Geographical Areas
We maintain administrative organizations in three regions - North America, Europe and Asia - to facilitate financial and statutory reporting and tax compliance on a worldwide basis and to support the three business units. We are located in the following countries, effective with the earlier described Airedale acquisition:
North America | Europe | South America | Africa | Asia/Pacific |
| | | | |
Canada El Salvador Mexico United States | Austria Belgium France Germany Hungary Italy The Netherlands Poland Spain Switzerland United Kingdom | Brazil | South Africa | China Japan South Korea Taiwan |
Our non-US subsidiaries and affiliates manufacture and sell a number of vehicular, industrial and electronic products similar to those produced in the US. In addition to normal business risks, operations outside the US are subject to others such as changing political, economic and social environments, changing governmental laws and regulations, currency revaluations and volatility and market fluctuations.
Information about business segment and geographic region regarding principal products, principal markets, methods of distribution, net sales, operating profit and assets is hereby incorporated by reference from pages 66-69 of our 2005 Annual Report to Shareholders, Note 25.
Exports
The Company exports from North America to foreign countries and receives royalties from foreign licensees. Export sales as a percentage of total sales were 6%, 8% and 10% for fiscal years ended in 2005, 2004 and 2003 respectively. Estimated after-tax earnings on export sales as a percentage of total net earnings were 6%, 8% and 10% for fiscal years ended in 2005, 2004 and 2003, respectively. Royalties from foreign licensees were 4%, 9% and 5% of total earnings before the cumulative effect of accounting change and 4%, 9% and 13% as a percentage of total after-tax earnings for the last three fiscal years, respectively. Royalty income declined $2.0 million in fiscal 2005 due to a reduction in PF royalties from Japanese companies and payments in arrears received in fiscal 2004.
Modine believes its international presence has positioned the Company to share profitably 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 2005 Annual Report to Shareholders and is incorporated herein by reference to Note 25 on pages 65-69 therein.
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.orders. 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 is capable of handling the sales volumes expected in fiscal 2005.2006.
In November 2004, the Company announced $330 million of expected net new original equipment business over the next five years. The Company is not adding any facilities to perform this new business.
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 2005.2006. In addition, when possible, Modine has made material pass-through arrangements with its key customers. Under these arrangements, the Company can pass material cost increases and decreases to its customers. However, where these pass-through arrangements are utilized, there is a time lag between the time of the material increase or decrease and the time of the pass-through.
Patents
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. Modine was awarded more than 100 newended its 2005 fiscal year with 2,049 worldwide patents, world-wide for technological innovations in fiscal 2004.an increase of 386 patents worldwide over the prior year, primarily due to 244 global patents connected with the ACC Division acquisition.
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 and services, orand the improvement of existing products, processes, and services. Research expenditures in fiscal 2005 were $32,002,000; in 2004 were- $31,414,000; and in fiscal 2003 - $27,923,000; and in fiscal 2002 - $26,802,000.$27,923,000. There were no material 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- sponsoredand government-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 s pecialspecial projects and systems designs. In addition, the Company is participating in government-funded projects, including dual purpose programs in which the Company retains commercial intellectual property rights in technology it develops for the government, such as a contract with the United States Army for the use of CO2 technology in the HMMWV cooling system.
Environmental, Health and Safety Matters
Modine continues the implementationmarked a significant achievement in fiscal 2005 by reaching its goal of its Environmental Management System (EMS) with fifteenimplementation at 26 OEM manufacturing facilities attainingfacilities. Each of these locations has now attained independent third-party certification to the internationally recognized ISO14001 standard. We are pursuing EMS implementation at our Original Equipment locations world-wide and expect certification to the ISO14001 standardEmployees at all levels of those locations by the end of fiscal 2005.organization were involved in reaching this goal which was announced in January 2002. Modine’s EMS represents a long-term strategic commitment for preventing pollution, eliminating waste and reducing environmental risks in the Company’s operations.
In fiscal 2004, Modine beganestablished a world-wideworldwide program for monitoring its environmental performance. OverThis program is a continuation of Modine’s Waste Minimization program that dates back to 1990, and was expanded in 2004 to also include conservation of natural resources. These standardized metrics provide a baseline for the past year, Modine's North American locationscontinued reduction of wastes, generation of fewer greenhouse gasses, and the introduction of more environmentally friendly production materials. In fiscal 2005, Modine recorded: a 13% decrease in water use; a 10% decrease in fuel use,waste; and a 2%5% decrease in electricity use, and a 6% decrease in water use (all metrics normalizedvolatile air emissions (normalized for sales). In addition, Modine has achievedeliminated greater than 1.1 million pounds, equal to a 30%35% year-over-year reduction, in the use of chemicals it has voluntarily targeted for elimination due to their potential environmental risks.risk to the environment. These chemicals include certain solvents and lead compounds.
Modine introduced its Energy Conservation Initiative in fiscal 2005, which challenges its manufacturing facilities world-wide to reduce energy consumption by 12% over the fiscal 2004 baseline year. The Company's US locations decreased their reportedinitiative not only targets on-site emissions of greenhouse gases from fuel combustion, but also extends to reducing emissions from utilities that supply Modine electricity. If successful, the Initiative will eliminate air emissions equivalent to that generated by more than 5,000 cars and result in an estimated annual savings of $2.3 million. Overall, Modine reduced its use of electricity and fuel by 11% and 13%, respectively, in fiscal 2005 (normalized for sales).
Modine's commitment to protecting the environment is also reflected in its reporting of chemical releases underas monitored by the United States Environmental Protection Agency's (USEPA's) Toxic Chemical Release Inventory programprogram. The Company's US locations decreased their reported chemical releases in fiveseven of the past sixeight years, and recorded a 66%10% decrease from 20012002 to 2002 (the most recent reporting statistics).2003. Modine achieved a 90%substantial 91% decline in reported chemical releases from 1996 to 2002,2003, and has consistently performed better than the national average. Modine expects continued improvement in this area for the 2004 calendar year which will be reported shortly.
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,""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. Although there are currently no known liabilities that might have a material effect on the Company's consolidated net assets, the USEPA has designated Modine as a potentially responsible party (PRP) for remediation of five waste disposal sites. These sites are as follows: Elgin Salvage (Illinois); N.L./Taracorp (Illinois); Interstate Lead (Alabama); H.O.D. Landfill (Illinois): and, Alburn Incinerator/Lake Calumet Cluster (Illinois) and Dixie Barrel & Drum (Tennessee). These sites are not Company-ownedcompany-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 tota ltotal 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.
At the N.L./Taracorp site, a settlement agreement was signed in January 2002 which included a $119,000 settlement assessment. On January 16, 2004, the USEPA published its notice of proposed settlement with the de minimis PRPs, including Modine.
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. USEPA 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 StatesUS at the site. OnIn November 6, 2003, Modine received a General Notice of Liability from the USEPA requesting Modine's participation as a PRP for the performance of additional activities that the USEPA has determined, or will determine, required to restore the Alburn Incinerator Inc./Lake Calumet Cluster site. Modine responded to USEPA's letter stating that it would be willing to participate as a member of a PRP group in settlement of the site remedial costs as a "micro de minimis PRP." In February 2005, the USEPA accepted the PRP Group’s Good Faith Offer to conduct or finance the Remedial Investigation/Feasibility Study at the site.
In October 2004, Modine received a Request for Information from the USEPA concerning the Dixie Barrel & Drum Superfund Site in Knoxville, Tennessee. The USEPA requested information pertaining to Modine's alleged contributions to this site and for any information Modine may possess relating to the site's activities. Modine responded to the USEPA 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. As of March 31, 2004, 2003 and 2002, the Company had $119,000 accrued for all respective periods, in "accrued expenses and other current liabilities" on the consolidated balance sheet to cover cleanup activities, including remediation and legal costs at the N.L./Taracorp site. This accrual does not reflect any possible insurance recoveries but does reflect a reasonable estimate of cost sharing at multi-party sites. The March 31, 2004 accrual is expected to be remitted as soon as a formal request for payment is received from the USEPA. Costs anticipated for settlement of the Alburn Incinerator/Lake Calumet Cluster siteand 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 this sitethese sites based upon Modine's relatively small portion of wastecontributed waste. There are no accruals for off-site cleanup activities, including remediation and legal costs, at just onethe end of the properties comprising the Lake Calumet Cluster.fiscal 2005.
