UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, ~~2017~~2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 1-1373

MODINE MANUFACTURING ~~COMPANY~~COMPANY

(Exact name of registrant as specified in its charter)

~~WISCONSIN~~ Wisconsin		39-0482000
(State or other jurisdiction of incorporation or organization)		~~(I.R.S.~~(I.R.S. Employer Identification No.)

1500 DeKoven Avenue, Racine, Wisconsin		53403
(Address of principal executive offices)		(Zip Code)

~~Registrant's~~Registrant’s telephone number, including area code ~~(262) 636‑1200~~(262) 636-1200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.625 par value	MOD	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐☑		Accelerated Filer ☑☐

Non-accelerated Filer ☐	~~(Do not check if a smaller reporting company)~~	Smaller reporting company ☐

		Emerging growth company ☐

If an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

The number of shares outstanding of the ~~registrant's~~registrant’s common stock, $0.625 par value, was ~~50,461,190~~51,421,276 at January ~~26, 2018.~~29, 2021.

~~Table of Contents~~

MODINE MANUFACTURING COMPANY

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements.	1

Item 2.	~~Management's~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations.	2126

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	3040

Item 4.	Controls and Procedures.	30
		40
PART II.	OTHER INFORMATION

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds.~~	31

Item 6.	Exhibits.	32
		41
SIGNATURE	3342

Table of Contents

~~PART I.~~

~~FINANCIAL INFORMATION~~

~~Item 1.~~

~~Financial Statements.~~

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

MODINE MANUFACTURING COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

For the three and nine months ended December 31, ~~2017~~2020 and ~~2016~~2019

(In millions, except per share amounts)

(Unaudited)

	Three months ended December 31,						Nine months ended December 31,						Three months ended December 31,						Nine months ended December 31,
	2017			2016			2017			2016			2020			2019			2020			2019
Net sales	$	512.7		$	349.8		$	1,536.5		$	1,014.7		$	484.3		$	473.4		$	1,293.5		$	1,502.6
Cost of sales		427.3			290.8			1,276.5			845.4			401.6			399.9			1,083.9			1,270.0
Gross profit		85.4			59.0			260.0			169.3			82.7			73.5			209.6			232.6
Selling, general and administrative expenses		60.8			50.7			182.2			143.1			56.1			63.5			151.6			194.4
Restructuring expenses		9.4			1.6			11.5			6.0			0.9			2.6			7.0			6.7
Impairment charge		1.3			-			1.3			-
Gain on sale of facility		-			-			-			(1.2	)
Operating income		13.9			6.7			65.0			21.4
Impairment charges														134.4			0			134.4			0
Gain on sale of assets														0			(0.8	)		0			(0.8	)
Operating (loss) income														(108.7	)		8.2			(83.4	)		32.3
Interest expense		(6.3	)		(4.5	)		(19.5	)		(10.5	)		(4.6	)		(5.6	)		(15.2	)		(17.3	)
Other expense – net		(0.3	)		(1.0	)		(2.3	)		(2.8	)
Earnings before income taxes		7.3			1.2			43.2			8.1
(Provision) benefit for income taxes		(35.2	)		0.7			(37.4	)		(1.3	)
Other (expense) income – net														(0.5	)		0.1			(1.0	)		(2.3	)
(Loss) earnings before income taxes														(113.8	)		2.7			(99.6	)		12.7
Provision for income taxes														(81.6	)		(1.7	)		(95.3	)		(8.3	)
Net (loss) earnings		(27.9	)		1.9			5.8			6.8			(195.4	)		1.0			(194.9	)		4.4
Net earnings attributable to noncontrolling interest		(0.4	)		(0.2	)		(1.2	)		(0.6	)
Net (earnings) loss attributable to noncontrolling interest														(0.3	)		0.2			(0.8	)		0.1
Net (loss) earnings attributable to Modine	$	(28.3	)	$	1.7		$	4.6		$	6.2		$	(195.7	)	$	1.2		$	(195.7	)	$	4.5

Net (loss) earnings per share attributable to Modine shareholders:
Net (loss) earnings per share attributable to Modine
Basic	$	(0.57	)	$	0.04		$	0.09		$	0.13		$	(3.81	)	$	0.02		$	(3.82	)	$	0.09
Diluted	$	(0.57	)	$	0.04		$	0.09		$	0.13		$	(3.81	)	$	0.02		$	(3.82	)	$	0.09

Weighted-average shares outstanding:
Basic		50.0			47.9			49.8			47.3			51.3			50.8			51.2			50.8
Diluted		50.0			48.5			50.6			47.7			51.3			51.1			51.2			51.1

The notes to condensed consolidated financial statements are an integral part of these statements.

Table of Contents

MODINE MANUFACTURING COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three and nine months ended December 31, ~~2017~~2020 and ~~2016~~2019

(In millions)

(Unaudited)

	Three months ended December 31,						Nine months ended December 31,						Three months ended December 31,					Nine months ended December 31,
	2017			2016			2017			2016			2020			2019		2020			2019
Net (loss) earnings	$	(27.9	)	$	1.9		$	5.8		$	6.8		$	(195.4	)	$	1.0	$	(194.9	)	$	4.4
Other comprehensive income (loss):
Foreign currency translation		5.0			(14.8	)		32.8			(17.7	)		18.4			14.0		41.2			(3.7	)
Defined benefit plans, net of income taxes of $0.4, $0.4, $1.3 and $1.3 million		0.9			0.9			2.6			2.6
Cash flow hedges, net of income taxes of $0.2, $0, $0.2 and $0 million		0.4			-			0.4			-
Defined benefit plans, net of income taxes of $0.3, $0.4, $1.1 and $1.0 million														1.3			1.0		3.8			3.2
Cash flow hedges, net of income taxes of $0, $0.2, $0.5 and ($0.2) million														0			0.6		1.4			(0.4	)
Total other comprehensive income (loss)		6.3			(13.9	)		35.8			(15.1	)		19.7			15.6		46.4			(0.9	)

Comprehensive income (loss)		(21.6	)		(12.0	)		41.6			(8.3	)		(175.7	)		16.6		(148.5	)		3.5
Comprehensive (income) loss attributable to noncontrolling interest		(0.8	)		0.4			(1.6	)		(0.1	)		(0.7	)		0		(1.4	)		0.2
Comprehensive income (loss) attributable to Modine	$	(22.4	)	$	(11.6	)	$	40.0		$	(8.4	)	$	(176.4	)	$	16.6	$	(149.9	)	$	3.7

The notes to condensed consolidated financial statements are an integral part of these statements.

Table of Contents

MODINE MANUFACTURING COMPANY

CONSOLIDATED BALANCE SHEETS

December 31, ~~2017~~2020 and March 31, ~~2017~~2020

(In millions, except per share amounts)

(Unaudited)

	December 31, 2017			March 31, 2017			December 31, 2020			March 31, 2020
ASSETS
Cash and cash equivalents	$	47.8		$	34.2		$	72.9		$	70.9
Trade accounts receivable – net		289.0			295.2			233.5			292.5
Inventories		186.8			168.5			190.6			207.4
Assets held for sale								92.9			0
Other current assets		60.0			55.4			39.5			62.5
Total current assets		583.6			553.3			629.4			633.3
Property, plant and equipment – net		491.3			459.0			305.2			448.0
Intangible assets – net		132.5			134.1			104.5			106.3
Goodwill		172.2			165.1			172.4			166.1
Deferred income taxes		95.6			108.4			25.2			104.8
Other noncurrent assets		27.0			29.6			70.0			77.6
Total assets	$	1,502.2		$	1,449.5		$	1,306.7		$	1,536.1

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term debt	$	53.5		$	73.4		$	0.6		$	14.8
Long-term debt – current portion		37.9			31.8			22.0			15.6
Accounts payable		243.7			230.3			200.6			227.4
Accrued compensation and employee benefits		89.0			74.8			64.9			65.0
Liabilities held for sale								83.2			0
Other current liabilities		44.9			45.1			49.7			49.2
Total current liabilities		469.0			455.4			421.0			372.0
Long-term debt		394.5			405.7			342.0			452.0
Deferred income taxes		9.4			9.7			6.1			8.1
Pensions		105.7			119.4			109.1			130.9
Other noncurrent liabilities		52.0			38.1			79.9			79.5
Total liabilities		1,030.6			1,028.3			958.1			1,042.5
Commitments and contingencies (see Note 15)
Shareholders' equity:
Preferred stock, $0.025 par value, authorized 16.0 million shares, issued - none		-			-
Common stock, $0.625 par value, authorized 80.0 million shares, issued 52.3 million and 51.8 million shares		32.7			32.4
Commitments and contingencies (see Note 18)								0			0
Shareholders’ equity:
Preferred stock, $0.025 par value, authorized 16.0 million shares, issued - NaN								0			0
Common stock, $0.625 par value, authorized 80.0 million shares, issued 53.8 million and 53.4 million shares								33.6			33.3
Additional paid-in capital		227.2			216.4			249.1			245.1
Retained earnings		377.3			372.4			274.2			469.9
Accumulated other comprehensive loss		(146.4	)		(181.8	)		(177.5	)		(223.3	)
Treasury stock, at cost, 1.8 million and 1.7 million shares		(27.1	)		(25.4	)
Total Modine shareholders' equity		463.7			414.0
Treasury stock, at cost, 2.7 million and 2.5 million shares								(37.9	)		(37.1	)
Total Modine shareholders’ equity								341.5			487.9
Noncontrolling interest		7.9			7.2			7.1			5.7
Total equity		471.6			421.2			348.6			493.6
Total liabilities and equity	$	1,502.2		$	1,449.5		$	1,306.7		$	1,536.1

The notes to condensed consolidated financial statements are an integral part of these statements.

