Modine Manufacturing Company specializes in providing innovative thermal management solutions to diversified global markets and customers.  We are a leading provider of engineered heat transfer systems and high-quality heat transfer components for use in on- and off-highway original equipment manufacturer (“OEM”) vehicular applications.  In addition, we are a global leader in thermal management technology and solutions for sale into a wide array of commercial, industrial, and building heating, ventilating, air conditioning, and refrigeration (“HVAC&R”) markets.  In addition, we are a leading provider of engineered heat transfer systems and high-quality heat transfer components for use in on- and off-highway original equipment manufacturer (“OEM”) vehicular applications.  Our primary product groups include i) powertrain coolingheating, ventilation and engine cooling;air conditioning; ii) coils, coolers, and coatings; and iii) heating, ventilationpowertrain cooling and air conditioning.engine cooling.  Our primary customers across the globe include:

We focus our development efforts on solutions that meet the ever-increasing heat transfer needs of OEMs and other customers within the automobile, commercial vehicle, construction, agricultural, industrial and HVAC&R industries.our customers.  Our products and systems are aimed at solving complex heat transfer challenges requiring effective thermal management.  Typical customer and market demands include products and systems that are lighter weight, more compact, more efficient and more durable to meet customer standards as they work to ensure compliance with increasingly stringent global emissions, fuel economy and energy efficiency requirements.  Our heritage provides a depth and breadth of expertise in thermal management, which, when combined with our global manufacturing presence, standardized processes, and state-of-the-art technical resources, enables us to rapidly bring highly-valued, customized solutions to our customers.

Modine was incorporated under the laws of the State of Wisconsin on June 23, 1916 by its founder, Arthur B. Modine.  Mr. Modine’s “Turbotube” radiators became standard equipment on the famous Ford Motor Company Model T.  When he died at the age of 95, A.B. Modine had personally been granted more than 120 U.S. patents for his heat transfer innovations.  The standard of innovation exemplified by A.B. Modine remains the cornerstone of Modine today.

When we use the terms “Modine,” “we,” “us,” the “Company,” or “our” in this report, unless the context otherwise requires, we are referring to Modine Manufacturing Company.  Our fiscal year ends on March 31 and, accordingly, all references to a particular year mean the fiscal year ended March 31 of that year, unless indicated otherwise.

Modine pursues market leadership by being a customer-focused, global company delivering exceptional quality,We thrive on innovation and value.  We hold a competitive positionuse our thermal management expertise to design products that better the world.  From improving indoor air quality to increasing energy efficiency of data centers to lowering harmful vehicular emissions, our businesses design quality systems and products to enable our customers to operate in the marketplace as thermal management experts.ever-changing global marketplace.

During fiscal 2020, we continuedFiscal 2021 presented challenges, largely driven by the COVID-19 pandemic.  Since the onset of the pandemic, our top priorities have been, and continue to employ our Strengthen, Diversifybe, the health and Grow (“SDG”) strategy in order to transform Modine into a more diversified industrial thermal-management company.  We launched our SDG strategy over four years ago to establish a more global, product-based organizational structure and a strategic framework for our company.  This strategic framework continues to provide benefits and has helped us to quickly implement cost-saving measures in response to lower end-market demand.  We faced various challenges in fiscal 2020, including weakness in key vehicular end markets that began in the middleoverall well-being of our fiscal year.  In addition,employees and delivering quality products and services to our customers.  COVID-19 has broadly impacted the outbreak of the novel coronavirus (“COVID-19”), which was declared a pandemic by the World Health Organization in March 2020, negatively impacted our business, beginning in the fourth quarter in our Asian and European markets.  Both the vehicular market weakness and the impacts of the COVID-19 pandemic placed significant strain on our previously-announced evaluation of strategic alternatives for the automotive business within our Vehicular Thermal Solutions (“VTS”) segment.  As a result, we have paused this process until economic conditions improve.  We remain committed, however, to exiting the automotive business in a manner that is in the best interest of our shareholders.

Despite the challenges, we ended the year in a position of strength.  By the end of fiscal 2021, we had reached agreements to sell both the liquid- and air-cooled automotive businesses in separate transactions.  These sale agreements represent significant progress towards our strategic exit of our Automotive segment businesses. The sale of the air-cooled automotive business closed in April 2021. The sale of the liquid-cooled automotive business is subject to the receipt of governmental and third-party approvals and satisfaction of other closing conditions. We are currently working with the buyer through the regulatory approval process. At this time, we are reducingnot able to estimate the ultimate impact of the regulatory approval process or the closing date for this transaction. We also completed the transition to our new President and Chief Executive Officer (“CEO”), Neil D. Brinker. Under Mr. Brinker’s leadership, our teams are energized in implementing an 80/20 strategy to examine our business using data analytics in order to focus our resources on products and markets with the highest growth and best returns.

During fiscal 2021, our consolidated net sales were $1.81 billion, an 8 percent decrease from $1.98 billion in fiscal 2020.  This decrease was primarily due to lower sales in our Commercial and Industrial Solutions (“CIS”), Heavy-Duty Equipment (“HDE”), and Automotive segments, largely driven by impacts of the COVID-19 pandemic.  Our Building HVAC Systems (“BHVAC”) segment sales increased 9 percent compared with the prior year.  Our operating loss of $98 million in fiscal 2021 was primarily due to $167 million of impairment charges recorded in the Automotive segment, partially offset by lower selling, general and administrative (“SG&A”) expenses, including travelwhich benefitted from lower project costs associated with our strategic exit of the automotive businesses and entertainment expenditures, and lowering the annual compensation paidcost-reduction initiatives in response to the Board of Directors.  We are also focused on reducing capital expenditures by delaying certain projects and the purchase of some program-related equipment and tooling.  We are committed to the health and safety of our employees and have implemented steps to mitigate risk in our manufacturing operations and administrative offices.  We are also committed to meeting our customers’ needs and will work to overcome any supply chain disruptions that may arise to deliver quality products and services to our customers in a timely manner.COVID-19.

Our top five customers are in the automotive, commercial vehicle, off-highway and off-highwayautomotive and light vehicle markets and our ten largest customers accounted for 4543 percent of our fiscal 20202021 sales.  In fiscal 2021, 63 percent of our total sales were generated from customers outside of the U.S., with 56 percent of total sales generated by foreign operations and 7 percent generated by exports from the U.S.  In fiscal 2020, 59 percent of our total sales were generated from customers outside of the U.S., with 52 percent of total sales generated by foreign operations and 7 percent generated by exports from the U.S.  In fiscal 2019, 58 percent of our total sales were generated from customers outside of the U.S., with 52 percent of total sales generated by foreign operations and 6 percent generated by exports from the U.S.  In fiscal 2018, 61 percent of our total sales were generated from customers outside of the U.S., with 56 percent of total sales generated by foreign operations and 5 percent generated by exports from the U.S.