An obligation for remedial activities may also arise at a Modine-owned facilitiesfacility 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. The Company investigates, and pursues where appropriate, insurance coverage to limit its risk associated with these facilities. ThreeTwo of the Company's currently owned manufacturing facilities currentlyand one formerly owned property have been identified as requiring soil and/or groundwater remediation. Environmental liabilities recorded atas of March 31, 2005, 2004, 2003 and 20022003 to cover the investigative work and remediation for sites in the U.S.US and The Netherlands were $1.2 million, $1.0$1.2 million, and $0.8$1.0 million, respectively. These liabilities are recorded in the consolidated balance sheet in "accrued expenses and other current liabilities" and "other noncurrent liabilities." It is unlikely these remediation efforts will have a material effect on the Company's consolidated financial condition.results of operations.
Emerging environmental regulations, as well as the Company's policy continuously to continuously improve upon its environmental management programs, will require capital equipment expenditures over the coming years. For the 2005 fiscal year, ending March 31, 2004 capital expenditures related to environmental projects were $0.5$0.3 million. Modine currently expects expenditures for environmentally related capital projects to be about $0.7$0.8 million in fiscal 2005.2006.
Environmental expenses charged to current operations, including remediation costs, solid waste disposal, and operating and maintenance costs totaled about $2.5$2.6 million for the fiscal year ending March 31, 2004.2005. Operating expenses of some facilities may increase during fiscal 2005year 2006 because of such chargesenvironmental matters, but thewe do not expect Modine’s competitive position of the Company is not expected to change materially.materially as a result. Although some environmental costs may be substantial, the Company has no reason to believe such costs vary significantly from costs incurred by other companies engaged in similar businesses.
With regard to its health and
Safetysafety program, the Company’s performance
of the Company continues to move in
fiscal 2005 remained steady, maintaining a
positive direction. In calendar 2003, the Company's North American and European locations achieved a 41% and a 39% Recordable Incidence Rate (RIR)
improvement, respectively.and Lost Time and Restricted Duty Incident
RatesRate (LWDII)
also improved by 48% throughoutwell below the national averages for North America.
Our Harrodsburg. KY facility achieved an entire year without an OSHA recordable injury, leading the wayWhile all facilities remain focused on health and safety improvements, several plants received external recognition for the
Company in incident rate improvement.Another major accomplishment forprogress they have made over the Companyrecent years. In July 2004, our Lawrenceburg, Tennessee facility was named the certificationrecipient of the 2004 Award of Excellence for outstanding safety from the Tennessee Department of Labor & Workforce Development and the following month reached a milestone of eight years without a lost-time injury. In January 2005, our Harrodsburg, KYKentucky facility aswas awarded the prestigious Kentucky Governor’s Award for Health & Safety in recognition of employees working half a KY OSHA Voluntary Protection Program (VPP) site. million hours without a lost-time accident. In April 2005, our West Kingston, Rhode Island facility received the Safe Employer Award from the Safety Association of Rhode Island, which recognizes industries in Rhode Island and Massachusetts for outstanding health and safety efforts.
We continue to challenge our North American facilities to become Modine Safety STAR sites, underwhich is a Modine program modeled after Federal OSHA's VPP. We award theOSHA’s Voluntary Protection Program. The Modine "STAR" is awarded to those facilities that achieve 100% compliance with the Company's 2324 Health and Safety elements and attain recordable and LWDII rates below the General Industry Average for the preceding twelve month period. In calendar 2003,2004, our Emporia, KS and the Toledo, OHLawrenceburg, TN facility met the Modine STAR challenge and wewere recognized the West Kingston, RI facility with a Safety Merit award for itstheir health and safety efforts.
Modine continues to enhance its Health and Safety efforts through further program development. In fiscal 2005,
we will implement a Corporate Ergonomics program
was implemented to
focus the efforts of the Body Mechanics programs that began in 1998 at many of the North American facilities. We designed the Ergonomics program to eliminatereduce musculoskeletal
disorder-relateddisorder related injuries, often caused by repetitive motion activities.
In addition, computer kiosks were established at all original equipment manufacturing facilities that are readily available to provide immediate access to valuable chemical information and interactive safety training programs.
Employees
The number of persons employed by the Company as of March 31, 20042005 was approximately 7,500.9,000.
Seasonal Nature of Business
Distributed Products may experience a degree of seasonality since the demand for aftermarketAftermarket and HVAC products is affected by weather patterns, construction, and other factors. On an overall companyCompany basis, though, there is no significant degree of seasonality as indicated by the percentages below. Sales to OEMs and electronics manufacturers are dependent upon the demand for new vehicles and equipment, respectively. The following quarterly net-sales detail illustrates the degree of fluctuation for the past five years:
($ in thousands)
Fiscal Year
Ended
March 31 | |
First
Quarter
| |
Second
Quarter
| |
Third
Quarter
| |
Fourth
Quarter
| | Fiscal
Year
Total |
| | |
2004 | | $288,898 | | $279,059 | | $310,799 | | $321,043 | | $1,199,799 |
2003 | | 272,293 | | 275,308 | | 271,830 | | 272,644 | | 1,092,075 |
2002 | | 279,145 | | 267,731 | | 268,958 | | 253,353 | | 1,069,187 |
2001 | | 298,889 | | 282,435 | | 263,762 | | 269,959 | | 1,115,045 |
2000 | | 289,967 | | 294.493 | | 289,695 | | 294,534 | | 1,168,689 |
| | | | | | | | | | |
Five-year
Average | | 285,838
| | 279,805 | | 281,009 | | 282,307 | | 1,128,959 |
| | | | | | | | | | |
Percent of Year | | 25% | | 25% | | 25% | | 25% | | 100% |
Fiscal Year | | | First Quarter | | | Second Quarter | | | Third Quarter | | | Fourth Quarter | | Fiscal Year Total |
| |
| 2005 | | $ | 347,362 | | $ | 363,620 | | $ | 418,398 | | $ | 414,550 | | $1,543,930 |
| 2004 | | | 288,898 | | | 279,059 | | | 310,799 | | | 321,043 | | 1,199,799 |
| 2003 | | | 272,293 | | | 275,308 | | | 271,830 | | | 272,644 | | 1,092,075 |
| 2002 | | | 279,145 | | | 267,731 | | | 268,958 | | | 253,353 | | 1,069,187 |
| 2001 | | | 298,889 | | | 282,435 | | | 263,762 | | | 269,959 | | 1,115,045 |
| | | | | | | | | | | | | | | |
Five-year Average | | $ | 297,317 | | $ | 293,631 | | $ | 306,749 | | $ | 306,310 | | $1,204,007 |
| | | | | | | | | | | | | | | |
| Percent of Year | | | 25 | % | | 24 | % | | 26 | % | | 25 | % | 100% |
Working Capital Items
The Company manufactures products for the Original Equipment and European segments on an as-ordered basis, which makes large inventories of such products unnecessary. In addition, the Company does not experience a significant amount of returned products. In the Distributed Products segment, the Company maintains varying levels of finished goods inventory due to the extensive distribution systems and seasonal sales programs. We manage this inventory efficiently and spread it throughout the Company's 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.
Available Information
The Company electronically files or furnishes reports pursuant to Section 13(a) or 15(d)
We make available free of the Securities Exchange Act of 1934 to the U.S. Securities and Exchange Commission, includingcharge through our website, www.modine.com (Investor Relations Link), our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, as well as anyproxy statements, other Securities Exchange Act reports and all amendments to those reports.reports as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (SEC). These documents were available on our website during the entire year covered by this report. Our reports are also available free of charge on the Company'sSEC’s website, www.modine.comwww.sec.gov. Also available free of charge on our website (Investor Relations link),Link) are the following corporate governance documents:
Modine Manufacturing Company Guideline for Business Conduct, which is applicable to all Modine employees, including the principal executive officer, the principal financial officer and controller (principal accounting officer);
Modine Manufacturing Company Corporate Governance Guidelines;
Audit Committee Charter;
Officer Nomination & Compensation Committee Charter; and
Corporate Governance and Nominating Committee Charter.
All of the our reports and corporate governance documents referred to above may also be obtained without charge by contacting Investor Relations, Modine Manufacturing Company, 1500 DeKoven Avenue, Racine, Wisconsin 53403-2552. We do not intend to incorporate our internet website and the information contained therein or incorporated therein into this Annual Report on Form 10-K.
The Company’s most recent certifications by the Company’s chief executive officer and chief financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are filed as soon as reasonably practicable after filing.exhibits to this Form 10-K. The Company has maintained access to such reports on its website throughout fiscal 2004.also filed with the New York Stock Exchange the most recent Annual CEO Certification as required by Section 303A.12(a) of the New York Stock Exchange Listed Company Manual.
ITEM 2. PROPERTIES.
