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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 26, 2004

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-1373


MODINE MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]  No ___

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No ___

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

MODINE MANUFACTURING COMPANY

INDEX

	Three months ended December 26		Nine months ended December 26
	2004	2003	2004	2003
Net Sales	$418,398	$310,799	$1,129,380	$878,756
Cost of sales	322,713	238,321	868,403	672,518
Gross profit	95,685	72,478	260,977	206,238
Selling, general, and administrative expenses	70,427	58,200	193,364	173,540
Restructuring	109	(21)	1,031	(68)
Income from operations	25,149	14,299	66,582	32,766
Interest expense	(1,641)	(1,316)	(4,424)	(4,009)
Other income -- net	6,651	5,180	13,990	12,999
Earnings before income taxes	30,159	18,163	76,148	41,756
Provision for income taxes	11,213	5,845	29,341	13,847
Net earnings	$ 18,946	$ 12,318	$ 46,807	$ 27,909
Net earnings per share of common stock:
Basic	$0.56	$0.36	$1.38	$0.82
Diluted	$0.55	$0.36	$1.36	$0.82
Dividends per share	$0.1625	$0.1375	$0.4675	$0.4125
Weighted average shares -- basic	34,142	33,924	34,031	33,888
Weighted average shares -- diluted	34,550	34,137	34,410	34,011

(See accompanying notes to consolidated financial statements.)

(See accompanying notes to consolidated financial statements.)

1.      General

The accompanying consolidated financial statements, which have not been audited by independent auditors, were prepared in conformity with generally accepted accounting principles and such principles were applied on a basis consistent with the preparation of the consolidated financial statements in Modine's March 31, 2004 Annual Report filed with the Securities and Exchange Commission, except for reclassifications made to conform the prior year with the current year's presentation. The financial information furnished includes all normal recurring adjustments that are, in the opinion of Management, necessary for a fair statement of results for the interim periods. Results for the first nine months of fiscal 2005 are not necessarily indicative of the results to be expected for the full year.

Certain notes and other information has been condensed or omitted from these interim financial statements. Therefore, such statements should be read in conjunction with the consolidated financial statements and related notes contained in Modine's 2004 Annual Report to Shareholders, which statements and notes were incorporated by reference in Modine's Annual Report on Form 10-K for the year ended March 31, 2004.

2.      Significant accounting policies

Cash and cash equivalents

Credit balances for checks written but not yet presented for payment have been classified as a reduction to cash and cash equivalents. Previously these credit balances have been included in accounts payable. Prior year balances have been reclassified to conform to the current year presentation. These credit balances were $9,162,000 and $11,127,000 at March 31, 2004 and 2003. At December 26, 2003 the credit balance was $5,245,000.

Certain prior year amounts have been reclassified to conform to the current year's presentation.

Stock-based compensation

Stock based compensation is recognized by the Company using the intrinsic value method of accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of Modine stock at the date of the grant over the amount an employee must pay to acquire the stock. If the fair-value-based method of accounting for the stock option grants for the periods shown had been applied in accordance with Statements of Financial Accounting Standards (SFAS) No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," requiring quarterly SFAS No. 123 pro forma disclosure, Modine's net earnings and net earnings per share would have been changed as follows:

New Accounting Pronouncements

In May 2004, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position No. 106-2 ("FSP 106-2"), "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003" (the "Act"). The Act introduces a prescription drug benefit under Medicare ("Medicare Part D") as well as a federal subsidy to sponsors of post-retirement health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. FSP 106-2 superseded FSP 106-1, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003," which was issued in January 2004 and permitted a sponsor of a post-retirement health care plan that provides a prescription drug benefit to make a one-time election to defer accounting for the effects of the Act until more authoritative guidance on the accounting for the federal subsidy was issued. Modine elected the one-time deferral allowed unde r FSP 106-1 and as a result any measures of the accumulated post-retirement benefit obligation or net periodic post-retirement benefit cost were not previously reflected in the financial statements or the accompanying notes. FSP 106-2 provides authoritative guidance on accounting for the federal subsidy and specifies the disclosure requirements for employers who have adopted FSP 106-2, including those who are unable to determine whether benefits provided under its plan are actuarially equivalent to Medicare Part D. FSP 106-2 became effective and was adopted by Modine in the second quarter of fiscal 2005. Accordingly, the information required by FSP 106-2 is presented in Note 3 below.

In November 2004, the FASB issued a Statement of Financial Accounting Standards ("SFAS") No. 151, "Inventory Costs -- An Amendment of ARB No. 43, Chapter 4," which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage). The Company is required to adopt the provisions of SFAS No. 151 effective for inventory costs incurred beginning during fiscal 2007. The Company does not expect the adoption of this statement to have a material impact on our financial condition or results of operations.

In December 2004, the FASB issued a SFAS No. 153, "Exchanges of Nonmonetary Assets -- An Amendment of APB Opinion No. 29," which eliminates the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The Company is required to adopt SFAS No. 153 for nonmonetary asset exchanges occurring beginning in the first quarter of fiscal 2007. The Company does not expect the adoption of this statement to have a material impact on our financial condition or results of operations.

In December 2004, the FASB issued a revised SFAS No. 123(R), "Share-Based Payment -- an Amendment of FASB Statements No. 123 and 95." SFAS 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services or incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments, focusing primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions.  SFAS No. 123(R) requires public entities to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions) and recognize the cost over the period during which an employee is required to provide service in exchange for the award.  The Company is required to adopt SFAS No. 123(R) in fiscal 2006.  The Company is evaluating the impact of SFAS No . 123(R) and expects that it will record non-cash stock compensation expenses.  The adoption of SFAS No. 123(R) is expected to have a similar, or slightly smaller, annual effect, on our results of operations than the impact reported in the SFAS No. 123 pro forma disclosure in Modine's 2004 Annual Report to Shareholders. The adoption of this statement is not expected to have any impact on the Company's financial condition or cash flows.

On October 22, 2004, the American Jobs Creation Act of 2004 (the "Act") was signed into law. Among its provisions, the Act provides for a one-time special dividends received deduction for certain qualifying dividends from controlled foreign corporations. The Company may elect to apply this provision to qualifying repatriations of foreign earnings in either the balance of fiscal 2005 or in fiscal 2006. Due to the complexity of the repatriation provision, the Company is still evaluating the effects of this provision on its repatriation planning and is awaiting the issuance of further clarifying regulations before finalizing our evaluation. Accordingly, we have not determined what actions we might take in response to the Act or the impact, if any, the Act may have on the income tax provision.

In addition, the American Jobs Creation Act provides a deduction for income from qualified domestic production activities, which will be phased in from 2005 through 2010. In return, the Act also provides for a two-year phase-out of the existing extra-territorial income exclusion (ETI) for foreign sales that was viewed to be inconsistent with international trade protocols by the European Union. Under guidance in FASB Staff Position No. 109-1, Application of FASB Statement No. 109, "Accounting for Income Taxes," to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004, the deduction will be treated as "special deduction" as described in FASB Statement No. 109. As such, the special deduction has no effect on deferred tax assets and liabilities existing at the enactment date. Rather, the impact of this deduction will be reported in the period in which the deduction is claimed on the tax return. The Company is currently evaluating whether its production ac tivities qualify for these special deductions. If the production activities qualify under the Act, the first time the Company could claim the deduction would be in its fiscal 2006 year.

Costs for Modine's pension and other post-retirement benefit plans for the three and nine months ended December 26, 2004 and 2003 include the following components:

Pension curtailment of $430,000 was recorded in the first quarter of fiscal 2005 related to the expiration of the eligibility period for employees in one of the Company's pension plans. In the third quarter an additional curtailment of $434,000 was recorded to reflect the modification to the Modine Manufacturing Company Pension Plan for Non-Union Hourly Paid Factory and Salaried Employees, a defined benefit plan. Effective April 1, 2006, no service performed after March 31, 2006 will be counted when calculating an employee's years of credited service under the pension plan formula. Salaried employees, currently covered under the existing salaried pension plan, will be eligible to participate beginning April 1, 2006 in the defined contribution plan which was implemented in calendar 2004 for certain new salaried employees.