We sell products to multiple end markets.  The following is a summary of our primary end markets, categorized as a percentage of our net sales:

We compete with many manufacturers of heat transfer and HVAC&R products, some of which are divisions of larger companies.  The markets for our products continue to be very dynamic.  Our traditional OEM customers are faced with dramatically increased international competition and have expanded their global manufacturing footprints to compete in local markets.  In addition, consolidation within the supply base and vertical integration have introduced new or restructured competitors to our markets.  Some of these market changes have caused us to experience competition from suppliers in other parts of the world that enjoy economic advantages such as lower labor costs, lower healthcare costs, and lower tax rates.  As a result, we have expanded and continue to expandoptimize our geographic footprint in part to provide more flexibility to serve our customers around the globe.  Many of our customers also continue to ask us, as well as their other primary suppliers, to provide research and development (“R&D”), design, and validation support for new potential projects.  This combined work effort often results in stronger customer relationships and more partnership opportunities for us.

Each of our operating segments is managed by a vice president and has separate financial results reviewed by our chief operating decision maker (“CODM.”)  These results are used by management in evaluating the performance of each business segment and in making decisions on the allocation of resources amongst our various businesses.  Financial information for our operating segments is included in Note 22 of the Notes to Consolidated Financial Statements.

Effective April 1, 2020, we began managing our automotive business separate from the VTSpreviously-reported Vehicular Thermal Solutions (“VTS”) segment.  We are managing the automotive business as a separate segment as we target the sale or eventual exitThe other businesses of the businesses in this segment.  In light of the ongoing COVID-19 pandemic, we have paused this process, but we intend to resume once we determine that market conditions will support our effort to maximize the value of the automotive business.  Beginning for fiscal 2021, we will report the financial results of the automotive business as the Automotive segment.  The remaining portion of the previous VTS segment, will be namedincluding the Heavy-Duty Equipment segment and will include the heavy-duty commercial vehicle and off-highway businesses.businesses, are being managed as the HDE segment.

The continued globalization of our vehicular customer base requires us to manage our strategic approach, product offerings and the competitive environment onGeographically, we have a global basis.  This trend offers significant opportunities for us with our market positioning, including ourstrong presence in keythe vehicular markets (U.S.within the U.S., Mexico, Brazil, Europe, India, China, and South Korea)Korea.  We leverage our global organizational structure and as a global organization with the expertise to solve our customers’ technical challenges.  We are recognized for having strongOur customers value our technical support presence in all regions, anour extensive product portfolio, and theour ability to provide them with global standard designs for our customers.  Many vehiculardesigns.

Vehicular OEMs continue tooften expect cost reductions from suppliers while requiring a consistent level of quality.  In addition, these OEMs often seek new technology solutions at low prices for their thermal management needs.  In general, this creates challenges for us and the entire supply base, but also provides an opportunity for suppliers, like Modine, who develop innovative solutions at a competitive cost.

Each of our main vehicular competitors, AKG Group, BorgWarner, Dana Corporation, Denso Corporation, Mahle, Tata Toyo, TitanX, T. Rad Co. Ltd., UFI Filters, Valeo SA, Hanon Systems, and Zhejiang Yinlun Machinery Co. Ltd., have a multi-regional or worldwide presence.  Increasingly, we face heightened competition as these competitors expand their product offerings and manufacturing footprints through expansion into lower-cost countries or lower-cost sourcing initiatives.  In addition, competitors from some lower-cost regions are beginning to expand into new geographical markets.

The following summarizes the primary vehicular markets served by our VTS segment:we serve:

Beyond the COVID-19 pandemic, trends influencing the commercial and specialty vehicle markets include the continued need by commercial vehicle manufacturers to meet increasingly stringent emissions and fuel consumption requirements in all regions of the world.  For example, Modine has realized incremental business in Asia as China 6 and Bharat Stage 6 regulations have been implemented in China and India, respectively.  Additionally, truck and bus manufacturers are developing and bringing to market alternative powertrains, including battery electric, waste heat recovery, fuel cells, and other hydrogen-based technologies aimed at improving vehicle efficiency and reducing carbon footprint.  These trends are driving the advancement of product development worldwide and are creating demand for incremental improvements to thermal transfer products and systems.  We are active in these developments with numerous customers – both traditional OEM’s and start-up companies – on vehicles that cover the full range of commercial vehicle applications from last-mile to Class 8 trucks.  We are well positioned to support these changes.

Overall, global off-highway markets were relatively flat in fiscal 2021.  The globalNorth and South American off-highway markets, including agricultural, construction, and mining markets, were negatively impacted by the COVID-19 pandemic.  The most severe COVID-19 impacts occurred early in fiscal 2021 and were followed by strong recovery in the second half of fiscal 2021.  While future impacts associated with the COVID-19 pandemic are uncertain, we expect strong growth in the Americas and in European off-highway markets during fiscal 2022, particularly in the first half of the fiscal year.  We expect the Asian off-highway markets will experience slight declines in fiscal 2022, primarily due to cyclicality of the markets and lower government spending in China.

The North American and European automotive and light vehicle markets declined during fiscal 2020.2021, primarily driven by the negative impacts of the COVID-19 pandemic.  The most severe impacts occurred early in fiscal 2021 and these markets have been recovering since.  While future impacts associated with the COVID-19 pandemic are uncertain, we expect these markets will continue to recover and exhibit growth during fiscal 2022.  The automotive market in China experienced modest growth during fiscal 2021; we expect slight declines in the Chinese automotive market in fiscal 2022, primarily due to market cyclicality.  Overall, we expect longer-term growth of the global automotive market will be supported by the tightening of emissions standards, in-vehicle technology enhancements and growth in emerging markets, we expect the global automotive markets will experience declines in fiscal 2021.  The COVID-19 pandemic is adversely impacting these markets; the duration and severity of the impacts of COVID-19 are currently uncertain.markets.

Automobile, light truck, motorcycle, and power sports vehicle and engine manufacturers.

Mahle; Dana Corporation; UFI Filters; Denso Corporation; Hanon Systems; BorgWarner; Valeo SA; and Zhejiang Yinlun Machinery Co., Ltd.

Our non-U.S. subsidiaries and affiliates manufacture and sell a number of vehicular and commercial, industrial and building HVAC&R products similar to those produced in the U.S.

Export sales from the U.S. to foreign countries, as a percentage of consolidated net sales, were 7 percent, 67 percent and 56 percent in fiscal 2021, 2020, 2019, and 2018,2019, respectively.

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

Our ten largest customers, some of which are conglomerates or otherwise affiliated, accounted for 4543 percent of our consolidated net sales in fiscal 2020.2021.  In fiscal 2021 and 2020, Daimler AG accounted for 10 percent or more of our sales.  In fiscal 2019, and 2018, Daimler AG and Volkswagen AG each accounted for 10 percent or more of our sales.