The Company's world headquarters, including general offices, and laboratory, experimental and tooling facilities, are maintained in Racine, Wisconsin. Additional technical support functions are located in Harrodsburg,
Kentucky,Kentucky; Lancaster,
PennsylvaniaPennsylvania; Bonlanden, Germany; and
Bonlanden, Germany.Asan City, South Korea. The Company owns substantially all of its manufacturing and larger distribution centers outright. The Company leases, under various lease arrangements, a few manufacturing facilities and numerous regional sales and service centers, distribution centers, and offices.
The Company used its principal plants and other facilities during fiscal 2004,2005, on an operating-segment basis, as follows:
Type of
Facility | Original
Equipment | Distributed
Products | European
Operations | Corporate
& Other |
Total
|
| | | | | | |
Manufacturing | 14 | 11 | 9 | - | 34 |
Distribution | - | 4 | - | - | 4 |
Sales & Service Centers/Offices | 1 | 13 | 8 | 2 | 24 |
Sales Branches | - | 108 | - | - | 108 |
Joint Ventures | - | - | 3 | 2 | 5 |
| | | | | |
Total | 15 | 136 | 20 | 4 | 175 |
Type of Facility | Original Equipment | Distributed Products | European Operations | Corporate & Other | Total |
| | | | | | |
| Manufacturing | 17 | 10 | 9 | - | 36 |
| Distribution | - | 4 | - | - | 4 |
| Sales & Service Centers/Offices | 3 | 13 | 8 | 2 | 26 |
| Sales Branches | - | 106 | - | - | 106 |
| Joint Ventures | - | - | 3 | 3 | 6 |
| | | | | | |
Total | 20 | 133 | 20 | 5 | 178 |
The Company has included in the above figures all of its aftermarket sales branches, even though on an individual basis, none would be considered a principal facility. Those same plants and facilities, on a geographic basis, are as follows:
Type of
Facility | North
America |
Europe
| South
America | Asia/
Pacific | Central
America |
Total
|
| | | | | | | |
Manufacturing | 21 | 12 | - | 1 | - | 34 |
Distribution | 3 | 1 | - | - | - | 4 |
Sales & Service Centers/Offices | 11 | 11 | - | 1 | 1 | 24 |
Sales Branches | 108 | - | - | - | - | 108 |
Joint Ventures | - | 3 | 1 | 1 | - | 5 |
| | | | | | |
Total | 143 | 27 | 1 | 3 | 1 | 175 |
Type of Facility | North America | Europe | South America | Asia/ Pacific | Total |
| | | | | | |
| Manufacturing | 21 | 12 | - | 3 | 36 |
| Distribution | 3 | 1 | - | - | 4 |
| Sales & Service Centers/Offices | 12 | 11 | - | 3 | 26 |
| Sales Branches | 99 | 7 | - | - | 106 |
| Joint Ventures | - | 3 | 1 | 2 | 6 |
| | | | | | |
Total | 135 | 34 | 1 | 8 | 178 |
The following table sets forth information regarding our principal properties by business segment as of March 31, 2004.2005. Properties with less than 30,000 square feet have been omitted from this table. Unless otherwise noted, all of the facilities listed in the table are used for office, manufacturing and warehousing.
Location | Sq. Ft.; Use | Owned/Leased |
Original Equipment Segment | | |
Camdenton, MO
Asan City, South Korea | 118,200
559,110 | Owned |
Harrodsburg,KY | 263,500 | Owned |
Clinton, TN | 194,100 | Owned |
| Pemberville, OH | 183,800 | Owned |
| Jefferson City, MO | 170,400 | Owned |
Washington, IA
McHenry, IL | 162,800
164,700 | Owned |
Clinton, TN
Washington, IA | 194,100
162,800 | Owned |
Logansport, IN
Trenton, MO | 141,600
161,300 | Owned |
McHenry, IL
Jackson, MS | 164,700
150,000 | Owned |
Toledo, OH
Lawrenceburg, TN | 50,900
143,800 | Leased
Owned |
Richland, SC
Joplin, MO | 114,900
142,300 | Owned |
Joplin, MO
Logansport, IN | 142,300
141,600 | Owned |
Lawrenceburg, TN
Camdenton, MO | 143,800
118,200 | Owned |
Pemberville, OH
Richland, SC | 183,800
114,900 | Owned |
Trenton, MO
Toledo, OH | 161,300
50,900 | Owned
Leased |
| | |
Distributed Products Segment
| | |
Emporia, KS
| 154,800
| Owned
|
Baldwin Park, CA
| 30,530, Office, Warehouse
| Leased
|
Buena Vista, VA
| 214,600
| Owned
|
Ferris, TX
| 36,500, Manufacturing, Office
| Owned
|
Guaymas, Mexico
| 100,000 Manufacturing, Office
| Owned
|
Hsinchu, Taiwan
| 40,000 Manufacturing, Office
| Owned
|
Kansas City, MO
| 250,000 Office, Warehouse
| Leased
|
Lancaster, PA
| 60,000
| Owned
|
Mexico City, Mexico
| 189,500
| Owned
|
Mill, Netherlands
| 274,380
| Owned
|
Nuevo Laredo, Mexico
| 198,500
| Owned
|
Orlando, FL
| 85,600, Office, Warehouse
| Leased
|
Rockbridge, VA
| 103,600
| Owned
|
West Kingston, RI
| 92,800
| Owned
|
| | |
European OperationsDistributed Products Segment
| | |
Berndorf, Austria
Mill, Netherlands | 139,880
274,380 | Owned |
Granada, Spain
Kansas City, MO | 66,981
250,000 Office, Warehouse | Owned
Leased |
Kirchentellinsfurt, Germany
Buena Vista, VA | 107,600
214,600 | Owned |
Mezoekoevesd, Hungary
Nuevo Laredo, Mexico | 59,567
198,500 | Owned |
Neuenkirchen, Germany
Mexico City, Mexico | 76,396
189,500 | Owned |
Pliezhausen, Germany
Emporia, KS | 136,383
154,800 | 84,251 Owned; 52,132 Leased
Owned |
Pontevico, Italy
Rockbridge, VA | 153,007
103,600 | Owned |
Tuebingen, Germany
West Kingston, RI | 126,430
92,800 | Owned |
Uden, Netherlands
Orlando, FL | 61,870
85,600, Office, Warehouse | Owned
Leased |
Wackersdorf, Germany
Lancaster, PA | 183,200
60,000 | 119,070 Owned; 64,130 Leased
Owned |
| Hsinchu, Taiwan | 40,000 Manufacturing, Office | Owned |
Corporate Headquarters
Ferris, TX | 36,500, Manufacturing, Office | Leased |
| Baldwin Park, CA | 30,530, Office, Warehouse | Leased |
| | |
Racine, WI
European Operations Segment | 458,000
| Owned
|
Wackersdorf, Germany | 344,363 | Owned |
| Pontevico, Italy | 153,007 | Owned |
| Berndorf, Austria | 145,744 | Owned; Land is Leased |
| Tuebingen, Germany | 126,430 | Owned |
| Pliezhausen, Germany | 122,449 | 49,819 Owned; 72,630 Leased |
| Kirchentellinsfurt, Germany | 107,600 | Owned |
| Neuenkirchen, Germany | 76,396 | Owned |
| Granada, Spain | 66,981 | Owned |
| Uden, Netherlands | 61,870 | Owned |
| Mezoekoevesd, Hungary | 59,567 | Owned |
| | |
| Corporate Headquarters | | |
| Racine, WI | 458,000 | Owned |
| Bonlanden, Germany | 262,241 | Owned |
The Company's facilities, in general, are well maintained and conform to the sales, distribution, or manufacturing operations for which they are being used. Their productive capacity is, from time to time, reduced or expanded as necessary to meet changing market conditions and Company needs. Operations at a new assembly facility in Germany began in fiscal 2004. In addition, the Company completed the construction of its European wind tunnel in fiscal 2004. The Company has included in the above figures all of its aftermarket sales branches, even though on an individual basis, none would be considered a principal facility.
ITEM 3. 3
. LEGAL PROCEEDINGS.
Certain information required hereunder is incorporated by reference from the Company's 20042005 Annual Report to Shareholders, pages 57-58,69-71, Note 28.26.
Under the rules of the SEC, 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.
