect on earnings or financial position.
9. The accompanying consolidated financial statements, which
have not been audited by independent certified public
accountants, were prepared in conformity with generally
accepted accounting principles and such principles were
applied on a basis consistent with the preparation of the
consolidated financial statements in the Company's March 31,
1998 Annual Report filed with the Securities and Exchange
Commission. The financial information furnished includes
all normal recurring accrual adjustments which are, in the
opinion of Management, necessary for a fair statement of
results for the interim period. Results for the first nine
months of fiscal 1999 are not necessarily indicative of the
results to be expected for the full year.
10. Certain notes and other information have been condensed or
omitted from these interim financial statements which
consolidate both domestic and foreign wholly-owned
subsidiaries. Therefore, such statements should be read in
conjunction with the consolidated financial statements and
related notes contained in the Company's 1998 Annual Report
to stockholders which statements and notes were incorporated
by reference in the Company's Form 10-K Report for the year
ended March 31, 1998.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
---------------------------------------------
The following discussion and analysis provides information which
Management believes is relevant to an assessment and
understanding of the Company's consolidated results of operations
and financial condition. This discussion should be read in
conjunction with the consolidated financial statements and notes
thereto.
RESULTS OF OPERATIONS
- ---------------------
Comparison of the Third Quarter of 1998-99 with the Third Quarter
- -----------------------------------------------------------------
of 1997-98
- ----------
Net sales for the third quarter of fiscal 1998-99 were $284.4
million, up 6.2% from the $267.7 million reported in the third
quarter of last year.
Quarterly sales increased substantially in Europe as a result of
new programs. Currency translation effects had a small positive
impact upon year over year sales for the quarter. On a worldwide
basis the original-equipment automotive and industrial markets
registered the largest sales increases. Domestic aftermarket
sales were assisted by the recent acquisition of Core Holdings,
Inc. Short-term softening in the agricultural- and construction-
equipment market and the European truck market hampered revenue
growth in the quarter. Also effecting the quarter were a slow
seasonal start in the building-heating market as well as on-going
pricing pressures in the North American aftermarket and in
Europe.
Gross margin decreased 1.1%, as a percentage of sales, over the
third quarter of the previous year to 27.1% from 28.2%. Lower
gross margins earned in recently opened European production
facilities were the main factor leading to the decline.
Selling, general and administrative expenses increased 13.3% over
last year's third quarter while increasing 1.1% as a percentage
of sales. Excluding the recent Core Holdings acquisition,
selling, general and administrative expenses grew by only 5.5%,
consistent with sales growth and inflation.
Operating income decreased 2.2%, as a percentage of sales over
last year's third quarter, to 9.2 % from 11.4%. Contributing
factors were lower margins earned at newly opened production
facilities in Europe and the effect of including the Core
acquisition in the quarterly operating results for the first
time.
Average outstanding debt levels during the quarter increased by
approximately $84.6 million, or 84.7%, from the same quarter a
year ago while interest expense increased 104%, for the same time
<PAGE>
period. The October acquisition of Core Holdings, including
higher interest rate debt assumed, and the joint venture purchase
and start-up activity reported earlier in the year were the main
factors leading to higher borrowing levels and interest expense.
Non-operating income in the current quarter, included a gain on
the sale of a closed facility in Michigan.
The effective tax rate decreased by 2.6% when compared to the
same period last year. The largest factor influencing the
decrease was a differential in foreign tax rates compared to U.S.
rates.
Net earnings for the third quarter decreased 2.8% to $17.3
million, or $0.59 basic and $0.58 diluted earnings per share from
last year's $17.8 million, or $0.60 basic and $0.59 diluted
earnings per share. Annualized return on shareholders'
investment, at 15.5% for the quarter, was in management's target
range of 15-20%.
