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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, 2000 Commission file number 1-1373
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MODINE MANUFACTURING COMPANY
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(Exact name of registrant as specified in its charter)
WISCONSIN 39-0482000
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 DeKoven Avenue, Racine, Wisconsin 53403
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (262) 636-1200
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Securities Registered pursuant to Section 12(g) of the Act:
Common Stock, $0.625 par value
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]
Approximately 58% of the outstanding shares are held by non-affiliates.
The aggregate market value of these shares was approximately $459,219,002
based on the market price of $27.0625 per share on June 20, 2000. 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 29,256,606 at June 20, 2000.
An Exhibit index appears at pages 15-21 herein.
Page 1 of 158
DOCUMENTS INCORPORATED BY REFERENCE
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Portions of the following documents are incorporated by reference
into the parts of this Form 10-K designated to the right of the
document listed.
Incorporated Document Location in Form 10-K
- --------------------- ---------------------
Annual Report to Shareholders for the
fiscal year ended March 31, 2000 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)
2000 Definitive Proxy Statement dated
June 9, 2000 Part III of Form 10-K
(Items 10, 11, 12, 13)
TABLE OF CONTENTS
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MODINE MANUFACTURING COMPANY - FORM 10-K
FOR THE YEAR ENDED MARCH 31, 2000
10-K Pages
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Cover
Table of Contents
Part I
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Item 1 - Business
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General, Developments and Strategy,
Geographical Areas, Exports, Foreign
and Domestic Operations, Events Subsequent
to the End of the Quarter, Competitive
Position, Customer Dependence, Backlog
of Orders, Raw Materials, Patents,
Research and Development, Environmental,
Health and Safety Matters, Employees,
Seasonal Nature of Business, Working
Capital Items, Year 2000, Euro Conversion 5
Item 2 - Properties 10
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Item 3 - Legal Proceedings 11
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Item 4 - Submission of Matters To A Vote of
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Security Holders 12
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Part II
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Item 5 - Market for Registrant's Common Equity
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and Related Stockholder Matters 12
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Item 6 - Selected Financial Data 13
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Item 7 - Management's Discussion and Analysis
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of Financial Condition and Results
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of Operations 13
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Item 8 - Financial Statements & Supplementary Data 13
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10-K Pages
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Item 9 - Changes in and Disagreements with Accountants
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on Accounting and Financial Disclosure 13
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Part III
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Items 10 and 11 - Directors and Executive Officers
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of the Registrant; Executive Compensation 14
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Item 12 - Security Ownership of Certain Beneficial
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Owners and Management 15
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Item 13 - Certain Relationships and Related Transactions 15
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Part IV
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Item 14 - Exhibits, Financial Statement Schedules, and
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Reports on Form 8-K 15
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1) Financial Statements
2) Financial Statement Schedules
3) Consent of Independent Accountants
4) Exhibit Index
Signatures 22
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PART I
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ITEM 1. BUSINESS.
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General
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Throughout this Report, the terms "Modine," the "Company" and/or the
"Registrant" refer to Modine Manufacturing Company and consolidated
subsidiaries.
Modine was incorporated under the laws of the State of Wisconsin on
June 23, 1916.
Modine 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
2000 1999 1998
---- ---- ----
Radiators & Radiator 31% 32% 33%
Cores
Vehicular Air 12% 12% 14%
Conditioning
Oil Coolers 16% 16% 17%
Charge Air Coolers 9% 8% 9%
Building HVAC 7% 7% 7%
Modules/Packages 22% 22% 17%
Miscellaneous 3% 3% 3%
Developments and Strategy
- -------------------------
We remain committed to the vision of "creating value through technology."
We will continue using our intellectual skills to strengthen our position
in key traditional markets. At the same time, we will leverage those
strengths into new, dynamic, rapidly growing markets that need heat-
transfer solutions to solve complex problems.
The creation process encompasses growth as a key focus for Modine. We
have identified many ways to continue building our basic businesses
through increasing marketshare, providing more content per application,
and making strategic acquisitions. An ongoing process is in place to
evaluate the markets that we currently serve and to allocate our
resources to those with the best growth opportunities. We are also
focusing on the most-promising new markets and new products.
Like growth, profitability also is a key focus for Modine. We are
concentrating heavily on managing our selling, general, and
administrative expenses through numerous cost-saving initiatives, a
reevaluation of our processes, and control of staff costs. In
addition, we are evaluating the profitability of current product
lines and plants, with the objective of improving our overall returns.