Our top customers operate primarily in the automotive, commercial vehicle, off-highway, data center coolingautomotive and light vehicle, commercial air conditioning and refrigeration markets.  Our top customers, listed alphabetically, include: Carrier,Carrier; Caterpillar; Daimler AG (including Daimler Trucks, Detroit Diesel, Mercedes-Benz, and Western Star Trucks); Deere & Company; FCA N.V.Navistar (including MWM International); Stallantis (including Chrysler, CNH, Fiat, Iveco, PSA-Peugeot-Citroen, and VM Motori); Ingersoll Rand Inc. (Trane); Navistar (including MWM International);Trane Technologies; Volkswagen AG (including Audi, MAN, Porsche, and Scania); and AB Volvo (including Mack Trucks and Renault Trucks).  In addition, our CIS segment includes significant sales generated from a single global technology customer (more than 10 percent of CIS segment sales in fiscal 2020) with which we are party to confidentiality agreements.; and ZF Friedrichshafen AG.  Generally, we supply products to our customers on the basis of individual purchase orders received from them.  When it is in the mutual interest of Modine and our customers, we utilize long-term sales agreements to minimize investment risks and provide the customer with a proven source of competitively-priced products.  These contracts are typically three to five years in duration.

Our operating segments maintain their own inventories and production schedules.  We believe that our current production capacity is capable of handling theour expected sales volume expected in fiscal 20212022 and beyond.

We purchase aluminum, nickel and steel 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 concentrated between two global suppliers, with other suppliers qualified and supplying lesser amounts to mitigate risk.  WeWhile our suppliers may become constrained due to global demand, we typically do not experience raw material shortages and believe that our suppliers’ production of these metals will be adequate throughout the next fiscal year.  We typically adjust metals pricing with our raw material suppliers on a monthly basis and our major fabricated component suppliers on a quarterly basis.  When possible, we have included provisions within our long-term customer contracts which allow usprovide for adjustments to adjust customer prices, on a prospective basis, based upon increases and decreases in the cost of key raw materials.  When applicable, however, these contract provisions 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 three-month to one-year lag until the time that we adjust the price with our customer.adjustments take effect.

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 2,500 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 automotive, powersports, commercial vehicle, construction, agricultural, and commercial, industrial, and building HVAC&R and commercial vehicle, construction, agricultural, powersports and automotive and light vehicle markets.  Our products and systems are often 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, totaled $46 million, $60 million, $70 million, and $66$70 million in fiscal 2021, 2020, 2019, and 2018,2019, respectively.  As a percentage of our consolidated net sales, we have spent approximately 3 percent on R&D in each of the last three years.  This level of investment reflects our continued commitment to R&D in an ever-changing marketplace.  To achieve efficiencies and lower development costs, our R&D groups work closely with our customers on special projects and system designs.  Projects include refrigerant heat exchangers, EGR technology, oil coolers, charge air coolers, refrigerant heat exchangers, and battery thermal management systems for the automotive,residential and commercial energy storage, commercial vehicle, agriculture, construction, and residentialautomotive and commercial energy storagelight vehicle markets, which enable our customers to meet more stringent emission and energy efficiency standards.  Most of our current R&D activities are focused on internal development in the areas of powertrain cooling, engine cooling, building HVAC, and commercial and industrial thermal management products.products and powertrain and engine cooling.  We also collaborate with several industry, university, and government-sponsored research organizations that conduct research and provide data on practical applications in the markets we serve.  We continue to identify, evaluate and engage in external research projects that complement our strategic internal research initiatives in order to further leverage our significant thermal technology expertise and capabilities.

Globally, we drive quality improvement by maintaining the Global Modine Management System applying the Modine Operating System, and executing the Modine Quality Strategy.

Through our integrated and process-oriented Global Modine Management System, the majority of our manufacturing facilities and administrative offices are registered to ISO 9001:20015 or IATF 16949:2016 standards, helping to ensure that our customers receive high quality products and services.  Modine puts emphasis on monitoring process performance and adherence to meet rising customer expectations for performance, quality and service.

Our Global Modine Management System operates within the context of our Modine Operating System, which focuses on well-defined improvement principles and leadership behaviors to engage our teams in facilitating rapid improvements.  We drive sustainable and systematic continuous improvement throughout our company by utilizing the principles, processes and behaviors that are corerelated to these systems.the Global Modine Management System.

To ensure future quality, we continue to execute the Modine Quality Strategy, which focuses on people, process, performance, tools and methodsquality engineering and the Global Modine Management System.

We are committed to preventing pollution, eliminating waste and reducing environmental risks and employ waste management programs to advance our environmental stewardship and minimize our environmental footprint.  The majority of our facilities maintain Environmental Management System (“EMS”) certification to the international ISO14001 standard through independent third-party audits.

We are focused on reducing both our energy and water usage and have empowered each of our global facilities to create and carry out action plans that will contribute to our company-wide reduction goals.  Examples of steps being takenwe are taking to meet these goals include the installation of more efficient LED lighting systems, the replacement of inefficient boilers and air compressors, improved building HVAC management systems, increased industrial water recycling, and the installation of water-saving faucets.

We are committed to continuously driving energy efficiency across our product portfolio, reflecting our sense of environmental responsibility.  Our VTS segmentFor our data center customers, we are focused on designing and providing cooling solutions that reduce both electrical and water usage.  We are also shifting our product portfolios in our industrial businesses toward lower-emission propellants and refrigerants that greatly reduce the environmental impact and enhance energy efficiency for our customers’ heating and cooling systems.  In addition, we are focusing on reducing energy use by recycling waste heat produced from air conditioning systems.  Lastly, products in our vehicular businesses include EGR, oil, charge-air, and charge-airexhaust gas recirculation (ERG) coolers, radiators, air conditioning condensers, and battery and oil coolingthermal management systems and charge-air coolers for cars, trucks, motorcycles,buses, specialty vehicles, and specialty vehicles.off-highway equipment.  These products allow both internal combustion and electric vehicle systems to run at optimal temperatures, which promotes better fuel efficiency, lower emissions, and improved vehicle lifespans.  We continue to focus on component design and development to improve fuel efficiency and reduce overall energy consumption, while still providing the vehicle performance that our customers expect.  In our CIS and BHVAC segments, we are shifting our product portfolios toward lower-emission propellants and refrigerants that greatly reduce the environmental impact and enhance energy efficiency for our customers’ heating and cooling systems.  In addition, in our BHVAC segment, we are also focusing on reducing energy use by recycling waste heat produced from air conditioning systems.

We have consistently out-performedidentified priorities that we believe are essential to attract, develop and retain highly-qualified talent.  These include, among others, i) providing career development programs; ii) promoting health and safety; iii) fostering diversity and inclusion in the private-industry Recordable Incident Rate (“RIR” as defined by OSHA) average for the manufacturing sector, which was 3.4 in 2018.  During fiscal 2020, we recorded an RIR of 1.14, which was lower than our prior year rate of 1.29.  Our behavior-based safety program proactively seeks to correct at-risk behaviors while positively reinforcing safe behaviors.workplace; and iv) providing competitive compensation and benefits.