The Company contributed $1.7 million to its domestic qualified plans in the third quarter of fiscal 2005. An additional $112,000 is expected to be contributed in the fourth quarter.

Certain of Modine's post-retirement benefit plans covering U.S. retirees currently provide certain prescription benefits to eligible participants. The Company's actuaries have determined that several of the prescription drug plans for retirees and their dependents provide a benefit that is a least actuarially equivalent to Medicare Part D under the Act.

The Act had the effect of reducing the accumulated postretirement benefit cost obligation by $2.2 million. We have applied the Act retrospectively. This will result in an expense reduction of $300,000 in the net periodic benefit cost for the 2005 fiscal year. The Company has recorded $75,000 in the third quarter and a total of $225,000 for the nine months ended December 26, 2004 of this expense as reduction in interest cost and unrecognized net loss and gain.

The computational components of basic and diluted earnings per share are as follows:

Comprehensive earnings (in thousands), which represents net earnings adjusted by the change in foreign-currency translation and minimum pension liability recorded in shareholders' equity for the periods ended December 26, 2004 and 2003 respectively, were $42,346 and $27,757 for three months then ended, and $66,059 and $44,236 for nine months then ended.

7.      Inventory

The components of inventory are as follows:

8.      Property, Plant, and Equipment

Effective July 31, 2004, Modine acquired the South Korean assets of the Automotive Climate Control Division of WiniaMando Inc. (ACC). In addition, effective September 3, 2004, Modine acquired WiniaMando's wholly owned subsidiary in Shanghai, China. On October 22, 2004, Modine completed the final element of these acquisitions, the 50% equity interest in a joint venture in Hefei, China after receiving certain necessary approvals by the Chinese government. This latter acquisition was closed effective October 15, 2004.

The total estimated purchase price of the assets and liabilities assumed in the Korean operation and the equity interests in the Chinese operations, including the joint venture interest that closed effective October 15, 2004, is approximately $85.5 million in cash. As part of the purchase agreement, $10.0 million dollars of the purchase price was placed in escrow to cover any potential claims or adjustments that may arise for a 21 month period from the date of the Korean closing. WiniaMando's obligations to Modine in the event of a breach are subject to certain limitations and exceptions as defined in the acquisition agreement. The completed portions of the acquisitions that closed in August and September were accounted for under the purchase method. Acquired assets and liabilities assumed were recorded at their respective fair market values. The excess of the purchase price, including estimated professional service and other acquisition costs, over the fair market values of the assets and liabilitie s acquired was recorded as goodwill. Goodwill recorded at December 26, 2004 from the South Korean asset acquisition and the equity interest in the Shanghai, China operation totaled $351,000 and $448,000, respectively. The adjustments made to the goodwill amount previously reported in the second quarter reflect changes in the amount of estimated professional services and certain adjustments to Korean fixed assets valuations and accounts receivables balances acquired. Additional adjustments may result from finalization of professional services costs incurred as part of the acquisitions and any potential claims or adjustments that may arise in the 21 month claim period as defined in the escrow agreement. The Company currently expects that the goodwill amounts will not be deductible for income tax purposes. The 50 % equity interest in the Hefei, China joint venture, which closed in October, is being accounted for under the equity method. The carrying value of the investment at December 26, 2004 was less th an the underlying value of the net assets by $518,000. The excess, which relates to certain tangible assets, is being amortized into income over the estimated remaining lives of the assets.

The newly acquired wholly owned operations in Korea and China are included in the Original Equipment segment while the 50% equity interest in the Hefei joint venture is being reported in the "Other items not allocated to segments" similar to the Company's other equity investments in affiliates. For financial reporting purposes, the newly acquired operations and equity investment, discussed above, are included in the consolidated financial statements using a one-month delay similar to the Company's other foreign subsidiaries. Accordingly, the operational results reported for fiscal 2005 include only four months of activity from the South Korean manufacturing plant, three months of activity from the wholly owned Chinese manufacturing plant and one and one-half months from the joint venture company in China. For balance sheet and cash flow purposes, the newly acquired operations (in the second and third quarters of fiscal 2005) are included in the reported amounts.

The following provides a preliminary allocation of the purchase price of the South Korean operation's, wholly owned subsidiary in Shanghai, China.

The following unaudited pro-forma financial information summarizes the estimated combined results of operations of the Company, and the South Korean and Shanghai, China operations of the Automotive Climate Control Division of WiniaMando. Also included in the pro-forma financial information presented is the results of operations from the joint venture company in Hefei, China recorded using the equity method. The financial information presented assumes that each of the acquisitions had taken place on April 1, 2003. The unaudited pro-forma combined results of operations reflect adjustments for interest expense and income, revised depreciation based on the fair market value of the property, plant and equipment, removal of goodwill amortization not allowable under U.S. GAAP, removal of one-time separation expenses paid to employees, and removal of certain incorporation and consulting fees incurred when WiniaMando was purchased by the former owners and allocated to ACC.

The unaudited pro forma financial information presented above is for informational purposes only and does not necessarily reflect the results of operations that would have occurred had the acquisitions, completed in the second and third quarters of fiscal 2005, actually taken place on the date assumed above, and those results are not necessarily indicative of the results of future combined operations.

Headquartered near Seoul, South Korea, with manufacturing facilities in Asan City, Modine Korea, LLC (formerly ACC) designs and manufacturers heating, ventilating and air conditioning (HVAC) systems for minivans, SUVs, commercial vehicles, trucks, buses and trains as well as other heat transfer components. The acquisition is expected to increase Modine's revenue by more than 15%, provide many complementary products and leverage Modine's significant technology investment. These acquisitions added nearly 700 people to Modine's ranks as well as a state-of-the-art wind tunnel, research center and manufacturing plant in South Korea and a wholly owned facility in Shanghai, China, as well as a 50/50 joint venture in Hefei, China.

10.     Restructuring and other plant closure costs

On June 17, 2004, the Company, through its Electronics Cooling Group (which is reported in the Distributed Products segment), announced plans to close its Guaymas, Mexico plant due to a shift in customer sourcing and over-capacity in its North American operations. The move, which consisted of transferring equipment and current operations to Lancaster, Pennsylvania and Hsinchu, Taiwan, was designed to reduce operating expenses, improve asset utilization and focus manufacturing operations closer to the electronics customers' assembly facilities. The financial statement impact, which includes restructuring and other closure costs, through the third quarter of fiscal 2005, was $2,114,000. These expenses are reported in the line items "restructuring charges" and "cost of sales" in the consolidated statements of earnings. The restructuring costs include severance due to a workforce reduction of 28 employees, and a negotiated buyout, reached at the end of the second quarter, on a non-cancelable operating leas e that was due to expire in April 2008. In the first quarter, the restructuring charges recognized on the non-cancelable operating lease were recorded at fair value as the lessor had not given an indication to the Company that he was willing to enter into buyout discussions. The resulting discussions and subsequent agreement reached at the end of the second quarter resulted in a $0.6 million reduction to the original restructuring amount recognized in the first quarter. The "other closure costs" consist primarily of accelerated depreciation of certain assets that are no longer be utilized. In the third quarter of fiscal 2005 an adjustment to other closure costs of ($148,000) was recorded upon final disposition of fixed assets at the Guaymas facility.

A summary of the restructuring and other closure costs recognized in the first nine months of fiscal 2005 are as follows:

The following table displays the components of the accrued restructuring liability:

11.      Goodwill and Intangible Assets

Changes in the carrying amount of goodwill through the nine months ended December 26, 2004, by segment and in the aggregate, are summarized in the following table:

Effective July 31 and September 3, 2004, respectively, the Company completed the acquisition of the South Korean assets and 100% equity interest in Shanghai, China of the Automotive Climate Control Division (ACC) of WiniaMando Inc. Based upon a preliminary allocation of the purchase prices, the excess of the South Korean operations purchase price over the fair value of the net assets acquired is $799,000 and has been recorded as goodwill. The newly acquired operations are included in the Original Equipment segment for reporting purposes using a one-month delay.

