Market Overview – TheAfter two consecutive years of strong growth, the North AmericanAmerica heating market has experienced significant volume increases over the past two years.contracted slightly in fiscal 2016, primarily due to warmer-than-normal winter temperatures.  We expect modest improvement in the North AmericanAmerica heating market in fiscal 2016, given the significant market growth seen in the past two fiscal years.2017.  We anticipate market demand for our data center cooling, ventilation, and geothermal heat pump products to increase in fiscal 2016.  Continued2017.  We expect continued growth in global computing power,demand for data and connected devices, coupled with increasing requirements for energy-efficient and green solutions, will continue to drive increased demand for our data center cooling products especiallyand, in particular, our high-density and free-cooling solutions.  Likewise, a steadily-improving economy,we expect improvement in construction markets and energy efficiency legislation is expected to drive increased demand for our ventilation and geothermal products.

Products – Unit heaters (gas-fired, hydronic, electric and oil-fired); duct furnaces (indoor and outdoor); infrared units (high- and low-intensity); hydronic products (commercial fin-tube radiation, cabinet unit heaters, and convectors); roof-mounted direct- and indirect-fired makeup air units; commercial packaged rooftop ventilation units; unit ventilators; single packaged vertical units; geothermal and water-source heat pumps; precision air conditioning units for data center applications; air-handling units; chillers; ceiling cassettes; and condensing units.

Customers – Mechanical contractors; HVAC wholesalers; installers; and end users in a variety of commercial and industrial applications, including banking and finance, data center management, education, hospitality, telecommunications, entertainment arenas, hotels, restaurants, hospitals, warehousing, manufacturing, and food and beverage processing.

We maintain administrative organizations in four geographical regions -– North America, South America, Europe, and Asia -– to facilitate customer support, development and testing, and other administrative functions.  We operate in the following countries:

Our non-U.S. subsidiaries and affiliates manufacture and sell a number of vehicular, building HVAC, and industrial products similar to those produced in the U.S.  In addition to normal business risks, operations outside the U.S. are subject to other risks such as changing political, economic and social environments, changing governmental laws, taxes and regulations, foreign currency volatility, and market fluctuations.

Export sales from the U.S. to foreign countries as a percentage of net sales were 9 percent 10 percent,in both fiscal 2016 and 72015 and 10 percent in fiscal 2015, 2014 and 2013, respectively.2014.

We believe our international presence has positioned us to share profitably in the anticipated long-term growth of the global vehicular, commercial, industrial, and building HVAC markets.  We are committed to increasing our involvement and investment in international markets in the years ahead.

Financial information relating to our foreign and domestic operations is included in Note 21 of the Notes to Consolidated Financial Statements.

Our ten largest customers, certain of which are conglomerates, accounted for 63 percent of our sales in fiscal 2015.2016.  These customers, listed alphabetically, were: BMW; Caterpillar; Daimler AG (including Daimler Trucks, Mercedes- Benz, Mitsubishi Fuso Trucks, Thomas Buses and Western Star Trucks); Deere & Company; Denso Corporation; FCA Italy S.p.A. (including Chrysler, CNH, Fiat, Iveco, and VM Motori); Ford Motor Co.; Navistar; Volkswagen AG (including Audi, MAN, Porsche, and Scania); Volvo; and ZF Friedrichshafen AG.Volvo.  In both fiscal 2016 and 2015, Daimler AG and Volkswagen AG each accounted for 10 percent or more of our sales.  In fiscal 2014, and 2013, Daimler AG was the only customer that accounted for 10 percent or more of our sales.  Generally, we supply products to our customers on the basis of individual purchase orders received from them.  When it is in the customer'smutual interest of Modine and our best interests,customers, we utilize long‑termlong-term sales agreements to minimize investment risks and provide the customer with a proven source of competitively pricedcompetitively-priced products.  These contracts are on average,typically three to five years in duration and may include built-in pricing adjustments.provisions that adjust sales prices in the future.

Our operating segments maintain their own inventories and production schedules.  We believe that our current production capacity is capable of handling the sales volume expected in fiscal 20162017 and beyond.