Comparison of the First Nine Months of 1998-99 with the First
- -------------------------------------------------------------
Nine Months of 1997-98
- ----------------------
Net sales for the first nine months of fiscal 1998-99 reached a
record $830.4 million, up 5.7% from the $785.4 million reported
in the first nine months of last year. Revenues from European
operations were up significantly compared with the same period a
year ago. Currency translation effects had a minimal impact upon
year over year sales. On a worldwide basis the strongest sales
increases were to the original-equipment automotive market and to
the industrial market. Other major markets registered small
increases except for the building-HVAC market which remained down
for the year.
Gross margin decreased 0.9%, as a percent of sales, over the
first nine months of the previous year to 27.9% from 28.8%. Lower
gross margins earned in recently opened European production
facilities were a contributing factor to the overall decline.
Selling, general and administrative expenses increased 6.8% over
the first nine months last year while increasing 0.2% as a
percentage of sales. Without the recent Core Holdings
acquisition, these expenses grew by only 4.2%, consistent with
sales growth and inflation.
Operating income decreased by 4.0% over the first nine months of
the previous year, while decreasing 1.1% as a percentage of
sales. Among the contributing factors were lower margins earned
at newly opened production facilities in Europe and the effect of
including the Core Holdings acquisition in the year-to-date
operating results.
Average outstanding debt levels during the first nine months
increased by approximately $47.1 million, or 46.6%, over the same
period a year ago. Corresponding interest expense increased by
26.9%, or $0.8 million, over the same nine-month period, a year
ago. An increase in major property, plant and equipment projects
<PAGE>
resulted in larger amounts of interest being capitalized in the
current period which partially offset the increased interest
expense resulting from the October acquisition of Core Holdings
and the joint venture activity reported earlier in the year.
Non-operating income included an amount for past royalties
related to worldwide licensing agreements for Modine's patented
PF technology and a gain on the sale of a closed facility in
Michigan.
The effective tax rate decreased by 1.1% when compared to the
same period last year.
Net earnings for the nine months increased 4.2% to $56.5 million,
or $1.91 basic and $1.88 diluted earnings per share from last
year's $54.3 million, or $1.82 basic and $1.79 diluted earnings per
share. Annualized return on shareholders' investment, at 17.2% for
the nine months, was in management's target range of 15-20%.
Year 2000 Remediation Program
- -----------------------------
General
-------
In response to the Year 2000 issue, the Company initiated a
number of projects in early 1997 to identify, evaluate, and
implement changes to its existing computerized business systems.
Each of the projects followed a four phase approach which
included inventory, assessment, remediation or replacement, and
system integration testing. All of the Year 2000 efforts were
carried on globally, and plans, executive sponsorship and funding
were put in place to address the effort. A number of the
Company's current systems were already Year 2000 compliant and
where third party software was being utilized, upgrades to the
vendor's Year 2000 compliant versions have been completed or are
in process. In addition to business systems, additional programs
to ensure supplier continuity and process capability were
initiated. All of the above projects are currently being funded
through normal operating cash flow. 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.
Business Systems
----------------
In North America, the conversion and remediation effort of the
Company's internally developed systems is being addressed by an
external party. The external party is also validating the Year
2000 changes with internally prepared tests scripts. Computer
hardware and LAN infrastructure is also in the process of being
converted to ensure compliance in its business system and desktop
operation. The expected Year 2000 costs for North America are
$4.5 million of which approximately 80% has been already expended.
The systems conversion project is in the last phase, system
integration testing, and is being conducted by Modine internal
staff. The project is 80% complete, and is scheduled for a second
calendar quarter 1999 completion. Recent accomplishments in
North America during the quarter include the conversion of
<PAGE>
business systems in Mexico and Canada to achieve Year 2000
compliance through a controlled series of system migration and
software upgrades.
Outside of North America, Year 2000 compliance is being achieved
by replacing current applications with SAP, a Year 2000 compliant
package of integrated manufacturing and financial software. Also
included are hardware migrations, LAN, e-mail and desktop upgrades
and replacements. The Year 2000 international cost associated with
the project is $4.6 million of which 80% has been expended. The
project is progressing and, depending on site, is in various stages
of readiness, most of which are completed. Overall, the European
project is 80% complete, and scheduled for a third calendar quarter
1999 completion.