A last, key focus involves asset utilization. We have made substantial
investments in new, highly efficient plants and equipment along with
state-of-the-art technical centers. All of these are critical to our
strategy of generating growth through technological leadership.
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 Central America Asia/Pacific
- ------------- ------ ------------- --------------- ------------
Canada Austria Brazil El Salvador 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 31-33 of our 2000 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 11.1%, 11.5% and 12.6% for fiscal years ended in
2000, 1999 and 1998, respectively. Estimated after-tax earnings on
export sales as a percentage of total net earnings were 11.1%, 11.5%
and 12.6% for fiscal years ended in 2000, 1999 and 1998, respectively.
Royalties from foreign licensees as a percentage of total earnings
were 4.8%, 5.5% and 2.5% 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 2000 Annual Report to
Shareholders and is incorporated herein by reference at Note 19 on
pages 31-33 therein.
Events Subsequent to the End of the Quarter
- -------------------------------------------
On June 9, 2000, 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. In addition, our customers have asked the
Company, as they have asked all primary suppliers, to participate
directly and more substantially in research and development, design,
and validation responsibilities that should result in stronger
relationships and more partnership opportunities.
Customer Dependence
- -------------------
Ten customers accounted for approximately 45.9% of the Company's sales
in the fiscal year ended March 31, 2000. These customers, listed
alphabetically, were: BMW, Caterpillar, DaimlerChrysler, Fiat, Ford,
John Deere, International Truck (formerly Navistar International),
NAPA, 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 2001.
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 2001.
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
- ------------------------
The Company remains committed to its vision of "creating value through
technology." 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
2000 amounted to $20,528,000; in fiscal 1999 amounted to $18,252,000;
and in fiscal 1998 amounted to approximately $16,816,000. 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, Health and Safety 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 in North America. Despite
the increases in North American sales volumes from calendar 1996
to 1999, the company achieved a 26% reduction in by-product
generation over that same period.
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.
Five 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 six waste
disposal sites. These sites are not company owned and allegedly
contain wastes attributable to Modine from past operations. For the
six 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.
Environmental regulations, as well as the company's policy to
continuously improve upon its environmental management programs, will
require significant capital equipment expenditures over the coming
years. For the fiscal year ending March 31, 2000 capital
expenditures related to environmental projects were $1.1 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 $2.5 million
in fiscal 2001.
Environmental expenses charged to current operations, including
remediation costs, totaled about $3.5 million for the fiscal year
ending March 31, 2000. These expenses include solid waste disposal
and operating and maintenance costs incurred in conducting
environmental compliance activities; and for other matters.
Operating expenses of some facilities may increase during fiscal year
2001 because of such charges but the competitive position of the
Company is not expected to change materially. Although environmental
costs are substantial, the Company has no reason to believe such
costs vary significantly from similar costs incurred by other
companies engaged in similar businesses.
Employees
- ---------
The number of persons employed by the Company at March 31, 2000, was
approximately 8,300.
Seasonal Nature of Business
- ---------------------------
Distributed Products may still experience a degree of seasonality
since the demand for aftermarket and HVAC products are affected by
weather patterns, constructions starts, and other factors. On an
overall Company basis, there is no significant degree of seasonality
as indicated by the percentages below. Sales to original equipment
manufacturers are dependent upon the demand for new vehicles and
equipment. The following quarterly net sales detail illustrates the
degree of fluctuation for the past five years:
Fiscal Year Fiscal
Ended First Second Third Fourth Year
March 31 Quarter Quarter Quarter Quarter Total
- ----------- ------- ------- ------- ------- -----
($ In Thousands)
2000 $283,847 $286,691 $283,520 $285,211 $1,139,269
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
Five-year 260,321 265,795 268,273 261,746 1,056,135
Average
Percent 25% 25% 25% 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 2000 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 2000 Annual Report to
Shareholders, at page 17, attached as Exhibit 13.
ITEM 2. PROPERTIES.
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The Company's general offices, along with laboratory, experimental
and tooling facilities, are maintained in Racine, Wisconsin.
Additional technical support functions are located in Harrodsburg,
Kentucky and Bernhausen, Germany. Almost all of the Company's
manufacturing and larger distribution centers are owned outright. A
few manufacturing facilities and numerous regional sales and service
centers, distribution centers and offices are occupied under various
lease arrangements.
