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, 1997 -------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from to -------- -------- 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 I.R.S. Employer incorporation or organization) Identification No.) 1500 DeKoven Avenue, Racine, Wisconsin 53403 - ----------------------------------------- -------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (414) 636-1200 --------------- Securities Registered pursuant to Section 12(g) of the Act: Common Stock, $0.625 par value - ------------------------------------------------------------------------ (Title of Class) An Exhibit index appears at pages 18-25 herein. Page 1 of 207
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 ---- ---- 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 53% of the outstanding shares are held by non- affiliates. The aggregate market value of these shares was approximately $453,683,001 based on the market price of $28.75 per share on June 17, 1997. 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 29,774,110 at June 17, 1997. DOCUMENTS INCORPORATED BY REFERENCE - ----------------------------------- 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 - --------------------- --------------------- Annual Report to Shareholders for the fiscal year ended March 31, 1997 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) 1997 Definitive Proxy Statement dated June 6, 1997 Part III of Form 10-K (Items 10, 11, 12, 13)
TABLE OF CONTENTS ----------------- MODINE MANUFACTURING COMPANY - FORM 10-K FOR THE YEAR ENDED MARCH 31, 1997 10-K Pages ---------- Cover Table of Contents Part I - ------ Item 1 - Business ------------------ 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 12 -------------------- Item 3 - Legal Proceedings 13 --------------------------- Item 4 - Submission of Matters To A Vote of -------------------------------------------- Security Holders 14 ---------------- Part II - ------- Item 5 - Market for Registrant's Common ---------------------------------------- Equity and Related Stockholder ------------------------------ Matters 14 ------- Item 6 - Selected Financial Data 15 --------------------------------- Item 7 - Management's Discussion and ------------------------------------- Analysis of Financial Condition ------------------------------- and Results of Operations 16 ------------------------- Item 8 - Financial Statements & -------------------------------- Supplementary Data 16 ------------------
10-K Pages ---------- Item 9 - Changes in and Disagreements -------------------------------------- with Accountants on Accounting ------------------------------ and Financial Disclosure 16 ------------------------ Part III - -------- Items 10 and 11 - Directors and Executive ------------------------------------------- Officers of the Registrant; Executive ------------------------------------- Compensation 16 ------------ Item 12 - Security Ownership of Certain --------------------------------------- Beneficial Owners and Management 18 -------------------------------- Item 13 - Certain Relationships and Related ------------------------------------------- Transactions 18 ------------ Part IV - ------- Item 14 - Exhibits, Financial Statement --------------------------------------- Schedules, and Reports on Form 8-K 18 ---------------------------------- 1) Financial Statements 2) Financial Statement Schedules 3) Consent of Independent Accountants 4) Exhibit Index Signatures 26 - ----------
PART I ------ ITEM 1. BUSINESS. - ------ -------- General - ------- 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 operates primarily in a single industry consisting of the manufacture and sale of heat transfer equipment. This includes heat exchangers for cooling all types of engines, transmissions, auxiliary hydraulic equipment, air conditioning components used in cars, trucks, farm and construction machinery and equipment, and heating and cooling equipment for residential and commercial building HVAC (heating, ventilating, air conditioning and refrigeration equipment). 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 salesmen, 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 ---------------------------------------- 1997 1996 1995 1994 1993 Radiators & Radiator 39% 41% 42% 45% 45% Cores Vehicular Condensers & Evaporators 22% 18% 14% 12% 12% Oil Coolers 16% 16% 16% 15% 13% Charge Air Coolers 11% 12% 12% 11% 10% Building HVAC 8% 8% 9% 11% 14% Miscellaneous 4% 5% 7% 6% 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:
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. On April 1, 1996 the Radman Corporation, Ltd. was amalgamated with and into Modine of Canada, Ltd. and ceased to exist as a separate entity as of that date. 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 will begin assembly of automotive cooling modules in Wackersdorf, Germany. (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 market; and (c) Hungaro Langerer Gep. Kft., located in Mezokovesd, Hungary.