The health and safety of our employees is paramount to us.  In response to the COVID-19 pandemic, we have taken steps at all of our global locations to limit the risk of exposure.  These actions have included increasing the spacing between work stations, rotating or splitting shifts to reduce the number of employees in the plant,our plants, providing additional personal protective equipment as necessary, removing chairs from cafeterias to ensureimprove social distancing, providing trainingcommunication on personal hygiene best practices, implementing additional cleansing and sanitizing processes in critical areas, and establishing programs allowing employees to work from home where possible, which are helping to protect both those employees who are working remotely and those who remain in our facilities.

We employed approximately 11,300 persons worldwide asare committed to a diverse workforce, founded on respect and value for people of March 31, 2020.different backgrounds, experiences, and perspectives.  Incorporating diverse talent and fostering an inclusive workforce is a key focus of our talent management strategy.  We track and focus on indicators of diversity and inclusion across our global operations.  These indicators include the number of women in supervisory roles and minority new hires in the U.S.

We offer our employees competitive compensation and comprehensive benefit packages.  We frequently benchmark our compensation practices and benefits programs against those of Business

Through our website, www.modine.com (Investors link), we make available, free of charge, 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, among others:

All of the reports and corporate governance documents referenced 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.

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus, COVID-19, a pandemic.  The spread of COVID-19 and the resulting work and travel restrictions, including international border closings, have disrupted, and may continue to disrupt, global supply chains and have negatively impacted the global economy.  As a result of this pandemic, we have experienced significant impacts on our operations.  We suspendedLocal government requirements or customer shutdowns caused us to suspend production at many of our manufacturing facilities around the world due to customer shutdowns or local government requirements.  Althoughin March and April 2020.  All of the temporarily-closed facilities reopened in the first or second quarter of fiscal 2021 and have generally returned to more normal production levels.  However, since reopened, we are operating manyreopening, production at certain of our manufacturing facilities has been negatively affected at reduced capacity levels in responsetimes by employee absences related to decreased customer orders.COVID-19.

Beginning largely in April 2020 and in an effort to mitigate the negative impacts of COVID-19, we have taken actions, including, but not limited to, production staffing adjustments, furloughs, shortened work weeks, and temporary salary reductions at all levels of our organization.  Our business operations could be further affected if any of our key management or leadership personnel are incapacitated or if a significant portion of our workforce is unable to work effectively due to illness, quarantines, government actions or similar pandemic-related impediments.  The COVID-19 threat has caused us to modify certain business practices (including employee work locations and limitations on physical participation in meetings) in ways that could be detrimental to our business, including, among others, working remotely and associated cybersecurity risks.

At this time, we are unable to quantify or predict the ultimate impacts on our business, the full extent of which will depend largely on future developments and the length and severity of the pandemic, all of which are unpredictable and outside of our control.  If we, our suppliers, or our customers experience further shutdowns or other significant business disruptions, our ability to conduct business in the manner and on the timelines presently planned could be materially and negatively impacted, which could have a material adverse effect on our business, financial position, results of operations and cash flows.

We face continuous price-reduction pressure from our vehicular OEM customers.  Virtually all of these OEMs impose aggressive price-reduction initiatives upon their suppliers, even if contrary to contractual terms, and we expect such actions to continue in the future.  In response, we must continually reduce our operating costs in order to maintain profit margins that are acceptable to us.  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.  In addition, we must balance our ongoing need to reduce operating costs against any potential compromise in the high quality of our products and our ability to provide the highest standard of service to our customers.  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 could be adversely affected.

Increases in the costs of raw materials and other purchased component inventory,components, which may be impacted by a variety of factors, including changes in trade laws, tariffs and tariffs,inflation, could have a significant adverse effect on our results of operations.  WeIn the short-term, our ability to adjust for cost increases is limited when prices are fixed for current orders.  In these cases, if we are not able to recover such cost increases through price increases to our customers, such cost increases will have an adverse effect on our results of operations.  With regard to our longer-term sales programs, we have sought to alleviate thisreduce the risk of cost increases by including provisions within our long-term customer contracts, where possible, which allow usprovide for adjustments to adjust customer prices, on a prospective basis, based upon increases and decreases in the cost of key raw materials.  However, where these contract provisions are applicable, there can often be a three-month to one-year lag until the time of the price adjustment.  To further mitigate our exposure, from time to time we enter 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.

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 upon total value (including price, delivery and quality), taking into consideration their production capacities, financial condition and willingness 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, strong demand, the potential effects of trade laws and tariffs, capacity constraints, financial instability, public health crises, such as pandemics and epidemics, including the ongoing COVID-19 pandemic, or other circumstances experienced by our suppliers could result in shortages or delays in their supply of product to us, or a significant price increase resulting in our need to resource.  For example, the COVID-19 pandemic and other factors have contributed to a global shortage of semiconductor chips, which has negatively impacted automotive and other markets, and in turn, order levels for certain products we provide to our automotive customers.  In addition, recent storms in Texas intensified already-constrained resin supply and, as a result, we experienced delays due to our suppliers’ inability to procure critical materials used in the production of certain of our products.  If such shortages continue or worsen, or if we were to experience a significant or prolonged shortageshortages of any 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 we would miss product delivery dates, which would adversely affect our sales, results of operations and customer relationships.

Deterioration of a business relationship with a major customer could cause our sales and profitability to suffer.  Generally speaking, this risk is highest inIn certain of our vehicular businesses, where a large portion of sales are attributable to a relatively small number of customers.  We principally compete for newIn our vehicular business both duringbusinesses, 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 vehicular components, it may be difficult in the short term for us to obtain new sales to replace any unexpected decline in 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 customer in any of our businesses, the loss of business with respect to one or more of the vehicle models that use our vehicular 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.

CustomersVehicular 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 results of operations.

The competitive environment continues to be dynamic as many of our customers, faced with intense international competition, have expanded their sourcing of components.  As a result, we experience 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.

We have manufacturing and technical facilities located in North America, South America, Europe, and Asia.  In fiscal 2020, 522021, 58 percent of our sales were generated from non-U.S. operations.  Consequently, our global operations are subject to complex international laws and regulations and numerous risks and uncertainties, including changes in monetary and fiscal policies, including those related to tax and trade, cross-border trade restrictions or prohibitions, import or other charges or taxes, fluctuations in foreign currency exchange and interest rates, inflation, changing economic conditions, public health crises, including the ongoing COVID-19 pandemic, unreliable intellectual property protection and legal systems, insufficient infrastructures, social unrest, political instability and disputes (including, for example, the continuing uncertainty related to the withdrawal of the United Kingdom from the European Union, commonly referred to as “Brexit”), incompatible business practices, and international terrorism.  Changes in policies or laws governing the terms of foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we either manufacture products, such as Mexico, or buy raw materials, such as China, could have a material adverse effect on our results of operations.  In addition, compliance with multiple and often conflicting laws and regulations of various countries is burdensomecan be challenging and expensive.