Recent Developments
Behr Patent Infringement Litigation
With a brief dated November 16, 2004, Behr GmbH & Co. KG sued Modine Europe GmbH, Modine Austria Ges.mbH, and Modine Wackersdorf GmbH in the District Court in Mannheim, Federal Republic of Germany claiming infringement of Behr EPO patent 0669506 which covers a “plastic cage” insert for an integrated receiver/dryer condenser. Behr claims past infringement and current infringement by the Modine entities. Behr demands a cease and desist order, legal costs as provided by law, sales information and compensation. The amount of compensation due to Behr, if any, would be based on lost profits of Behr, profits made by the Modine entities or a reasonable royalty rate of any integrated receiver/dryer condensers manufactured or sold by Modine and found to have infringed. In a related suit in the Federal Patent Court in Munich, Federal Republic of Germany, the Modine entities are asserting that the Behr patent described above is null and void and, therefore, Modine has not infringed and is not infringing any intellectual property rights of Behr in the production of integrated receiver/dryer condensers based on Modine designs. Under German law, the determination of patent validity is considered in a separate legal action from the consideration of infringement. We anticipate that the court in Mannheim considering the infringement case will issue its findings prior to the court in Munich considering the validity issue. An evidentiary hearing was held in Mannheim on June 3, 2005. A decision from the Mannheim court is expected in late July 2005. A decision from the Munich court is expected in the second quarter of 2006. Modine intends to vigorously defend the Mannheim infringement action and pursue the Munich nullity action and, in the event of any adverse determination, appeal to a higher court.
Behr Damages Litigation
With a brief dated July 23, 2004, Behr GmbH & Co. KG sued Modine Manufacturing Company in the District Court in Duesseldorf, Federal Republic of Germany, alleging a claim based on Modine bringing a patent infringement suit in bad faith and thereby causing Behr damages in the year 2000. The lawsuit seeks compensatory damages as the result of Behr having to re-design certain of its PF-style condensers to avoid the Modine patent, and recovery of its legal costs as provided by German law. Modine has responded to the complaint and we believe the Behr allegations are without merit. We anticipate that the court in Duesseldorf will issue its findings in the third calendar quarter of 2005. Modine intends to vigorously defend the Duesseldorf damages action and, in the event of any adverse determination, appeal to a higher court.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted as not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT.
Executive Officers of Registrant |
| | | | |
Name
|
Age
|
Position
| Officer
Since |
| | | | |
D. B. Rayburn | 56 | President and Chief Executive Officer | 1991 |
D. R. Zakos | 50 | Vice President, General Counsel and Secretary | 1985 |
B. C. Richardson | 45 | Vice President, Finance and Chief Financial Officer | 2003 |
C. R. Katzfey | 57 | Group Vice President | 2000 |
K. A. Feldmann | 50 | Group Vice President | 2000 |
J. R. Rulseh | 48 | Group Vice President | 2001 |
A. C. DeVuono | 55 | Vice President and Chief Technology Officer | 1996 |
R. L. Hetrick | 62 | Vice President, Human Resources | 1989 |
R. W. Possehl* | 59 | Vice President, Administration | 1985 |
R. S. Bullmore | 54 | Corporate Controller | 1983 |
G. A. Fahl | 49 | Environmental, Health & Safety Officer | 1998 |
C. C. Harper | 50 | Chief Information Officer | 1998 |
D. B. Spiewak | 50 | Treasurer | 1998 |
M. C. Kelsey | 39 | Senior Counsel and Assistant Secretary | 2002 |
| | | | |
* R.W. Possehl announced his retirement, effective July 2, 2004.
Current Executive Officers of Registrant |
| | | | |
Name | Age | Position | Officer Since |
| | | | |
| D. B. Rayburn | 57 | President and Chief Executive Officer | 1991 |
| B. C. Richardson | 46 | Vice President, Finance and Chief Financial Officer | 2003 |
| T. A. Burke | 48 | Executive Vice President | 2005 |
C. R. Katzfey K. A. Feldmann | 58 51 | Group Vice President Group Vice President | 2000 2000 |
J. R. Rulseh D. R. Zakos | 50 51 | Group Vice President Vice President, General Counsel and Secretary | 2001 1985 |
| A. C. DeVuono | 56 | Vice President and Chief Technology Officer | 1996 |
| R. L. Hetrick | 63 | Vice President, Human Resources | 1989 |
| R. S. Bullmore | 55 | Corporate Controller | 1983 |
| G. A. Fahl | 50 | Vice President, Environmental, Safety & Security | 1998 |
| C. C. Harper | 51 | Chief Information Officer | 1998 |
| D. B. Spiewak | 51 | Treasurer | 1998 |
| M. C. Kelsey | 40 | Senior Counsel and Assistant Secretary | 2002 |
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 T. A. Burke, B. C. Richardson and M. C. Kelsey.
Mr. Burke joined Modine on May 31, 2005 as Executive Vice President. Mr. Burke joined Modine from Visteon Corporation, a leading supplier of parts and systems to automobile manufacturers, in Dearborn, Michigan, where he was Vice President Manufacturing Operations (2002 - May 2005); Vice President, European and South American Operations (2001 - 2002); Customer Account Director, Ford Account, Europe, South America and India (1999 - 2001) and Business Director, Climate Control Systems, Europe, South America and India (1996 - 1999). Mr. Burke’s experience also includes 13 years with Ford Motor Company.
Mr. Richardson joined Modine on May 12, 2003 as Vice President, Finance and Chief Financial Officer. Mr. Richardson came to Modine from BP Amoco, now known as BP, where he spent over 20 years in various positions. His last position at BP Amoco, which he held beginning in 2000, was Chief Financial Officer and Vice President of Performance Management and Control for BP's Worldwide Exploration and Production division.
Ms. Kelsey joined Modine as Senior Counsel on April 2, 2001. Ms. Kelsey came to Modine from Quarles & Brady LLP, a large national law firm, where she was a partner. Ms. Kelsey was with Quarles & Brady for 12 years.
There are no arrangements or understandings between any of the above officers and any other person pursuant to which he or she was elected an officer of Modine.
Information relating to the employment agreements, termination and change-in-control arrangements is incorporated by reference from the Company's definitive Proxy Statement dated June 11, 200415, 2005 at pages 21-22.26-27.
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 & Compensation Committee of the board, accelerate or otherwise release shares granted or awarded under those plans.
ITEM 5. 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
The Company's Common Stock is quoted on the National Association of Securities Dealers' Automated Quotation system ("NASDAQ") as a National Market issue.New York Stock Exchange. The Company's trading symbol is "MODI."MOD." The Company moved to the NYSE on October 19, 2004 from the National Association of Securities Dealers’ Automated Quotation system. The table below shows, from April 1, 2003 to October 18, 2004, the range of high and low bid information for the Company’s common stock and, from October 19, 2004 to March 31, 2005 the range of high and low sales prices for the Company's Common Stock for fiscal years 2003-04 and 2002-03.Stock. As of March 31, 2004,2005, shareholders of record numbered approximately 4,760;4,403; it is estimated that beneficial owners numbered approximately 17,000.18,900.
| | 2003-04 | 2002-03 | |
Quarter | High | Low | Dividends | High | Low | Dividends | |
First | $22.94 | $14.67 | $ .1375 | $30.00 | $22.26 | $ .125 | |
Second | 25.72 | 18.75 | .1375 | 26.00 | 17.70 | .125 | |
Third | 27.74 | 23.27 | .1375 | 20.58 | 15.65 | .125 | |
Fourth | 29.50 | 23.98 | .1375 | 19.02 | 12.46 | .125 | |
TOTAL | | | $ .5500 | | | $ .500 | |
| | 2005 | 2004 | |
| Quarter | High | Low | Dividends | High | Low | Dividends | |
| First | $31.49 | $25.83 | $ .1525 | $22.94 | $14.67 | $ .1375 | |
| Second | 32.25 | 29.04 | .1525 | 25.72 | 18.75 | .1375 | |
| Third | 33.33 | 28.40 | .1625 | 27.74 | 23.27 | .1375 | |
| Fourth | 33.99 | 28.92 | .1625 | 29.50 | 23.98 | .1375 | |
TOTAL | | | $ .6300 | | | $ .5500 | |
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 net acquisition of Company stock (restricted payments). Under the most restrictive covenant, restrictive payments may not exceed $50,000,000 in any fiscal year. Restrictive payments made in fiscal 20042005 totaled $18,666,000. Other$21,610,000. Certain loan agreements give certain existing unsecured lenders security equal to any future secured borrowing.
On May 18, 2005, the Company announced programs involving the repurchase of up to 5% of our outstanding common stock over the next 18 months as well as the indefinite buyback of additional shares to attempt to offset any dilution from Modine’s incentive stock plans. The dual stock repurchase programs are a part of the Company’s goal of delivering the best possible return to its shareholders.