Table of Contents

MODINE MANUFACTURING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended December 31, ~~2017~~2020 and ~~2016~~2019

(In millions)

(Unaudited)

	Nine months ended December 31,						Nine months ended December 31,
	2017			2016			2020			2019
Cash flows from operating activities:
Net earnings	$	5.8		$	6.8
Adjustments to reconcile net earnings to net cash provided by operating activities:
Net (loss) earnings							$	(194.9	)	$	4.4
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:
Depreciation and amortization		56.8			39.9			54.2			57.8
Impairment charges								134.4			0
Gain on sale of assets								0			(0.8	)
Stock-based compensation expense		7.6			6.1			4.2			5.2
Impairment charge		1.3			-
Gain on sale of facility		-			(1.2	)
Deferred income taxes		10.1			(9.1	)		77.5			0.2
Other – net		6.6			1.5			4.7			3.5
Changes in operating assets and liabilities:
Trade accounts receivable		22.3			33.2			24.5			52.6
Inventories		(10.5	)		-			9.9			(23.6	)
Accounts payable		2.2			(21.1	)		1.1			(32.4	)
Other assets and liabilities		3.4			(21.1	)		30.9			(21.0	)
Net cash provided by operating activities		105.6			35.0			146.5			45.9

Cash flows from investing activities:
Expenditures for property, plant and equipment		(55.0	)		(46.0	)		(23.7	)		(58.2	)
Acquisition of Luvata HTS – net of cash acquired		-			(363.9	)
Proceeds from dispositions of assets		0.1			4.3
Proceeds from disposition of assets								0.7			6.5
Proceeds from sale of investment in affiliate								0			3.8
Other – net		(0.9	)		0.4			0.6			0.8
Net cash used for investing activities		(55.8	)		(405.2	)		(22.4	)		(47.1	)

Cash flows from financing activities:
Borrowings of debt		121.5			475.4			12.0			600.1
Repayments of debt		(162.5	)		(113.2	)		(134.5	)		(601.3	)
Borrowings on bank overdraft facilities – net								3.5			5.0
Financing fees paid								(0.8	)		(1.1	)
Purchases of treasury stock under share repurchase program								0			(2.4	)
Dividend paid to noncontrolling interest		(0.9	)		-			0			(1.3	)
Financing fees paid		-			(8.5	)
Other – net		2.7			(0.3	)		(0.8	)		(2.9	)
Net cash (used for) provided by financing activities		(39.2	)		353.4
Net cash used for financing activities								(120.6	)		(3.9	)

Effect of exchange rate changes on cash		3.0			(2.1	)		3.6			(0.5	)
Net increase (decrease) in cash and cash equivalents		13.6			(18.9	)
Net increase (decrease) in cash, cash equivalents, restricted cash and cash held for sale								7.1			(5.6	)

Cash and cash equivalents – beginning of period		34.2			68.9
Cash and cash equivalents – end of period	$	47.8		$	50.0
Cash, cash equivalents, restricted cash and cash held for sale – beginning of period								71.3			42.2
Cash, cash equivalents, restricted cash and cash held for sale – end of period							$	78.4		$	36.6

The notes to condensed consolidated financial statements are an integral part of these statements.

Table of Contents

MODINE MANUFACTURING COMPANY

~~NOTES TO CONDENSED~~ CONSOLIDATED ~~FINANCIAL~~ STATEMENTS OF SHAREHOLDERS’ EQUITY

For the three and nine months ended December 31, 2020 and 2019

(In ~~millions, except per share amounts)~~millions)

~~(unaudited)~~(Unaudited)

											_________________
	Common stock				Additional			Retained			Accumulated other			Treasury stock,			Non- controlling
	Shares		Amount		paid-in capital			earnings			comprehensive loss			at cost			interest		Total
Balance, March 31, 2020		53.4	$	33.3	$	245.1		$	469.9		$	(223.3	)	$	(37.1	)	$	5.7	$	493.6
Net loss attributable to Modine		-		0		0			(8.6	)		0			0			0		(8.6	)
Other comprehensive income		-		0		0			0			7.5			0			0.1		7.6
Stock options and awards		0.3		0.2		(0.2	)		0			0			0			0		0
Purchase of treasury stock		-		0		0			0			0			(0.8	)		0		(0.8	)
Stock-based compensation expense		-		0		0.7			0			0			0			0		0.7
Net earnings attributable to noncontrolling interest		-		0		0			0			0			0			0.2		0.2
Balance, June 30, 2020		53.7	$	33.5	$	245.6		$	461.3		$	(215.8	)	$	(37.9	)	$	6.0	$	492.7
Net earnings attributable to Modine		-		0		0			8.6			0			0			0		8.6
Other comprehensive income		-		0		0			0			19.0			0			0.1		19.1
Stock options and awards		0.1		0.1		0			0			0			0			0		0.1
Stock-based compensation expense		-		0		1.4			0			0			0			0		1.4
Net earnings attributable to noncontrolling interest		-		0		0			0			0			0			0.3		0.3
Balance, September 30, 2020		53.8	$	33.6	$	247.0		$	469.9		$	(196.8	)	$	(37.9	)	$	6.4	$	522.2
Net loss attributable to Modine		-		0		0			(195.7	)		0			0			0		(195.7	)
Other comprehensive income		-		0		0			0			19.3			0			0.4		19.7
Stock-based compensation expense		-		0		2.1			0			0			0			0		2.1
Net earnings attributable to noncontrolling interest		-		0		0			0			0			0			0.3		0.3
Balance, December 31, 2020		53.8	$	33.6	$	249.1		$	274.2		$	(177.5	)	$	(37.9	)	$	7.1	$	348.6

	Common stock				Additional			Retained			Accumulated other			Treasury stock,			Non-controlling
	Shares		Amount		paid-in capital			earnings			comprehensive loss			at cost			interest			Total
Balance, March 31, 2019		52.8	$	33.0	$	238.6		$	472.1		$	(178.4	)	$	(31.4	)	$	7.2		$	541.1
Net earnings attributable to Modine		-		0		0			8.0			0			0			0			8.0
Other comprehensive income (loss)		-		0		0			0			2.2			0			(0.1	)		2.1
Stock options and awards		0.5		0.2		(0.1	)		0			0			0			0			0.1
Purchase of treasury stock		-		0		0			0			0			(5.6	)		0			(5.6	)
Stock-based compensation expense		-		0		1.7			0			0			0			0			1.7
Dividend paid to noncontrolling interest		-		0		0			0			0			0			(1.3	)		(1.3	)
Net earnings attributable to noncontrolling interest		-		0		0			0			0			0			0.2			0.2
Balance, June 30, 2019		53.3	$	33.2	$	240.2		$	480.1		$	(176.2	)	$	(37.0	)	$	6.0		$	546.3
Net loss attributable to Modine		-		0		0			(4.7	)		0			0			0			(4.7	)
Other comprehensive loss		-		0		0			0			(18.4	)		0			(0.2	)		(18.6	)
Stock-based compensation expense		-		0		2.7			0			0			0			0			2.7
Net loss attributable to noncontrolling interest		-		0		0			0			0			0			(0.1	)		(0.1	)
Balance, September 30, 2019		53.3	$	33.2	$	242.9		$	475.4		$	(194.6	)	$	(37.0	)	$	5.7		$	525.6
Net earnings attributable to Modine		-		0		0			1.2			0			0			0			1.2
Other comprehensive income		-		0		0			0			15.4			0			0.2			15.6
Stock-based compensation expense		-		0		0.8			0			0			0			0			0.8
Net loss attributable to noncontrolling interest		-		0		0			0			0			0			(0.2	)		(0.2	)
Balance, December 31, 2019		53.3	$	33.2	$	243.7		$	476.6		$	(179.2	)	$	(37.0	)	$	5.7		$	543.0

~~Note 1:~~

~~General~~

The ~~accompanying~~notes to condensed consolidated financial statements ~~were prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States applied on a basis consistent with those principles used in the preparation~~are an integral part of ~~the annual~~these statements.

