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, 1999 -------------- 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 15-21 herein. Page 1 of 209
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 56% of the outstanding shares are held by non- affiliates. The aggregate market value of these shares was approximately $503,597,917 based on the market price of $30.4375 per share on June 15, 1999. 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 29,545,199 at June 15, 1999. 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, 1999 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) 1999 Definitive Proxy Statement dated June 10, 1999 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, 1999 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, Year 2000, Euro Conversion 5 Item 2 - Properties 10 ---------------------- Item 3 - Legal Proceedings 10 ----------------------------- Item 4 - Submission of Matters To A Vote of Security ------------------------------------------------------- Holders 11 ------- Part II - ------- Item 5 - Market for Registrant's Common Equity and ----------------------------------------------------- Related Stockholder Matters 11 --------------------------- Item 6 - Selected Financial Data 12 ----------------------------------- Item 7 - Management's Discussion and Analysis of --------------------------------------------------- Financial Condition and Results of ---------------------------------- Operations 12 ---------- Item 8 - Financial Statements & Supplementary Data 13 -----------------------------------------------------
10-K Pages ---------- Item 9 - Changes in and Disagreements with --------------------------------------------- Accountants on Accounting and Financial --------------------------------------- Disclosure 13 ---------- Part III - -------- Items 10 and 11 - Directors and Executive ------------------------------------------- Officers of the Registrant; Executive ------------------------------------- Compensation 13 ------------ Item 12 - Security Ownership of Certain Beneficial ---------------------------------------------------- Owners and Management 14 --------------------- Item 13 - Certain Relationships and Related --------------------------------------------- Transactions 14 ------------ Part IV - ------- Item 14 - Exhibits, Financial Statement Schedules, ---------------------------------------------------- and Reports on Form 8-K 15 ----------------------- 1) Financial Statements 2) Financial Statement Schedules 3) Consent of Independent Accountants 4) Exhibit Index Signatures 22 - ----------
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 is an independent, worldwide leader in heat-transfer and heat storage technology serving vehicular, industrial, commercial, and building HVAC (heating, ventilating, air conditioning) markets. Modine develops, manufactures, and markets heat exchangers and systems for use in various OEM (original equipment manufacturer) applications and for sale to the automotive aftermarket (as replacement parts) and to a wide array of building markets. The primary markets consist of: - Automobile, truck and bus manufacturers; - Farm implement manufacturers - Heating and cooling equipment manufacturers; - Construction contractors; - Wholesalers of plumbing and heating equipment; - Radiator repair shops; and - Wholesalers of auto repair parts. We distribute our products through: - Company salespersons; - Independent manufacturers' representatives; - Independent warehouse distributors; - Mass merchandisers and - National accounts. Our operations are organized on the basis of market categories or geographical responsibility, as follows: Original Equipment, which provides heat-transfer products, generally from business units in North America, to original- equipment manufacturers of on-highway and off-highway vehicles, as well as to industrial- and commercial-equipment manufacturers, located primarily in North America; Distributed Products, which provides heat-transfer products primarily for the North American vehicular replacement market and the building HVAC market, from business units in North America; and European Operations, which provides heat-transfer products, primarily to European original-equipment manufacturers of on- highway and off-highway vehicles, industrial equipment manufacturers, and the vehicular replacement market from business units in Europe.