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 7 12 -- 35
Distribution -- 4 1 -- 5
Sales & Service
Centers/Offices 2 13 20 1 36
Joint Ventures 3 3 6
Total 18 24 36 4 82
The Company's facilities, on a geographic basis, are as follows:
Type of North South Asia/ Central
Facility America Europe America Pacific America Total
-------- ------- ------ ------- ------- ------- -----
Manufacturing 22 13 -- -- -- 35
Distribution 4 1 -- -- -- 5
Sales & Service
Centers/Offices 14 20 -- 1 1 36
Joint Ventures 1 3 1 1 -- 6
Total 41 37 1 2 1 82
Total square footage of the 82 facilities is approximately 8,263,635
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 1999, the U.S. Patent Office Board of Appeals rejected
the Company's 1994 PF patent which rejection is being appealed to the
Court of Appeals for the Federal Circuit.
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 and another having been approved at
the opposition level.
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
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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 1999-00 and 1998-99. As of
April 1, 2000, shareholders of record numbered approximately 5,914;
it is estimated that beneficial owners numbered about 14,500.
1999-00 1998-99
--------------------------- ---------------------------
Quarter High Low Dividends High Low Dividends
First $34.00 $26.50 $.23 $37.500 $32.313 $.21
Second 34.13 24.25 .23 36.500 27.750 .21
Third 29.63 23.00 .23 38.625 26.625 .21
Fourth 26.69 21.00 .23 38.000 25.250 .21
---- ----
TOTAL $.92 $.84
- ------------------------------------------------------------------------
Certain of the Company's financing agreements require it to maintain
specific financial ratios and place certain limitations on the use of
retained earnings for the payment of cash dividends and the acquisition
of treasury stock. Under the most restrictive, $192,158,000 was
available for these purposes at March 31, 2000. (However, dividend
payments may not exceed $50,000,000 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
------------------------------------------------------
2000 1999 1998 1997 1996
Sales (in thousands) $1,139,269 $1,111,447 $1,040,418 $999,046 $990,493
Net earnings (in
thousands) 65,403 73,943 72,471 63,763 61,399
Total assets (in
thousands) 931,107 915,739 759,024 694,955 671,836
Long-term debt (in
thousands) 211,112 143,838 89,587 85,197 87,809
Dividends per share .92 .84 .76 .68 .60
Net earnings per share
- Basic 2.22 2.50 2.44 2.14 2.07
- Assuming dilution 2.20 2.46 2.39 2.10 2.03
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 2000 Annual Report to Shareholders, pages 12-20
and 22, attached as Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------ -------------------------------------------
The Consolidated Statements of Earnings, and the related Consolidated
Balance Sheets, Cash Flows, Shareholders' Investment, Notes to
Consolidated Financial Statements, and the report of Pricewaterhouse-
Coopers LLP dated April 26, 2000 appearing on pages 19, 21, 23, 24,
and 25-33, respectively, of the Company's 2000 Annual Report to
Shareholders are incorporated herein by reference. With the exception
of the aforementioned information, no other data appearing in the 2000
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 - 5 and pages 10, 11, 15, and 16, of the
Company's definitive Proxy Statement dated June 9, 2000 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 11-14.
Executive Officers of Registrant
Officer
Name Age Position Since
- ---- --- -------- -----
R. T. Savage* 61 Chairman 1981
D. R. Johnson* 58 President and Chief Executive Officer 1988
D. B. Rayburn* 52 Executive Vice President, Operations 1991
W. E. Pavlick 66 Senior Vice President, General Counsel 1979
and Secretary
E. T. Thomas 46 Group Vice President 1998
C. R. Katzfey** 53 Group Vice President 2000
K. A. Feldmann** 46 Group Vice President 2000
A. C. DeVuono 51 Vice President, Technical Services 1996
R. L. Hetrick 58 Vice President, Human Resources 1989
R. W. Possehl 55 Vice President, Administration 1985
A. D. Reid 58 Vice President, Finance and Chief
Financial Officer 1985
R. S. Bullmore 50 Corporate Controller 1983
G. A. Fahl 45 Environmental, Health & Safety Officer 1998
C. C. Harper 46 Chief Information Officer 1998
D. B. Spiewak 46 Treasurer 1998
D. R. Zakos 46 Associate General Counsel and
Assistant Secretary 1985
L. D. Howard*** 56 Group Vice President, Europe 1991
* 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.