The following describes theour purchases of Common Stock during the Company's 4tthth quarter of fiscal year 2004.ISSUER PURCHASES OF EQUITY SECURITIES |
Period
|
(a) Total Number of
Shares Purchased
|
(b) Average Price
Paid per Share
|
(c) Total Number of
Shares Purchased
as part of Publicly
Announced Plans or
Programs
| (d) Maximum
Number or
Approximate Value
of Shares that May
Yet be Purchased
under the Plans or
Programs |
December 27, 2003
through January 26,
2004 |
8,415 (1)
|
$28.31
|
0
|
212,990 (2)
|
January 27, 2004
through February
26, 2004 |
0
|
0
|
0
|
212,990 (2)
|
February 27, 2004
through March 31,
2004 |
78 (1)
|
$27.21
|
0
|
212,990 (2)
|
Total | 8,493 | $27.76 | 0 | 212,990 (2) |
2005.
ISSUER PURCHASES OF EQUITY SECURITIES |
Period | (a) Total Number of Shares Purchased | (b) Average Price Paid per Share | (c) Total Number of Shares Purchased as part of Publicly Announced Plans or Programs | (d) Maximum Number or Approximate Value of Shares that May Yet be Purchased under the Plans or Programs |
December 27, 2004 through January 26, 2005 | 14,313 (1) | $31.84 | 0 | (2) |
January 27, 2005 through February 26, 2005 | 0 | 0 | 0 | (2) |
February 27, 2005 through March 31, 2005 | 3,642(1) | $33.16 | 0 | (2) |
| Total | 17,955 | $32.11 | 0 | (2) |
(1) Shares purchased solely from employees of the Company and its subsidiaries who received awards of shares of restricted stock.stock and stock option grants. 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 and, in the case of exercise of stock options, an optionee may pay the exercise price with already owned shares.
(2) The Company cannot determine the number of shares that will be turned back to the Company by holders of restricted stock awards.awards or upon the exercise of stock options. 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 212,990,244,830, with a market value of $5,550,519$7,180,864 at March 31, 2004.2005. The tax withholding obligation on such shares is approximately 40% of the value of the periodic restricted stock award. TheThrough the end of fiscal 2005, the restrictions applicable to the stock awards lapsed 20% per year over five years. Commencing on April 1, 2005, the restrictions applicable to the stock awards lapse 20%25% per year over fivefour years. The Company cannot determine the number of shares of already owned stock that may be used to purchase shares upon the exercise of stock options.
ITEM 6. 6
. SELECTED FINANCIAL DATA.| | Fiscal Year ended March 31 |
| | |
| | 2004 | 2003(1) | 2002(2) | 2001(3) | 2000 |
| | | | | |
Sales (in thousands) | $1,199,799 | $1,092,075 | $1,069,187 | $1,115,045 | $1,168,689 |
Earnings before cumulative effect of accounting change (in thousands) |
40,437
|
34,348
|
23,345
|
51,830
|
66,332
|
Cumulative effect of change in accounting for Goodwill impairment -- net of tax (in thousands) |
- -
|
(21,692)
|
- -
|
- -
|
- -
|
Net Earnings (in thousands) | 40,437 | 12,666 | 23,345 | 51,830 | 66,332 |
Total assets (in thousands) | 978,059979192 | 910,818 | 903,044 | 937,171 | 955,871 |
Long-term debt (in thousands) | 84,885 | 98,556 | 139,654 | 137,449 | 214,585 |
Dividends per share | .55 | .50 | .875 | 1.00 | .92 |
Net earnings per share of common stock - basic: Before cumulative effect of accounting change |
1.19
|
1.03
|
..70
|
1.61
|
2.05
|
Cumulative effect of accounting change |
- -
|
(.65)
|
- -
|
- -
|
- -
|
Net earnings -- basic: | 1.19 | .38 | .70 | 1.61 | 2.05 |
Net earnings per share of common stock - diluted: Before cumulative effect of accounting change |
1.19
|
1.02
|
..70
|
1.58
|
2.01
|
Cumulative effect of accounting change |
- -
|
(.64)
|
- -
|
- -
|
- -
|
Net earnings -- diluted | 1.19 | .38 | .70 | 1.58 | 2.01 |
Fiscal Year ended March 31 | | |
| | | |
| | | | 2005 | | | 2004 | | | 2003(1 | ) | | 2002(2 | ) | | 2001(3 | ) |
| | | | | | | | | | | | | | | | | |
| Sales (in thousands) | | $ | 1,543,930 | | $ | 1,199,799 | | $ | 1,092,075 | | $ | 1,069,187 | | $ | 1,115,045 | |
| Earnings before cumulative effect of accounting change (in thousands) | | | 61,662 | | | 40,437 | | | 34,348 | | | 23,345 | | | 51,830 | |
| Cumulative effect of change in accounting for Goodwill impairment - net of tax (in thousands) | | | - | | | - | | | (21,692 | ) | | - | | | - | |
| Net Earnings (in thousands) | | | 61,662 | | | 40,437 | | | 12,666 | | | 23,345 | | | 51,830 | |
| Total assets (in thousands) | | | 1,152,155 | | | 976,523 | | | 907,221 | | | 898,698 | | | 935,053 | |
| Long-term debt - excluding current portion (in thousands) | | | 40,724 | | | 84,885 | | | 98,556 | | | 139,654 | | | 137,449 | |
| Dividends per share | | | .63 | | | .55 | | | .50 | | | .875 | | | 1.00 | |
| Net earnings per share of common stock - basic: Before cumulative effect of accounting change | | | 1.81 | | | 1.19 | | | 1.03 | | | .70 | | | 1.61 | |
| Cumulative effect of accounting change | | | - | | | - | | | (.65 | ) | | - | | | - | |
| Net earnings - basic: | | | 1.81 | | | 1.19 | | | .38 | | | .70 | | | 1.61 | |
| Net earnings per share of common stock - diluted: Before cumulative effect of accounting change | | | 1.79 | | | 1.19 | | | 1.02 | | | .70 | | | 1.58 | |
| Cumulative effect of accounting change | | | - | | | - | | | (.64 | ) | | - | | | - | |
| Net earnings - diluted | | | 1.79 | | | 1.19 | | | .38 | | | .70 | | | 1.58 | |
(1) An impairment loss relating to goodwill in accordance with SFAS No. 142 reduced net earnings by $21.7 million and was recorded as a cumulative effect of a change in accounting. See Note 15 and Note 29 from the Company's 20042005 Annual Report to Shareholders, pages 49 and 59,page 58 for further details.
(2) A restructuring charge reduced net earnings by $5.2 million. These charges primarily included employee severance and related benefits, goodwill impairment and other disposal costs. See Note 14 and Note 29 from the Company's 2004 Annual Report to Shareholders, pages 47-49 and 59, for further details.
(3) Patent royalty settlements added $12.7 million to net earnings. See Note 28 from the Company's 20042005 Annual Report to Shareholders, pages 57-58 for further details.
(3) Fiscal 2001 included PF patent royalty settlements which added $12.7 million to net earnings.
Additional information concerning the comparability of net earnings presented in the table above is hereby incorporated by reference from the Company's 20042005 Annual Report to Shareholders, page 2731 under the caption "Net Earnings."
ITEM 7. 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 20042005 Annual Report to Shareholders, pages 15-31.17-36.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Quantitative and Qualitative Disclosures about Market Risk" on Pages 22-24pages 26-29 of the Company's 20042005 Annual Report to Shareholders, incorporated by reference in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in this report, for information concerning potential market risks to which the Company is exposed.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Statements of Earnings, and the related Consolidated Balance Sheets, Statements of Cash Flows, Statements of Shareholders' Equity and Comprehensive Income, Notes to Consolidated Financial Statements, and the report of PricewaterhouseCoopers LLP dated April 30, 2004June 13, 2005 appearing on pages 32-5937-71 of the Company's 20042005 Annual Report to Shareholders are incorporated herein by reference. With the exception of the aforementioned information, no other data appearing in the 20042005 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. 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 auditorsaccountants during fiscal 2004.2005.
ITEM 9A.9A
. CONTROLS AND PROCEDURES.
Conclusion Regarding Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report on Form 10-K, the Company carried out an evaluation, at the direction of the General Counsel and under the supervision 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 Exchange Act Rules 13a-15(e) and 15d-15(e), with the participation of the Company's management. 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 toas of March 31, 2005.
Management’s Report on Internal Control Over Financial Reporting
The management of the Company that is required to be included in the Company's periodic SEC filings.
There has been no change in the Company'sresponsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of its financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that occurred(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2005. The assessment was based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control—Integrated Framework.”Based on this assessment management concluded that, as of March 31, 2005, the Company’s internal control over financial reporting was effective based on those criteria.