Additional disclosures related to acquired intangible assets are as follows:

The aggregate amortization expense for the nine months ended December 26, 2004 and 2003 were $198,000 and $255,000, respectively. Total estimated annual amortization expense expected for fiscal years 2005 through 2010 and beyond are as follows:

12.     Indebtedness

On October 27, 2004, Modine amended and restated its $150 million multi-currency revolving credit facility, which was to expire in April 2005. The new facility extended the term for five years, expiring in October 2009, and increased the facility to $200 million, with a customary accordion feature that allows for an additional $75 million of borrowing capacity. The terms of this credit facility contain various restrictive financial covenants relating to maximum debt-to-EBITDA and minimum interest coverage ratio. In addition, the credit facility contains limitations on investments, liens, dividends and other indebtedness. Borrowings under the credit facility bear interest at a rate of LIBOR plus a spread based on certain financial criteria, or the prime rate at Modine's option. Financing fees and other third-party costs are $0.7 million and will be amortized over the five-year life of the new revolving credit facility.

In addition, approximately $68 million of debt was reclassified from long-term to the current portion of long-term debt ahead of the planned refinancing of a September 2005 note.

13.     Financial Instruments

The Company invests excess cash in investment quality short-term liquid debt instruments. Such investments are made only in instruments issued by high quality institutions. Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of accounts receivable. The Company sells a broad range of products that provide thermal solutions to a diverse group of customers operating throughout the world. At December 26, 2004 and March 31, 2004 approximately 60% and 54%, respectively, of the Company's trade accounts receivables were from the Company's top ten individual customers. These customers operate primarily in the automotive, truck, and heavy equipment markets and are all influenced by many of the same market and general economic factors. To reduce credit risk, the Company performs periodic credit evaluations of each customer and actively monitors its financial condition and developing business news. The Company does not generally requir e collateral or advanced payments from its customers, but does so in those cases where we identify a substantial credit risk. Credit losses to customers operating in the markets served by the Company have not been material. Total bad debt write-offs have been well below 1% of outstanding trade receivable balances for the presented periods.

In addition to the external borrowing, the Company has certain foreign-denominated long-term inter-company loans that are sensitive to foreign exchange rates. These loans are not hedged at December 26, 2004 and, as such, are exposed to transactional currency risk. At December 26, 2004, the Company has a 43.1 billion won or, $41.1 million dollar, 8-yr loan to its wholly owned subsidiary Modine Korea, LLC. The potential loss from a hypothetical 10% change in the exchange rates between the South Korean won and the U.S. dollar could result in an adverse or favorable currency transaction gain /(loss) of approximately $4.11 million dollars. For the three and nine months ended December 26, 2004, the Company had recorded $3.7 million and $4.1 million, respectively, in currency transaction gains in "other income" from the date of the initial loan in August 2004. The Company is currently investigating potential alternatives to mitigate this foreign currency exposure. Similarly, the Company's wholly owned German subsidiary Modine Holding GmbH has an 11.1 million Euro, or $14.8 million dollars, on-demand loan to its wholly owned subsidiary Modine Hungaria Kft. at December 26, 2004. The potential loss from a hypothetical 10% change in exchange rates between the Euro and the Hungarian Forint, assuming a stable exchange rate between the Euro and the U.S. dollar, could result in an adverse or favorable currency transaction gain/(loss) of approximately $1.48 million dollars. For the three months ended December 26, 2004 and 2003, the Company recorded in "other income/(expense)" transaction (losses)/gains of ($0.4) million and $0.4 million, respectively. For the nine months ended December 26, 2004 and 2003, transaction (losses)/gains recorded were ($1.3) million and $1.4 million, respectively.

14.     Foreign Exchange Contracts/Derivatives/Hedges

Modine maintains a foreign risk-management strategy that uses derivative instruments in a limited way to protect assets and obligations already held by Modine and to protect its cash flows. Derivative instruments are not used for the purpose of generating income or speculative activity. Leveraged derivatives are prohibited by Company policy. Modine's principal derivative/hedging activity in the first nine months of fiscal 2005 consisted of the following:

Hedges of Net Investments in Foreign Subsidiaries

The Company has a number of investments in wholly owned foreign subsidiaries and non-consolidated foreign joint ventures. The net assets of these subsidiaries are exposed to currency exchange rate volatility. The Company uses non-derivative financial instruments to hedge this exposure. The currency exposure related to the net assets of Modine's European subsidiaries are managed partially through foreign-currency-denominated debt agreements entered into by the parent. For the three and nine months ended December 26, 2004, $6.3 million and $6.1 million in net losses, respectively, related to the foreign-currency-denominated debt agreements were included in the cumulative translation adjustment.

The increase in the warranty accrual over the prior year amounts reflects the balances assumed as part of the acquisition of the assets of ACC.

Commitments:

At December 26, 2004, the Company had capital expenditure commitments of approximately $24,471,000. Approximately 60% of the commitments originate from the European Operations segment. Significant commitments relate to tooling and equipment purchases for new programs or to improve manufacturing processes in both North America and Europe. In addition, commitments exist associated with the future SAP installation of ERP (enterprise resource planning).

16.     Segment data

During the first quarter of fiscal 2005, management introduced a change to the segment reporting structure. The Emporia, Kansas facility, which was previously reported in the Original Equipment segment, is now reported in the Distributed Products segment. This change was made to include the manufacturing plant in the segment for which it is manufacturing product. Sales and operating income presented for the three and nine months ended December 2003 have been restated for the realignment of this manufacturing facility. In addition, certain centralized service expenses have been allocated to the reportable segments from corporate and administration expenses beginning in the first quarter of fiscal 2005. The new central service allocations for expenses directly attributable to the reportable segments include expenses related to the engine products group, and information technology, finance, purchasing, quality assurance, and environmental departments. Operating income presented for the three an d nine months ended December 2003 has been restated to reflect the new central service allocations. In addition, the Original Equipment segment results include four months of operating income from manufacturing operations of ACC that were acquired effective July 31, 2004, and 3 months of operating income from the wholly owned Chinese subsidiary acquired effective September 3, 2004. Both operations are being reported using a one month delay, similar to the Company's other foreign operations. Included in the "Other items not allocated to segments" is the Company's 50% share of the earnings being reported under the equity method for its investment in the Chinese joint venture acquired effective October 15, 2005. These financial results are also being reported using a one-month delay.

The Emporia, Kansas facility, which was previously reported in the Original Equipment segment, is now reported in the Distributed Products segment. The asset data presented has been restated for March 31, 2004 to reflect the change in segment in which this manufacturing facility is included. In addition, the Original Equipment segment data presented includes the assets of the South Korean and wholly owned China subsidiary of the ACC Division of WiniaMando, purchased by the Company in the second quarter. Included in the Corporate & Administrative caption is the investment in the Hefei, China joint venture acquired effective October 15, 2005.

17.     Contingencies and Litigation

The United States Environmental Protection Agency (US EPA) has designated Modine as a potentially responsible party ("PRP") for remediation of five waste disposal sites. These sites are as follows: Elgin Salvage (Illinois); Interstate Lead (Alabama); H.O.D. Landfill (Illinois); Alburn Incinerator/Lake Calumet Cluster (Illinois) and Dixie Barrel & Drum (Tennessee). These sites are not company-owned and allegedly contain wastes attributable to Modine from past operations. The Company's potential liability at these five sites is significantly less than the total site remediation costs because the percentage of material attributable to Modine is relatively low. These claims are in various stages of administrative or judicial proceedings and include recovery of past governmental costs and for future investigations and remedial actions. In three instances, Modine has not received, and may never receive, documentation verifying its involvement and/or its share of waste contributions to the sites . Additionally, the dollar amounts of the claims have not been specified.