** K. A. Feldmann and C. R. Katzfey became officers on April 1,
2000. Prior to April 1, 2000, K. A. Feldmann was Heavy Duty
Business Unit Managing Director and C. R. Katzfey was Truck
Division General Manager.
*** L. D. Howard retired April 1, 2000.
Officer positions are designated in Modine's By-Laws and the persons
holding these positions are elected annually by the Board at its first
meeting after the annual meeting of shareholders in July of each year.
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 1999-2000 definitive Proxy Statement dated June 9, 2000
attached to this Report at page 17 and 18 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 9, 2000 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 9, 2000 on
page 18 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, 2000,1999, and 1998. 19
Consolidated Balance Sheets at March 31, 2000
and 1999. 21
Consolidated Statements of Cash Flows for the
years ended March 31, 2000, 1999, and 1998. 23
Consolidated Statements of Shareholders'
Investment for the years ended March 31, 2000,
1999, and 1998. 24
Notes to Consolidated Financial Statements 25 - 33
Report of Independent Accountants 33
* Incorporated by reference from the indicated
pages of the 1999-00 Annual Report to Shareholders
Page in
Form 10-K
---------
(2) Financial Statement Schedules:
Report of Independent Accountants on Financial
Statement Schedule for the three years ended
March 31, 2000 24
Schedule II - Valuation and Qualifying Accounts
for the years ended March 31, 2000, 1999, and 1998. 25
(3) Consent of Independent Accountants 133
(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.
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, 1999).
*3(b) Restated By-Laws (as amended). 26
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). 37
*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). 40
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
4(b)(iii) Rights Agreement Amendment No. 3 dated as
of October 15, 1996, between the Registrant
and First Chicago Trust Company of New York
(Rights Agent) (filed by reference to the
exhibit contained within the Registrant's
Quarterly Report on Form 10-Q dated
December 26, 1996).
4(b)(iv) Rights Agreement Amendment No. 4 dated as
of November 10, 1997 between the Registrant
and Norwest Bank Minnesota, N.A. (Rights
Agent) (filed by reference to the exhibit
contained within the Registrant's Quarterly
Report on Form 10-Q dated December 26, 1997).
Note: The amount of long-term debt authorized
----
under any instrument defining the rights of
holders of long-term debt of the Registrant,
other than as noted above, does not exceed ten
percent of the total assets of the Registrant
and its subsidiaries on a consolidated basis.
Therefore, no such instruments are required to
be filed as exhibits to this Form. The
Registrant agrees to furnish copies of such
instruments to the Commission upon request.
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)(filed by reference to
the Registrant's Annual Report on Form 10-K
for the fiscal year ended March 31, 1999).
10(e) 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, 1999).
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
*10(f) Executive Supplemental Retirement Plan (as 43
amended).
10(g) 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, 1999).
10(h) 1994 Incentive Compensation Plan (as amended)
(filed by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended
March 31, 1997).
10(i) 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(j) 1995 Stock Award Plan [a part of the 1994
Incentive Compensation Plan]. 48
*10(k) 1995 Stock Option Agreements (incentive and
non-qualified) [a part of the 1994
Incentive Compensation Plan]. 54
*10(l) 1995 Stock Option Agreement [a part of the
1994 Stock Option Plan for Non-Employee
Directors]. 66
10(m) 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(n) 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(o) 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 this Annual Report
on Form 10-K as Exhibit 10(l).
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
10(p) 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(q) 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(r) 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 this Annual Report
on Form 10-K as Exhibit 10(l).
10(s) 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(t) 1998 Stock Option Agreements (incentive
and non-qualified) [a part of the 1994
Incentive Compensation Plan].
Note: The 1998 Stock Option Agreements
----
are not materially different from the
1996 Stock Option Agreements filed with
the Registrant's Annual Report on Form
10-K for the fiscal year 1996.
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
10(u) 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 this Annual Report
on Form 10-K as Exhibit 10(l).
10(v) 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(w) 1999 Stock Option Agreement [a part of
the 1994 Stock Option Plan for Non-
Employee Directors].
Note: The 1999 Stock Option Agreement
----
is not materially different from the
1995 Non-Employee Directors Stock Option
Agreement filed with this Annual Report
on Form 10-K as Exhibit 10(l).