Embargoes or sanctions imposed by the U.S. government or those abroad that restrict or prohibit sales to or purchases from specific persons or countries or based upon product classification may expose us to potential criminal and civil sanctions to the extent that we are alleged or found to be in violation, whether intentional or unintentional.  We cannot predict future regulatory requirements to which our business operations may be subject or the manner in which existing laws might be administered or interpreted.

In addition, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other similar anti-corruption laws generally prohibit companies and their intermediaries from making payments to improperly influence foreign government officials or other persons for the purpose of obtaining or retaining business.  In recent years, there has been a substantial increase in the global enforcement of anti-corruption laws.  In the event that we believe our employees or agents may have violated applicable anti-corruption laws, or if we are subject to allegations of any such violations, we may have to expend significant time and financial resources towards the investigation and remediation of the matter, which could disrupt our business and result in a material adverse effect on our financial condition, results of operations and reputation.

WeIn recent years, we have engaged in various restructuring activities in our VTS, CIS, HDE and BHVACAutomotive segments in order to optimize our manufacturing footprint and cost structure.  These restructuring activities have included targeted headcount reductions that support our objective of reducing operational and SG&A cost structures and the consolidation and/or closure of manufacturing facilities in North America, Europe and Europe.Asia.  In addition, we continue to focus on reducing costs for materials and services through targeted adjustments and negotiations with our supply base.  Our successful execution of these initiatives, and our ability to identify and execute future opportunities to optimize our cost structures, is critical to enable us to establish a cost environment that will increase and sustain our long-term competitiveness.  Any failure to do so could, in turn, adversely affect our results of operations and financial condition.

We design technologically advanced products, and the processes required to produce these products can be difficult and complex.  We commitspend significant time and financial resources to ensure the successful launch of new products and programs.  Due to our high level of launch activity, particularly within our VTSHDE segment, we must appropriately manage these launches and deploy our operational and administrative resources to take advantage of the resulting increase in our business.  If we do not successfully launch new 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 operating inefficiencies or asset impairment charges, which could adversely affect our results of operations.

We are dependent upon our IT infrastructure, including network, hardware, and software systems, to conduct our business.  Despite network and other cybersecurity measures we have in place, our IT systems could be disrupted or we could experience a security breach from computer viruses, break-ins or similar disruptions.  A substantial disruption in our IT systems for a prolonged time period, or a material breach of our IT systems, could result in delays in receiving inventory and supplies or filling customer orders, and/or the release of otherwise confidential information, including personal information that is protected by the General Data Protection Regulation, adversely affecting our customer service and relationships as well as our reputation, and could lead to significant remediation expenses and litigation risks.  Our systems, and the systems of our service providers or others, could be breached, damaged or interrupted by cyber-attacks or other man-made intentional or unintentional events, or by natural disasters or occurrences, many of which may, despite our best efforts, be beyond our ability to effectively detect, anticipate or control.  This impact may be heightened by the increased disbursement of our workforce resulting from our own and from government efforts to mitigate the spread of the COVID-19 pandemic.  Any such events and the related delays, problems or costs could have a material adverse effect on our business, financial condition, results of operations and reputation.

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.

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 vehicular customers offer extended warranty protection for their vehicles and put pressure onrequire their supply base to extend warranty coverage as well.  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, results of operations, financial condition and reputation.

We previously announceddisclosed our evaluation of strategic alternatives for the businesses within our Automotive segment. As of March 31, 2021, we classified the liquid- and air-cooled automotive businesses within the Automotive segment as held for sale on our consolidated balance sheet. The sale of the air-cooled automotive business within our VTS segment. While we have paused this process in lightto Schmid Metall GmbH closed on April 30, 2021. The sale of the COVD-19 pandemic, weliquid-cooled automotive business to Dana Incorporated is subject to the receipt of governmental and third-party approvals and satisfaction of other closing conditions. There can be no assurance that the pending sale will be consummated.

We are also evaluating strategic alternatives for the other Automotive segment business operations and are committed to exiting this business in a manner that is in the best interest of our shareholders and will resume the process when economic conditions improve.shareholders.  It is possible that our exit strategy may ultimately include a combination of both selling and winding-down or closing portions of the automotive business.  While we have spent considerable resources working towardsremaining business operations within the separation of the automotive business and preparing for a potential sale, there can be no assurance that the evaluation will result in a consummated transaction.  Automotive segment.

If our evaluation process does not result in the successful consummation of a strategic alternative,alternatives, or if we are otherwise unable through such consummation to realize our goalgoals for the automotive business,Automotive segment, we may not be able to optimize theour future profitability, of our VTS segment, which could adversely affect our results of operations and financial condition.

We expectare pursuing growth, through both organic and inorganic opportunities.  Under our new CEO’s leadership, we are implementing a new strategy, which we refer to as our “80/20 strategy,” to examine our businesses using data analytics in order to focus our resources on products and markets with the highest growth and best returns.  In addition, we will continue to review our business portfolio and pursue acquisitions in “industrial” markets.  Thereto accelerate growth.  If we are unable to successfully implement the 80/20 strategy, we may not achieve the financial or operational successes anticipated.  In addition, there can be no assurance we will be able to identify attractive acquisition targets and/or organic growth opportunities.  If we are unable to successfully complete such transactionsacquisitions and execute on organic opportunities in the future, our growth may be limited.  In addition, 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.

As of March 31, 2020,2021, we had total outstanding indebtedness of $482 million.$340 million, of which $5 million was classified as held for sale on our consolidated balance sheet.  Our indebtedness and related debt service obligations (i) require that significant cash flow from operations be used for principal and interest payments, which reduces the funds we have available for other business purposes; (ii) limit our flexibility in planning for or reacting to changes in our business and market conditions; and (iii) expose us to interest rate risk, since the majority of our debt obligations carry variable interest rates.

Our credit and Senior Note agreements contain financial covenants that, among other things, require us to maintain a minimum interest coverage ratio and impose a maximum leverage ratio.  Although we recently amended these agreements to provide additional flexibility in light of risks and uncertainties resulting from the COVID-19 pandemic, our failureFailure to comply with debt covenants could result in an event of default, which, if not cured or waived, could result in us being required to repay these borrowings before their due date.  If we are forced to refinance these borrowings on less favorable terms, our results of operations and financial condition could be adversely affected by increased costs and interest rates.

Our revolving credit facility and current term loans utilize LIBOR to set the interest rate on outstanding borrowings.  The United Kingdom’s Financial Conduct Authority announced that after 2021 it would no longer persuade or compel panel banks to submit the rates required to calculate LIBOR.  Currently, there is no definitive information or consensus regardingOn November 30, 2020, the future utilizationICE Benchmark Administration, the administrator of LIBOR, announced a consultation on the extension of most tenors of USD LIBOR until June 2023.  The proposed extension would not apply to the rate’s other denominations, including the euro.  Meanwhile, U.S. banking regulators have advised that most USD LIBOR originations should end no later than 2021 and it is expected that LIBOR may be replaced with the Secured Overnight Financing Rate (“SOFR”), a new index calculated on a daily basis by reference to short-term repurchase agreements for U.S. Treasury securities.  It is currently uncertain whether SOFR or other alternative reference rates.  rates will attain market acceptance as replacements for LIBOR.  As a result, it is not possible to predict the effect of these changes, other reforms, or the establishment of alternative reference rates.  Should a suitable replacement for LIBOR not be available, however, the rates under our variable rate indebtedness could increase and access to capital could be limited.