In 1986, Modine executed a Consent Decree involving other PRPs and the Illinois EPA and paid $1,029 for its allocated share (0.1%) of the Alburn Incinerator, Inc. remediation costs. The US EPA signed a Covenant Not to Sue in conjunction with the Consent Decree, but reserved its right to "seek additional relief" for any additional costs incurred by the United States at the site. In November 2003, Modine received a General Notice of Liability from the US EPA concerning the Alburn Incinerator Inc./Lake Calumet Cluster site. The US EPA requested Modine's participation as a PRP for the performance of additional activities that the US EPA has determined, or will determine, required to restore the Alburn Incinerator Inc./Lake Calumet Cluster site. In December 2003, Modine responded to the US EPA stating that it would be willing to participate in a settlement of the Lake Calumet site remedial costs as a "micro de minimis PRP." On April 27, 2004 and July 23, 2004, Modine signed participation agreements with o ther site PRPs to perform site investigations, collect pertinent site data, and develop a remedial work plan.

In October 2004, Modine received a Request for Information from the US EPA concerning the Dixie Barrel & Drum Superfund Site in Knoxville, Tennessee. The US EPA requested information pertaining to Modine's alleged contributions to this site and for any information Modine may possess relating to the site's activities. In October 2004, Modine responded to the US EPA indicating that it arranged for Dixie Barrel & Drum to accept empty drums for reclamation purposes from the then-owned Knoxville, Tennessee location and possibly from Modine's Clinton, Tennessee location. Modine, however, did not use Dixie Barrel & Drum for the purposes of disposal or treatment of any hazardous materials or wastes.

The Company accrues costs associated with environmental matters, on an undiscounted basis, when they become probable and reasonably estimable. Costs anticipated for settlement of the Alburn Incinerator/Lake Calumet Cluster and Dixie Barrel & Drum sites cannot be reasonably defined at this time and have not been accrued. The costs to Modine, however, are not expected to be material at these sites based upon Modine's relatively small portion of contributed waste. There are no accruals for off-site cleanup activities, including remediation and legal costs, as of the fiscal quarter ending December 26, 2004.

An obligation for remedial activities may also arise at a Modine-owned facility due to past practices or as a result of a property purchase or sale. These expenditures most often relate to 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 appropriate environmental protection. Environmental liabilities recorded at March 31, 2004 and December 26, 2004 to cover the investigative work and remediation for sites in the United States and The Netherlands was $1.2 million and $1.3 million, respectively. These liabilities are recorded in the consolidated balance sheet in "accrued expense and other current liabilities" and "other noncurrent liabilities." No significant changes to these accruals were recorded in the first nine months of fiscal 2005.

Other recent developments concerning legal proceedings reported in the Modine Manufacturing Company Form 10-K report for the year ended March 31, 2004, are updated in this Quarterly Report on Form 10-Q in Part II, Other Information, Item 1, Legal Proceedings.

18.    Subsequent Events

On January 31, 2005, Modine entered into a Merger Agreement, Contribution Agreement and OEM Acquisition Agreement with Transpro, Inc. ("Transpro"). In accordance with the Contribution Agreement, Modine and certain of its subsidiaries that conduct its Aftermarket business will contribute to Modine's wholly owned subsidiary, Modine Aftermarket Holdings, Inc. ("Aftermarket Holdings") the assets used to conduct such business. Subsequent to the contribution of the Aftermarket assets to Aftermarket Holdings, Modine will spin Aftermarket Holdings off to Modine's shareholders. Pursuant to the Merger Agreement, Aftermarket Holdings will be merged with and into Transpro. After the merger, Modine shareholders as of the record date for the merger will own 52% of the outstanding common stock of the combined company as well as continuing to hold their shares of Modine.

In accordance with the OE Acquisition Agreement, Modine will acquire the heavy duty original equipment business conducted by Transpro at its facility in Jackson, Mississippi. The purchase price of this business is $17 million.

Modine continues to conduct normal Aftermarket business operations and accordingly the financial results presented reflect the business as held and in use until the date the spin off is completed. The merger, which is not subject to Modine shareholder approval, is subject to regulatory clearance, Transpro stockholder approval and satisfaction of other customary closing conditions. Closing of the Aftermarket spin off and merger is anticipated during the second calendar quarter of 2005 with the expectation for Modine to close earlier on its purchase of Transpro's heavy-duty OEM business.

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of Modine's consolidated results of operations and financial condition. This discussion should be read in conjunction with the consolidated financial statements and notes thereto.

RESULTS OF OPERATIONS

Comparison of the Third Quarter of Fiscal 2005 with the Third Quarter of Fiscal 2004

Third quarter record net sales of $418.4 million were 34.6% higher than the $310.8 million reported in the third quarter of last year. This is the Company's fifth consecutive quarter of record sales. Sales were positively impacted by net favorable currency exchange rates, primarily the stronger euro in relation to the dollar, of approximately $11.9 million when compared to the same quarter last year. Also contributing to the net sales increase were a full three months of operating results from Modine Asia, the Company's South Korean and Chinese manufacturing facilities acquired as part of the purchase of WiniaMando's Automotive Climate Control (ACC) business during the second quarter.

Revenues from the Original Equipment segment grew by 63.0% or $77.5 million, from the same quarter last year. The current year results include the first full quarter of revenues from Modine Asia, as noted above. Sales increases in existing markets were driven by large volume improvements in the truck market and to a lesser extent but still sizable increase in the heavy-duty and industrial business. Sales decreases occurred in the automotive market when compared to the third quarter of the prior year due to reduced volumes for certain vehicle platforms and continued pricing pressures. The Original Equipment segment is benefiting from a combination of new business programs and general industrial and agricultural market recoveries. Revenues from the European Operations segment grew by 26.1%, or $27.9 million, from the same quarter last year. Excluding the impact of the stronger euro in relation to the U.S. dollar, revenues would have increased by 16.0%. Volume increases were recorded in both the European automotive and heavy-duty and industrial markets, in addition to the favorable impact in the exchange rate. In the Distributed Products segment, revenue decreased slightly by 1.9%, or $1.6 million. Decreased revenues in the Aftermarket of 8.5% and a small decline in the electronics cooling markets were partially offset by a 9.0% increase in HVAC&R (heating, ventilating, air conditioning and refrigeration) revenues.

Gross profit, as a percentage of sales, was 22.9%. This was a 0.4% decrease as a percentage of sales from the 23.3% earned in the third quarter of the previous year. Higher gross margins were reported in the European Operations and the Distributed Products segments while the gross margin declined by 3 percentage points in the Original Equipment segment. Improved gross margins were reported in the majority of the Company's major markets, while the North American automotive, heavy-duty and industrial, and HVAC&R markets registered declines. Higher material costs as a percentage of sales were partially offset by lower manufacturing overhead costs as a percentage of sales. Labor costs as a percentage of sales declined slightly in the same period comparison to one year ago. Rising commodity market prices, which are calculated and passed through when possible to original equipment customers on a delayed basis, once again negatively impacted the material content as a percentage of sales. Improved sales v olumes allowed for better utilization of the fixed component of manufacturing overhead during the quarter. The prior year gross profit was negatively impacted by incremental expenses of $2.2 million as a result of an agreement reached with a European Original Equipment customer relating to a product performance issue and approximately $1.0 million in warranty costs associated with a North American Original Equipment customer.

Selling, general and administrative expenses, as a percentage of sales, was 16.8%. This was a 1.9% decrease as a percentage of sales from the 18.7% recorded in the third quarter of the previous year. In absolute dollar terms, selling, general and administrative expenses of $70.4 million increased by 21.0% from the prior year's third quarter of $58.2 million. The inclusion of a full quarter of operating results for the new Modine Asia acquisitions accounted for $4.3 million, or 35% of the increase. The impact of currency exchange rates, primarily the stronger euro in relation to the U.S. dollar, also contributed approximately 10%, or $1.2 million, to the overall increase. The largest items contributing to the remaining increase were wages, fringe benefits and other personnel-related benefits. In addition, professional services were higher during the quarter related to Sarbanes-Oxley 404 requirements and the spin-off of the aftermarket business.

Restructuring charges reduced income by $0.1 million during the current quarter as the final remaining termination payments were completed related to the previously announced closure of the Guaymas, Mexico facility in the Company's electronics cooling business.