Aluminum,We purchase aluminum, nickel and steel are purchased from several domestic and foreign suppliers.  In general, we do not rely on any one supplier for these materials, which are, for the most part, available from numerous sources in quantities required by us.  The supply of copper and brass material is highly concentrated between two global suppliers.  We normally do not experience material shortages and believe that our suppliers’ production of these metals will be adequate throughout the next fiscal year.  MetalsWe typically adjust metals pricing with our raw material and major fabricated component suppliers are typically adjusted on a quarterly basis.  When possible, we have made material pass-through arrangements with key customers, which allow us to pass material cost increases and decreases to our customers.  When utilized, however, these pass-through arrangements are typically limited to the underlying cost of the material based upon the London Metal Exchange, and do not include related premiums or fabrication costs.  In addition, there can often be a timethree-month to one-year lag between the time of the material price increase or decrease and the time that we adjust the price with our customer.  This time lag typically ranges from three months to one year.

We own or license numerous patents related to our products and operations.  These patents and licenses have been obtained over a period of years and expire at various times.  Because we have many product lines, we believe that our business as a whole is not materially dependent upon any particular patent or license, or any particular group of patents or licenses. We consider each of our patents, trademarks and licenses to be of value and aggressively defend our rights throughout the world against infringement. We have been granted and/or acquired more than 2,0002,200 patents worldwide over the life of our company.

We remain committed to our vision of creating value through technology and innovation.  We focus our engineering and R&D efforts on solutions that meet challenging heat transfer needs of OEMs and other customers within the commercial vehicle, automotive, construction, agricultural, industrial, and building HVAC markets.  Our products and systems are typically are aimed at solving difficult and complex heat transfer challenges requiring advanced thermal management.  Typical market demands are for products and systems that are lighter weight, more compact, more efficient and more durable to meet customer standards as customers work to ensure compliance with increasingly stringent global emissions and energy efficiency requirements.  Our heritage includes a depth and breadth of expertise in thermal management that, combined with our global manufacturing presence, standardized processes, and state-of-the-art technical resources, enables us to rapidly bring customized solutions to our customers.

R&D expenditures, including certain application engineering costs for specific customer solutions, weretotaled $61 million in fiscal 2016 and $62 million in both fiscal 2015 and 2014 and $68 million in fiscal 2013.2014.  Over the last three years, R&D expenditures have been between 4 and 5 percent of sales.  This level of investment reflects our continued commitment to R&D in an ever-changing market.  To achieve efficiencies and lower development costs, our R&D groups work closely with our customers on special projects and system designs.  Projects include next generation aluminum radiators, charge air coolers and waste heat recovery systems for the automotive, commercial vehicle, agricultural and construction markets,markets; and EGR technology, which enablesenable our customers to efficiently meet tighter regulatory emission standards.  Most of our current R&D activities are focused on internal development in the areas of powertrain cooling, engine, and building HVAC, and coils products.  We also collaborate with several industry, university, and government-sponsored research organizations that conduct research and provide data on technical topics of interest to us for practical applications in the markets we serve.  We received $1 million, $1 million, and $2 million of reimbursements from government-sponsored organizations during fiscal 2015, 2014 and 2013, respectively.

Through our global Quality Management System (“QMS”), our manufacturing facilities in our North America,Americas, Europe South America and Asia segments are registered to ISO 9001:2008 or ISO/TS 16949:2009 standards, helping to ensure that our customers receive high quality products and services from every facility.  While customer expectations for performance, quality and service have risen continuously over recent years,continue to rise, our QMS has allowed us to drive improvements in quality performance and has enabled the ongoing delivery of products, service and servicesvalue that meet or exceed customer expectations.

The global QMS operates within the context of the Modine Operating System (“MOS”), which focuses on well-defined improvement principles and leadership behaviors to engage our teams in drivingfacilitating rapid improvements.  We drive sustainable and systematic continuous improvement throughout all functional areas and operating segments of the organization by utilizing the principles, processes and behaviors that are core to these systems.

We are committed to preventing pollution, eliminating waste and reducing environmental risks.  Our facilities maintain Environmental Management System (“EMS”) certification to the international ISO14001 standard through independent third-party audits. All of our locations have established specific environmental improvement targets and objectives for the upcoming fiscal year.

In fiscal 2015,2016, our carbon emissions, resulting from our on-site use of natural gas and propane and from our use of electricity generated by off-site sources, decreased slightly (normalized for sales)6 percent compared with the prior year.year, representing our lowest emissions level over the past five years. We will continue to identify and implement carbon reduction opportunities when feasible over the upcoming fiscal year.