Suppliers & Customers
---------------------
With respect to suppliers, the Company has surveyed its material
and service suppliers to determine whether they are actively
involved in Year 2000 remediation projects that will ensure that
services to Modine will continue without interruption to any of
Modine's business processes. The Company has since developed a
second, more detailed survey that has been resent to our suppliers
to gain better insight into their actual Year 2000 status. To date,
85% of the surveys have been returned, of which 100% have indicated
that they are or will be compliant by July 1, 1999. The responses
are being used as the basis of developing specific contingency plans
for those suppliers who cannot meet our compliance deadline.
With our dependency on customers for sales and cash flow, Year
2000 interruptions in our customers' operations could result in
reduced sales, increased inventory or receivable levels and cash
flow reductions. While these events are possible, our customer
base is broad enough to minimize the effects of a single occurrence.
Facilities & Embedded Systems
-----------------------------
In addition, for non-IT areas, a major effort to assess Modine's
production facilities to include embedded systems, is in process
and is being conducted by a third party consulting firm
specialized in this type of activity. The facilities evaluation
was completed in the fourth calendar quarter of 1998. Dependent
upon formal risk assessments by facility and corporate teams,
recommended actions include testing, repair, replacement,
upgrading, and/or retirement of specific systems or components.
Modine expects to complete any testing and/or any systems
remediation activities by the end of the second calendar quarter
of 1999, and development of contingency plans, if needed, by the
third calendar quarter of 1999. Cost for the inventory
assessment is $300,000. The projected budget for remediations is
estimated to be $360,000.
Risks & Contingency Planning
----------------------------
The failure to correct a material Year 2000 problem could result
in an interruption of the Company's business activities or
<PAGE>
operations. Modine's Year 2000 projects were designed and are
being implemented to significantly reduce that possibility.
Despite the significant efforts to address Year 2000 concerns,
the Company could potentially experience disruptions to some of
its operations, including those resulting from non-compliant
systems used by its suppliers and customers. To alleviate those
concerns, Modine is actively involved in developing and
implementing contingency plans in the critical areas of the
business. We have already issued operational contingency plans to
our manufacturing facilities and are continuing to formalize system
and supplier contingency plans. The Company will continue that
process throughout 1999 whenever the risk appears to be warranted.
Euro Conversion
- ---------------
A single currency called the Euro was introduced in Europe on
January 1, 1999. Eleven of the fifteen member countries of the
European Union agreed to adopt the Euro as their common legal
currency on that date. Fixed conversion rates between these
participating countries' existing currencies and the Euro have
been established. The legacy currencies are scheduled to remain
legal tender as denominations of the Euro until at least January
1, 2002, but not later than July 1, 2002. During this transition
period, the parties may settle transactions using either the Euro
or a participating country's legacy currency.
Certain of Modine's business functions in Europe introduced Euro-
capability as of January 1, 1999, including systems for making
and receiving certain payments, pricing and invoicing. Other
business functions and financial reporting will be converted to
the Euro by the end of the transition period, but may be
converted earlier where operationally efficient or cost effective,
or to meet customer requirements. Any delays in the Company's
ability to become Euro compliant, or in its key suppliers and
customers to be Euro compliant could result in an interruption
of the Company's business activities or operations. The impact,
if any, of these interruptions upon the results of operations,
financial condition and cash flows has not yet been determined.
Outlook for the Remainder of the Year
- -------------------------------------
Management expects short-term market factors to result in fiscal
1999 sales growth being close to earlier projections made last
summer while earnings are anticipated to increase at a slightly
lower percentage. Beginning in calendar year 2000, the Company
expects to benefit from significant new business with large
customers such as Chrysler and PACCAR. Improved profitability in
Germany from new business, efficiency improvements, and a reduced
workforce are also anticipated. These forward-looking statements
regarding sales and earnings are subject to certain risks and
uncertainties which could cause actual results to differ
materially from those projected. See "Important Factors and
Assumptions Regarding Forward-Looking Statements" attached hereto
as exhibit 99 and incorporated herein by reference.