Our defined benefit pension plans in the U.S. are frozen to new participants.  Our funding policy 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 liability totaling $98 million.$41 million as of March 31, 2021.  During fiscal 2021,2022, we anticipate making funding contributions totaling $20$13 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 assumptions, 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 financial condition could be adversely affected.

Our balance sheet includes goodwill and intangible assets totaling $272$271 million at March 31, 2020.2021.  We perform goodwill impairment tests annually, as of March 31, or more frequently if appropriate.business events or other conditions exist that require a more frequent evaluation.  In addition, we review intangible assets for impairment whenever business conditions or other events indicate that the assets may be impaired.  If we determine the carrying value of an asset is impaired, we write down the asset to fair value and record an impairment charge to current operations.

We use judgment in determining if an indication of impairment exists.  For our annual goodwill impairment tests, we use significant estimates and assumptions, including revenue growth rates and operating profit margins to calculate estimated future cash flows, risk-adjusted discount rates, business trends and market conditions.  We cannot predict the occurrence of future events or circumstances, including lower than forecasted revenues, market trends that fall below our current expectations, actions of key customers, increases in discount rates, and the continued economic uncertainty and impacts associated with the COVID-19 pandemic, which could adversely affect the carrying value of goodwill and intangible assets.  An impairment of a significant portion of goodwill or intangible assets could have a material adverse effect on our financial results.

We operate manufacturing facilities located in the U.S. and in multiple foreign countries.  Our world headquarters, including general offices and laboratory, experimental and tooling facilities, is located in Racine, Wisconsin.  We have additional technical support functions located in Grenada, Mississippi; Leeds, United Kingdom; Pocenia, Italy; Guadalajara, Spain; Bonlanden, Germany; Söderköping, Sweden; Pocenia, Italy; Sao Paulo, Brazil; Leeds, United Kingdom; Changzhou, China; and Chennai, India.

The following table sets forth information regardingsummarizes the number of manufacturing facilities within each of our principal propertiesoperating segments as of March 31, 2020.  Properties with less than 20,000 square feet of building space have been omitted from this table.2021.

The information required hereunder is incorporated by reference from Note 20 of the Notes to Consolidated Financial Statements.

Not applicable.

The following sets forth the name, age (as of March 31, 2020)2021), recent business experience and certain other information relative to each executive officer of the Company.

Executive Officer positions are designated in our Bylaws and the persons holding these positions are elected annually by the Board, generally at its first meeting after the annual meeting of shareholders in July of each year.  In addition, the Officer NominationHuman Capital and Compensation Committee of the Board may recommend and the Board of Directors may approve promotions and other actions with regard to executive officers at any time during the fiscal year.

There are no arrangements or understandings between any of the executive officers and any other person pursuant to which he or she was elected an officer of Modine.

Our common stock is listed on the New York Stock Exchange.  Our trading symbol is MOD.  As of March 31, 2020,2021, shareholders of record numbered 2,282.2,220.

We did not pay dividends during fiscal 20202021 or 2019.2020.  Under our credit agreements, we are permitted to pay dividends on our common stock, subject to certain restrictions based upon the calculation of debt covenants, as further described under “Liquidity and Capital Resources” under Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.  We currently do not intend to pay dividends in fiscal 2021.2022.

The following graph compares the cumulative five-year total return on our common stock with similar returns on the Russell 2000 Index and the Standard & Poor’s (S&P) MidCap 400 Industrials Index.  The graph assumes a $100 investment and reinvestment of dividends.

Our primary product groups include i) powertrain coolingheating, ventilation and engine cooling;air conditioning; ii) coils, coolers, and coatings; and iii) heating, ventilationpowertrain cooling and air conditioning.  Our products are used in on- and off-highway original-equipment vehicular applications.  In addition, weengine cooling.  We provide our thermal management technology and solutions to a wide array of commercial, industrial, and building heating, ventilating, air conditioning, and refrigeration markets.  In addition, our products are used in on- and off-highway original-equipment vehicular applications.

Fiscal 2020 brought2021 presented challenges, including business disruptions and market weakness in key vehicular end markets andspurred by the COVID-19 pandemic.  Since the onset of the pandemic, which negativelyour top priorities have been, and continue to be, the health and overall well-being of our employees and delivering quality products and services to our customers.  COVID-19 has broadly impacted the global economy and our key end markets.  Our businesses beginning inwere most severely impacted during the fourthfirst quarter in Asia and Europe.of fiscal 2021.  In response, to these challenges, we have rapidlyswiftly implemented cost-savings measures to mitigate the impacts of lower customer demand.  These measures have included,cost-saving actions, including, but are not limited to, production staffing adjustments, furloughs, shortened work weeks, and temporary salary reductions at all levels of our organization.  We withdrew most of these cost-saving actions in the third quarter of fiscal 2021 as production returned to more normal levels as markets recovered.

Under new leadership, our teams are energized in implementing an “80/20 strategy” in order to focus our resources on products and markets with the highest growth and best returns.  We are reducing operatingin the early stages of implementing this new strategy and administrative expenses, including travelare in process of examining our customer base and entertainment expenditures,product portfolio by end market to identify areas of our business that we should focus more of our resources, and loweringalso areas that we should emphasize less in the annual compensation paidfuture. We see opportunities to grow our businesses and are particularly focused on expanding our presence in and increasing sales to the Boarddata center and ventilation markets.  We expect continued growth in the data center market related to cloud storage, digitalization and the internet of Directors.things.  We have also taken steps specifically aimed to preserve cash and maximize our liquidity.see opportunities in the ventilation market, as the COVID-19 pandemic has highlighted the need for improved indoor air quality.  In addition, we are focusedengaged with truck and bus manufacturers on reducing capital expenditures by delaying certain projects and the purchase of some program-related equipment and tooling.

Our executive management incentive compensation (annual cash incentive) plan for fiscal 20202021 was based upon two performance goals: growth in consolidated operating income growthnet earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”); and a cash flow margin metric.  These performance goals drive alignment of management and shareholders’ interests in both our earnings growth and cash flow targets.  In addition, we provide a long-term incentive compensation plan for officers and certain key employees to attract, retain, and motivate employees who directly impact the long-term performance of our company.  The plan is comprised of stock awards, stock options, and performance-based stock or cash awards.  The performance-based stock awards for the fiscal 20202021 through 20222023 performance period are based upon a target three-year average annual revenue growth and a target three-year average consolidated cash flow return on invested capital.

Each of our operating segments is managed by a vice president and has separate strategic and financial plans, and financial results, all of which are reviewed by our chief operating decision maker.  These plans and results are used by management to evaluate the performance of each segment and to make decisions on the allocation of resources.