Table of Contents

Note 1: General

The accompanying condensed consolidated financial statements of Modine Manufacturing Company (“Modine” or the “Company”) were prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the ~~fiscal year ended March 31, 2017, except in regards~~instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the ~~new accounting guidance adopted, as described below.~~information and footnotes necessary for a comprehensive presentation of financial position, results of operations and cash flows required by GAAP for complete financial statements. The financial statements include all normal recurring adjustments that are, in the opinion of management, necessary for a fair statement of results for the interim periods. Results for the first nine months of fiscal ~~2018~~2021 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the consolidated financial statements and related notes in ~~Modine's~~Modine’s Annual Report on Form 10-K for the year ended March 31, ~~2017.~~2020.

~~United States Tax Reform~~COVID-19

In ~~December 2017, U.S. tax reform legislation was enacted and included various changes to existing U.S. tax regulations. As~~March 2020, the World Health Organization declared the outbreak of the novel coronavirus, COVID-19, a ~~result of these changes, the Company recorded income tax charges totaling $35.7 million during the third quarter of fiscal 2018.~~pandemic. See Note 818 for additional information regarding the ~~recently-enacted tax reform legislation.~~risks and uncertainties to the Company resulting from this pandemic.

~~Acquisition~~Pending Disposition of ~~Luvata HTS~~Liquid-cooled Automotive Business

On November ~~30, 2016,~~2, 2020, the Company ~~completed~~signed a definitive agreement to sell its liquid-cooled automotive business to Dana Incorporated. In connection with the ~~acquisition~~pending sale, the Company classified the liquid-cooled automotive business as held for sale and, accordingly, is reporting the assets and liabilities of ~~100 percent of~~this business as held for sale on the shares of multiple companies held by Luvata Heat Transfer Solutions II AB, a company incorporated in Sweden. Combined, these acquired companies represented the Luvata Heat Transfer Solutions (“Luvata HTS”) business.December 31, 2020 consolidated balance sheet. See Note 2 for additional information.

~~New Accounting Guidance~~

~~Derivatives and Hedging~~Chief Executive Officer (“CEO”) Transition

In August ~~2017,~~2020, Thomas A. Burke stepped down from his position as President and CEO. The Board of Directors subsequently conducted a search for his successor and, effective December 1, 2020, appointed Neil D. Brinker as President and CEO.

As a result of Mr. Burke's departure and in connection with the search for his successor, the Company recorded costs totaling $5.9 million during the nine months ended December 31, 2020. These costs, which were recorded as selling, general and administrative (“SG&A”) expenses at Corporate, primarily consisted of severance and benefit-related expenses based upon the terms of Mr. Burke's transition and separation agreement and costs directly associated with the CEO search, partially offset by the impact of Mr. Burke's forfeited stock-based compensation awards.

Sale of facility in Germany

During the third quarter of fiscal 2020, the Company completed the sale of a previously-closed manufacturing facility in Germany for a selling price of $6.0 million. As a result of this transaction, the Company recorded a gain of $0.8 million within the Automotive segment. The Company reported this gain within the gain on sale of assets line on the consolidated statements of operations.

Sale of Nikkei Heat Exchanger Company, Ltd. (“NEX”)

During the second quarter of fiscal 2020, the Company completed the sale of its 50 percent ownership interest in NEX for a selling price of $3.8 million. Prior to the sale, the Company accounted for its investment in this non-consolidated affiliate using the equity method. As a result of this sale, the Company recorded a gain of $0.1 million, which included the write-off of accumulated foreign currency translation gains of $0.6 million, within other income and expense on the consolidated statements of operations.

Table of Contents

New Accounting Guidance

In June 2016, the Financial Accounting Standards Board ~~(“FASB”)~~ issued new guidance related to ~~hedge accounting.~~the accounting for credit losses for certain financial assets, including trade accounts receivable and contract assets. The ~~main objectives of the~~ new guidance ~~include aligning hedge accounting with companies’ risk management strategies~~modifies the credit loss model to measure and ~~increasing disclosure transparency regarding both the scope and results of hedging programs.~~recognize credit losses based upon expected losses rather than incurred losses. The Company ~~early~~ adopted ~~the new~~this guidance ~~in the third quarter~~as of ~~fiscal 2018. This new guidance~~April 1, 2020. The adoption did not have a material impact on the Company’s consolidated ~~financial statements.~~balance sheets, statements of operations or statements of cash flows.

~~Pension Costs~~

Note 2: Assets Held for Sale

~~In March 2017,~~

On November 2, 2020, the ~~FASB issued new guidance related~~Company signed a definitive agreement to ~~the income statement presentation of pension and postretirement costs. This guidance requires companies~~sell its liquid-cooled automotive business to continue to present the service cost component of net periodic benefit cost within the same financial statement line item as other employee compensation costs; however, other components of net benefit cost are required to be presented outside of results from operations.Dana Incorporated. The Company ~~adopted~~expects this ~~guidance, on a retrospective basis, beginning in its~~transaction will close during the first quarter of fiscal ~~2018.~~2022, subject to regulatory approvals and other customary closing conditions. The Company does not expect significant net cash proceeds from this transaction based upon the one dollar selling price and adjustments for cash, debt, and working capital, as defined within the definitive agreement. The Company reports financial results of the liquid-cooled automotive business within its Automotive segment.

In connection with the pending sale, the Company classified the liquid-cooled automotive business (the “disposal group”) as held for sale beginning on November 2, 2020 and ceased depreciating long-lived assets in the disposal group. The Company evaluated the disposal group and determined that it did not qualify as a discontinued operation for reporting purposes under U.S. GAAP. As part of its evaluation, the Company considered anticipated future sales to automotive and light vehicle customers as well as sales to other vehicular customers with similar product offerings and using similar heat-transfer technology within the Automotive and Heavy Duty Equipment segments. In addition, the Company will continue to operate in the same major geographical areas as it does today.

Upon classification as held for sale, the Company compared the disposal group’s carrying value with its fair value, less costs to sell. Through this review and based upon the selling price, the Company identified an implied loss in excess of the carrying value of the disposal group’s long-lived assets, which consist entirely of property, plant and equipment and right of use lease assets. As a result, the Company recorded ~~$0.6~~a non-cash impairment charge of $132.7 million and $2.2 million of net periodic benefit cost within other income and expense for the three and nine months ended December 31, 2017, respectively, and reclassified the net periodic benefit cost, exclusive of service cost, to other income and expense for the comparative periods in fiscal 2017. For the three and nine months ended December 31, 2016, the Company reclassified net periodic benefit cost totaling $0.7 million ($0.3 million from cost of sales and $0.4 million from selling, general and administrative (“SG&A”) expenses) and $2.2 million ($0.9 million from cost of sales and $1.3 million from SG&A expenses), respectively, to other income and expense.

~~Table of Contents~~

~~MODINE MANUFACTURING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In millions, except per share amounts)~~

~~(unaudited)~~

~~Share-based Compensation~~

In March 2016, the FASB issued new guidance to simplify several aspects of accounting for share-based payment transactions. The Company adopted this guidance beginning in its first quarter of fiscal 2018. The Company elected to account for forfeitures in the period in which they occur and recorded a cumulative-effect adjustment to equity. In addition, the Company prospectively adopted the guidance requiring all excess tax benefits or deficiencies to be recognized as income tax expense or benefit when share-based awards are settled. The provisions of this guidance did not have a material impact on the Company's consolidated financial statements. As a result of adopting this new guidance, the Company recorded a $0.4 million increase to both deferred tax assets and equity as of April 1, 2017.

~~Leases~~

In February 2016, the FASB issued new comprehensive lease accounting guidance that supersedes existing lease accounting guidance. Upon adoption of this new guidance, the Company will be required to recognize most leases on its balance sheet. This guidance is effective for the Company’s first quarter of fiscal 2020. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.

~~Revenue Recognition~~

In May 2014, the FASB issued new guidance that outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of the new guidance is that companies are to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also includes a cohesive set of disclosure requirements intended to provide users of financial statements with comprehensive information about revenue arising from contracts with customers. This new guidance will be effective for the Company’s first quarter of fiscal 2019, and the Company plans to adopt it using a modified-retrospective transition method.

The Company is currently in the process of assessing customer contracts and evaluating contractual provisions that may result in a change in the timing of revenue recognized in comparison with current guidance. Under current guidance, the Company generally recognizes revenue when products are shipped and risk of loss has transferred to the customer. The Company is evaluating whether provisions in certain customer contracts may provide an enforceable right to payment for customized products, which may require revenue recognition prior to the product being shipped to the customer. In addition, the Company is evaluating pricing provisions contained in certain of its customer contracts to determine the appropriate timing of revenue recognition based upon the new guidance. The Company continues to evaluate the impact this new guidance will have on its consolidated financial statements and its revenue recognition policies.