Management has excluded the businesses in Asan City, South Korea, Shanghai, China and Jackson, Mississippi, from its assessment of internal control over financial reporting as of March 31, 2005 because they were acquired by the Company in purchase business combinations during fiscal 2005. Each of these businesses are wholly-owned subsidiaries of the lastCompany, the total assets of which represent 12.6%, 0.5% and 2.2%, respectively, and whose total revenue represent 7.4%, 0.1% and 0.3%, respectively, of the related consolidated financial statement amounts as of and for the fiscal year ended March 31, 2005.
Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of March 31, 2005 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report included on page 72 in the 2005 Annual Report to Shareholders.
Changes in Internal Control Over Financial Reporting
During the fourth quarter
of fiscal 2005, there was no change in Modine’s internal control over financial reporting that
has materially affected, or is reasonably likely to materially affect, the
Company'sCompany’s internal control over financial reporting.
ITEM 9B.OTHER INFORMATION
Omitted as not applicable.
PART III
ITEM 10. 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTDirectors.
Directors. The information appearing in the Company's Definitive Proxy Statement for the 20042005 Annual Meeting of Shareholders dated June 11, 200415, 2005 under the caption "Election of Directors" (pages 3-4)4-6) is incorporated herein by reference.
Executive Officers. Information in response to this Item appears under the caption "Executive Officers and Directors"of the Registrant" in Item I of this Annual Report on Form 10-K.
Compliance with Section 16(a) of the Exchange Act.Act. The information appearing in the Company's Definitive Proxy Statement for the 20042005 Annual Meeting of Shareholders dated June 11, 200415, 2005 under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" (pages 24-25)(page 39) is incorporated herein by reference.
Code of Ethics. The information appearing in the Company's Definitive Proxy Statement for the 20042005 Annual Meeting of Shareholders dated June 11, 200415, 2005 under the caption "Code of Ethics" (pages 7-8)(page 9) is incorporated herein by reference. The Company's Code of Ethics is included inon its website, www.modine.com.www.modine.com (Investor Relations link).
Board Committee Charters. The Board of Directors has approved charters for the Board’s Audit Committee, Officer Nomination & Compensation Committee, Pension Committee and Corporate Governance and Nominating Committee.
Audit Committee Financial Expert. The information appearing in the Company's Definitive Proxy Statement for the 20042005 Annual Meeting of Shareholders dated June 11, 200415, 2005 under the caption "Roles of the Board's Committees: Audit Committee" (page 8) is incorporated herein by reference.
Audit Committee Disclosure. The information appearing in the Company's Definitive Proxy Statement for the 20042005 Annual Meeting of Shareholders dated June 11, 200415, 2005 under the caption "Rolescaptions “Board Meetings and Committees” and “Roles of the Board's Committees: Audit Committee"Committee” (page 8) is10) are incorporated herein by reference.
Guidelines on Corporate Governance. The Board of Directors has adopted Guidelines on Corporate Governance. The Company’s Guidelines on Corporate Governance are included on its website at www.modine.com (Investor Relations link).
Procedures for Communicating with the Board. The information appearing in the Company's Definitive Proxy Statement for the 20042005 Annual Meeting of Shareholders dated June 11, 200415, 2005 under the caption "Shareholder Communication with the Board" (page 10)(pages 12-13) is incorporated herein by reference.
ITEM 11.
EXECUTIVE COMPENSATION.
The information appearing in the Company's Definitive Proxy Statement for the 20042005 Annual Meeting of Shareholders dated June 11, 200415, 2005 under the caption "Compensation Summary""Executive Compensation " (pages 17- 18)22-28) is incorporated herein by reference.
ITEM 12. 12
. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Company incorporates by reference the information relating to stock ownership on pages
5-7 of the Company's definitive Proxy Statement dated June 11, 20046-9 under the headings, "Certain Beneficial Owners of Common Stock" and "Directors' and Officers' Ownership of Common
Stock."Stock" and page 29 under the heading, “Equity Compensation Plan Information,” in the Company's Proxy Statement dated June 15, 2005. The Company specifically excludes from this incorporation the information included under the heading "Corporate Governance."
Equity Compensation Plan Information
The following table sets forth required information about equity compensation plans as of March 31, 2004.
Plan Category (1)
| (a)
Number of shares to be
issued upon exercise of
outstanding options,
warrants or rights | (b)
Weighted-average exercise
price of outstanding options,
warrants and rights | (c)
Number of shares remaining
available for future issuance
(excluding securities reflected
in Column (a)) |
Equity Compensation Plans approved by security holders (2) |
2,881,758
|
$24.23
|
2,609,440
|
| | | |
Equity Compensation Plans not approved by security holders (3) |
208,000
|
$24.93
|
292,000
|
| | | |
Total | 3,089,758 | $24.27 | 2,901,440 |
(1) The referenced plans contain standard anti-dilution provisions that provide for adjustment of the number of shares covered by the plan in the event of stock dividends, stock splits or similar transactions or in the event the Company acquires an entity which has issued, and has outstanding, stock options or rights. Any such adjustments shall be made to prevent substantial dilution or enlargement of the benefits granted to, or available for, participants.
(2) Includes the following shareholder-approved plans: 1985 Incentive Stock Plan; 1985 Stock Option Plan for Non-Employee Directors and Directors Emeriti; 1994 Incentive Compensation Plan; 2002 Incentive Compensation Plan; 1994 Stock Option Plan for Non-Employee Directors; Modine Manufacturing Company Stock Option Plan for Thermacore Employees under the DTX Corporation 1995 Stock Option Plan; and Modine Manufacturing Company Stock-Based Compensation Plan for Thermacore Employees under the DTX Corporation 1997 Plan.
(3) Includes the 2000 Stock Option Plan for Non-Employee Directors, which was approved by the Board of Directors on May 17, 2000 and effective after June 30, 2000. The 2000 Plan did not require shareholder approval since the option grants (all of which are non-qualified) thereunder are not discretionary in any way. Under the 2000 Plan, upon election and each re-election to the Board, a non-employee director automatically receives a grant of 6,000 non-qualified stock options for each year of his/her new term.
ITEM 13. 13
. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company incorporates by reference the information contained in the Company's definitive Proxy Statement Proxy Statement for the 2005 Annual Meeting of Shareholders dated June 11, 200415, 2005 on page 2329 under the heading "Transactions."Certain Transactions."
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The Company incorporates by reference the information contained in the Company's definitive Proxy Statement Proxy Statement for the 2005 Annual Meeting of Shareholders dated June 11, 200415, 2005 on page 2438 under the heading "Fees to" Independent AuditorsAuditors’ Fees for Fiscal 2003/20042005 and 2002/2003.2004."
ITEM 15. 15. 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: | 37-71 |
| | |
Consolidated Statements of Earnings for the years ended March 31, 2005, 2004, 2003, and 2002. 2003. | 32
37 |
Consolidated Balance Sheets at March 31, 20042005 and 2003. 2004. | 33
38 |
Consolidated Statements of Cash Flows for the years ended March 31, 2005, 2004, 2003, and 2002. 2003. | 34
39 |
Consolidated Statements of Shareholders' Equity and Comprehensive Income for the years ended March 31, 2005, 2004, 2003, and 2002. 2003.29 | 35
40 |
Notes to Consolidated Financial Statements.30 - 46 | 36-59
41-71 |
Report of Independent Accountants. Auditors.46 | 59
73 |
* Incorporated by reference from the indicated pages of the 2004-032005 Annual Report to Shareholders, attached hereto as Exhibit 13. | |
| | |
| | |
| | Page in Form 10-K |
(2) Financial Statement Schedules: | |
| | |
Report of Independent AccountantsAuditors on Financial Statement Schedules. |
23
31 |
Report of Independent Accountants
| 24
|
Schedule II -- Valuation and Qualifying Accounts for the years ended March 31, 2005, 2004, 2003, and 2002. 242003. |
25
32 |
(3) Consent of Independent Accountants. 28Auditors. | Exhibit 23(a) 23 |
| | |
(4) Notice regarding Consent of Arthur Anderson.
| (5) Exhibit 23(b) |
| Index. | |
(5) Exhibit Index. 16
| 16-21
|
(b) 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:
Exhibit No. | Description | Incorporated Herein By
Referenced To | Filed
Herewith |
2(a) | Asset Purchase Agreement between Modine Manufacturing Company and WiniaMando Inc. | Exhibit 2.1 to the Registrant'sRegistrant’s Form 8-K datedfiled April 30, 2004 2004. | |
| | | | |
3(a)
2(b) | Restated ArticlesAgreement and Plan of Incorporation (as amended)Merger, dated as of January 31, 2005, by and among Modine Manufacturing Company, Modine Aftermarket Holding, Inc., and Transpro, Inc.