Effective April 1, 2020, we began managing our automotive business separate from the VTS segment as we target the sale or eventual exit of the automotive business.  We will report financial results for the automotive segment beginning in the first quarter of fiscal 2021.

During fiscal 2021, CIS segment sales volume decreased, primarily due to the impacts of the COVID-19 pandemic on the HVAC&R and industrial cooling markets.  Sales were most severely impacted early in our fiscal year and sales volumes have been recovering since.  In addition, sales in fiscal 2021 were negatively impacted by lower sales to a significant data center customer.  During fiscal 2021, we transferred production from our Zhongshan, China manufacturing facility to our Wuxi, China manufacturing facility, consolidating two manufacturing locations into one.  While costs incurred for our plant consolidation activities negatively impacted on our fiscal 2021 operating results, we expect to realize operating efficiencies going forward.  Despite the challenging market conditions in fiscal 2021, we are proud to have supported numerous customers that produced products used in battling the COVID-pandemic and improving safety, from disinfectant application to vaccine storage.

Looking ahead, we anticipate continued market recovery, with stronger recovery expected in the second half of fiscal 2022.  We are poised to generate new sales in Europe, as heat pump technology is improved to address regulatory guidelines.  Our CIS team is focused on improving financial results through manufacturing efficiencies, pricing strategies, and vertical integration projects.  We will continue to support our customers with innovative products, such as computer room air conditioninghandlers, antimicrobial coating lines, and ventilation products.low-VOC topcoats, which have reduced amounts of volatile organic compounds and are less harmful to the environment.  In addition, we see growth opportunities with our product offerings that use alternative refrigerants, including carbon dioxide, which are more environmentally friendly.  We aim to capitalize on opportunities arising from energy and environmental regulations and post-pandemic shifting consumer buying patterns.  We believe we are well-positioned to be the partner of choice for our customers.

Fiscal 2021 net sales decreased $167 million, or 8 percent, from the prior year, primarily due to lower sales in our CIS, HDE, and Automotive segments, partially offset by higher sales in our BHVAC segment.  Foreign currency exchange rate changes favorably impacted sales in fiscal 2021 by $28 million.  Cost of sales decreased $153 million, or 9 percent, from last year, primarily due to lower sales volume.  Gross profit decreased $14 million and gross margin improved 60 basis points to 16.2 percent.  SG&A expenses decreased $39 million, primarily due to lower costs associated with our review of strategic alternatives for our Automotive segment businesses and preparing the liquid- and air-cooled automotive businesses for sale.  In addition, SG&A expenses decreased due to cost-reduction initiatives implemented early in the development of sustainable HVAC solutions for our customers.  As recently announced, we are targeting to expand our data center cooling business into the North American market.  We have established rootsfiscal year in the data center space and plan to leverage our North American presence, including our manufacturing footprint and thermal management expertise, to deploy integrated data center cooling solutionsresponse to the U.S. market.  We are seeing heightened demand innegative impacts of COVID-19.  The operating loss of $98 million during fiscal 2021 represents a $136 million decline from the data center markets, particularly in lightprior-year operating income of $38 million and was primarily due to $167 million of impairment charges recorded primarily for assets of the increasing reliance on virtual capabilities resulting from stay-at-home edicts associated with the COVID-19 pandemic.liquid- and air-cooled automotive businesses, partially offset by lower SG&A expenses.

Fiscal 2020 net sales decreased $237 million, or 11 percent, from the prior year, primarily due to lower sales in our VTSHDE, CIS, and CIS operatingAutomotive segments, partially offset by higher sales in our BHVAC segment.  Foreign currency exchange rate changes negatively impacted sales in fiscal 2020 by $46 million.  Cost of sales decreased $179 million, or 10 percent, from lastthe prior year, primarily due to lower sales volume.  Gross profit decreased $58 million and gross margin declined 90 basis points to 15.6 percent.  SG&A expenses increased $6 million, primarily due to separation and projecthigher costs associated with ourthe review of strategic alternatives for the VTS segment’s automotive business, which increased approximately $29 million compared with fiscal 2019.  The higher separation and project costs wereour Automotive segment businesses, partially offset by lower-compensation related expenses.  Operating income during fiscal 2020 decreased $72 million to $38 million, primarily due to lower gross profit and higher SG&A expenses.

The COVID-19 pandemic began negatively impacting our business beginning with our Asian and European markets in the fourth quarter of fiscal 2020.  Both weakness in key vehicular markets and the impacts of the COVID-19 pandemic placed significant strain on our previously-announced evaluation of strategic alternatives for the automotive business within the VTS segment.  As a result, we paused this process until economic conditions improve.  We remain committed, however, to exiting the automotive business in a manner that is in the best interest of our shareholders.  Once we resume the process, it is possible that our exit strategy may ultimately include a combination of both selling and winding-down or closing portions of the automotive business.  We have spent considerable time and money separating the automotive business and preparing for a potential sale.  We have dedicated resources to physically separate the automotive manufacturing operations, including resources for IT systems and separate business processes, and have also established new legal entities.  We believe these resource investments are critical to exiting the automotive business.  We remain committed to our strategy of becoming a diversified industrial company and executing on the best strategic alternative for the automotive business in order to both optimize our VTS segment’s financial performance and maximize shareholder value.

Fiscal 2021 net sales of our consolidated fiscal 2019 and 2018 financial results can be found$1,808 million were $167 million, or 8 percent, lower than the prior year, primarily due to lower sales volume in the Management’s DiscussionCIS, HDE, and AnalysisAutomotive segments, partially offset by a $28 million favorable impact of Financial Conditionforeign currency exchange rate changes and Results of Operations sectionhigher sales volume in the Company’s 2019 Annual Report on Form 10-K filedBHVAC segment.  Sales in the CIS, HDE and Automotive segments decreased $92 million, $64 million and $47 million, respectively, and were significantly impacted by market-driven volume declines and temporary plant closures early in the fiscal year due to the COVID-19 pandemic.  Sales increased $20 million in our BHVAC segment.

Fiscal 2021 cost of sales of $1,515 million decreased $153 million, or 9 percent, primarily due to lower sales volume.  Fiscal 2021 cost of sales was negatively impacted by $24 million from foreign currency exchange rate changes.  As a percentage of sales, cost of sales decreased 60 basis points to 83.8 percent.  The unfavorable impacts of lower sales volume and, to a lesser extent, higher material costs, which negatively impacted cost of sales as a percentage of sales by approximately 50 basis points, were more than offset by benefits from procurement and other cost-reduction initiatives and an $8 million decrease in depreciation expense in the Automotive segment.  We ceased depreciating the long-lived assets within the liquid- and air-cooled automotive businesses once they were classified as held for sale during fiscal 2021.  In addition, program and equipment transfer costs to prepare the liquid-cooled automotive business for sale decreased approximately $3 million compared with the SEC on May 23, 2019.prior year.