(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 and environment; and the accounting functions of controlling, cost accounting, and financial accounting. The Company operates, through Signet Systems, Inc., Signet Systems GmbH located in Goch, Germany. Signet 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, and The Netherlands. 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. 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 11.8%, 12.9% and 13.8% for fiscal years ended in 1997, 1996 and 1995, respectively. Estimated after-tax earnings on export sales as a percentage of total net earnings were 11.8%, 12.9% and 13.8% for fiscal years ended in 1997, 1996 and 1995, respectively. Royalties from foreign licensees as a percentage of total earnings were 1.6%, 1.0% 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 - ------------------------------- Financial information relating to the Company's foreign and domestic operations, including export sales, is included in the Company's 1997 Annual Report to Shareholders and is incorporated herein by reference at Note 18 on Page 28 therein. Events subsequent to the End of the Quarter - ------------------------------------------- On June 6, 1997, 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 25 herein for further details. Competitive Position - -------------------- 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 - ------------------- Ten customers accounted for approximately 40.7% of the Company's sales in the fiscal year ended March 31, 1997. These customers, listed alphabetically, were: BMW, Caterpillar, Chrysler Motor Corporation, Citroen/PSA, Fiat, Ford Motor Company, John Deere, Navistar International, Paccar, Inc. 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. Backlog of Orders - ----------------- 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 copper, brass, steel, and aluminum 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 1997-98. Raw Materials - ------------- Copper, brass, steel, aluminum, 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 1997. Patents - ------- 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 - ------------------------ 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 1996-97 amounted to $16,877,000; in fiscal 1995-96 amounted to $14,256,000; and in fiscal 1994-95 amounted to approximately $10,907,000. 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. Environmental Matters - --------------------- 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. 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 1996, the Company revised its corporate waste minimization program, which originated in 1991, to encompass all by-products of the manufacturing process. All Modine facilities have committed to one and five year goals for their own unique programs. 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 investigatory and/or remedial work to ensure sufficient protection to the environment. Seven 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 eleven waste disposal sites. These sites are not company-owned and allegedly contain wastes attributable to Modine from past operations. For the eleven 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, 1997 capital expenditures related to environmental projects were $0.6 million. These environmental expenditures include capital outlays to retrofit existing 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 $3.5 million in 1997-98. 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 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 $2.3 million for the fiscal year ending March 31, 1997. These expenses include: operation and maintenance costs for solid-waste treatment, storage, and disposal; for costs incurred in conducting environmental- compliance activities; and for other matters. Operating expenses of some facilities may increase during fiscal year 1997-98 because of such charges but the competitive position of the Company is not expected to change materially. Although environmental costs are substantial, the Company has no reason to believe such costs vary significantly from similar costs incurred by other companies engaged in similar businesses. Employees - --------- The number of persons employed by the Company at March 31, 1997, was approximately 7,900. Seasonal Nature of Business - --------------------------- In recent years the Company's business has become more continuous and less seasonal. However, a degree of seasonality may still be experienced since the Aftermarket, Commercial Products, Heating, and Signet Systems Divisions are affected by weather patterns,
constructions starts, and other factors. Sales to original equipment manufacturers are dependent upon the demand for new vehicles and equipment. The following quarterly net sales detail illustrates the degree of fluctuation for the past five years: Fiscal Fiscal Year First Second Third Fourth Year Ended Quarter Quarter Quarter Quarter Total -------- -------- -------- -------- -------- March 31 - -------- ($ In Thousands) 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 1993 133,817 144,603 146,591 145,828 570,839 Five-year $195,431 $206,369 $213,047 $213,741 $828,588 Average Percent 23% 25% 26% 26% 100% of Year Working Capital Items - --------------------- 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. ITEM 2. PROPERTIES. - ------ ---------- 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 that it plans to expand its existing testing capabilities in Racine, Wisconsin. The Company will invest approximately $32 million over two and one-half years in this project, 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.
The Company's facilities, on a geographic basis, are as follows: Type of North Asia/ Facility America Europe Pacific Total -------- ------- ------ ------- ------ Manufacturing 21 11 32 Distribution 3 1 4 Sales & Service Centers/Offices 14 15 1 30 Joint Ventures 3 1 4 -- -- - -- Total 38 30 2 70 Total square footage of the 70 facilities is approximately 7,327,000 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. - ------ ----------------- 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 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 July 1993, the ITC reversed an earlier ruling by a hearing officer and upheld, as valid and enforceable, the Company's basic patent on parallel-flow air-conditioning condensers. The ITC also ruled that specific condensers from the two Japanese companies did not infringe the Company's patent. Each of the parties appealed, to the U.S. Court of Appeals for the Federal Circuit, the portion of the ITC opinion adverse to them. In February 1996, the U.S. Court of Appeals for the Federal Circuit, upheld the patent as valid and enforceable and remanded the case to the ITC for a determination with respect to Showa infringement. 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. 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 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 1996-97 and 1995-96. As of April 1, 1997, shareholders of record numbered approximately 6,157; it is estimated that beneficial owners numbered at least 13,000.