The Company has assigned specific business units to a segment based principally on these defined markets and their geographical location. The Company's three reportable segments offer a broad line of products that can be categorized as follows: Percentage of total company revenue by product ---------------------------------------------- Years ended March 31 1999 1998 1997 ---- ---- ---- Radiators & Radiator 39% 40% 39% Cores Vehicular Air 19% 20% 22% Conditioning Oil Coolers 16% 17% 16% Charge Air Coolers 12% 12% 11% Building HVAC 7% 8% 8% Miscellaneous 7% 3% 4% Geographical Areas - ------------------ We maintain administrative organizations in two regions - North America and Europe - to facilitate financial and statutory reporting and tax compliance on a worldwide basis and to support the three business units. Our operations are located in the following countries: North America Europe South America Asia/Pacific - ------------- ------ ------------- ------------ Canada Austria Brazil Japan Mexico Belgium United States Denmark England France Germany Hungary Italy Netherlands Poland Spain Switzerland Our non-U.S. subsidiaries and affiliates manufacture and sell a number of vehicular and industrial products similar to those produced in the U.S. In addition to normal business risks, operations outside the U.S. are subject to others such as changing political, economic and social environments, changing governmental laws and regulations, currency revaluations and market fluctuations. You can find more information in "Note 19. Business Segments" on pages 31-32 of our 1999 Annual Report.
Exports - ------- In addition, the Company exports to foreign countries and receives royalties from foreign licensees. Export sales as a percentage of total sales were 11.5%, 12.6% and 11.8% for fiscal years ended in 1999, 1998 and 1997, respectively. Estimated after-tax earnings on export sales as a percentage of total net earnings were 11.5%, 12.6% and 11.8% for fiscal years ended in 1999, 1998 and 1997, respectively. Royalties from foreign licensees as a percentage of total earnings were 5.5%, 2.5% and 1.6% 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 is included in the Company's 1998-1999 Annual Report to Shareholders and is incorporated herein by reference at Note 19 on Pages 31-32 therein. Events subsequent to the End of the Quarter - ------------------------------------------- On June 10, 1999, 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 21 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 44.3% of the Company's sales in the fiscal year ended March 31, 1999. These customers, listed alphabetically, were: BMW, Caterpillar, Chrysler, DaimlerChrysler, Fiat, Ford, John Deere, Navistar International, Paccar and Volkswagen. Goods are supplied to these customers on the basis of individual purchase
orders received from them. When it is in the customer's and the Company's best interests, the Company utilizes long-term supply agreements to minimize investment risks and provide a proven source of competitively priced products. There are no other relationships between the Company and its customers. 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 aluminum, copper, brass, and steel and have a relatively short manufacturing cycle. The Company's operating units maintain their own inventories and production schedules. Current production capacity (including additional capacity planned to become operational this year) is capable of handling the sales volumes expected in fiscal 1999-2000. Raw Materials - ------------- Aluminum, copper, brass, steel, and solder, all essential to the business, are purchased regularly from several domestic and foreign producers. In general, the Company does not rely on any one supplier for these materials, which are for the most part available from numerous sources in quantities required by the Company. The Company normally does not experience material shortages within its operations and believes that producers' supplies of these materials will be adequate through the end of fiscal year 2000. 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 1999 amounted to $18,252,000; in fiscal 1998 amounted to $16,816,000; and in fiscal 1997 amounted to approximately $16,804,000. There were no significant expenditures on research activities that 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 worldwide. Modine continues to appraise environmental issues and regulatory compliance with a proactive approach. The benefits realized from the Company's environmental programs include conserved resources, more efficient manufacturing processes, minimized liability exposure and reduced operational costs. Modine evaluates the performance of the Company's environmental programs through continuous monitoring, auditing and accounting systems. The Company constantly examines its operations and processes to minimize their impact on the environment. In calendar 1996, the Company revised its corporate waste minimization program, which originated in 1991, to encompass all by-products of the manufacturing