During fiscal 2015,2016, our water consumption decreased 10 percent, saving nine million gallons of water. This decrease was a continuation of consecutive improvements overrelatively flat compared with fiscal 2015.  Over the past sevenfive years, during which we have realized a cumulative 4431 percent decrease in our water usage.  In fiscal 2015, we consumed 67usage, using approximately 38 million fewer gallons of water than we did in fiscal 2008.2016 than in fiscal 2011.  As in previous years, we continue to systematically identify opportunities and implement measures to reduce waste and conserve natural resources within the EMS structure.

Our fiscal 2015Manufacturing by-products consisting of solid wastes and volatile organic air emissions decreased 20 percent compared with fiscal 2014, primarily due to operational improvements in a solvent cleaning process.were relatively flat year-over-year. We are actively pursuing alternative manufacturing processes that use more environmentally-friendly materials.

Our commitment to environmental stewardship is reflected in our reporting of chemical releases, as monitored by the United States Environmental Protection Agency's Toxic Chemical Release Inventory program. Our U.S. locations decreased their reported chemical releases by 98 percent over the 10-year period from 20032004 to 2013.2014. This long-term improvement is the result of manufacturing efficiencies and a transition to more environmentally-friendly manufacturing technologies and raw materials.

Our product portfolio reflects our sense of environmental responsibility.  We continue our development and refinement of environmentally-friendly product lines, including oil, fuel, and EGR coolers for diesel applications, light-weight and high-performance powertrain cooling heat exchangers, and our Advanced Cooling System technology. These products provide increased fuel economies and enable combustion technologies that reduce harmful gas emissions. Our Building HVAC segmentproduct offerings, including the Airedale SchoolMate geothermal heat pump,pump; the Effinity^93TM, the most efficienta condensing gas-fired unit heater in North America,with industry-leading efficiencies; and the Atherion^TM Commercial Packaged Ventilation System, are helping commercial, industrial and residential users achieve high energy efficiencies and reduce utility costs.  Our geothermal products feature innovative heat pump technologies, providing energy savings and reduced carbon emissions in both heating and cooling seasons.

Obligations for remedial activities may arise at our facilities 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 that were considered acceptable under then-existing regulations, but now require investigative and/or remedial work to ensure appropriate environmental protection, or where we are a successor to the obligations of prior owners and current laws and regulations require investigative and/or remedial work to ensure sufficient environmental compliance.  ThreeTwo of our currently-owned manufacturing facilities and twothree formerly-owned properties have been identified as requiring soil and/or groundwater remediation.  Environmental liabilities for investigative work and remediation at sites in the United States, Brazil, and the Netherlands totaled $3.8$5 million at March 31, 2015.2016.

We recorded a fiscal 20152016 global Recordable Incident Rate (“RIR” as defined by OSHA) of 1.63, which increased slightly over thewas unchanged compared with our RIR in fiscal 2014 rate of 1.59.2015.  Our long-term safety performance, as indicated by RIR, improved 1820 percent over the past five years.  We have consistently out-performed the private-industry RIR average for the manufacturing sector, which, by comparison was 3.104.0 in 2013.2014.

For our U.S. locations, annual workers’ compensation claims reported in fiscal 20152016 decreased approximately $2 million as compared with fiscal 2010,for the second consecutive year, representing an 84a 70 percent improvement.improvement over the past five years. We attribute these lower claims to the continued strengthening of our safety culture.

Our behavior-based safety program is a proactive global effort under which we seek to correct at-risk behaviors, and positively reinforce safe behaviors. OurBuilding further on behavior-based safety, program iswe introduced process stream safety to our Americas segment facilities this past fiscal year. This in-depth evaluation and correction of workplace conditions further engages employees to eliminate safety risks. Our focus on behavior-based safety and process stream safety are part of our long-term commitment to improvingstrengthen our safety culture.

We employed approximately 6,9007,100 persons worldwide as of March 31, 2015.2016.

Our overall operating performance is generally not subject to a significant degree of seasonality, as sales to OEM customers are dependent upon market demand for new vehicles.  However, our second fiscal quarter production schedules are typically impacted by customer summer shut downs and our third fiscal quarter is affected by holiday schedules.  Additionally, our Building HVAC segment experiences some seasonality as demand for HVAC products can be affected by heating and cooling seasons, weather patterns, construction, and other factors.  Generally, sales volume within the Building HVAC segment is stronger in our second and third fiscal quarters, corresponding with demand for heating products.