~~Note 2:~~

~~Acquisition of Luvata HTS~~

On November 30, 2016, the Company completed its acquisition of a 100 percent ownership interest in the Luvata HTS business for consideration totaling $415.6 million ($388.2 million, net of cash acquired). Operating as Modine’s Commercial and Industrial Solutions (“CIS”) segment, this business is a leading global supplier of coils, coolers and coatings to the heating, ventilation, air conditioning, and refrigeration industry. For the nine months ended December 31, 2017, the Company included $451.6 million of net sales and operating income of $14.3 million within its consolidated statement of operations attributable to CIS operations. For the nine months ended December 31, 2016, the Company included $34.7 million of net sales and an operating loss of $0.3 million attributable to one month of CIS operations.

~~Table of Contents~~

~~MODINE MANUFACTURING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In millions, except per share amounts)~~

~~(unaudited)~~

The Company has completed the purchase price allocation for its acquisition of Luvata HTS. During the first and second quarters of fiscal 2018, the Company recorded measurement-period adjustments which resulted in an increase in goodwill totaling $1.3 million, primarily due to increases to income tax reserves and changes in liabilities for product warranties.

~~The Company’s allocation of the purchase price for its acquisition of Luvata HTS is as follows:~~

Cash and cash equivalents $ 27.4
Trade accounts receivable 86.1
Inventories 55.0
Property, plant and equipment 120.4
Intangible assets 130.2
Goodwill 151.9
Other assets 39.1
Accounts payable (73.7 )
Accrued compensation and employee benefits (24.3 )
Deferred income taxes (39.5 )
Pensions (14.3 )
Other liabilities (42.7 )
Purchase price $ 415.6

The following unaudited supplemental pro forma information presents the Company’s consolidated results of operations as though the acquisition of Luvata HTS had occurred at the beginning of fiscal 2016. This pro forma financial information is presented for illustrative purposes only and is not considered to be indicative of the operating results that would have been achieved had the acquisition been completed as of the date indicated.

Three months ended
December 31, 2016

Nine months ended
December 31, 2016

Net sales $ 439.5 $ 1,393.3
Net earnings attributable to Modine 8.5 26.8
Net earnings per share attributable to Modine shareholders:
Basic $ 0.17 $ 0.54
Diluted 0.17 0.53

The supplemental pro forma financial information includes adjustments for: (i) quarterly amortization and depreciation expense totaling $3.2 million for acquired tangible and intangible assets, (ii) estimated quarterly interest expense of $3.5 million resulting from acquisition-related borrowings, and (iii) the estimated income tax impacts related to the pro forma adjustments, considering the statutory tax rates within the applicable jurisdictions. In addition, the pro forma financial information assumes that both $8.6 million of fiscal 2017 acquisition-related transaction costs and a $2.9 million inventory purchase accounting adjustment recorded induring the third quarter of fiscal ~~2017 were incurred~~2021 to reduce the net carrying value of the disposal group’s long-lived assets to 0. Also during the third quarter of fiscal ~~2016. The pro forma financial information does~~2021, the Company recorded an impairment charge of $1.7 million within the Automotive segment related to equipment that will not ~~reflect achieved or~~convey to the buyer as part of the sale transaction and is not expected ~~cost and revenue synergies.~~to be used within the Company’s other businesses. These charges are reported within the impairment charges line on the consolidated statements of operations.

Table of Contents

~~MODINE MANUFACTURING COMPANY~~The Company separately classified the assets and liabilities of the liquid-cooled automotive business as held for sale on the December 31, 2020 consolidated balance sheet. The assets and liabilities held for sale are classified as current as the transaction is expected to close during the first quarter of fiscal 2022. The major classes of assets and liabilities held for sale were as follows:

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

	December 31, 2020
ASSETS
Cash and cash equivalents	$	5.3
Trade accounts receivables - net		51.7
Inventories		17.7
Other current assets		11.6
Property, plant and equipment - net		132.0
Other noncurrent assets		7.3
Impairment of carrying value		(132.7	)
Total assets held for sale	$	92.9

LIABILITIES
Short-term debt	$	6.0
Accounts payable		36.9
Accrued compensation and employee benefits		10.2
Other current liabilities		12.7
Pensions		12.4
Other noncurrent liabilities		5.0
Total liabilities held for sale	$	83.2

~~(In millions, except per share amounts)~~

~~(unaudited)~~The Company will reassess the disposal group’s fair value less costs to sell at each reporting period until the transaction is completed. The Company expects to record an additional loss on sale of approximately $15.0 million to $25.0 million upon transaction completion. The loss on sale recorded will be impacted by changes in working capital, costs to sell, and net actuarial losses in accumulated other comprehensive loss related to the disposal group’s pension plans. It is possible that the loss on sale recorded could differ materially from the Company’s estimate.

Table of Contents

Note 3: Revenue Recognition

Disaggregation of Revenue

The table below presents revenue for each of the Company’s business segments, Commercial and Industrial Solutions (“CIS”), Building HVAC Systems (“BHVAC”), Heavy Duty Equipment (“HDE”) and Automotive. Each segment’s revenue is disaggregated by primary end market, by geographic location and based upon the timing of revenue recognition, and includes inter-segment sales.

Effective April 1, 2020, the Company realigned its segment structure. The segment revenue information presented in the table below for fiscal 2020 has been recast to conform to the fiscal 2021 presentation. See Note 20 for additional information regarding the Company’s operating segments.

	Three months ended December 31, 2020										Three months ended December 31, 2019
	CIS		BHVAC		HDE		Automotive		Segment Total		CIS		BHVAC		HDE		Automotive		Segment Total
Primary end market:
Commercial HVAC&R	$	103.8	$	56.5	$	0	$	0	$	160.3	$	104.3	$	53.1	$	0	$	0	$	157.4
Data center cooling		11.8		12.2		0		0		24.0		30.2		11.2		0		-		41.4
Industrial cooling		12.0		0		0		0		12.0		10.4		0		0		0		10.4
Commercial vehicle		0		0		67.0		5.5		72.5		0		0		63.2		5.1		68.3
Off-highway		0		0		68.3		0.8		69.1		0		0		51.6		3.5		55.1
Automotive and light vehicle		0		0		28.8		105.4		134.2		0		0		27.8		98.5		126.3
Other		1.4		0		21.5		2.2		25.1		2.6		0.6		22.3		3.4		28.9
Net sales	$	129.0	$	68.7	$	185.6	$	113.9	$	497.2	$	147.5	$	64.9	$	164.9	$	110.5	$	487.8

Geographic location:
Americas	$	66.4	$	45.0	$	107.9	$	14.8	$	234.1	$	78.1	$	43.2	$	106.2	$	17.2	$	244.7
Europe		52.4		23.7		35.0		80.9		192.0		57.6		21.7		29.2		77.1		185.6
Asia		10.2		0		42.7		18.2		71.1		11.8		0		29.5		16.2		57.5
Net sales	$	129.0	$	68.7	$	185.6	$	113.9	$	497.2	$	147.5	$	64.9	$	164.9	$	110.5	$	487.8

Timing of revenue recognition:
Products transferred at a point in time	$	119.5	$	68.7	$	177.6	$	113.9	$	479.7	$	119.3	$	64.9	$	156.8	$	110.5	$	451.5
Products transferred over time		9.5		0		8.0		0		17.5		28.2		0		8.1		0		36.3
Net sales	$	129.0	$	68.7	$	185.6	$	113.9	$	497.2	$	147.5	$	64.9	$	164.9	$	110.5	$	487.8

	Nine months ended December 31, 2020										Nine months ended December 31, 2019
	CIS		BHVAC		HDE		Automotive		Segment Total		CIS		BHVAC		HDE		Automotive		Segment Total
Primary end market:
Commercial HVAC&R	$	303.0	$	137.1	$	0	$	0	$	440.1	$	351.1	$	137.2	$	0	$	0	$	488.3
Data center cooling		40.0		40.8		0		0		80.8		81.1		31.3		0		0		112.4
Industrial cooling		36.6		0		0		0		36.6		33.5		0		0		0		33.5
Commercial vehicle		0		0		174.8		11.4		186.2		0		0		232.0		16.8		248.8
Off-highway		0		0		179.8		2.3		182.1		0		0		178.5		10.1		188.6
Automotive and light vehicle		0		0		69.8		257.4		327.2		0		0		85.0		305.6		390.6
Other		6.0		0.3		50.3		14.8		71.4		7.3		1.4		73.0		7.3		89.0
Net sales	$	385.6	$	178.2	$	474.7	$	285.9	$	1,324.4	$	473.0	$	169.9	$	568.5	$	339.8	$	1,551.2

Geographic location:
Americas	$	193.9	$	109.5	$	274.4	$	39.2	$	617.0	$	261.2	$	110.4	$	369.7	$	52.2	$	793.5
Europe		156.3		68.7		91.2		195.9		512.1		173.7		59.5		107.3		242.7		583.2
Asia		35.4		0		109.1		50.8		195.3		38.1		0		91.5		44.9		174.5
Net sales	$	385.6	$	178.2	$	474.7	$	285.9	$	1,324.4	$	473.0	$	169.9	$	568.5	$	339.8	$	1,551.2