process. From calendar 1996 to calendar 1998, a 9% reduction in by-product generation was achieved. Modine accrues for environmental remediation activities relating to past operations - including those under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), often referred to as "Superfund", and under the Resource Conservation and Recovery Act (RCRA) - when it is probable that a liability has been incurred and reasonable estimates can be made. In addition, an obligation may arise when a facility is closed or sold. These expenditures most often relate to facilities and sites where past operations followed practices and procedures that were considered acceptable under then- existing regulations, but will now require investigative and/or remedial work to ensure sufficient protection to the environment. Six of the Company's manufacturing facilities currently have been identified as requiring soil and/or groundwater remediation. Because of the joint and several liability of former landowners, contractual obligations, and certain state programs that provide for partial reimbursement of certain remediation costs, it is unlikely these remediation efforts will have a material effect on the Company's consolidated financial condition. Although there are no currently known liabilities that might have a material effect on the Company's consolidated net assets, the Environmental Protection Agency ("EPA") has designated Modine as a potentially responsible party ("PRP") for remediation of seven waste disposal sites. These sites are not company owned and allegedly contain wastes attributable to Modine from past operations. For the seven 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, 1999 capital expenditures related to environmental projects were $1.6 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 $1.4 million in 1999-2000. Environmental expenses charged to current operations, including remediation costs, totaled about $1.7 million for the fiscal year ending March 31, 1999. These expenses include operation and maintenance costs for solid waste treatment, storage, and disposal and for costs incurred in conducting environmental compliance activities; and for other matters. Operating expenses of some facilities may increase during fiscal year 1999-2000 because of such charges but the competitive position of the Company is not expected to change materially. Although environmental costs are substantial, the Company has no reason to believe such costs vary significantly from similar costs incurred by other companies engaged in similar businesses. Employees - --------- The number of persons employed by the Company at March 31, 1999, was approximately 8,700. Seasonal Nature of Business - --------------------------- Distributed Products may still experience a degree of seasonality since the aftermarket and heating domains are affected by weather patterns, constructions starts, and other factors. On an overall Company basis, there is no significant degree of seasonality as indicated by the percentages below. Sales to original equipment manufacturers are dependent upon the demand for new vehicles and equipment. The following quarterly net sales detail illustrates the degree of fluctuation for the past five years: Fiscal Year Fiscal Ended First Second Third Fourth Year March 31 Quarter Quarter Quarter Quarter Total ----------- ------- ------- ------- ------- ------ ($ In Thousands) 1999 $273,104 $272,961 $284,355 $281,027 $1,111,447 1998 256,923 260,806 267,699 254,990 1,040,418 1997 248,514 254,224 252,972 243,336 999,046 1996 239,216 254,292 252,817 244,168 990,493 1995 208,436 221,760 240,505 242,309 913,010 Five-year $245,238 $252,809 $259,670 $253,166 $1,010,883 Average Percent 24% 25% 26% 25% 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. Year 2000 - --------- Information required hereunder regarding Year 2000 is incorporated by reference from the Company's 1998-1999 Annual Report to Shareholders, pages 16 and 17, attached as Exhibit 13. Euro Conversion - --------------- Information required hereunder regarding Euro Conversion is incorporated by reference from the Company's 1998-1999 Annual Report to Shareholders, at page 17, attached as Exhibit 13. 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. The Company's facilities, on an operating segment basis, are as follows: Type of Original Distributed European Corporate & Facility Equipment Products Operations Other Total - -------- --------- ----------- ---------- ----------- ----- Manufacturing 16 8 12 --- 36 Distribution -- 4 1 --- 5 Sales & Service Centers/Offices 2 14 20 1 37 Joint Ventures 3 3 6 Total 18 26 36 4 84
The Company's facilities, on a geographic basis, are as follows: Type of North South Asia/ Facility America Europe America Pacific Total - -------- ------- ------ ------- ------- ----- Manufacturing 23 13 --- --- 36 Distribution 4 1 --- --- 5 Sales & Service Centers/Offices 16 20 --- 1 37 Joint Ventures 1 3 1 1 6 Total 44 37 1 2 84 Total square footage of the 84 facilities is approximately 8,192,000 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 November 1991 lawsuit. In August, 1997, the ITC issued an Order excluding from U.S. import Showa