<PAGE>
FINANCIAL CONDITION
- -------------------
Comparison between December 26, 1998 and March 31, 1998
- -------------------------------------------------------
Current Assets
- --------------
Cash and cash equivalents decreased by $0.2 million to a total of
$36.2 million. The Company's primary sources of liquidity and
capital resources were cash provided by operations and the use of
available borrowing facilities.
Net trade receivables increased $12.4 million, or 7.6%.
Approximately $2.4 million of the increase can be attributed to
the recent Core Holdings acquisition. The remainder of the
overall increase can be attributed to higher sales for the third
quarter of fiscal 98-99 in the amount of $29.4 million or 11.5%
compared to the sales in the fourth quarter of the prior year.
Overall inventory levels increased by $7.5 million. While the
acquisition of Core Holdings increased inventories by more than
this amount, others factors affecting inventory levels were
ongoing management efforts to control inventory levels, changes
in sales volumes, exchange rate fluctuations in Europe, process
and product line changes at certain manufacturing facilities and
a normal seasonal decline in the HVAC division.
Deferred income taxes and other current assets decreased $2.1
million. The largest items influencing change were a reduction
in unbilled customer tooling, an increase in foreign currency
contracts hedging sales in French francs, an increase in
receivables from the company's stock plans trustee and the Core
Holdings acquisition.
Working capital decreased approximately 6.7% to $187.1 million
from $200.5 million and the current ratio declined slightly to
1.8 to 1 from 2.0 to 1. A number of categories experienced
changes, with the largest item influencing the change being an
increase in debt due within one year. Partially offsetting this
change were increases in both trade receivables and inventory.
The Core Holdings acquisition was also a factor contributing to
the overall changes recorded.
Property, Plant and Equipment
- -----------------------------
Net property, plant and equipment increased $48.4 million to
$296.7 million as capital expenditures exceeded depreciation,
retirements and foreign currency translation impact. Outstanding
material commitments for capital expenditures were $49.6 million
at December 26, 1998, compared to $48.1 million at March 31, 1998.
The largest commitment of approximately $27.2 million is related to
facility expansions, improvements, equipment upgrades, and new
equipment for a number of European plants. Another $4.2 million
relates to the construction of a new technical center in Racine,
Wisconsin. The outstanding commitments will be financed primarily
through internally generated cash and external borrowing, as required.
<PAGE>
Goodwill and Other Intangible Assets
- ------------------------------------
Goodwill and other intangible assets, net of accumulated
amortization increased $23.6 million. The main factor
contributing to the increase was the $21.5 million recorded in
conjunction with the Core Holdings acquisition Amortization and
foreign currency translations were also factors contributing to
the overall change.
Deferred Charges and Other Noncurrent Assets
- --------------------------------------------
Deferred charges and other noncurrent assets increased $2.8
million. The net increase is primarily the result of continuing
recognition of the surplus in the Company's overfunded pension
plans.
Current Liabilities
- -------------------
Accounts payable and various accrued expenses decreased $3.6
million. An increase of $7.0 million from the Core acquisition
was offset by normal timing differences in the level of operating
activity in other areas of the company. Accrued income taxes
increased $5.8 million with Core contributing $1.7 million of the
increase with the remainder arising from normal timing
differences in making estimated tax payments and federal tax
benefits resulting from the exercise of stock options.
Debt
- ----
Outstanding debt increased by $87.5 million from March 31, 1998.
Long-term debt increased by $64.1 million. The major events
influencing the change were the purchase of Core Holdings, Inc.,
headquartered in Miami, the purchase of a 50% interest in
Radiadores Visconde located in Brazil, the startup of the newly
formed joint venture company, Daikin-Modine, Inc., and capital
expenditures in Europe for facility expansion and modernization.
Most of the increase in the long-term debt was domestic. During
this time, short-term debt increased by $23.4 million. The U.S.
portion of short-term debt increased by $19.0 million and the
European portion outstanding increased $4.4 million.
Consolidated available lines of credit increased by $1.4 million.
Domestically, the Company's multi-currency revolver was increased
from $25 million to $50 million, and is fully utilized. Foreign
unused lines of credit at December 26, 1998 were $14.7 million.