Income from operations of $25.1 million increased by $10.9 million, or 75.9% over the same quarter last year. The Original Equipment segment's operating income increased 40.1% to $23.0 million from $16.4 million a year ago. The current year results include the first full quarter of operations from Modine Asia as previously discussed. The truck and heavy-duty & industrial markets benefited from new business programs as well as the steady recovery in general industrial and agricultural markets. The Company continues to implement cost reduction programs which are generating operating improvements. Partially offsetting this strong performance was the North American automotive business, which had reduced volumes for certain vehicle platforms and continued pricing pressure. The European Operations segment's operating income increased 67.8% to $20.3 million from $12.1 million one year ago. Major influences were continued growth in the automotive and heavy-duty businesses, the stronger euro in relation to the dollar, offset in part by higher selling, general and administration costs in support of new business programs. The Distributed Products segment's operating loss decreased 39.0% to a loss of $0.6 million from a loss of $1.0 million a year ago. Weaker Aftermarket results were more than offset by a stronger performance in the electronics cooling business as the results of cost-containment programs, acceleration of new business in Taiwan and plant restructuring initiatives continue to take effect, coupled with slightly improved profits in HVAC&R market.

Interest expense increased 24.7%, or $0.3 million, while average outstanding debt levels increased $32.5 million, or approximately 31.3%, from the same quarter one year ago. The increase in interest expense is mainly due to increased borrowings to fund, in part, the ACC acquisitions, debt assumed as part of the acquisition and short-term borrowing recorded by the new Korean subsidiary. The relationship of the increase in the interest expense compared to the increase in debt level was also influenced by exchange rate fluctuations on euro-denominated loans.

Net non-operating income increased by $1.5 million from the same quarter one year ago. Gains on foreign currency transactions were up $2.4 million from the same quarter one year ago. The gains were derived predominantly from unhedged inter-company loans. The Company currently has an inter-company loan denominated in euros with the Company's wholly owned Hungarian subsidiary and an inter-company loan denominated in Korean won with the Company's wholly owned Korea subsidiary. Equity in earnings of non-consolidated affiliates was up $0.6 million from the third quarter last year with continued strong performance from Modine's Brazilian joint venture, Radiadores Visconde, Ltda. Equity in earnings of non-consolidated affiliates also includes the Company's share of the 50% equity interest in the newly acquired joint venture in Hefei, China. Royalty income was down $0.9 million from the third quarter last year. The prior year included recognition of $0.7 million in royalty income that was in arrears from a ma nufacturer producing heat transfer products for the power generation industry. Profits recorded on the sale of property, equipment and tooling also declined by $0.7 million from the same period one year ago. The prior year included the sale of the LaPorte, Indiana manufacturing facility as part of the restructuring program announced in fiscal 2002.

The provision for income taxes in the current quarter was $11.2 million compared to last years' third quarter expense of $5.8 million. The effective tax rate of 37.2% represents an increase of 5.0 percentage points from the prior year. The increase results primarily from the following: higher state income taxes and foreign tax rate differential.

Net earnings for the quarter of $18.9 million, or $0.56 basic earnings per share and $0.55 diluted earnings per share were up when compared to last year's third quarter net earnings of $12.3 million, or $0.36 basic and diluted earnings per share. Return on shareholders' equity through the third quarter of the current fiscal year was 12.1%.

Comparison of the First Nine Months of Fiscal 2005 with the First Nine Months of Fiscal 2004

Net sales for the first nine months of fiscal 2004-05 were $1,129.4 million, up 28.5% from the $878.8 million reported in the same period of last year. Sales were positively impacted by net favorable currency exchange rates, primarily the stronger euro in relation to the U.S. dollar, of approximately $31.6 million, when compared to the first nine months of last year.

Overall, changes in the Company's segment sales were mixed for the first nine months of the year. In the Original Equipment segment, net sales grew by 48.2%. Sales increases were seen in all markets served by the segment. The current year includes four months of revenues from new Modine Asia acquisitions, or approximately 40% of the segments overall increase. The largest improvement in existing markets was recorded in the truck market as a result of new product launches in the second half of last year. The heavy-duty and industrial market also recorded strong improvements followed by a small increase in the automotive market. The European Operations segment net sales increased by 29.1% from year-ago levels. Both the European automotive and heavy-duty markets reported sale volume increases in addition to the favorable currency translation impact of $29.0 million recorded in the first nine months of the year. The Distributed Products segment sales weakened by 3.4%. Reduced Aftermarket revenues were th e major contributor to the decline from the same period one year ago. The Aftermarket business continues to experience negative sales impact associated with the increasing competition in the markets served. In addition, cooler summer weather in the United States and the effects of the hurricane season in the southeast portion of the United States were significant factors contributing to disappointing sales in the first nine months of fiscal 2005. Partially offsetting the Aftermarket declines were stronger coil sales in the commercial HVAC&R business. The electronics cooling business also experienced lower sales in the first nine-months of fiscal 2005 as the division undertook a plant restructuring initiative and the ramp-up of manufacturing operations for new business in Taiwan.

Gross profit of 23.1% was down 0.4 percentage points when compared with the first nine months of the previous year. An increase in material costs, as a percentage of sales, was the largest driver in the reduction in gross profit. Rising commodity market prices, which are calculated and passed through when possible to original equipment customers on a delayed basis, once again negatively impacted the material content as a percentage of sales. As a percentage of sales, labor declined slightly while manufacturing overhead improved from the prior year results which included additional program launch costs and a program scope change. Gross profits, in dollars, grew in the Original Equipment, European Operations, and Distributed Products segments by 41%, 39% and 1%, respectively.

Selling, general and administrative expenses of $193.4 million, or 17.1% of sales, decreased 2.6 percentage points when compared to the first nine months of last year. Selling, general and administrative expenses, in absolute dollars, grew by $19.8 million. The inclusion of four months of operating results for the new Modine Asia acquisitions accounted for $5.4 million, or 27% of the increase. The impact of currency exchange rates, primarily the stronger euro in relation to the U.S. dollar, contributed to approximately 18%, or $3.5 million, of the overall dollar increase. The largest items contributing to the remaining increase were wages and other compensation, depreciation expenses and higher professional and other contract services.

Restructuring charges of $1.0 million were recorded during the first nine months related to the previously announced closure of the Guaymas, Mexico facility in the Company's electronics cooling business. The closure is the result of a shift in customer sourcing and overcapacity in North American operations for the electronic cooling market. The charges recorded during the current year include $0.7 million for a lease buyout agreement and severance costs of $0.3 million.

Operating income of $66.6 million, or 5.9% of sales, was up 2.2 percentage points as a percentage of sales, from $32.8 million, or 3.7% of sales, in the first nine months of the previous year. The Original Equipment segment's operating income increased 54.5% to $65.9 million from $42.7 million one year ago. Current year results were positively impacted by new business programs, general industrial and agricultural market recoveries and operational improvements and cost reductions. The European Operations segment's operating income increased 45.5% to $46.8 million from $32.1 million one year ago. Major influences were higher sales volumes in both the automotive and heavy-duty markets along with the stronger euro in relation to the dollar. The Distributed Products segment's operating loss increased to a loss of $1.1 million from a loss of $0.1 million one year ago. The Company continues to experience weakness in the aftermarket business, due in part, to weather related factors encountered this summer whic h were partially offset by a stronger year-over-year performance in the electronics cooling business as the results of cost-containment programs, acceleration of new business in Taiwan and plant restructuring initiatives during the year. Included in the electronic cooling results were $2.1 million restructuring charges and other closure costs which negatively impacted operating income for the segment in the current year.

Interest expense increased $0.4 million, or just over 10% from the same nine month-period one year ago. The increase in interest expense is mainly due to increased borrowings to fund, in part, the acquisition of ACC, debt assumed as part of the acquisition and short-term borrowing recorded by the new South Korean subsidiary.