Timing of revenue recognition:
Products transferred at a point in time	$	351.7	$	178.2	$	456.3	$	285.9	$	1,272.1	$	395.6	$	169.9	$	544.4	$	339.8	$	1,449.7
Products transferred over time		33.9		0		18.4		0		52.3		77.4		0		24.1		0		101.5
Net sales	$	385.6	$	178.2	$	474.7	$	285.9	$	1,324.4	$	473.0	$	169.9	$	568.5	$	339.8	$	1,551.2

Table of Contents

Contract Balances

Contract assets and contract liabilities from contracts with customers were as follows:

	December 31, 2020		March 31, 2020
Contract assets	$	5.1	$	21.7
Contract liabilities		6.0		5.6

Contract assets, included within other current assets in the consolidated balance sheets, primarily consist of capitalized costs related to customer-owned tooling contracts, wherein the customer has guaranteed reimbursement, and assets recorded for revenue recognized over time, which represent the Company’s rights to consideration for work completed but not yet billed. The $16.6 million decrease in contract assets during the first nine months of fiscal 2021 primarily resulted from a decrease in contract assets for revenue recognized over time. In addition, the March 31, 2020 balance included $7.2 million of contract assets of the liquid-cooled automotive business, which have since been classified as held for sale. See Note 2 for additional information regarding assets and liabilities held for sale as of December 31, 2020.

Contract liabilities, included within other current liabilities in the consolidated balance sheets, consist of payments received in advance of satisfying performance obligations under customer contracts, including contracts for customer-owned tooling. The $0.4 million increase in contract liabilities during the first nine months of fiscal 2021 was primarily related to customer contracts for which payment was received in advance of the Company’s satisfaction of performance obligations. The March 31, 2020 balance included $1.3 million of contract liabilities of the liquid-cooled automotive business, which have since been classified as held for sale.

~~Note 3:~~

Note 4: Fair Value Measurements

Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Fair value measurements are classified under the following hierarchy:

·●

Level 1 – Quoted prices for identical instruments in active markets.

·●

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.

·●

Level 3 – Model-derived valuations in which one or more significant inputs are not observable.

When available, the Company uses quoted market prices to determine fair value and classifies such measurements as Level 1. In some cases, where market prices are not available, the Company uses observable market-based inputs to calculate fair value, in which case the measurements are classified as Level 2. If quoted or observable market prices are not available, the Company determines fair value based upon valuation models that use, where possible, market-based data such as interest rates, yield curves or currency rates. These measurements are classified as Level 3.

The carrying values of cash, ~~and~~ cash equivalents, restricted cash, short-term investments, trade accounts receivable, accounts payable, and short-term debt approximate fair value due to the short-term nature of these instruments. In addition, the Company assesses the fair value of a disposal group for each reporting period it is held for sale. See Note 2 for additional information regarding assets held for sale.

The Company holds ~~trading securities~~investments in deferred compensation trusts to fund obligations under certain non-qualified deferred compensation plans. The ~~securities’~~Company records the fair ~~values, which are recorded as~~value of these investments within other noncurrent assets ~~are determined based upon quoted prices from active markets and classified~~on its consolidated balance sheets. The Company classifies money market investments held by the trusts within Level 2 of the valuation hierarchy. The Company classifies all other investments held by the trusts within Level 1 of the valuation ~~hierarchy.~~hierarchy, as it uses quoted market prices to determine the investments’ fair value. The Company’s deferred compensation obligations, which are recorded as other noncurrent liabilities, are recorded at the fair values of the investments held by the ~~trusts. The~~trust. At both December 31, 2020 and March 31, 2020, the fair values of the investments and obligations for the Company’s ~~trading securities and~~ deferred compensation ~~obligations~~plans each totaled ~~$5.7~~$3.8 million ~~and $5.0 million at December 31, 2017 and March 31, 2017, respectively.~~. The fair value of the Company’s long-term debt is disclosed in Note ~~14.~~17.

~~Note 4:~~

~~Pensions~~

~~Pension cost included the following components:~~

Three months ended
December 31,

Nine months ended
December 31,

2017 2016 2017 2016
Service cost $ 0.1 $ 0.1 $ 0.4 $ 0.4
Interest cost 2.5 2.5 7.4 7.3
Expected return on plan assets (2.9 ) (3.1 ) (8.9 ) (9.2 )
Amortization of unrecognized net loss 1.4 1.4 4.2 4.2
Curtailment gain (a) (0.3 ) - (0.3 ) -
Net periodic benefit cost $ 0.8 $ 0.9 $ 2.8 $ 2.7

~~(a)~~

During the third quarter of fiscal 2018, the Company recorded a curtailment gain as a result of the closure of a manufacturing facility in Austria (CIS segment). See Note 6 for additional information regarding the closure of this facility.

Table of Contents

~~MODINE MANUFACTURING COMPANY~~Note 5: Pensions

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In millions, except per share amounts)~~Pension cost included the following components:

~~(unaudited)~~

	Three months ended December 31,						Nine months ended December 31,
	2020			2019			2020			2019
Service cost	$	0.1		$	0.1		$	0.3		$	0.3
Interest cost		2.0			2.3			5.9			6.8
Expected return on plan assets		(2.9	)		(3.0	)		(8.6	)		(8.9	)
Amortization of unrecognized net loss		1.7			1.5			5.2			4.5
Net periodic benefit cost	$	0.9		$	0.9		$	2.8		$	2.7

During the nine months ended December 31, ~~2017~~2020 and ~~2016,~~2019, the Company contributed ~~$11.1~~$8.8 million and ~~$6.3~~$2.6 million, respectively, to its U.S. pension plans. The Company has deferred certain contributions to its U.S. pension plans during fiscal 2021, as permitted by the Coronavirus Aid, Relief and Economic Security Act. The Company expects to contribute approximately $10.0 million to its U.S. pension plans during the fourth quarter of fiscal 2021.

~~Note 5:~~

Note 6: Stock-Based Compensation

The Company’s stock-based incentive programs consist of the following: (1) a long-term incentive ~~compensation program~~plan (“LTIP”) for officers and other executives that consists of stock awards, stock options, and performance-based stock awards granted for retention and performance, (2) a discretionary equity program for other management and key employees, and (3) stock awards for non-employee directors.

The Company calculates compensation expense based upon the fair value of the instruments at the time of grant and subsequently recognizes expense ratably over the respective vesting periods of the stock-based awards. The Company recognized stock-based compensation expense of ~~$2.2~~$2.1 million and ~~$2.6~~$0.8 million for the three months ended December ~~31, 2017~~31,2020 and ~~2016,~~2019, respectively. The Company recognized stock-based compensation expense of ~~$7.6~~$4.2 million and ~~$6.1~~$5.2 million for the nine months ended ~~December~~December 31, ~~2017~~2020 and ~~2016,~~2019, respectively. ~~The performance component~~

Table of awards granted under the Company’s long-term incentive plan during the first quarter of fiscal 2018 is based upon both a target three-year average return on average capital employed and a target three-year average revenue growth at the end of the three-year performance period.Contents

The fair value of stock-based compensation awards granted during the nine months ended December 31, ~~2017~~2020 and ~~2016~~2019 were as follows:

	Nine months ended December 31,
	2020				2019
	Shares		Fair Value Per Award		Shares		Fair Value Per Award
Stock options		0.4	$	3.46		0.3	$	5.56
Restricted stock awards		0.6	$	8.34		0.3	$	13.26
Performance stock awards (a)		0		0		0.3	$	13.26
Unrestricted stock awards		0.2	$	5.21		0.1	$	14.50

Nine months ended December 31,
2017 2016
Shares
Fair Value
Per Award
Shares
Fair Value
Per Award

Stock options 0.2 $ 7.30 0.3 $ 4.60
Restricted stock awards 0.2 $ 15.90 0.3 $ 10.03
Performance stock awards 0.2 $ 15.90 0.3 $ 10.00
Unrestricted stock awards 0.1 $ 16.95 0.1 $ 9.38

(a)

In lieu of performance-based stock awards, the Company granted performance cash awards to the LTIP participants in fiscal 2021. The performance metrics for the cash awards are based upon a target three-year average cash flow return on invested capital and a target three-year average revenue growth at the end of the three-year performance period ending March 31, 2023. These performance metrics are the same as the metrics for the fiscal 2020 and 2019 performance-based stock awards.