condensers that infringe Modine Manufacturing Company's parallel-flow patent. The ITC's Order covers condensers, their parts, and certain products including them, such as air-conditioning kits and systems. It directs the U.S. Customs Service to exclude from importation into the United States such products manufactured by Showa Aluminum Corporation of Japan and Showa Aluminum Corporation of America. The decision is based on a Modine U.S. patent covering condensers with tube hydraulic diameters less than 0.04822 inches. The Showa companies must certify to Customs officials that any condenser items imported by them do not infringe Modine's parallel-flow patent. The Showa companies must also file annual reports with the ITC regarding their sales of Showa parallel- flow condensers in the United States. In July, 1994, Showa filed a lawsuit against the Company alleging infringement by the Company of certain Showa patents pertaining to condensers. In June 1995, the Company filed a motion for partial summary judgment against such lawsuit. In December of 1994, the Company filed another lawsuit against Mitsubishi and Showa pertaining to a newly issued patent on parallel-flow air- conditioning condensers. Both 1994 suits have been stayed pending the outcome of re-examination in the U.S. Patent Office of the patents involved. In October of 1997, Modine was issued a Japanese patent covering parallel- flow air-conditioning condensers having tube 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 this patent seeking an injunction and damages. Several patents have been issued to Modine by the European Patent Office, one having been rejected at the opposition level, which is being appealed. 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 1998-99 and 1997-98. As of April 1, 1999, shareholders of record numbered approximately 6,528; it is estimated that beneficial owners numbered about 13,500.
1998-99 1997-98 ---------------------------- --------------------------- Quarter High Low Dividends High Low Dividends First $37.500 $32.313 $.21 $30.063 $24.750 $.19 Second 36.500 27.750 .21 35.000 28.500 .19 Third 38.625 26.625 .21 36.000 33.125 .19 Fourth 38.000 25.250 .21 35.813 32.000 .19 ---- ---- TOTAL $.84 $.76 - ---------------------------------------------------------------------- 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, $186,737,000 was available for these purposes at March 31, 1999. (However, dividend payments may not exceed $30,000,000 in any fiscal year.) Other loan agreements give certain existing unsecured lenders security equal to any future secured borrowing. In October 1986, the Company adopted a shareholder rights plan and issued one right for each share of common stock. The rights are not currently exercisable but will become exercisable 10 days after a shareholder has acquired 20 percent or more, or commenced a tender or exchange offer for 30 percent or more, of the Company's common stock. Each right will initially entitle the holder to purchase a unit of 1/100 Preferred Series A Participating Stock. During fiscal 1996-1997, the Company amended the Plan increasing the price from $21.25 to $95.00 per unit. In the event of certain mergers, sales of assets, or self-dealing transactions involving a 20 percent or more shareholder, each right not owned by such 20 percent or more shareholder will be modified so that it will then be exercisable for common stock having a market value of twice the exercise price 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 ---------------------------------------------------- 1999 1998 1997 1996 1995 Sales (in thousands) $1,111,447 $1,040,418 $999,046 $990,493 $913,010 Net earnings (in thousands) 73,943 72,471 63,763 61,399 68,442 Total assets (in thousands) 915,739 759,024 694,955 671,836 590,187 Long-term debt (in thousands) 143,838 89,587 85,197 87,809 62,220 Dividends per share .84 .76 .68 .60 .52 Net earnings per share - Basic 2.50 2.44 2.14 2.07 2.31 - Assuming dilution 2.46 2.39 2.10 2.03 2.25
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 1998-99 Annual Report to Shareholders, pages 12-20 and 22, attached as Exhibit 13. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. - ------ ------------------------------------------- The report of PricewaterhouseCoopers LLP dated April 28, 1999, the Consolidated Statements of Earnings, and the related Consolidated Balance Sheets, Cash Flows, Shareholders' Investment, and Notes to Consolidated Financial Statements, appearing on pages 19, 21, 23, 24, and 25-33, respectively, of the Company's 1998-99 Annual Report to Shareholders are incorporated herein by reference. With the exception of the aforementioned information, no other data appearing in the 1998- 99 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 3 - 4 and pages 9, 10, 14, and 15, of the Company's definitive Proxy Statement dated June 10, 1999 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 - 13.