We manufacture products for the original equipment markets on an as-ordered basis, which makes large inventories of suchfinished products unnecessary.  In our Building HVAC segment, we maintain varying levels of finished goods inventory due to seasonal demand and certain sales programs.  In these areas, we make use of extended payment terms, not to exceed 90 days, for our Building HVAC customers on a limited basis.  In Brazil, within our South AmericaAmericas segment, we maintain higher levels of aftermarket product inventory in order to timely meet customer needs in the Brazilian automotive and commercial vehicle aftermarkets.  We do not experience a significant number of returned products within any of our operating segments.

WeThrough our website, www.modine.com (Investors link), we make available, free of charge, through our website, www.modine.com (Investors link), our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, other Securities Exchange Act reports and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).  Our reports are also available free of charge on the SEC’s website, www.sec.gov.  Also available free of charge on our website are the following corporate governance documents:

All of the reports and corporate governance documents referred toreferenced above and other materials relating to corporate governance may also be obtained without charge by contacting Corporate Secretary, 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.

We are highly susceptible to downwardunfavorable trends in the markets we serve as our customers’ sales and production levels are affected by general economic conditions, including access to credit, the price of fuel and electricity, employment levels and trends, interest rates, labor relations issues, regulatory requirements, trade agreements and other market factors, as well as by customer-specific issues.  Any significant decline in production levels for current and future customers could result in long-lived asset impairment charges and a reduction in our sales, thereby adversely impacting our results of operations and financial condition.

A challenge that we, along with other suppliers to vehicular OEMs,We face is continued price reductioncontinuous price-reduction pressure from our customers.  Downward pricing pressure has been a characteristic of the automotive industry and is migrating to all of our vehicular OEM markets.customers.  Virtually all such OEMs impose aggressive price reductionprice-reduction initiatives upon their suppliers, and we expect such actions to continue in the future.  In response, we must reduce our operating costs in order to maintain profitability.  We have taken, and will continue to take, steps to reduce our operating costs to offset customer price reductions; however, price reductions adversely affect our profit margins and are expected to do so in the future.  If we are unable to avoid price reductions for our customers, or if we are unable to offset price reductions through improved operating efficiencies and manufacturing processes, sourcing alternatives, technology enhancements and other cost reduction initiatives, our results of operations and financial condition could be adversely affected.

Deterioration of a business relationship with a major OEM customer could cause our revenuesales and profitability to suffer.  We principally compete for new business both during the initial development of new models and upon the redesign of existing models by our major customers.  New model development generally begins two to five years prior to marketing such models to the public.  The failure to obtain new business on new models or to retain or increase business on redesigned existing models could adversely affect our business and financial results.  In addition, as a result of the relatively long lead times required for many of our complex components, it may be difficult in the short-term for us to obtain new sales to replace any unexpected decline in the sales of existing products.  We may incur significant expense in preparing to meet anticipated customer requirements that may not be recovered.  The loss of a major OEM customer, the loss of business with respect to one or more of the vehicle models that use our products, or a significant decline in the production levels of such vehicles could have an adverse effect on our business, results of operations and financial condition.

In an effort to manage and reduce our cost of purchased goods and services, we, like many suppliers and customers, have been consolidating our supply base.  As a result, we are dependent upon limited sources of supply for certain components used in the manufacture of our products.  We select our suppliers based on total value (including price, delivery and quality), taking into consideration their production capacities, financial condition and ability to meet our demand.  In some cases, it can take several months or longer to find a supplier due to qualification requirements.  However, there can be no assurance that strong demand, capacity limitations, financial instability, or other problems experienced by our suppliers will notcould result in occasional shortages or delays in their supply of product to us.  If we were to experience a significant or prolonged shortage of critical components or materials from any of our suppliers and could not procure the components or materials from other sources, we would be unable to meet our production schedules and miss product delivery dates, which would adversely affect our sales, results of operations and customer relationships.

Increases in the costs of materials could have a significant effect on our results of operations and on those of others in our industry.  We have sought to alleviate this risk by including material pass-through provisions in our customer contracts when possible.  Under these arrangements, we can pass certain material cost increases and decreases to our customers.  However, where these pass-through arrangements are utilized, there can often be a timethree-month to one-year lag between the time of the material increase or decrease and the time of the pass-through.  This time lag can range between three months and one year.  To further mitigate our exposure, we have, from time to time, entered into forward contracts to hedge a portion of our forecasted aluminum and copper purchases.  However, these hedges may only partially offset increases in material costs, and significant increases could have an adverse effect on our results of operations.