The Company used the following assumptions in determining fair value for stock options:

	Nine months ended December 31,
	2020			2019
Expected life of awards in years		6.1			6.3
Risk-free interest rate		0.4	%		2.2	%
Expected volatility of the Company's stock		54.1	%		39.2	%
Expected dividend yield on the Company's stock		0.0	%		0.0	%

Nine months ended December 31,
2017 2016
Expected life of awards in years 6.4 6.4
Risk-free interest rate 1.9 % 1.4 %
Expected volatility of the Company's stock 44.3 % 45.5 %
Expected dividend yield on the Company's stock 0.0 % 0.0 %

~~Table of Contents~~

~~MODINE MANUFACTURING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In millions, except per share amounts)~~

~~(unaudited)~~

As of December 31, ~~2017,~~2020, unrecognized compensation expense related to non-vested stock-based compensation awards, which will be amortized over the remaining service periods, was as follows:

	Unrecognized Compensation Expense		Weighted-Average Remaining Service Period in Years
Stock options	$	2.3		3.0
Restricted stock awards		8.1		2.9
Performance stock awards		0.6		1.2
Total	$	11.0		2.8

Unrecognized
Compensation
Expense

Weighted-Average
Remaining Service
Period in Years

Stock options $ 2.6 2.7
Restricted stock awards 6.1 2.7
Performance stock awards 5.2 1.9
Total $ 13.9 2.4

Table of Contents

~~Note 6:~~

Note 7: Restructuring Activities

During ~~the third quarter of~~ fiscal ~~2018,~~2021, the Company ~~ceased~~transferred production atfrom its ~~Gailtal, Austria~~ manufacturing facility ~~primarily~~in Zhongshan, China to ~~reduce excess capacity and lower~~another CIS segment manufacturing ~~costs~~facility in ~~Europe.~~China. As a result of this ~~facility closure,~~plant consolidation, the Company recorded ~~$8.2~~$3.1 million of ~~restructuring~~severance expenses ~~within the CIS segment,~~ during the ~~third quarter of fiscal 2018. These restructuring expenses primarily related to employee severance and related benefits. Also~~nine months ended December 31, 2020. In addition, the Company is in the ~~third quarter~~process of ~~fiscal 2018, the Company recorded a $1.3 million asset impairment charge to reduce the carrying value of the Austrian facility~~transferring product lines to its ~~estimated fair value, less costs~~CIS manufacturing facility in Mexico.

The Company also implemented targeted headcount reductions in fiscal 2021, the most significant of which were in North America in the HDE and CIS segments. The headcount reductions were in response to ~~sell.~~lower market demand and supported the Company’s objective of reducing operational and SG&A cost structures.

The Company’s restructuring actions during the first nine months of fiscal ~~2018 also included~~2020 consisted primarily of targeted headcount reductions and plant consolidation ~~activities~~activities. The fiscal 2020 headcount reductions were primarily in Europe within the Automotive segment and in the Americas ~~segment and targeted headcount reductions in the Americas and Europe segments. In addition, the Company transferred production of certain product lines to Hungary from other manufacturing facilities~~ within the ~~Europe segment, primarily to expand its low-cost country footprint in Europe and to ensure continued competitiveness in the region.~~

~~The Company’s restructuring actions during the first nine months of fiscal 2017 primarily consisted of plant consolidation activities and targeted headcount reductions in the Americas~~HDE segment.

Restructuring and repositioning expenses were as follows:

	Three months ended December 31,				Nine months ended December 31,
	2020		2019		2020		2019
Employee severance and related benefits	$	0.5	$	2.2	$	6.2	$	5.5
Other restructuring and repositioning expenses		0.4		0.4		0.8		1.2
Total	$	0.9	$	2.6	$	7.0	$	6.7

Three months ended
December 31,

Nine months ended
December 31,

2017 2016 2017 2016
Employee severance and related benefits $ 8.6 $ 0.1 $ 9.2 $ 2.2
Other restructuring and repositioning expenses 0.8 1.5 2.3 3.8
Total $ 9.4 $ 1.6 $ 11.5 $ 6.0

Other restructuring and repositioning expenses primarily consist of equipment ~~transfer~~transfers and plant consolidation costs.

~~Table of Contents~~

~~MODINE MANUFACTURING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In millions, except per share amounts)~~

~~(unaudited)~~

The Company accrues severance in accordance with its written plans, procedures, and relevant statutory requirements. Changes in accrued severance were as follows:

	Three months ended December 31,
	2020			2019
Beginning balance	$	5.8		$	7.4
Additions		0.5			2.2
Payments		(2.5	)		(5.0	)
Reclassified as held for sale		(0.8	)		0
Effect of exchange rate changes		0.2			0.1
Ending balance	$	3.2		$	4.7

	Nine months ended December 31,
	2020			2019
Beginning balance	$	5.0		$	10.0
Additions		6.2			5.5
Payments		(7.7	)		(10.7	)
Reclassified as held for sale		(0.8	)		0
Effect of exchange rate changes		0.5			(0.1	)
Ending balance	$	3.2		$	4.7

Three months ended December 31,
2017 2016
Beginning balance $ 3.0 $ 9.2
Additions 8.6 0.1
Payments (0.6 ) (1.3 )
Effect of exchange rate changes 0.2 (0.5 )
Ending balance $ 11.2 $ 7.5

Nine months ended December 31,
2017 2016
Beginning balance $ 6.5 $ 14.7
Additions 9.2 2.2
Payments (5.1 ) (8.5 )
Effect of exchange rate changes 0.6 (0.9 )
Ending balance $ 11.2 $ 7.5

~~During~~In January 2021, the ~~second~~Company eliminated the Vice President, CIS and Chief Operating Officer senior executive position. As a result, the Company expects to record approximately $1.0 million of severance-related expenses during the fourth quarter of fiscal ~~2017, the Company sold a manufacturing facility in its Europe segment for cash proceeds~~2021.

Table of ~~$4.3 million and recognized a gain of $1.2 million as a result.~~Contents

~~Note 7:~~

Note 8: Other Income and Expense

Other income and expense consisted of the following:

Three months ended
December 31,

Nine months ended
December 31,

2017 2016 2017 2016
Equity in earnings of non-consolidated affiliate $ 0.1 $ - $ - $ 0.1
Interest income 0.1 0.1 0.3 0.3
Foreign currency transactions (a) 0.1 (0.4 ) (0.4 ) (1.0 )
Net periodic benefit cost (b) (0.6 ) (0.7 ) (2.2 ) (2.2 )
Total other expense - net $ (0.3 ) $ (1.0 ) $ (2.3 ) $ (2.8 )

	Three months ended December 31,						Nine months ended December 31,
	2020			2019			2020			2019
Interest income	$	0.1		$	0.1		$	0.4		$	0.3
Foreign currency transactions (a)		0.2			0.7			0.9			(0.7	)
Net periodic benefit cost (b)		(0.8	)		(0.7	)		(2.3	)		(2.1	)
Equity in earnings of non-consolidated affiliate (c)		0			0			0			0.2
Total other (expense) income - net	$	(0.5	)	$	0.1		$	(1.0	)	$	(2.3	)

(a)

Foreign currency transactions primarily consist of foreign currency transaction gains and losses on the re-measurement or settlement of foreign currency-denominated assets and liabilities, including intercompany loans and transactions denominated in a foreign currency, along with gains and losses on certain foreign currency exchange ~~contracts.~~contracts.

(b)

~~Represents net~~Net periodic benefit ~~cost, exclusive of service~~ cost for the Company’s pension and postretirement ~~plans.~~plans is exclusive of service cost.

(c)	The Company sold its ownership interest in NEX during the second quarter of fiscal 2020. See Note 1 for additional information.

Table of Contents

~~MODINE MANUFACTURING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In millions, except per share amounts)~~

~~(unaudited)~~Note 9: Income Taxes

~~Note 8:~~

~~Income Taxes~~

The Company’s effective tax rate for the three months ended December 31, ~~2017~~2020 and ~~2016~~2019 was ~~482.2~~(71.7) percent and ~~(58.3)~~63.0 percent, respectively. The Company’s effective tax rate for the nine months ended December 31, ~~2017~~2020 and ~~2016~~2019 was ~~86.6~~(95.7) percent and ~~16.0~~65.4 percent, respectively. The effective tax rates for the fiscal ~~2018~~2021 periods ~~are higher than in the prior year, primarily due to third quarter~~were largely driven by both significant impairment charges ~~totaling $35.7 million~~and income tax charges related to valuation allowances. See Note 2 for information regarding the ~~recently-enacted~~$134.4 million of impairment charges recorded during the third quarter of fiscal 2021. The income tax ~~reform legislation~~benefits associated with these impairment charges totaled $24.4 million and $13.3 million in the U.S. ~~Other factors that impacted the Company’s effective tax rate for the three~~ and ~~nine months ended December 31, 2017, as compared with the prior-year periods, were income tax benefits resulting from a development tax credit~~ in ~~Hungary, changes in the valuation allowances related to~~ certain foreign jurisdictions, respectively, and ~~changes~~increased the deferred tax assets in the ~~mix~~applicable jurisdictions. The deferred tax assets, in turn, were evaluated for realizability as of ~~foreign~~December 31, 2020, as further described below.