Total debt as a percentage of shareholders' equity increased from
26.8% to 44.4%.
Shareholders' Investment
- ------------------------
Total shareholders' investment increased by $29.2 million to a
total of $451.7 million. The net increase came primarily from
net earnings of $56.5 million for the first nine months.
Dividends paid to shareholders of $18.6 million, net treasury
<PAGE>
stock activity of $8.8 million, favorable foreign currency
translation impact of $1.5, and other minor changes to the
capital accounts also contributed to the change.
Other
- -----
Subsequent to the end of the third quarter, recent economic
events in Brazil led to the devaluation of its currency. As a
result of the devaluation and subsequent exchange rate movements,
the value of the Company's investment in its recently formed
Brazilian joint venture has been affected. Although the
devaluation is expected to have a minimal impact on the Company's
fourth quarter net earnings, it will unfavorably impact the
foreign currency translation adjustment to be reported in
shareholders' equity and comprehensive earnings if exchange rates
remain at their current levels.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In the normal course of business, the Company and its
subsidiaries are named as defendants in various lawsuits and
enforcement proceedings by private parties, the Occupational
Safety and Health Administration, the Environmental Protection
Agency, other governmental agencies, and others in which claims,
such as personal injury, property damage, or antitrust and trade
regulation issues, are asserted against the Company. While the
outcome of these proceedings is uncertain, in the opinion of the
Company's Management and counsel, any liabilities that may result
from such proceedings are not reasonably likely to have a
material effect on the Company's liquidity, financial condition
or results of operations. Many of the pending damage claims are
covered by insurance and, in addition, the Company from time to
time establishes reserves for uninsured liabilities.
The Mitsubishi and Showa Litigation
-----------------------------------
In November 1991, the Company filed a lawsuit in the Federal
District Court in Milwaukee, Wisconsin against Mitsubishi Motor
Sales of America, Inc. and Showa Aluminum Corporation, alleging
infringement of the Company's Patent No. 4,998,580 on parallel-
flow air-conditioning condensers. The suit seeks an injunction
to prohibit continued infringement and accounting for damages, a
trebling of such damages for willful infringement, and
reimbursement of attorneys' fees. In December of 1991, the
Company submitted a complaint to the U. S. International Trade
Commission (ITC) requesting that the ITC ban the import and sale
of parallel-flow air-conditioning condensers and systems or
vehicles that contain them, which are the subject of the
aforementioned lawsuit. In 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
<PAGE>
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
flow path 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 companies must also file annual
reports with the ITC regarding their sales of Showa parallel-flow
condensers in the United States.
In July of 1994, Showa filed a lawsuit against the Company in the
Federal District Court in Columbus, Ohio alleging infringement by
the Company of Showa's patents pertaining to double circuit
condensers and baffles therefor (In June, 1995, the Company filed
a motion for partial summary judgment against such lawsuit). In
December of 1994, the Company filed another lawsuit against
Mitsubishi Motor Sales of America, Inc. and Showa Aluminum
Corporation in the Federal District Court in Milwaukee, Wisconsin
pertaining to the Company's newly-issued Patent No. 5,372,188
also pertaining to parallel-flow air-conditioning condensers but
having tube flow path hydraulic diameters less than 0.070 inches.
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 has been issued Japanese Patent No.
2,132,321 covering parallel-flow air conditioning condensers
having tube flow path hydraulic diameters less than 0.070 inches.
In August of 1998, the Company filed a patent infringement suit
in Japan against Showa with respect to such patent seeking an
injunction and damages. A similar patent has been issued to the
Company 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.
Item 5. Other Information.
On October 8, 1998, the Company completed the acquisition of Core
Holdings, Inc. of Orlando, Florida, an aftermarket wholesale
distributor specializing in complete lines of vehicular engine-
cooling and air-conditioning systems products. For additional
information see footnote 6 to the Notes to Consolidated Financial
Statements (Unaudited) herein.