Net non-operating income increased by $1.0 million from the same nine-month period one year ago. Equity earnings of non-consolidated affiliates were up $2.4 million due primarily to the strong operating performance of the Company's Brazilian joint venture, while smaller improvements were recognized by the Company's other joint ventures. Gains on foreign currency transactions were up $0.8 million from the first nine months of fiscal 2005. The gains were derived predominantly from unhedged inter-company loans. The Company currently has an inter-company loan denominated in euros with the Company's wholly owned Hungarian subsidiary and an inter-company loan denominated in Korean won with the Company's wholly owned Korea subsidiary. Royalty income has declined $0.9 million from the same nine-month period one year ago. Profits recorded on the sale of property, equipment and tooling also declined by $1.2 million from the same period one year ago. The prior year included the sale of the LaPorte, Indiana m anufacturing facility as part of the restructuring program announced in fiscal 2002.

The provision for income taxes in the first nine months was $29.3 million compared to last year's first nine months' expense of $13.8 million. The effective tax rate of 38.5% represents an increase of 5.3 percentage points from the prior year. The increase stems primarily from the following: foreign earnings repatriation, foreign tax rate differential, and higher state income taxes.

Net earnings were $46.8 million or $1.38 basic earnings per share and $1.36 diluted earnings per share for the first nine months of the fiscal 2005. This compares to earnings of $27.9 million, or $0.82 basic and diluted earnings per share, for the first nine months of the prior year. Return on shareholders' equity through the third quarter of the current fiscal year was 10.1%.

Outlook for the Remainder of the Year

Management is confident that the Company will significantly exceed the original fiscal 2005 sales and earnings per share guidance provided at the start of the year. Fourth quarter results, though, may be only in-line or slightly below last year's level of 37 cents per share given the absence of a gain from plant sales recorded in fiscal 2004, as well as softening in certain economies such as Asia and the market challenges our Aftermarket business continues to face ahead of its spin off and merger with Transpro. The Company is encouraged about prospects for continued growth in earnings per share, cash flows and underlying revenues next year and will provide a more comprehensive outlook for fiscal 2006 in the year-end earnings release and conference call in early May. Among the factors that give us confidence at this early juncture are a strong line-up of new business programs and a continuation of solid demand in several of our North American and European markets. These forward-looking statements rega rding sales, earnings, and operations are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. See "Important Factors and Assumptions Regarding Forward-Looking Statements" below.

The Company is currently undergoing a comprehensive effort to ensure compliance with the new regulations under Section 404 of the Sarbanes-Oxley Act that take effect for the Company's fiscal year ending March 31, 2005. This effort includes internal control documentation and testing of key controls under the direction of senior management. While the Company has not completed an evaluation of all deficiencies, it has not been notified that any item is considered to be either a significant deficiency or material weakness.

FINANCIAL CONDITION

Comparison between December 26, 2004 and March 31, 2004

Current assets

Cash and cash equivalents of $43.4 million decreased $19.9 million from the March 31, 2004 balance. The acquisition of the South Korean assets, the 100% equity interest in the Shanghai, China subsidiary and the 50% equity interest in the joint venture in Hefei, China of ACC, capital expenditures and dividend payments were the main uses of cash. Cash provided by operating activities, additional net borrowing in conjunction with the acquisition and the issuance of common stock, upon the exercise of options granted pursuant to employee benefit plans, were the main sources of cash during the period.

Trade receivables of $268.1 million were up $87.9 million from year-end. Excluding the impact of the recent Asian acquisitions which added $52.5 million to the trade receivables balance, the remaining $35.4 million in changes are attributable to higher sales (excluding the new acquisitions) over the previous 60 days of $7.7 million, seasonal sales programs in the HVAC&R and aftermarket divisions and timing differences in collections from major customers created by closing on the 26^th of the month throughout the year and the 31^st of the month at year-end along with increases due to foreign currency translation.

Inventory levels increased by $11.3 million from year-end to $147.7 million at the end of the third quarter. Excluding the impact of the acquisition which added $12.3 million to the inventory balance, the remaining changes consisted of an $8.0 million reduction in aftermarket inventories, offset by increases in the remaining operating divisions. Seasonal factors were the main item influencing the change in the Distributed Products segment, which includes the aftermarket and HVAC&R divisions. Inventory increases in the remaining operating divisions were driven by increased sales levels and rising material costs and foreign currency translation.

Deferred income taxes and other current assets increased by $4.2 million to $57.6 million from year-end. The largest item contributing to the change is $4.8 million of other current assets from the ACC acquisitions in Modine Asia. The remaining $0.6 million decrease from existing operations came from a number of categories with the largest two changes being a $2.8 million reduction in prepaid taxes and a $1.9 million increase in unbilled customer tooling.

The current ratio decreased from 2.1 to 1 to 1.5 to 1. Net working capital decreased $59.3 million to $169.8 million. The major item contributing to the overall decrease was due to the reclassification of approximately $68 million of debt from long-term to current ahead of the planned refinancing of a September 2005 note, in addition the recent acquisition of the ACC assets added $22.2 million in working capital. Excluding the reclassification of debt and the recent acquisition, the other major items contributing to the overall change were lower cash and cash equivalents, lower inventories, lower other current assets, additional debt due within a year, higher accrued expenses and other current liabilities and higher income taxes. These reductions in working capital were offset in part by higher trade receivables and lower accounts payable.

Noncurrent assets

Net property, plant and equipment, of $481.3 million increased by $83.6 million over year-end balance of $397.7 million. Included in the December consolidated balance sheet were $74.0 million from the operations acquired from ACC in the period. Capital expenditures along with the foreign currency translation were higher than depreciation and retirements for the remaining operations. Outstanding commitments for capital expenditures were $24.5 million at December 26, 2004. More than 60% of the commitments relate to Modine's European operations. These commitments include tooling and equipment purchases for new programs, improvements in manufacturing processes in both North America and Europe and the future installation of SAP ERP software. The outstanding commitments will be financed through a combination of funds generated from operations and third-party borrowing as required.

Investments in unconsolidated affiliates of $35.4 million increased by $7.3 million from year-end. Equity earnings of affiliates were $4.1 million for the first nine months of fiscal 2005 as Radiadores Visconde, the Company's joint venture in Brazil, continued to produce strong operating results. Offsetting the earnings recorded in the first nine months were dividends received from Radiadores Visconde of $0.7 million. On October 22, 2004, Modine completed the acquisition from WinniaMando of the 50% equity interest in a joint venture in Hefei, China for $2.2 million. In addition, net favorable currency translation of $1.8 million was recorded since the end of the year.

Goodwill increased by $0.8 million to $33.4 million. This increase consisted of $0.8 million originating from the Modine Asia ACC acquisitions. Intangible assets declined by $0.5 million, which was primarily caused by a reduction in the noncurrent pension liability due to the recognition of a pension curtailment change in the first quarter. The remaining reduction is related to amortization expense recorded in the first nine months of the current year offset in part by a non-compete agreement recorded during the third quarter.

Deferred charges and other noncurrent assets increased by $0.8 million. Excluding the impact of the ACC acquisition which added $1.2 million to the balance, the largest factor influencing the remaining $0.4 million decrease was the result of continuing recognition of a change in deferred pension assets.

Current Liabilities

Accounts payable and other current liabilities of $247.0 million were $58.1 million higher than in March 2004. Excluding the impact of the Modine Asia acquisitions, which added $47.0 million in current liabilities to the balance sheet at December 26, 2004, the remaining $11.1 million increase was due to normal timing differences in the level of operating activity and the impact of exchange rates on foreign currency balances, primarily the stronger euro in comparison to the dollar. Accrued income taxes increased $11.0 million, primarily from improved profits and timing differences in making estimated payments.

Debt

Total outstanding debt increased $40.0 million to $127.9 million from the March 2004 balance of $87.9 million. The change in short-term debt accounted for $1.1 million of the total increase arising from borrowing on the Korean lines of credit. Domestic long-term debt increased $47.1 million mainly due to the utilization of existing credit lines to finance the ACC acquisitions. International long-term debt decreased $8.2 million during the period. Debt from the acquired Korean operations of $2.7 million was offset by a decrease of $10.9 million in Europe that consisted of $12.4 million in scheduled and discretionary payments and a $1.5 million increase in the dollar value of euro denominated loans.