1996-97 1995-96 ---------------------------- ---------------------------- Quarter High Low Dividends High Low Dividends First $29.75 $24.50 $.17 $39.75 $31.50 $.15 Second 28.00 25.00 .17 40.50 28.75 .15 Third 27.25 23.75 .17 32.00 24.00 .15 Fourth 29.75 24.50 .17 26.50 22.50 .15 ---- ---- TOTAL $.68 $.60 - ----------------------------------------------------------------------- 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, $145,950,000 was available for these purposes at March 31, 1997. (However, these restricted payments may not exceed $30,000,000 in any fiscal year.) 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 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 ----------------------------------------------------- 1997 1996 1995 1994 1993 Sales (in thousands) $999,046 $990,493 $913,010 $669,553 $570,839 Net earnings (in thousands) 63,763 61,399 68,442 43,990*** 19,987** Total assets (in thousands) 694,955 671,836 590,187 509,981 405,187 Long-term debt (in thousands) 85,197 87,809 62,220 77,646 52,350 Dividends per share* .68 .60 .52 .46 .42 Net earnings per share* 2.10 2.02 2.24 1.44*** .66** * Adjusted for stock splits and stock dividends.
** Includes recognition of an accounting change from the adoption of FAS 106, resulting in a one-time after-tax expense of $13,700,000, or $.46 per share. ***Includes recognition of an accounting change from the adoption of FAS 109, resulting in a one-time after-tax benefit of $899,000, 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 1996-97 Annual Report to Shareholders, pages 4, 7, 8, 11, 12, 13, 14, 15, 16 and 18, attached as Exhibit 13. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. - ------ ------------------------------------------- The report of Coopers & Lybrand L.L.P. dated May 1, 1997, the Consolidated Statements of Earnings, and the related Consolidated Balance Sheets, Cash Flows, Shareholders' Investment, and Notes to Consolidated Financial Statements, appearing on pages 15, 17, 19, 20, and 21-29 of the Company's 1996-97 Annual Report to Shareholders are incorporated herein by reference. With the exception of the aforementioned information, no other data appearing in the 1996-97 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. 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 6, 1997 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 10 - 12. Executive Officers of Registrant Officer Name Age Position Since - ---- --- -------- ------- R. T. Savage 58 Chairman and Chief Executive 1981 Officer D. R. Johnson 55 President and Chief Operating 1988 Officer W. E. Pavlick 63 Senior Vice President, General Counsel and Secretary 1979 V. S. Frangopoulos 61 Group Vice President, Off-Highway 1981 Products M. G. Baker 57 Group Vice President, Distributed 1987 Products L. D. Howard 53 Group Vice President, Europe 1991 D. B. Rayburn 49 Group Vice President, Highway 1991 Products J. H. Firestone 59 Vice President, Quality & 1990 Environment J. J. Hankey 47 Vice President and General Manager, Commercial Products Division 1992 R. L. Hetrick 55 Vice President, Human Resources 1989 R. W. Possehl 52 Vice President, Administration 1985 A. D. Reid 55 Vice President, Finance and Chief Financial Officer 1985 A. C. De Vuono 48 Vice President, Technical Services 1996 R. S. Bullmore 47 Corporate Controller 1983 R. M. Gunnerson 48 Treasurer 1977 D. R. Zakos 43 Associate General Counsel and Assistant Secretary 1985 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. Savage and Mr. Johnson have employment agreements with the Company. As of February 26, 1997, the Company entered into change-in- control agreements (the "Change-in-Control Agreements") with
other key employees (except with Messrs. Savage and 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 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 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 5 - 7 of the Company's definitive Proxy Statement dated June 6, 1997 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 6, 1997 on page 15 under the heading "Transactions" attached to this report. 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, 1997, 1996, and 1995 15
Page in Annual Report* ------------- Consolidated Balance Sheets at March 31, 1997 and 1996 17 Consolidated Statements of Cash Flows for the years ended March 31, 1997, 1996, and 1995 19 Consolidated Statements of Shareholders' Investment for the years ended March 31, 1997, 1996, and 1995 20 Notes to Consolidated Financial Statements 21 - 28 Independent Auditors' Report 29 * Incorporated by reference from the indicated pages of the 1996-97 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, 1997 28 Schedule II - Valuation and Qualifying Accounts for the years ended March 31, 1997, 1996 and 1995 201 (3) Consent of Independent Accountants 182 (4) Exhibit Index 19 (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: 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).
Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- 3(b) Restated By-Laws (as amended) (filed by reference to the Registrant's Quarterly Report on Form 10-Q dated September 26, 1996). 4(a) Specimen Uniform Denomination Stock Certificate of the Registrant (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1993). *4(b) Rights Agreement dated as of October 16, 1986 between the Registrant and First Chicago Trust Company of New York (Rights Agent) 29 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.) Note: The amount of long-term debt authorized ---- under any instrument defining the rights of holders of long-term debt of the Registrant, other than as noted above, does not exceed ten percent of the total assets of the Registrant and its subsidiaries on a consolidated basis. Therefore, no such instruments are required to be filed as exhibits to this Form 10-K. The Registrant agrees to furnish copies of such instruments to the Commission upon request.
Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- 9 Not applicable. *10(a) Director Emeritus Retirement Plan (effective April 1, 1992). 83 10(b) 1978 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, 1993). *10(c) Employment agreement between the Registrant and R. T. Savage. 98 10(c)(i) 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). 123 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. 128 10(j) 1992 Stock Award Plan [a part of the 1985 Incentive Stock Plan]. Note: The 1992 Plan is not materially ---- different from the 1987 Stock Award Plan filed with the Registrant's Annual Report on Form 10-K for the fiscal year 1993.
Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- 10(k) 1993 Stock Award Plan [a part of the 1985 Incentive Stock Plan]. Note: The 1993 Plan is not materially ---- different from the 1987 Stock Award Plan filed with the Registrant's Annual Report on Form 10-K for the fiscal year 1993. 10(l) 1994 Stock Award Plan [a part of the 1985 Incentive Stock Plan]. Note: The 1994 Plan is not materially ---- different from the 1987 Stock Award Plan filed with the Registrant's Annual Report on Form 10-K for the fiscal year 1993. *10(m) 1994 Incentive Compensation Plan (as amended). 130 *10(n) 1994 Stock Option Plan for Non- Employee Directors (as amended). 138 10(o) 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(p) 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(q) 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(r) 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(s) 1996 Stock Option Agreements (incentive and non-qualified) [a part of the 1994 Incentive Compensation Plan] (filed by
Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- reference to the exhibit contained within the Registrant's Annual Report on Form 10-K for the fiscal year 1996). 10(t) 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(u) 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(v) 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(w) 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. *11 Statement re: computation of per share earnings. 143 12 Not applicable.
Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- *13 1996-97 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. 144 16 Not applicable. 18 Not applicable. *21 List of subsidiaries of the Registrant. 180 22 Not applicable. *23 Consent of independent accountants. 182 24 Not applicable. *27 Financial Data Schedule 183 28 Not applicable. *99 Definitive Proxy Statement of the Registrant dated June 6, 1997. 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. 184 None Appendix (filed pursuant to Item 304 of Regulation S-T). 202 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 6, 1997, 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.
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 18, 1997 By: R. T. SAVAGE ------------------------------- R. T. Savage, Chairman 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 18, 1997 - ------------------------------------ ------------- R. T. Savage, Chairman, Chief Date Executive Officer and Director D. R. JOHNSON June 18, 1997 - ------------------------------------ ------------- D. R. Johnson, President and Date Chief Operating Officer A. D. REID June 18, 1997 - ------------------------------------ ------------- A. D. Reid, Vice President, Finance Date and Chief Financial Officer W. E. PAVLICK June 18, 1997 - ------------------------------------- ------------- W. E. Pavlick, Senior Vice President, Date General Counsel and Secretary R. J. DOYLE June 18, 1997 - ------------------------------------- ------------- R. J. Doyle, Director Date T. J. GUENDEL June 18, 1997 - ------------------------------------- ------------- T. J. Guendel, Director Date F. W. JONES June 18, 1997 - ------------------------------------- ------------- F. W. Jones, Director Date D. J. KUESTER June 18, 1997 - ------------------------------------- ------------- D. J. Kuester, Director Date V. L. MARTIN June 18, 1997 - ------------------------------------- ------------- V. L. Martin, Director Date
G. L. NEALE June 18, 1997 - ------------------------------------- ------------- G. L. Neale, Director Date S. W. TISDALE June 18, 1997 - ------------------------------------- ------------- S. W. Tisdale, Director Date M. T. YONKER June 18, 1997 - ------------------------------------- ------------- M. T. Yonker, Director Date
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 1997 annual report to shareholders of Modine Manufacturing Company and Subsidiaries on page 29 herein. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in the index on page 19 of this Form 10-K. In our opinion, the financial statement schedules 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 LLP COOPERS & LYBRAND L.L.P. Chicago, Illinois May 1, 1997