We continue to be pressured to absorb costs related to product design, engineering and tooling, as well as other costs previously paid directly by OEMs.  OEM customers often request that we pay for design, engineering and tooling costs that are incurred prior to the start of production and recover these costs through amortization in the piece price of the product.  Some of these costs cannot be capitalized, which adversely affects our profitability until the programs for which they have been incurred are launched.  If a given program is not launched, or is launched with significantly lower volumes than planned, we may not be able to recover the design, engineering and tooling costs from our customers, further adversely affecting our profitability.

The competitive environment has changed dramatically over the past few yearscontinues to be dynamic as our traditional OEM customers, faced with intense international competition, have expanded their sourcing of components. As a result, we have experienced competition from suppliers in other parts of the world that enjoy economic advantages, such as lower labor costs, lower health care costs, lower tax rates, lower costs associated with legal compliance, and, in some cases, export or raw materials subsidies.  In addition, consolidation and vertical integration within the supply base have introduced new or restructured competitors to our markets.  Increased competition could adversely affect our business and our results of operations.

Although our financial results are reported in U.S. dollars, a significant portion of our sales and operating costs are realized in euros,foreign currencies, including the euro, British pound, Brazilian real and other currencies.others.  Our sales and profitability isare affected by movements of the U.S. dollar against the euro, the real and otherforeign currencies in which we generate revenuessales and incur expenses.  To the extent that we are unable to match revenues receivedsales in foreign currencies with costs paid in the same currency, exchange rate fluctuations in any such currency could have an adverse effect on our financial results.  During times of a strengthening U.S. dollar, our reported sales and earnings from our international operations will be lower because the applicable local currency will be translated into fewer U.S. dollars.  In certain instances, currency rate fluctuations may create pricing pressure relative to competitors quoting in different currencies, which could result in our products becoming less competitive.  Significant long-term fluctuations in relative currency values, in particular a significant change in the relative values of the U.S. dollar, euro, British pound or Brazilian real, could have an adverse effect on our results of operations and financial condition.

In efforts to optimize our cost structure and improve efficiencyAs part of the “Strengthen” objective of our operations,Strengthen, Diversify and Grow transformational strategy, we are transitioning to a more global, product-based organization.  We have engaged in restructuring activities in our Americas and Europe North Americasegments in efforts to optimize our manufacturing footprint and South America segments.  Successful implementation of these cost-reduction initiatives, and in particularcost structure.  These restructuring activities include the consolidation of manufacturing facilities in Europe and North America and Europe, as well as targeted headcount reductions in Brazil due to the economic slowdown,that will support our objective of reducing operational and SG&A cost structures.  In addition, we are focused on reducing costs for materials and services through targeted adjustments and negotiations with our supply base.  Our successful execution of these initiatives is critical to enable us to establish a cost environment that will increase and sustain our future competitiveness and ability to improve profitability and generate a level of cost savings sufficient to effectively compete within those segments and across Modine as a whole.long-term competitiveness.

We design technologically advanced products, and the processes required to produce these products can be difficult and complex.  We commit significant time and financial resources to ensure the successful launch of new products and programs.  Managing product launches is difficult as we are launching many new products and programs in each of our segments.  Due to our high level of launch activity in each of our segments, we must appropriately manage these launches, and deploy our operational and administrative resources to take advantage of this increase in our business.  If we do not successfully launch the products and programs, we may lose market share or damage relationships with our customers, which could negatively affect our business.  In addition, any failure in our manufacturing strategy for these new products or programs could result in production inefficiencies or long-lived asset impairment charges.

We have manufacturing and technical facilities located in North America, South America, Europe, Asia, and Africa.  In fiscal 2015, 552016, 54 percent of our sales were from non-U.S. operations.  Consequently, our global operations are subject to numerous risks and uncertainties, including changes in monetary and fiscal policies, trade restrictions or prohibitions, import or other charges or taxes, fluctuations in foreign currency exchange and interest rates, limitations on the repatriation of funds, changing economic conditions, unreliable intellectual property protection and legal systems, insufficient infrastructures, social unrest, political instability and disputes, incompatible business practices, and international terrorism.  In addition, compliance with multiple and often conflicting laws and regulations of various countries is burdensome and expensive.

Price, quality, delivery, technological innovation, and application engineering development are the primary elements of competition in our markets.  If we fail to keep pace with technological changes and cannot differentiate ourselves from our competitors with our technology or to provide high quality products and services, we may experience price erosion, lower sales, and lower margins.  Significant technological developments by others also could adversely affect our business and results of operations.