Subsequent to the end of the quarter, on January 20, 1999, the
Company's Board of Directors elected Marsha Williams to serve as
a new director of the corporation, expanding the number of board
members to ten. Please see the Company's News Release dated
February 8, 1999, attached to this Report Form 10-Q as Exhibit
99(b), for further information.
As previously reported, in May of 1986, the Board of Directors
authorized the Company to acquire up to 10% per year of the
issued and outstanding shares of the common stock of the Company.
Pursuant to this authorization, the Company purchases shares of
its common stock from time to time as such shares become
available on the open market, from the Company's pension plans,
<PAGE>
or in private transactions for resale to the employee stock
purchase plans and for other corporate purposes. Since December 31,
1996, the Company has purchased at market price a total of 1,058,203
shares, 132,884 shares of which were purchased during the fourth
fiscal quarter of 1996-97; 362,427 shares of which were purchased
from April 1, 1996 through December 31, 1997; 160,293 shares of
which were purchased during the fourth fiscal quarter of 1997-98,
and 402,599 shares of which were purchased from April 1, 1998
through December 31, 1998. The Company currently has 833,135
shares (as of February 5, 1999) in its Treasury.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
--------
The following exhibits are included for information only unless
specifically incorporated by reference in this report:
Reference Number
per Item 601 of
Regulation S-K Page
- -------------- ----
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 January 20,
1999). 22
4(a) Rights Agreement dated as of October 16,
1986 between the Registrant and First
Chicago Trust Company of New York (Rights
Agent) (filed by reference to the
Registrant's Annual Report on Form 10-K
for the fiscal year ended March 31, 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).
<PAGE>
Reference Number
per Item 601 of
Regulation S-K Page
- -------------- ----
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 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. The Registrant
agrees to furnish copies of such instruments
to the Commission upon request.
27* Financial Data Schedule (electronic
transmission only).
99(a)* Important Factors and Assumptions Regarding
Forwarding-Looking Statements. 33
99(b)* News Release dated February 8, 1999
regarding new director. 34
*Filed herewith.
(b) Reports on Form 8-K:
-------------------
The Company filed no Reports on Form 8-K during the quarter ended
December 26, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MODINE MANUFACTURING COMPANY
(Registrant)
By: A. D. REID
---------------------------------------
A. D. Reid, Vice President,
Finance and Chief Financial Officer
(Principal Financial Officer)
Date: February 8, 1998 By: W. E. PAVLICK
---------------------------------------
W. E. Pavlick, Senior Vice President,
General Counsel and Secretary
<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)
(as amended January 20, 1999)
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 ten. Directors need not be
stockholders.
The Board of Directors shall be divided into three
classes: a class consisting of four directors and two classes
consisting of three directors each. 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 99(a)
IMPORTANT FACTORS AND ASSUMPTIONS
REGARDING FORWARD-LOOKING STATEMENTS
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; variations in currency-exchange rates in view of a
large portion of the Company's business being non-domestic; 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 such statements
are made.
<PAGE>
EXHIBIT 99(b)
NEWS RELEASE
Release Date: Immediate Modine Manufacturing Company
Contact: Gerald J. Sweda 1500 DeKoven Avenue
Racine, Wisconsin 53403-2552
Telephone: (414) 636-1361
Modine board elects new director
RACINE, Wis., Feb. 8, 1999 - The Modine Manufacturing Company
(Nasdaq: MODI) Board of Directors has elected Marsha Williams to serve as
a new director of the corporation, expanding the number of board members
to ten.
Since May 1998, Williams has been chief administrative officer for
Crate & Barrel, a privately held specialty chain owned by the German
company Otto Versand. Previously, she had been vice president &
treasurer of Amoco Corporation and Carson Pirie Scott & Company, and vice
president of The First National Bank of Chicago.
Williams is a 1973 graduate of Wellesley College and earned an MBA
in 1976 at the University of Chicago Graduate School of Business.
Modine is a world leader at solving heating and cooling problems in
vehicles, buildings, and off-highway and industrial equipment. Modine
has annualized sales of more than $1 billion and has 8,800 employees
worldwide.
<PAGE>