| Exhibit 2.1 to the Registrant's Form 8-K dated January 31, 2005 (“Jan. 31, 2005 8-K”). | | X
|
| | | | |
3(b)
2(c) | Contribution Agreement, dated as of January 31, 2005, by and among Modine Manufacturing Company, Modine Aftermarket Holdings, Inc. and Transpro. Inc. | Exhibit 2.2 to the Registrant’s Form 8-K dated January 31, 2005 (“Jan. 31, 2005 8-K”). | |
| | | |
| 2(d) | OEM Acquisition Agreement, dated as of January 31, 2005, by and among Modine Manufacturing Company and Transpro, Inc. | Exhibit 2.3 to the Registrant’s Form 8-K dated January 31, 2005 (“Jan. 31, 2005 8-K”). | |
| | | |
| 2(e) | Share Purchase Agreement between the shareholders of Airedale International Air Conditioning Limited, Modine U.K. Dollar Limited and Modine Manufacturing Company. | | X |
| | | |
| 3(a) | Restated Articles of Incorporation (as amended). | Exhibit 3(a) to the Registrant’s Form 10-K for the fiscal year ended March 31, 2004 (“2004 10-K”). | |
| | | |
| 3(b) | Restated By-Laws (as amended). | Exhibit 3(c) to the Registrant's Form 10-K for the fiscal year ended March 31, 2003 ("2003 10-K"). | |
| | | | |
4(a) | Specimen Uniform Denomination Stock Certificate of the Registrant. | Exhibit 4(a) to the 2003 10-K 10-K. | |
| | | | |
4(b) | Restated Articles of Incorporation | See Exhibit 3(a) hereto. | |
| | | | |
4(c) | Amended and Restated Bank One Credit Agreement dated April 17, 2002.October 27, 2004. 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. | Exhibit 4(c) to the Registrant'sRegistrant’s Form 10-K10-Q for the fiscal yearquarter ended March 31, 2002 ("2002 10-K") September 26, 2004. | |
| | | | |
10(a)* | Director Emeritus Retirement Plan effective April 1, 1992 (and frozen as of July 1, 2000). | Exhibit 10(a) to the Registrant’s Form 10-K for the fiscal year ended March 31, 2002 10-K. (“2002 10-K”). | |
| | | | |
10(b)* | Employment Agreement between the Registrant and D.B. Rayburn. | Exhibit 10(c) to the Registrant's Form 10-K for the fiscal year ended March 31, 2001 ("2001 10-K"). | |
| | | | |
10(c)* | Employment Agreement between the Registrant and B.C. Richardson dated May 12, 2003.** | | |
| | | | |
10(d)* | Employment Agreement between the Registrant and A.C. DeVuono dated May 16, 2001. ** | | |
| | | | |
10(e)* | Change in Control and Termination Agreement between the Registrant and D.B. Rayburn. | Exhibit 10(e) to the Registrant’s Form 10-K for the fiscal year ended March 31, 2004 (“2004 10-K”). | | X
|
| | | | |
10(f)* | Form of Change in Control and Termination Agreement (amended and restated) between the Registrant and eachofficers. | Exhibit 10(f) to the following officers: D.R. Zakos; C.R. Katzfey; J.R. Rulseh; A.C. DeVuono; R.L. Hetrick; R.W. Possehl; R.S. Bullmore; G.A. Fahl; C.C. Harper; and D.B. Spiewak (each amended and restated as of May 20, 1999); B.C. Richardson (dated May 12, 2003); and M.C. Kelsey (dated April 1, 2002)Registrant’s Form 10-K for the fiscal year ended March 31, 2004 (“2004 10-K”). | | X
|
| | | |
10(g)*
| 1985 Incentive Stock Plan (as amended).
| Exhibit 10(j) to 2002 10-K.
| |
| | | | |
10(h)10(g)*
| 1985 Incentive Stock Option Plan for Non-Employee Directors. (as amended). | Exhibit 10(j) to 2002 10-K. | | X
|
| | | | |
10(h)* | 1985 Stock Option Plan for Non-Employee Directors. | Exhibit 10(h) to the Registrant’s Form 10-K for the fiscal year ended March 31, 2004 (“Form 10-K”). | |
| | | |
| 10(i)* | Executive Supplemental Retirement Plan (as amended). | Exhibit 10(f) to the Registrant's Form 10-K for the fiscal year ended March 31, 2000 ("2000 10-K"). | |
| | | | |
10(j)* | Modine Deferred Compensation Plan (as amended). | Exhibit 10(y) to 2003 10-K. | |
| | | | |
10(k)* | 1994 Incentive Compensation Plan (as amended). | Exhibit 10(o) to 2002 10-K. | |
| | | | |
10(l)* | Form of Incentive and Non-Qualified Stock Option Agreements. | Exhibit 10(q) to 2001 10-K. | |
| | | | |
10(m)* | 1994 Stock Option Plan for Non-Employee Directors (as amended). | Exhibit 10(p) to 2002 10-K. | |
| | | | |
10(n)* | Form of Stock Option Agreement (for 1994 Stock Option Plan for Non-Employee Directors). | Exhibit 10(l) to 2000 10-K. | |
| | | | |
10(o)* | 2000 Stock Option Plan for Non-Employee Directors. | Exhibit 10(ac) to 2001 10-K. | |
| | | | |
10(p)* | Form of Director's Stock Option Agreement (for 2000 Stock Option Plan for Non-Employee Directors). | Exhibit 10(ad) to 2001 10-K 10-K. | |
| | | | |
10(q)* | Modine Manufacturing Company Stock Option Plan for Thermacore Employees under the DTX Corporation 1995 Stock Option Plan. | Exhibit 10(ae) to 2001 10-K. | |
| | | |
| 10(r)* | Modine Manufacturing Company Stock-Based Compensation Plan for Thermacore Employees under the DTX Corporation 1997 Plan. | Exhibit 10(af) to 2001 10-K. | |
| | | |
| 10(s)* | Form of Stock Option Agreement pertaining to Stock Option and Stock-Based Compensation Plan for Thermacore Employees. | Exhibit 10(ag) to 2001 10-K. | |
| | | | |
10(t)* | 2002 Incentive Compensation Plan. | Exhibit A to the Registrant's Definitive Proxy Statement dated June 7, 2002. | |
| | | |
10(u)*
| Board of Directors Deferred Compensation Plan.
| Exhibit 10(eee) to 2003 10-K.
| |
| | | | |
10(v)10(u)*
| FormBoard of Stock AwardDirectors Deferred Compensation Plan.***
| Exhibit 10(p)10(eee) to 2001 10-K 2003 10-K. | |
| | | | |
13
10(v)* | Form of Stock Award Plan.*** | Exhibit 10(p) to 2001 10-K. | |
| | | |
| 10(w)* | Description of Modine’s Management Compensation Program | | X |
| | | |
| 13 | Incorporated portions of 2003-20042004-2005 Annual Report to Shareholders. Except for the portions of the Report expressly incorporated by reference, the Report is furnished solely for the information of the Commission and is not deemed "filed" as a part hereof. | | X |
| | | | |
21 | List of subsidiaries of the Registrant. | | X |
| | | | |
23(a) | Consent of independent registered public accounting firm. | | X |
| | | | |
23(b)
31(a) | Notice regarding consent of Arthur Andersen.
| | X
|
| | | |
31(a)
| Certification of D.B. Rayburn, President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | X |
| | | | |
31(b) | Certification of B.C. Richardson, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | X |
| | | | |
32(a) | Certification of D.B. Rayburn, President and Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | X |
| | | | |
32(b) | Certification of B.C. Richardson, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | X |
| | | | |
99(a) | Appendix (filed pursuant to item 304 of Regulation S-T). Note: All Exhibits filed herewith are current to the end of the reporting period of the Form 10-K (unless otherwise noted). | | X |
* Denotes management contract or executive compensation plan or arrangement required to be filed as an exhibit pursuant to Item 15(c) of Form 10-K.
** Employment Agreement is not materially different from the Employment Agreement between the Registrant and D.B. Rayburn filed as Exhibit 10(c) to 2001 10-K.
*** Each year the Company enters into a Stock Award Plan, the terms of which are not materially different from the form agreement included herewith.
Current Reports on Form 8-K:
SIGNATURES
The following current Reports on Form 8-K were filed by the Company during the last quarter of the fiscal year and thereafter, except as noted below for reports that were furnished rather than filed:January 21, 2004, reporting the financial results of the third fiscal quarter.*
January 21, 2004, announcing quarterly dividend.
April 30, 2004, announcing signing of a definitive asset purchase agreement with WiniaMando Inc. for the purchase of the assets of its Automotive Climate Control Division.
May 5, 2004, announcing the financial results for the fourth fiscal quarter and fiscal year end.*
May 19, 2004, announcing a Board resolution to increase dividend payments.