Fiscal 2020 net sales of $1,976 million were $237 million, or 11 percent, lower than the prior year, primarily due to lower sales in our VTSHDE, CIS, and CISAutomotive segments and a $46 million unfavorable impact of foreign currency exchange rate changes, partially offset by higher sales in our BHVAC segment.  Sales decreased $175$126 million, $84 million, and $84$44 million in our VTSHDE, CIS, and CISAutomotive segments, respectively.  Sales increased $9 million in our BHVAC segment.

Fiscal 2020 cost of sales of $1,668 million decreased $179 million, or 10 percent, primarily due to lower sales volume and a $39 million favorable impact of foreign currency exchange rate changes.  As a percentage of sales, cost of sales increased 90 basis points to 84.4 percent and was negatively impacted by approximately 80 basis points due to higher labor and inflationary costs and, to a lesser extent, by sales mix.  These negative impacts were partially offset by favorable material costs, which impacted costs of sales by approximately 30 basis points.  The favorable material costs primarily resulted from lower commodity pricing, which more than offset thea negative impacts ofimpact from tariffs.  In addition, we recorded $3 million of costs at Corporate for program and equipment transfers associated with the separation of the VTS segment’sliquid-cooled automotive business in preparation for a potential sale.

As a result of lower sales and higher cost of sales as a percentage of sales, fiscal 2020 gross profit decreased $58 million and gross margin declined 90 basis points to 15.6 percent.

Fiscal 2020 SG&A expenses increased $6 million.  The increase in SG&A was primarily due to separation and project costs recorded at Corporate associated with our review of strategic alternatives for the VTS segment’s automotive business,Automotive segment businesses, which increased approximately $29 million.  This increase was partially offset by lower compensation-related expenses, which decreased approximately $13 million, lower environmental charges related to previously-owned manufacturing facilities in the U.S., which decreased approximately $3 million, and a $4 million favorable impact from foreign currency exchange rate changes.

Restructuring expenses totaled $12 million during fiscal 2020 and increased $2 million compared with the prior year.  The fiscal 2020 restructuring expenses primarily consisted of severance expenses related to targeted headcount reductions in the VTS segmentHDE and Automotive segments and equipment transfer and plant consolidation costs in the CIS segment.  The fiscal 2020 headcount reductions were in response to lower market demand and in support of our objective to reduce operational and SG&A cost structures.  During fiscal 2021, we approved headcount reductions in the VTS and CIS segments and, as a result, we expect to record approximately $4 million of severance expenses during the first quarter of fiscal 2021.

During fiscal 2020, we recorded impairment charges totaling $9 million, primarily related to two manufacturing facilities in the VTSAutomotive segment.

Operating income of $38 million during fiscal 2020 decreased $72 million compared with the prior year.  This decrease was primarily due to an increase of $32 million of separation and project costs associated with our review of strategic alternatives for our automotive businessbusinesses and lower earnings in our VTSHDE, CIS, and CISAutomotive segments, which decreased $37$27 million, $20 million, and $20$10 million respectively, partially offset by higher earnings in our BHVAC segment, which increased $9 million.

The provision for income taxes was $12 million in fiscal 2020, compared with a benefit for income taxes of $5 million in fiscal 2019.  The $17 million change was primarily due to the absence of income tax benefits totaling $25 million recorded in the prior yearfiscal 2019 and income tax charges totaling $10 million in the current year,fiscal 2020, partially offset by lower operating earnings in fiscal 2020.  The $25 million of income tax benefits recorded in fiscal 2019 related to the recognition of tax assets for foreign tax credits and a manufacturing deduction in the U.S. and our accounting for the Tax Act.  The $10 million of income tax charges in fiscal 2020 were comprised of net charges totaling $7 million resulting from adjustments of valuation allowances on certain deferred tax assets in the U.S. and in a foreign jurisdiction and $3 million associated with legal entity restructuring in preparation for a potential sale of ourthe liquid-cooled automotive business.  See Note 7 of the Notes to Consolidated Financial Statements for additional information.

Effective April 1, 2020, we began managing our global automotive business separate from the other businesses within the previously-reported VTS segment.  We arehave been managing the automotive business as a separatethe Automotive segment as we targetwork towards the sale or eventual exit of the automotive businesses.  Beginning for fiscal 2021, we will report the financial results for theits underlying automotive business asoperations.  We are managing the Automotive segment.  The remaining portionother businesses of the previous VTS segment, will be namedincluding the Heavy-Duty Equipment segment and will include the heavy-duty commercial vehicle and off-highway businesses.businesses, as the HDE segment.  We began reporting financial results for our new segment structure beginning for fiscal 2021.  Segment financial information for fiscal 2020 and 2019 has been recast to conform to the fiscal 2021 presentation.  The segment realignment had no impact on the CIS and BHVAC segments.

VTS SG&A expenses decreased $13BHVAC cost of sales increased $8 million, compared with the prior year yet increased 20 basis points as a percentage of sales.  The decreaseor 5 percent, in SG&A expenses was primarily due to lower compensation-related expenses, which decreased approximately $9 million, lower environmental charges related to previously-owned manufacturing facilities in the U.S, which decreased approximately $3 million, and a $3 million favorable impact of foreign currency exchange rate changes.

As a result of the lowerhigher sales and higherlower cost of sales as a percentage of sales, gross profit decreased $22increased $11 million and gross margin declined 130improved 220 basis points to 14.934.5 percent.

CISBHVAC SG&A expenses decreased $4increased $1 million compared withfrom the prior year yet increased 60 basis points as a percentage of sales.year.  The decreaseincrease in SG&A expenses was primarily due to lowerhigher compensation-related expenses, which decreased approximately $2 million, and the favorable impact of cost-control initiatives.

Operating income in fiscal 2020 decreased $202021 of $47 million to $33increased $11 million, primarily due to lowerhigher gross profit, partially offset by lower SG&A expenses.profit.

BHVAC net sales increased $9 million, or 4 percent, in fiscal 2020 compared with the prior year, primarily due to higher sales in the U.S., which increased $14 million, partially offset by lower sales in the U.K., which decreased $5 million. The higher sales in the U.S. were primarily driven by the increased sales of ventilation and heating products.  The lower sales in the U.K. were primarily due to lower sales of air conditioning and ventilation products and a $3 million unfavorable impact of foreign currency exchange rate changes, partially offset by higher data center sales.

BHVAC cost of sales increased $1 million, or less than 1 percent, in fiscal 2020.  As a percentage of sales, cost of sales decreased 240 basis points to 67.7 percent, primarily due to favorable sales mix and favorable customer pricing.

As a result of the higher sales and lower cost of sales as a percentage of sales, gross profit increased $9 million and gross margin improved 240 basis points to 32.3 percent.

BHVAC SG&A expenses remained consistent with the prior year yet decreased 60 basis points as a percentage of sales.

During fiscal 2019, we sold our business in South Africa and, as a result, recorded a loss of $2 million.  Annual net sales attributable to this disposed business were less than $2 million.

Operating income in fiscal 2020 of $36 million increased $9 million, primarily due to higher gross profit.