*10(x) 2000 Stock Award Plan [a part of the
1994 Incentive Compensation Plan]. 72
*10(y) 2000 Stock Option Agreements (incentive
and non-qualified) [a part of the 1994
Incentive Compensation Plan]. 78
Note: The 2000 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.
11 Not applicable.
12 Not applicable.
*13 2000 Annual Report to Shareholders.
Except for the portions of the Report
expressly incorporated by reference,
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
the Report is furnished solely for the
information of the Commission and is
not deemed "filed" as a part hereof. 91
16 Not applicable.
18 Not applicable.
*21 List of subsidiaries of the Registrant. 131
22 Not applicable.
*23 Consent of independent accountants. 133
24 Not applicable.
*27 Financial Data Schedules -- Fiscal 2000
(electronic transmission only)
28 Not applicable.
*99(a) Definitive Proxy Statement of the
Registrant dated June 9, 2000. 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. 134
*99(b) Appendix (filed pursuant to Item 304 of
Regulation S-T). 156
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 9, 2000, 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 21, 2000 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 21, 2000
- ---------------------------------------- -------------
R. T. Savage, Chairman and Director Date
D. R. JOHNSON June 21, 2000
- ---------------------------------------- -------------
D. R. Johnson, President and Date
Chief Executive Officer and Director
A. D. REID June 21, 2000
- ---------------------------------------- -------------
A. D. Reid, Vice President, Finance Date
and Chief Financial Officer
W. E. PAVLICK June 21, 2000
- ---------------------------------------- -------------
W. E. Pavlick, Senior Vice President, Date
General Counsel and Secretary
R. J. DOYLE June 21, 2000
- ---------------------------------------- -------------
R. J. Doyle, Director Date
F. P. INCROPERA June 21, 2000
- ---------------------------------------- -------------
F. P. Incropera, Director Date
F. W. JONES June 21, 2000
- ---------------------------------------- -------------
F. W. Jones, Director Date
D. J. KUESTER June 21, 2000
- ---------------------------------------- -------------
D. J. Kuester, Director Date
G. L. NEALE June 21, 2000
- ---------------------------------------- -------------
G. L. Neale, Director Date
M. C. WILLIAMS June 21, 2000
- ---------------------------------------- -------------
M. C. Williams, Director Date
M. T. YONKER June 21, 2000
- ---------------------------------------- -------------
M. T. Yonker, Director Date
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Modine Manufacturing Company
Our audits of the consolidated financial statements referred to in
our report dated April 26, 2000 appearing in the Annual Report to
Shareholders of Modine Manufacturing Company and its Subsidiaries
(which report and consolidated financial statements are incorporated
by reference in this Annual Report on Form 10-K) also included an
audit of the financial statement schedule listed in Item 14(a)(2) of
this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated
financial statements.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
April 26, 2000
MODINE MANUFACTURING COMPANY AND SUBSIDIARIES
(A Wisconsin Corporation)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years ended March 31, 2000, 1999 and 1998
($ In Thousands)
Col. A Col. B Col. C Col. D Col. E
- ------ ------ ------ ------ ------
Additions
(1) (2)
Balance at Balance
Beginning Charged to Charged to at
of Costs and Other End of
Description Period Expenses Accounts Deductions Period
- ----------- ---------- ---------- ----------- ---------- -------
2000:
Intangible Assets-
Accumulated
Amortization $23,852 $8,390 $(1,093)(B) $ 80(C) $31,069
------- ------ ----------- --------- -------
Allowance for
Doubtful Accounts $ 3,749 $1,173 $ (8)(B) $ 478(A) $ 4,436
------- ------ ----------- --------- -------
Valuation
Allowance for
Deferred Tax Assets $ 5,154 $4,298(D) $ 856
------- --------- -------
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
------- ------- ----------- --------- -------
Valuation
Allowance for
Deferred Tax Assets $ 3,947 $1,304(D) $ 97(D) $ 5,154
------- --------- --------- -------
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
------- ------ ------------ --------- -------
Valuation
Allowance for
Deferred Tax Assets $ 4,127 $ 644(D) $ 824(D) $ 3,947
------- --------- --------- -------
Notes:
(A) Bad debts charged off during the year.
(B) Translation and other adjustments.
(C) Retirement of fully amortized intangibles.
(D) Includes foreign operating losses and tax credit carryforwards.