* Furnished, not filed.
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.
Date: June 14, 2004 2005 | Modine Manufacturing Company
By:/s/D.B. /s/ D. B. Rayburn
D. B. Rayburn, 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.
/s/D.B. Rayburn
D. B. Rayburn, President, and Chief Executive Officer and Director (Principal Executive Officer) | June 14, 2004
2005 Date |
| |
/s/B.C. Richardson
B. C. Richardson, Vice President, Finance and Chief Financial Officer (Principal Accounting Officer) | June 14, 2004
2005 Date |
| | |
/s/D. R.R Zakos
D. R. Zakos, Vice President, General Counsel and Secretary | June 14, 2004
2005 Date |
| | |
R. J. Doyle, Director | June 14, 2004
2005 Date |
| | |
/s/F. P. Incropera
F. P. Incropera, Director | June 14, 2004
2005 Date |
| | |
/s/F. W. Jones
F. W. Jones, Director | June 14, 2004
2005 Date |
| | |
/s/D. J. Kuester
D. J. Kuester, Director | June 14, 2004
2005 Date |
| | |
/s/V. L.Martin
L. Martin V. L. Martin, Director | June 14, 2004
2005 Date |
| | |
/s/G. L. Neale
G. L. Neale, Director | June 14, 2004
2005 Date |
| | |
/s/M. C. Williams
M. C. Williams, Director | June 14, 2004
2005 Date |
| | |
/s/M. T. M.T. Yonker
M. T. Yonker, Director | June 14, 2004
2005 Date |
Report
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF MODINE MANUFACTURING COMPANY
We have completed an integrated audit of
Independent Registered Public Accounting FirmTo the Shareholders and Board of Directors
Modine Manufacturing Company’s 2005 consolidated financial statements and of its internal control over financial reporting as of March 31, 2005 and audits of its 2004 and 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.
Consolidated financial statements
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of consolidated earnings, cash flows and shareholders'shareholders’ equity and comprehensive income, present fairly, in all material respects, the financial position of Modine Manufacturing Company and its subsidiaries at March 31, 20042005 and March 31, 2003,2004, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 20042005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit inclu desof financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 15 to the consolidated financial statements, on April 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill“Goodwill and Other Intangible Assets."”
/s/ PricewaterhouseCoopers LLPPricewaterhouseCoopers LLPChicago, IllinoisApril 30, 2004THE FOLLOWING REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of Thermacore International, Inc.
We have audited
Internal control over financial reporting
Also, in our opinion, management’s assessment, included in the accompanying consolidated balance sheets of Thermacore International, Inc. (a Pennsylvania corporation) and subsidiariesManagement’s Report on Internal Control Over Financial Reporting, that the Company maintained effective internal control over financial reporting as of June 30, 2000 and 1999, andMarch 31, 2005 based on criteria established in “Internal Control—Integrated Framework” issued by the related consolidated statementsCommittee of income, shareholders' investment and cash flows for the years then ended. These financial statements are the responsibilitySponsoring Organizations of the Company's management.Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2005 based on criteria established in “Internal Control—Integrated Framework” issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinionopinions on thesemanagement’s assessment and on the effectiveness of the Company’s internal control over financial statementsreporting based on our audits.
audit. We conducted our auditsaudit of internal control over financial reporting in accordance with auditingthe standards generally accepted byof the United States.Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether theeffective internal control over financial statements are free ofreporting was maintained in all material misstatement.respects. An audit of internal control over financial reporting includes examining, on a test basis, evidence supportingobtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the amountsdesign and disclosuresoperating effectiveness of internal control, and performing such other procedures as we consider necessary in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.circumstances. We believe that our audits provideaudit provides a reasonable basis for our opinion.opinions.
In our opinion,
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements referredstatements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to above present fairly,future periods are subject to the risk that controls may become inadequate because of changes in all material respects,conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded the businesses in Asan City, South Korea, Shanghai, China and Jackson, Mississippi, from its assessment of internal control over financial position of Thermacore International, Inc. and subsidiariesreporting as of June 30, 2000March 31, 2005, because they were acquired by the Company in purchase business combinations during fiscal 2005. We have also excluded these businesses from our audit of internal control over financial reporting. Each of these businesses are wholly-owned subsidiaries of the Company, whose total assets represent 12.6%, 0.5% and 1999,2.2% , respectively, and whose total revenue represent 7.4%, 0.1% and 0.3%, respectively, of the resultsrelated consolidated financial statement amounts as of their operations and their cash flows for the years thenfiscal year ended in conformity with accounting principles generally accepted in the United States.March 31, 2005.
As discussed in Note 1 to the consolidated statements, the Company changed its method of accounting for organizational costs in 1999 to adopt the provisions of AICPA Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities."
/s/Arthur AndersenPricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chicago, Illinois
June 13, 2005
Arthur Andersen LLPLancaster, PAAugust 11, 2000MODINE MANUFACTURING COMPANY AND SUBSIDIARIES
(A Wisconsin Corporation)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years ended March 31, 2005, 2004 2003 and 2002
2003
($ In Thousands)
Col. A | Col. B | Col. C | Col. D | Col. E |
| | | Additions | | |
| | | (1) | (2) | | |
Description
| Balance at
Beginning
of
Period |
Charged to
Costs and
Expenses
|
Charged to
Other
Accounts
|
Deductions
| Balance
at
End of
Period |
2004:
Intangible Assets-
Accumulated
Amortization |
$61,182
|
$321
|
$1,769(B)
|
$0
|
$63,272
|
| | | | | |
Allowance for
Doubtful Accounts |
$2,687
|
$1,681
|
$215(B)
|
$1,078(A)
|
$3,505
|
| | | | | |
Valuation Allowance for Deferred Tax Assets
|
$1,495
|
$1,457
|
$180(B)
|
$0
|
$3,132
|
2003:
Intangible Assets-
Accumulated
Amortization |
$37,337
|
$23,210(E)
|
$2,202(B)
|
$1,567(C)
|
$61,182
|
| | | | | |
Allowance for
Doubtful Accounts |
$3,217
|
$1,233
|
$(70)(B)
|
$1,693(A)
|
$2,687
|
| | | | | |
Valuation Allowance for Deferred Tax Assets |
$557
|
$775
|
$163(B)
|
$0
|
$1,495
|
| | | | | |
2002:
Intangible Assets-
Accumulated
Amortization |
$35,302
|
$9,065
|
$(330)(B)
|
$6,700(C)
|
$37,337
|
| | | | | |
Allowance for
Doubtful Accounts |
$2,459
|
$2,086
|
$(39)(B)
|
$1,289(A)
|
$3,217
|
| | | | | |
Valuation Allowance for Deferred Tax Assets |
$592
|
$0
|
$(35)(B)
|
$0
|
$557
|
| | | | | |
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. |
| | (E) Includes SFAS No. 142 Goodwill Impairment of $22,828,000. |
| Col. A | Col. B | Col. C | Col. D | Col. E |
| | | Additions | | |
| | | (1) | (2) | | |
Description | Balance at Beginning of Period | Charged to Costs and Expenses | Charged to Other Accounts | Deductions | Balance at End of Period |
2005: Intangible Assets- Accumulated Amortization | $63,272 | $263 | $807(B) | $0 | $64,342 |
| | | | | | |
Allowance for Doubtful Accounts | $3,505 | $1,695 | $78 (B) | $2,065(A) | $3,213 |
| | | | | | |
| Valuation Allowance for Deferred Tax Assets | $3,132 | $568 | $171(B) | $0 | $3,871 |
2004: Intangible Assets- Accumulated Amortization | $61,182 | $321 | $1,769(B) | $0 | $63,272 |
| | | | | | |
Allowance for Doubtful Accounts | $2,687 | $1,681 | $215(B) | $1,078(A) | $3,505 |
| | | | | | |
| Valuation Allowance for Deferred Tax Assets | $1,495 | $1,457 | $180(B) | $0 | $3,132 |
| | | | | | |
2003: Intangible Assets- Accumulated Amortization | $37,337 | $23,210(D) | $2,202(B) | $1,567(C) | $61,182 |
| | | | | | |
Allowance for Doubtful Accounts | $3,217 | $1,233 | $(70)(B) | $1,693(A) | $2,687 |
| | | | | | |
| Valuation Allowance for Deferred Tax Assets | $557 | $775 | $163(B) | $0 | $1,495 |
| | | | | | |
| Notes: | | | | | |
| | (A) Bad debts charged off during the year. |
| | (B) Translation and other adjustments. |
| | (C) Retirement of fully amortized intangibles |
| | (D) Includes SFAS No. 142 Goodwill Impairment of $22,828,000. |