In the fiscal 2020 periods, the effective tax rates were negatively impacted by income tax charges recorded during the third quarter of fiscal 2020. A $3.0 million income tax charge was recorded related to a valuation allowance on deferred tax assets in the U.S. and ~~domestic earnings.~~a net income tax charge totaling $2.7 million was recorded in connection with legal entity restructuring completed in preparation of the potential sale of the liquid-cooled automotive business. Partially offsetting the negative impacts of the income tax charges, the effective tax rates for the fiscal 2020 periods were favorably impacted by the recognition of a tax incentive in Italy during the third quarter and by the release of an unrecognized tax benefit during the second quarter.

The Company records valuation allowances against its net deferred tax assets to the extent it determines it is more likely than not that such assets will not be realized in the future. Each quarter, the Company evaluates the probability that its deferred tax assets will be realized and determines whether valuation allowances or adjustments thereto are needed. This determination involves judgement and the use of significant estimates and assumptions, including expectations of future taxable income and tax planning strategies. In addition, the ~~effective tax rate for~~Company considers the ~~nine months ended~~duration of statutory carryforward periods and historical financial results.

Based upon its analysis as of December 31, ~~2017 benefitted from~~2020, the Company determined it was more likely than not that its deferred tax assets in the U.S. and in certain foreign jurisdictions will not be realized in the future. As a ~~$1.8~~result, the Company recorded income tax charges totaling $116.5 million ~~reduction~~ in ~~unrecognized~~the third quarter of fiscal 2021 to increase the valuation allowance on deferred tax ~~benefits~~assets in the U.S. ($103.3 million) and in certain foreign jurisdictions ($13.2 million). Combined with the $6.6 million income tax charge recorded during the second quarter of fiscal ~~2018~~2021, the Company has now established a full valuation allowance on its U.S. deferred tax assets. Based upon the Company’s projections of future taxable income at the time, the Company previously believed it was more likely than not that ~~resulted from a lapse in statutes of limitations. The development~~these deferred tax ~~credit in Hungary resulted in a tax benefit of $2.2 million and $7.9 million~~assets would be realized in the ~~three and nine months ended December 31, 2017, respectively.~~

~~On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”).~~future. The Tax Act includes broad and complex changes to the U.S. tax code, including (i) a reduction in the U.S. federal corporate tax rate from 35 percent to 21 percent effective January 1, 2018, and (ii) a transition tax on certain unrepatriated earnings of foreign subsidiaries. For fiscal 2018, the Company will record its income tax provision based on a blended U.S. statutory tax rate of 31.5 percent, which is based on a proration of the applicable tax rates before and after the effective date of the Tax Act. The statutory tax rate of 21 percent will applyCompany’s analysis for ~~fiscal 2019 and beyond.~~

The Tax Act also puts in place new tax laws that may impact the Company’s taxable income beginning in fiscal 2019, which include, but are not limited to (i) creating a base erosion anti-abuse tax (BEAT), which is a new minimum tax, (ii) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries, (iii) adding a new provision designed to tax global intangible low taxed income (GILTI), (iv) adding a provision that could limit the amount of deductible interest expense, and (v) limiting the deductibility of certain executive compensation.

Shortly after the Tax Act was enacted, the SEC issued accounting guidance, which provides a one-year measurement period during which a company may complete its accounting for the impacts of the Tax Act. To the extent a company’s accounting for certain income tax effects of the Tax Act is incomplete, the company may determine a reasonable estimate for those effects and record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply the provisions of the tax laws that were in effect immediately prior to the Tax Act being enacted.

~~During~~ the third quarter of fiscal ~~2018,~~2021 included consideration of the impairment charges recorded during the quarter in connection with the pending sale of the liquid-cooled automotive business; see Note 2 for additional information. These impairment charges contributed to the Company ~~recorded provisional discrete tax charges~~entering into a three-year cumulative loss position in the U.S. and in certain foreign jurisdictions as of ~~$35.7 million related to the Tax Act.~~December 31, 2020. The Company ~~adjusted its U.S.~~also considered year-to-date taxable income, which has been negatively impacted by the COVID-19 pandemic and lower sales to data center cooling customers, and current future projections of taxable income in the relevant jurisdictions. After considering both the positive and negative evidence, the Company determined it is more likely than not that these deferred tax assets by $20.7 million due to the reduction in the U.S. federal corporate tax rate. This net reduction in deferred tax assets also included the estimated impact on the Company’s net state deferred tax assets. In addition, the Company recorded a $15.0 million charge for the transition tax. The Company expects to pay this estimated $15.0 million tax liability over the next eight years, beginning with a paymentwill not be realized.

As of ~~approximately $1.0 million in fiscal 2019.~~

The Company is also analyzing other provisions of the Tax Act to determine if they will impact the Company’s effective tax rate in fiscal 2018 or in the future. These provisions include BEAT, as described above, the elimination of U.S. federal income taxes on dividends from foreign subsidiaries, the new limits on the deductibility of interest expense and executive compensation, and the state tax implications of the Tax Act, including the impact of the transition tax and the impact on the realizability of tax attributes and valuation allowances.

The Tax Act includes a provision designed to tax GILTI, as described above, starting in fiscal 2019. The Company has elected to record the tax effects of the GILTI provision as a period expense in the applicable tax year. As a result, the Company does not expect GILTI to impact its fiscal 2018 income tax provision.

~~Table of Contents~~

~~MODINE MANUFACTURING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In millions, except per share amounts)~~

~~(unaudited)~~

For various reasons, the Company has not completed its accounting for the income tax effects of certain elements of the Tax Act. In regards to the reduction in the U.S. corporate tax rate, the Company is continuing to analyze the temporary differences that existed on the date of enactment, and the temporary differences originating in the current fiscal year. In regards to the transition tax, the Company is awaiting further interpretative guidance, continuing to assess available tax methods and elections, and continuing to gather additional information to more precisely compute the amount of this tax. Previously, the Company’s practice and intention was to reinvest, with certain insignificant exceptions, the earnings of its non-U.S. subsidiaries outside of the U.S. As a result, the Company did not record U.S. deferred income taxes or foreign withholding taxes for these earnings. The Company is currently analyzing its global working capital requirements and the potential tax liabilities that would be incurred if the non-U.S. subsidiaries distribute cash to the U.S. parent, which include local country withholding tax and potential U.S. state taxes. ~~The Company expects to complete its analysis of the accounting guidance related to the Tax Act and its evaluation of the impacts of the Tax Act in the~~ ~~fourth quarter of fiscal 2018 or in early fiscal 2019.~~

At December 31, ~~2017,~~2020, valuation allowances against deferred tax assets in the U.S. and in certain foreign jurisdictions totaled ~~$47.4~~$121.7 million and ~~valuation allowances against certain U.S. deferred tax assets totaled $7.0~~$55.5 million as it is more likely than not these assets will not be realized based upon historical financial results. The $1.2 million increase in the U.S. valuation allowances during the three months ended December 31, 2017 relates mainly to adjustments made to state tax attributes as a result of tax reform., respectively. The Company will ~~continue to provide a~~maintain the valuation ~~allowance against its net deferred tax assets~~allowances in each ~~of the~~ applicable ~~jurisdictions~~tax jurisdiction until ~~the need for a valuation allowance is eliminated. The need for a valuation allowance is eliminated when the Company~~it determines it is more likely than not the deferred tax assets will be ~~realized. The Company may release~~realized, thereby eliminating the need for a valuation ~~allowance (approximately $3.0 million)~~allowance.

Table of Contents

As further discussed in aNote 18, the COVID-19 pandemic has resulted in risks and uncertainties to our business. Future events or circumstances, such as lower taxable income or unfavorable changes in the financial outlook of the Company’s operations in certain foreign ~~jurisdiction during~~jurisdictions, could necessitate the ~~fourth quarter~~establishment of ~~fiscal 2018 or in fiscal 2019.~~further valuation allowances.

Accounting policies for interim reporting require the Company to adjust its effective tax rate each quarter to be consistent with its estimated annual effective tax rate. Under this methodology, the Company applies its estimated annual income tax rate to its year-to-date ordinary earnings to derive its income tax provision each quarter. The Company records the tax impacts of certain significant, unusual or infrequently occurring items in the period in which they occur. The Company excluded the impact of its operations in certain foreign locations from the overall effective tax rate methodology and recorded them discretely based upon year-to-date results because the Company anticipates net operating losses for the full fiscal year in these jurisdictions. The Company does not anticipate a significant change in unrecognized tax benefits during the remainder of fiscal ~~2018.~~2021.