Consolidated available lines of credit increased $56.7 million to $191.0 million during the quarter. An additional $75.0 million is available on the credit line revolver, subject to lenders' approval, bringing the total available up to $266.0 million. Domestically, Modine's unused lines of credit decreased $48.0 million to $159.0 million, due to the new five-year credit facility the Company entered into on October 27, 2004. Foreign unused lines of credit, which include $18.0 million of available credit lines in South Korea, were $32.0 million. At the end of the third quarter of fiscal 2005, total debt-to-capital (capital = total debt + shareholders equity) was 16.6% compared with 13.0% at the end of fiscal 2004.

On October 27, 2004, the Company amended and restated its $150 million multi-currency revolving credit facility, which was due to expire in April 2005. The new facility extended the term for five years, expiring in October 2009 and increased the facility to $200 million, with a customary accordion feature that allows for an additional $75 million of borrowing capacity. For further details, see Note 12 in the accompanying notes to financial statements.

Shareholders' Equity

Total shareholders' equity increased from year-end by $58.2 million to a total of $644.8 million. Retained earnings increased by $30.8 million. The additions to retained earnings included $46.8 million in net earnings reported year-to-date, offset in part by $16.0 million in dividend payments. Net favorable foreign currency translation of $19.3 million was recorded in the period. The largest portion of the change resulted from the dollar weakening against the euro and Korean won while other less significant changes occurred in other foreign currencies. Also favorably impacting shareholders' equity was an increase in paid-in capital and common stock of $9.2 million. This increase resulted from the issuance of common stock used to satisfy stock option exercises and restricted stock grants. Also recognized in paid-in capital were the associated tax benefits resulting from stock option exercises. Treasury stock purchases in the period were $1.0 million and represented shares purchased by the Company in connection with stock options and restricted stock activity.

Liquidity

Operating cash flow for the quarter and nine-months ended December 26, 2004 were $57.0 million and $88.6 million, respectively, compared to $40.9 million and $88.1 million one year ago for the same periods, respectively. The differences for the quarter were mainly the result of higher net earnings adjusted for non-cash items offset in part by a larger increase in accounts receivable this year, due to a 35% year-over-year increase in third quarter sales, which included the first full quarter of operations from Modine Asia as a result of the ACC acquisitions, and a decrease in accounts payable versus an increase in the same period last year. Strong operating cash flow in the quarter enabled the Company to pay down debt by $22.5 million and increase its cash balance by $15.7 million. In addition, the Company announced a 6.6% increase in the Company's annual common stock dividend rate to 65 cents per share from 61 cents per share which began effective with the dividend paid on December 2, 2004.

Due to the reclassification of approximately $68 million of debt ahead of the planned refinancing of a September 2005 note, working capital at the close of the third quarter fell sharply to $169.8 million from $229.7 million at the end of the second quarter and $229.1 million at fiscal 2004 year-end. The Company does not anticipate any liquidity issues arising from this planned refinancing. Compared with the prior year, inventory turns increased from 7.6 to 8.7 and days sales outstanding increased to 56 days from 51 days, with both increases essentially driven by the addition of the customer base from the ACC acquisition.

The Company expects cash flows to remain strong in the current fiscal year and to meet its future operating, capital expenditure and strategic business opportunity costs primarily through a combination of existing cash balances, cash flows generated from operating activities and borrowings under committed and uncommitted lines of credit. The Company expects to make scheduled and discretionary debt repayments in fiscal 2005 with internally generated funds. Modine believes that its internally generated cash flow, together with access to external resources, will be sufficient to satisfy existing commitments and plans.

On October 27, 2004, Modine amended and restated its $150 million multi-currency revolving credit facility, which was to expire in April 2005. The new facility extended the term for five years, expiring in October 2009, and increased the facility to $200 million, with an increase in a customary accordion feature from $50 million to $75 million in additional borrowing capability. Based on the Company's strong balance sheet, improved financial position and the favorable bank market, the new facility has a lower cost, is unsecured and has fewer restrictive covenants.

With this increase in the credit facility and strong operating cash flows, management believes it is positioned to provide the necessary financial resources to take advantage of additional potential strategic business opportunities that may arise in the near future.

Environmental

Please see Footnote 17 to the Notes to Consolidated Financial Statements (unaudited) herein.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, Modine is subject to market exposure from changes in foreign exchange rates, interest rates, credit risk, economic risk and commodity price risk.

Foreign Currency Risk

Modine is subject to the risk of changes in foreign currency exchange rates due to its operations in foreign countries. Modine has manufacturing facilities in Mexico, Taiwan, South Korea, China and throughout Europe. It also has equity investments in companies located in France, Japan, Brazil and China (effective with the acquisition on October 22, 2004). Modine sells and distributes its products throughout the world. As a result, the Company's financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which the Company manufactures, distributes and sells it products. The Company's operating results are principally exposed to changes in exchange rates between the dollar and the European currencies, primarily the euro, and are also exposed, as the result of the acquisitions made in the second quarter, to the change between the dollar and the Korean won. Changes in foreign currency exchange rates for the Company's foreign subsidiaries reporting in local currencies are generally reported as a component of shareholders' equity. The Company's favorable currency translation adjustments recorded for the nine months ended December 26, 2004 and for the twelve months ended March 31, 2004 were $19.3 million and $28.5 million, respectively. As of December 26, 2004 and March 31, 2004, the Company's foreign subsidiaries had net current assets (defined as current assets less current liabilities) subject to foreign currency translation risk of $92.3 million and $73.7 million, respectively. The potential decrease in the net current assets from a hypothetical 10% adverse change in quoted foreign currency exchange rates would be approximately $9.2 million and $7.4 million, respectively. This sensitivity analysis presented assumes a parallel shift in foreign currency exchange rates. Exchange rates rarely move in the same direction relative to the dollar. This assumption may overstate the impact of changing exch ange rates on individual assets and liabilities denominated in a foreign currency.

The Company has certain foreign denominated long-term debt obligations that are sensitive to foreign currency exchange rates. The following table presents the future principal cash flows and weighted average interest rates by expected maturity dates. The fair value of long-term debt is estimated by discounting the future cash flows at rates offered to the Company for similar debt instruments of comparable maturities. The carrying value of the debt approximates fair value.

In addition to the external borrowing, the Company has certain foreign-denominated long-term inter-company loans that are sensitive to foreign exchange rates. These loans are not hedged at December 26, 2004 and, as such, are exposed to transactional currency risk. At December 26, 2004, the Company has a 43.1 billion won or, $41.1 million dollar, 8-yr loan to its wholly owned subsidiary, Modine Korea, LLC. The potential loss from a hypothetical 10% change in the exchange rates between the Korean won and the dollar could result in an adverse or favorable currency transaction gain/(loss) of approximately $4.11 million dollars. For the three and nine months ended December 26, 2004, the Company had recorded $3.6 million and $4.0 million, respectively, in currency transaction gains in "other income" from the date of the initial loan in August 2004. The Company is currently investigating potential alternatives to mitigate this foreign currency exposure. Similarly, the Company's wholly owned German subsidia ry, Modine Holding GmbH, has an 11.1 million euro, or $14.8 million dollars, on-demand loan to its wholly owned subsidiary, Modine Hungaria Kft., at December 26, 2004. The potential loss from a hypothetical 10% change in exchange rates between the euro and the Hungarian forint, assuming a stable exchange rate between the euro and the dollar, could result in an adverse or favorable currency transaction gain/(loss) of approximately $1.48 million dollars. For the three months ended December 26, 2004 and 2003, the Company recorded in "other income/(expense)" transaction (losses)/gains of ($0.4) million and $0.4 million, respectively. For the nine months ended December 26, 2004 and 2003, transaction (losses)/gains recorded were ($1.3) million and $1.4 million, respectively.

Interest Rate Risk

Modine's interest rate risk policies are designed to reduce the potential volatility of earnings that could arise from changes in interest rates. The Company utilizes a mixture of debt maturities together with both fixed-rate and floating-rate debt to manage its exposure to interest rate variations related to its borrowings. The Company has not entered into any interest rate derivative instruments. The following table presents the future principal cash flows and weighted average interest rates by expected maturity dates. The fair value of long-term debt is estimated by discounting the future cash flows at rates offered to the Company for similar debt instruments of comparable maturities. The carrying value of the debt approximates its fair value.