Executive Officers of Registrant Officer Name Age Position Since - ---- --- -------- ------- R. T. Savage* 60 Chairman 1981 D. R. Johnson* 57 President and Chief Executive 1988 Officer D. B. Rayburn* 51 Executive Vice President, Original 1991 Equipment W. E. Pavlick 65 Senior Vice President, General Counsel and Secretary 1979 M. G. Baker 59 Group Vice President, Distributed 1987 Products V. S. Frangopoulos 63 Group Vice President, Off-Highway 1981 Products L. D. Howard 55 Group Vice President, Europe 1991 E. T. Thomas 45 Group Vice President, Highway 1998 Products A. C. DeVuono 50 Vice President, Technical Services 1996 R. L. Hetrick 57 Vice President, Human Resources 1989 R. W. Possehl 54 Vice President, Administration 1985 A. D. Reid 57 Vice President, Finance and Chief 1985 Financial Officer R. S. Bullmore 49 Corporate Controller 1983 G. A. Fahl 44 Environmental Health & Safety 1998 Officer C. C. Harper 45 Chief Information Officer 1998 D. B. Spiewak 45 Treasurer 1998 D. R. Zakos 45 Associate General Counsel and 1985 Assistant Secretary * Prior to March 31 and April 1, 1998: R. T. Savage was Chairman, President and Chief Executive Officer (now retired); D. R. Johnson was President and Chief Operating Officer; and D. B. Rayburn was Group Vice President, Highway Products. 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, E. T. Thomas, C. C. Harper, and D. B. Spiewak. 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 the Ohio State University and the University of Illinois. Mr. Thomas joined Modine on August 3, 1998 as Group Vice President, Highway Products. Mr. Thomas previously worked at Eaton Corporation for nine years where he had been General Manager of the Fluid Power Division. Before that, he was General Manager of Eaton's Torque Control Products Division. He also served Eaton as a Plant Manager and Manager of Strategic Planning and Acquisition Analysis. Prior to joining Eaton, Mr. Thomas spent eleven years at General Motors as a member of the Corporate Financial Staff.
Mr. Harper was promoted to Chief Information Officer on October 21, 1998. Mr. Harper joined Modine in January, 1997 as Director of Information Systems. Previous to Modine, Mr. Harper had been employed by Tenneco Incorporated for 14 years in a number of technical and managerial positions. Mr. Spiewak joined Modine as Treasurer on September 21, 1998. Mr. Spiewak came to Modine from Alliant Foodservice, Inc., formerly a part of Kraft Foods. Prior to Alliant, Mr. Spiewak spent eight years with Illinois Tool Works, Inc. as Manager, Treasury Systems. 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. Information relating to the employment agreements, termination and change-in-control arrangements is incorporated by reference from the Company's 1998-1999 definitive Proxy Statement dated June 10, 1999 attached to this Report at page 16 and 17 therein. 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 10, 1999 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 10, 1999 on page 22 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, 1999, 1998, and 1997 19 Consolidated Balance Sheets at March 31, 1999 and 1998 21 Consolidated Statements of Cash Flows for the years ended March 31, 1999, 1998, and 1997 23 Consolidated Statements of Shareholders' Investment for the years ended March 31, 1999, 1998, and 1997 24 Notes to Consolidated Financial Statements 25 - 33 Independent Accountants' Report 33 * Incorporated by reference from the indicated pages of the 1998-99 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, 1999 23 Schedule II - Valuation and Qualifying Accounts for the years ended March 31, 1999, 1998 and 1997 24 (3) Consent of Independent Accountants 177 (4) Exhibit Index 15 (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.
Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- *3(a) Restated Articles of Incorporation (as amended). 25 *3(b) Restated By-Laws (as amended). 33 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, 1998). 4(b) Rights Agreement dated as of October 16, 1986 between the Registrant and First Chicago Trust Company of New York (Rights Agent) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1997). 4(b)(i) Rights Agreement Amendment No. 1 dated as of January 18, 1995 between the Registrant and First Chicago Trust Company of New York (Rights Agent) (filed by reference to the exhibit contained within the Registrant's Current Report on Form 8-K dated January 13, 1995). 4(b)(ii) Rights Agreement Amendment No. 2 dated as of January 18, 1995 between the Registrant and First Chicago Trust Company of New York (Rights Agent) (filed by reference to the exhibit contained within the Registrant's Current Report on Form 8-K dated January 13, 1995). 4(b)(iii) Rights Agreement Amendment No. 3 dated as of October 15, 1996, between the Registrant and First Chicago Trust Company of New York (Rights Agent) (filed by reference to the exhibit contained within the Registrant's Quarterly Report on Form 10-Q dated December 26, 1996). 4(b)(iv) Rights Agreement Amendment No. 4 dated as of November 10, 1997 between the Registrant and Norwest Bank Minnesota, N.A. (Rights Agent) (filed by reference to the exhibit contained within the Registrant's Quarterly Report on Form 10-Q dated December 26, 1997).
Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- 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. 9 Not applicable. 10(a) Director Emeritus Retirement Plan (effective April 1,1992) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1997). 10(b) 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(c) 1985 Incentive Stock Plan (as amended) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1997). *10(d) 1985 Stock Option Plan for Non-Employee Directors (as amended). 44 *10(e) Pension and Disability Plan For Salaried Employees of Modine Manufacturing Company (as amended). 51 10(f) 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(g) Modine Manufacturing Company Executive Supplemental Stock Plan (as amended). 132 10(h) 1994 Stock Award Plan [a part of the 1985 Incentive Stock Plan]. 10(i) 1994 Incentive Compensation Plan as amended) (filed by reference to
Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1997). 10(j) 1994 Stock Option Plan for Non-Employee Directors (as amended) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1997). 10(k) 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(l) 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(m) 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(n) 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(o) 1996 Stock Option Agreements (incentive and non-qualified) [a part of the 1994 Incentive Compensation Plan] (filed by reference to the exhibit contained within the Registrant's Annual Report on Form 10-K for the fiscal year 1996). 10(p) 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
Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- Annual Report on Form 10-K for the fiscal year 1995. 10(q) 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(r) 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(s) 1997 Stock Option Agreement [a part of the 1994 Stock Option Plan for Non-Employee Directors]. Note: The 1997 Stock Option Agreement ---- is not materially different from the 1995 Non-Employee Directors Stock Option Agreement filed with the Registrant's Annual Report or Form 10-K for the fiscal year 1995. 10(t) 1998 Stock Award Plan [a part of the 1994 Incentive Compensation Plan]. Note: The 1998 Stock Award Plan is ---- not materially different from the 1996 Stock Award Plan filed with the Registrant's Annual Report on Form 10-K for fiscal year 1996. 10(u) 1998 Stock Option Agreements (incentive and non-qualified) [a part of the 1994 Incentive Compensation Plan]. Note: The 1998 Stock Option Agreements ---- are not materially different from the 1996 Stock Option Agreements filed with
Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- the Registrant's Annual Report on Form 10-K for the fiscal year 1996. 10(v) 1998 Stock Option Agreement [a part of the 1994 Stock Option Plan for Non- Employee Directors]. Note: The 1998 Stock Option Agreement ---- is not materially different from the 1995 Non-Employee Directors Stock Option Agreement filed with the Registrant's Annual Report on Form 10-K for the fiscal year 1995. 10(w) 1999 Stock Option Agreements (incentive and non-qualified) [a part of the 1994 Incentive Compensation Plan]. Note: The 1999 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(x) 1999 Stock Option Agreement [a part of the 1994 Stock Option Plan for Non- Employee Directors]. Note: The 1998 Stock Option Agreement is ---- not materially different from the 1995 Non-Employee Directors Stock Option Agreement filed with the Registrant's Annual Report on Form 10-K for the fiscal year 1995. 11 Not applicable. 12 Not applicable. *13 1998-99 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. 136 16 Not applicable. 18 Not applicable. *21 List of subsidiaries of the Registrant. 176
Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- 22 Not applicable. *23 Consent of independent accountants. 178 24 Not applicable. *27 Financial Data Schedules -- Fiscal 1999 (electronic transmission only) 28 Not applicable. *99(a) Definitive Proxy Statement of the Registrant dated June 10, 1999. 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. 179 *99(b) Appendix (filed pursuant to Item 304 of Regulation S-T). 207 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 10, 1999, 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 16,1999 By: D. R. JOHNSON -------------------------------- D. R. Johnson, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated. R. T. SAVAGE June 16, 1999 - -------------------------------------- ------------- R. T. Savage, Chairman and Director Date D. R. JOHNSON June 16, 1999 - -------------------------------------- ------------- D. R. Johnson, President and Date Chief Executive Officer and Director A. D. REID June 16,1999 - -------------------------------------- ------------- A. D. Reid, Vice President, Finance Date and Chief Financial Officer W. E. PAVLICK June 16,1999 - -------------------------------------- ------------- W. E. Pavlick, Senior Vice President, Date General Counsel and Secretary R. J. DOYLE June 16,1999 - -------------------------------------- ------------- R. J. Doyle, Director Date F. W. JONES June 16,1999 - -------------------------------------- ------------- F. W. Jones, Director Date D. J. KUESTER June 16,1999 - -------------------------------------- ------------- D. J. Kuester, Director Date
V. L. MARTIN June 16,1999 - -------------------------------------- ------------- V. L. Martin, Director Date S. W. TISDALE June 16,1999 - -------------------------------------- ------------- S. W. Tisdale, Director Date M. T. YONKER June 16,1999 - -------------------------------------- ------------- M. T. Yonker, Director Date
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 as of March 31, 1999 and 1998, and for each of the three years in the period ending March 31, 1999, has been incorporated by reference in this Form 10-K from page 33 of the 1999 Annual Report to Shareholders f Modine Manufacturing Company and Subsidiaries. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in the index on page 15 of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. PRICEWATERHOUSECOOPERS LLP PricewaterhouseCoopers LLP Chicago, Illinois April 28, 1999
MODINE MANUFACTURING COMPANY AND SUBSIDIARIES (A Wisconsin Corporation) SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS for the years ended March 31, 1999, 1998 and 1997 ($ In Thousands) Col. A Col. B Col. C Col. D Col. E - ------ ------ ------ ------ ------ Additions (1) (2) Charged Balance Balance at to Costs Charged at Beginning and to Other End of Description of Period Expenses Accounts Deductions Period - ----------- ---------- -------- -------- ---------- ------- 1999: Intangible Assets - Accumulated Amortization $17,150 $5,856 $846(B) $0(C) $23,852 ------- ------ ------- ----- ------- Allowance for Doubtful Accounts $4,585 $(427) $5(B) $414(A) $3,749 ------- ------ ------- ------- ------ 1998: Intangible Assets - Accumulated Amortization $12,885 $4,761 $(496)(B) $0(C) $17,150 ------- ------ --------- ------- ------- Allowance for Doubtful Accounts $4,140 $1,029 $(70)(B) $514(A) $4,585 ------- ------ -------- ------- ------ 1997: Intangible Assets - Accumulated Amortization $8,689 $4,937 $(741)(B) $0(C) $12,885 ------- ------ --------- ------- ------- Allowance for Doubtful Accounts $5,052 $(117) $(168)(B) $627(A) $4,140 ------- ------ --------- ------- ------ Notes: (A) Bad debts charged off during the year. (B) Balance acquired in acquisitions plus translation and other adjustments. (C) Retirement of fully amortized intangibles.