 

We own significant intellectual property, including a large number of patents, trademarks, copyrights and trade secrets.  Our intellectual property plays an important role in maintaining our competitive position in a number of the markets we serve.  As we expand our operations in jurisdictions where the enforcement of intellectual property rights is less robust, the risk of others duplicating our proprietary technologies increases, despite our efforts to protect them.  Developments or assertions by or against us relating to intellectual property rights could adversely affect our business and results of operations.

Our operations are dependent upon our information technology systems, which encompass all of our major business functions.  A substantial disruption in our information technology systems for a prolonged time period, or a material breach of our information security, could result in delays in receiving inventory and supplies or filling customer orders, and/or the release of otherwise confidential information, adversely affecting our customer service and relationships as well as our reputation.  OurWe recognize the volume of cyber attacks is increasing; therefore, we employ commercially practical efforts to avoid such attacks, regardless of source, and provide reasonable assurance that we can appropriately mitigate an attack, should it occur.  Each year, we evaluate our threat profile and our countermeasures in a continuing effort to maintain the integrity of our systems and data.  In addition, our systems might be damaged or interrupted by other natural or man-made events (caused by us, by our service providers or others) or by computer viruses, physical or electronic break-ins and similar disruptions affecting the internet..  Such delays, problems or costs could have a material adverse effect on our business, financial condition, results of operations and reputation.

In the event our products fail to perform as expected, we are exposed to warranty and product liability claims and may be required to participate in a recall or other field campaign of such products.  Many of our OEM customers have extended warranty protection for their vehicles, putting pressure on the supply base to extend warranty coverage as well.  Historically, we have experienced relatively low warranty charges from our customers due to our contractual arrangements and the quality, reliability and durability of our products.  If our customers demand higher warranty-related cost recoveries, or if our products fail to perform as expected, it could have a material adverse impact on our results of operations and financial condition.  We are also involved in various legal proceedings from time to time incidental to our business.  If any such proceeding has a negative result, it could adversely affect our business and results of operations.

Our operations are subject to various federal, state, local and foreign laws and regulations governing, among other things, emissions to air, discharge to waters and the generation, handling, storage, transportation, treatment and disposal of waste and other materials.  The operation of our manufacturing facilities entails risks in these areas and there can be no assurance we will avoid material costs or liabilities relating to such matters.  Our financial responsibility to clean up contaminated property may extend to previously owned or used property, properties owned by unrelated companies, as well as properties we currently own and use, regardless of whether the contamination is attributable to prior owners.  In addition, potentially significant expenditures could be required in order to comply with evolving environmental, health and safety laws, regulations or other requirements that may be adopted or imposed in the future.

WeAs part of the “Grow” objective of our Strengthen, Diversify and Grow transformational strategy, we expect to aggressively pursue growth opportunitiesacquisitions in “industrial” markets and expand our market share in high-growth engine and powertrain cooling areas through acquisitionsfocused research and business ventures.development activities and commercial pursuits.  There can be no assurance we will be able to identify attractive acquisition targets and successfully complete transactions in the future.and/or organic growth opportunities.  If we are unable to successfully complete additional acquisitions,such transactions in the future, our growth may be limited.  RecentIn addition, recent and future acquisitions will require integration of operations, sales and marketing, information technology, finance, and administrative functions.  If we are unable to successfully integrate acquisitions and operate these businesses profitably, we may not achieve the financial or operational success expected from the acquisitions.

We have several defined benefit pension plans that cover most of our domestic employees hired on or before December 31, 2003.  Our funding policy for these plans is to contribute annually, at a minimum, the amount necessary on an actuarial basis to provide for benefits in accordance with applicable laws and regulations.  Our domestic plans have an unfunded balance of $80$90 million.  During fiscal 2016,2017, we anticipate making funding contributions totaling approximately $7$8 million related to these domestic plans.  Funding requirements for our defined benefit plans are dependent upon, among other things, interest rates, underlying asset returns, mortality rate tables, and the impact of legislative or regulatory changes.  Should changes in actuarial assumptions or other factors result in the requirement of significant additional funding contributions, our liquidity position could be adversely affected.

Unfavorable changes in the financial outlook of our operations in certain jurisdictions could lead to adverse changes in our valuation allowance assertions for our deferred tax assets.  Additionally, the subjectivity of or changes in tax laws and regulations in jurisdictions where we have significant operations could materially affect our results of operations.  We are subject to tax audits by governmental authorities in each taxing jurisdiction in which we operate.  Unfavorable or unexpected outcomes from one or more such tax audits could adversely affect our results of operations and financial position.

 

None.