Credit Risk

Credit risk is the possibility of loss from a customer's failure to make payment according to contract terms. The Company's principal credit risk consists of outstanding trade receivables. Prior to granting credit, each customer is evaluated, taking into consideration the borrower's financial condition, past payment experience and credit information. After credit is granted the Company actively monitors the customer's financial condition and developing business news. Approximately 60% of the trade receivables balance at December 26, 2004 was concentrated in the Company's top ten customers. Modine's history of incurring credit losses from customers has not been material, and the Company does not expect that trend to change.

Economic Risk

Economic risk is the possibility of loss resulting from economic instability in certain areas of the world or significant downturns in markets that the Company supplies. For example, traditionally, significant increases in oil prices have had an adverse effect on many markets the Company serves. Continued high oil prices may negatively impact the economic recovery that the Company is currently experiencing, particularly in the truck and off-highway markets.

With respect to international instability, the Company continues to monitor economic conditions in the United States and elsewhere. In particular, the Company monitors conditions in Brazil and the effect on the Company's $19.2 million investment in its 50%-owned joint venture. During the first nine months of Modine's fiscal 2005, the Brazilian Real strengthened against the dollar by 6%. The Company is focusing more intently on conditions in Asia as we continue to integrate the asset acquisition of ACC, which brought to the Company new operations in South Korea and China. As Modine expands its global presence, we also encounter risks imposed by potential trade restrictions, including tariffs, embargoes and the like. We continue to pursue non-speculative opportunities to mitigate these economic risks, and capitalize, when possible, on changing market conditions.

The Company pursues new market opportunities after careful consideration of the potential associated risks and benefits. Successes in new markets are dependent upon the Company's ability to commercialize its investments. Current examples of new and emerging markets for Modine include those related to exhaust gas recirculation (EGR), CO₂, and fuel cell technology. Modine's investment in these areas is subject to the risks associated with business integration, technological success, customers' and market acceptance and Modine's ability to meet the demands of its customers as these markets emerge.

The upturn in the economy is putting production pressure on certain of the Company's suppliers of raw materials. In particular, there are a limited number of suppliers of steel and aluminum fin stock serving a more robust market. As a result, some suppliers are allocating product among customers, extending lead times or holding supply to the prior year's level. The Company is exposed to the risk of supply of certain raw materials not being able to meet customer demand and of increased prices being charged by raw material suppliers. In addition to the purchase of raw materials, the Company purchases parts from suppliers that use the Company's tooling to create the part. In many instances, the Company does not have duplicate tooling for the manufacture of its purchased parts. As a result, the Company is exposed to the risk of a supplier of such parts being unable to provide the quantity or quality of parts that the Company requires. Even in situations where suppliers are manufacturing parts without t he use of Company tooling, the Company faces the challenge of obtaining high quality parts from suppliers.

In addition to the above risks on the supply side, the Company is also exposed to risks associated with demands by its customers for decreases in the price of the Company's products. The Company offsets this risk with firm agreements with its customers whenever possible.

The Company operates in diversified markets as a strategy for offsetting the risk associated with a downturn in any one or more of the markets it serves, or a reduction in the Company's participation in any one or more markets. However, the risks associated with these market downturns and reductions are still present.

In particular, the Company continues to experience negative impact associated with the highly competitive automotive aftermarket, and the recovering electronics cooling market. With respect to the aftermarket, the Company believes this risk is exacerbated by the proliferation of competitors and on-going changes in the traditional distribution channels. We have lessened the impact of this economic risk by implementing appropriate operational initiatives. The Company has entered into agreements with Transpro, Inc. pursuant to which the Company will spin off its aftermarket business and merge it into Transpro.

Commodity Price Risk

The Company is dependent upon the supply of certain raw materials and supplies in the production process and has, from time to time, entered into firm purchase commitments for copper and aluminum alloy, and natural gas. Other than as mentioned above, the Company does not use forward contracts to hedge against changes in certain specific commodity prices of the purchase commitments outstanding. The Company does maintain agreements with certain original equipment customers to pass through certain material price fluctuations in order to mitigate the commodity price risk. The majority of agreements contain provisions in which the pass through of the price fluctuations can lag behind the actual fluctuations by a quarter or longer.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures designed to ensure that the information the Company must disclose in its filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis. As of the end of the period covered by this quarterly report on Form 10-Q, the Company, through its established Disclosure Committee, which is made up of several key management employees, carried out an evaluation, at the direction of the General Counsel and with the participation of the Company's President and Chief Executive Officer and Vice President, Finance and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the President and Chief Executive Officer and Vice President, Finance and Chief Financial Officer concluded that the design and operation of the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company that is required to be included in the Company's periodic SEC filings.

There has been no change in the Company's internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act).

The Company is currently undergoing a comprehensive effort to ensure compliance with the new regulations under Section 404 of the Sarbanes-Oxley Act that take effect for the Company's fiscal year ending March 31, 2005. This effort includes internal control documentation and testing under the direction of senior management. The Company is moving from the process documentation phase to the testing phase of its program, and expects to confirm the validity of any potential control deficiencies and to assess whether or not they rise to the level of significant deficiencies or material weaknesses. The Company has established a series of procedures to remediate any potential identified deficiencies in the internal control design effectiveness and operating effectiveness of its key controls. To ensure that the Company addresses these issues thoroughly, effectively, and timely, the Company has supplemented its internal project team with the services of several outside specialists. Management routinely review s potential internal control issues and the status of its compliance efforts with the Company's Audit Committee.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

In the normal course of business, Modine 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 those relating to personal injury, property damage, or business loss, are asserted against Modine. Modine is also subject to other liabilities that arise in the ordinary course of its business. Many of the pending damages claims are covered by insurance, and when appropriate Modine accrues for uninsured liabilities. While the outcomes of these matters are uncertain, Modine does not expect that any unrecorded liabilities that may result from these matters are reasonably likely to have a material effect on Modine's liquidity, financial condition or results of operations.

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.

Other previously reported legal proceedings have been settled or the issues resolved so as to not merit further reporting.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following describes the purchases of Common Stock during the Company's third quarter of fiscal year 2005.

(1)  Shares purchased solely from employees of the Company and its subsidiaries who received awards of shares of restricted stock. The Company, pursuant to the 1994 Incentive Compensation Plan and the 2002 Incentive Compensation Plan, gives such persons the opportunity to turn back to the Company the numbers of shares from the award sufficient to satisfy the person's tax withholding obligations that arise upon the periodic termination of restrictions on the shares.

(2)  During the third quarter, the Company issued shares of restricted stock to certain employees as performance based awards in accordance with the 2002 Incentive Compensation Plan. These shares were not subject to the vesting requirements described in footnote (1) above. Seven recipients of these restricted stock awards sold to the Company, in the aggregate, the number of shares indicated to satisfy the individuals' income tax withholding obligation.

(3)  Use of previously owned shares as consideration for exercise of stock options.

(4)  The Company cannot determine the number of shares that will be turned back to the Company by holders of restricted stock awards. The participants also have the option of paying the tax-withholding obligation described in footnote 1 above by cash or check, or by selling shares on the open market. The number of shares subject to outstanding stock awards is 243,230, with a value of $7,802,818 at February 2, 2005. The tax withholding obligation on such shares is approximately 40% of the value of the periodic restricted stock award. The restrictions applicable to the stock awards generally lapse 20% per year over five years.

Item 6. Exhibits and Reports on Form 8-K.

(a)   Exhibits:

The following exhibits are attached for information only unless specifically incorporated by reference in this Report:

(b)     Reports on Form 8-K:

The Company filed 7 reports on Form 8-K during the period covered by this report, described as follows:

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



MODINE MANUFACTURING COMPANY
(Registrant)

By: /s/B. C. Richardson                             
B. C. Richardson, Vice President, Finance
and Chief Financial Officer

By: /s/D. R. Zakos                             
D. R. Zakos, Vice President, General
Counsel and Secretary


Date: February 4, 2005