~~Table of Contents~~

Note 10: Earnings Per Share

~~MODINE MANUFACTURING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In millions, except per share amounts)~~

~~(unaudited)~~

~~Note 9:~~

~~Earnings Per Share~~

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

	Three months ended December 31,					Nine months ended December 31,
	2020			2019		2020			2019
Net (loss) earnings attributable to Modine	$	(195.7	)	$	1.2	$	(195.7	)	$	4.5

Weighted-average shares outstanding - basic		51.3			50.8		51.2			50.8
Effect of dilutive securities		0			0.3		0			0.3
Weighted-average shares outstanding - diluted		51.3			51.1		51.2			51.1

(Loss) earnings per share:
Net (loss) earnings per share - basic	$	(3.81	)	$	0.02	$	(3.82	)	$	0.09
Net (loss) earnings per share - diluted	$	(3.81	)	$	0.02	$	(3.82	)	$	0.09

Three months ended
December 31,

Nine months ended
December 31,

2017 2016 2017 2016
Net (loss) earnings attributable to Modine $ (28.3 ) $ 1.7 $ 4.6 $ 6.2
Less: Undistributed earnings attributable to unvested shares - - - (0.1 )
Net (loss) earnings available to Modine shareholders $ (28.3 ) $ 1.7 $ 4.6 $ 6.1

Weighted-average shares outstanding - basic 50.0 47.9 49.8 47.3
Effect of dilutive securities - 0.6 0.8 0.4
Weighted-average shares outstanding - diluted 50.0 48.5 50.6 47.7

Earnings per share:
Net (loss) earnings per share - basic $ (0.57 ) $ 0.04 $ 0.09 $ 0.13
Net (loss) earnings per share - diluted $ (0.57 ) $ 0.04 $ 0.09 $ 0.13

For ~~both~~ the three and nine months ended December 31, ~~2017,~~2020, the calculation of diluted earnings per share excluded ~~0.2~~1.4 million ~~stock options because they were anti-dilutive. For the three~~ and ~~nine months ended December 31, 2016, the calculation of diluted earnings per share excluded 0.9~~1.5 million ~~and 1.0 million~~ stock options, respectively, because they were anti-dilutive. ~~For~~In addition, the calculation for the three and nine months ended December 31, ~~2017,~~2020 excluded 0.5 million and 0.6 million restricted stock awards, respectively, because they were anti-dilutive. For the three months and nine months ended December 31,2020, the total number of ~~potentially dilutive~~potentially-dilutive securities was ~~1.1 million.~~0.2 million and 0.1 million, respectively. However, these securities were not included in the computation of diluted net loss per share since to do so would have decreased the loss per ~~share.~~share.

~~Note 10:~~

~~Inventories~~

For the three and nine months ended December 31,2019, the calculation of diluted earnings per share excluded 1.2 million and 0.8 million stock options, respectively, because they were anti-dilutive. In addition, the calculation for both the three and nine months ended December 31,2019 excluded 0.5 million restricted stock awards because they were anti-dilutive.

Table of Contents

Note 11: Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash consisted of the following:

	December 31, 2020		March 31, 2020
Cash and cash equivalents	$	72.9	$	70.9
Restricted cash		0.1		0.4
Cash and restricted cash held for sale		5.4		0
Total cash, cash equivalents, restricted cash and cash held for sale	$	78.4	$	71.3

Restricted cash, which is reported within other current assets and other noncurrent assets in the consolidated balance sheets, consists primarily of deposits for contractual guarantees or commitments required for rents, import and export duties, and commercial agreements.

Note 12: Inventories

Inventories consisted of the following:

	December 31, 2020		March 31, 2020
Raw materials	$	115.3	$	123.6
Work in process		35.5		34.6
Finished goods		39.8		49.2
Total inventories	$	190.6	$	207.4

December 31, 2017 March 31, 2017
Raw materials and work in process $ 140.0 $ 127.7
Finished goods 46.8 40.8
Total inventories $ 186.8 $ 168.5

~~Note 11:~~

Note 13: Property, Plant and Equipment

Property, plant and equipment, including depreciable lives, consisted of the following:

	December 31, 2020			March 31, 2020
Land	$	20.1		$	19.7
Buildings and improvements (10-40 years)		227.4			276.7
Machinery and equipment (3-15 years)		689.2			870.3
Office equipment (3-10 years)		83.1			95.2
Construction in progress		15.7			40.5
		1,035.5			1,302.4
Less: accumulated depreciation		(730.3	)		(854.4	)
Net property, plant and equipment	$	305.2		$	448.0

December 31, 2017 March 31, 2017
Gross property, plant and equipment $ 1,266.2 $ 1,177.6
Accumulated depreciation (774.9 ) (718.6 )
Net property, plant and equipment $ 491.3 $ 459.0

~~Table of Contents~~

~~MODINE MANUFACTURING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In millions, except per share amounts)~~

~~(unaudited)~~

~~Note 12:~~

Note 14: Goodwill and Intangible Assets

Changes in the carrying amount of goodwill were as follows:

	CIS		BHVAC		Total
Goodwill, March 31, 2020	$	152.6	$	13.5	$	166.1
Effect of exchange rate changes		5.2		1.1		6.3
Goodwill, December 31, 2020	$	157.8	$	14.6	$	172.4

Asia
Building
HVAC
CIS Total
Goodwill, March 31, 2017 $ 0.5 $ 13.7 $ 150.9 $ 165.1
Acquisition (a) - - 1.3 1.3
Effect of exchange rate changes - 0.8 5.0 5.8
Goodwill, December 31, 2017 $ 0.5 $ 14.5 $ 157.2 $ 172.2

~~(a)~~

During the first six months of fiscal 2018, the Company recorded a $1.3 million increase to goodwill as a result of measurement period adjustments made in connection with purchase accounting for the acquisition of Luvata HTS. See Note 2 for additional information.

~~Intangible assets consisted of the following:~~

December 31, 2017 March 31, 2017

Gross
Carrying
Value

Accumulated
Amortization

Net
Intangible
Assets

Gross
Carrying
Value

Accumulated
Amortization

Net
Intangible
Assets

Customer relationships $ 63.6 $ (4.7 ) $ 58.9 $ 60.5 $ (1.7 ) $ 58.8
Trade names 60.1 (9.8 ) 50.3 58.4 (7.2 ) 51.2
Acquired technology 28.4 (5.1 ) 23.3 27.0 (2.9 ) 24.1
Total intangible assets $ 152.1 $ (19.6 ) $ 132.5 $ 145.9 $ (11.8 ) $ 134.1

The Company recorded amortization expense of $2.5 million and $1.1 million for the three months ended December 31, 2017 and 2016, respectively. The Company recorded amortization expense of $7.3 million and $1.9 million for the nine months ended December 31, 2017 and 2016, respectively. Estimated future amortization expense is as follows:

Fiscal Year
Estimated
Amortization
Expense

Remainder of 2018 $ 2.4
2019 9.6
2020 9.5
2021 8.9
2022 8.7
2023 & Beyond 93.4

Table of Contents

~~MODINE MANUFACTURING COMPANY~~Intangible assets consisted of the following:

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

	December 31, 2020							March 31, 2020
	Gross Carrying Value		Accumulated Amortization			Net Intangible Assets		Gross Carrying Value		Accumulated Amortization			Net Intangible Assets
Customer relationships	$	64.0	$	(16.2	)	$	47.8	$	60.8	$	(12.6	)	$	48.2
Trade names		60.3		(19.0	)		41.3		58.3		(16.2	)		42.1
Acquired technology		25.1		(9.7	)		15.4		23.6		(7.6	)		16.0
Total intangible assets	$	149.4	$	(44.9	)	$	104.5	$	142.7	$	(36.4	)	$	106.3

~~(In millions, except per share amounts)~~

~~(unaudited)~~The Company recorded amortization expense of $2.2 million and $2.3 million for the three months ended December 31,2020 and 2019, respectively. The Company recorded amortization expense of $6.4 million and $6.7 million for the nine months ended December 31,2020 and 2019, respectively. The Company estimates that it will record $2.1 million of amortization expense during the remainder of fiscal 2021 and approximately $8.0 million of annual amortization expense in fiscal 2022 through 2026.

~~Note 13:~~

Note 15: Product Warranties

Changes in accrued warranty costs were as follows:

	Three months ended December 31,
	2020			2019
Beginning balance	$	9.0		$	8.1
Warranties recorded at time of sale		1.8			1.3
Adjustments to pre-existing warranties		(0.4	)		(0.4	)
Settlements		(1.1	)		(1.0	)
Reclassified as held for sale		(1.5	)		0
Effect of exchange rate changes		0.1			0.2
Ending balance	$	7.9		$	8.2

	Nine months ended December 31,
	2020			2019
Beginning balance	$	7.9		$	9.2
Warranties recorded at time of sale		4.3			3.9
Adjustments to pre-existing warranties		(0.3	)		(1.3	)
Settlements		(2.8	)		(3.6	)
Reclassified as held for sale		(1.5	)		0
Effect of exchange rate changes		0.3			0
Ending balance	$	7.9		$	8.2

Three months ended December 31,
2017 2016
Beginning balance $ 9.4 $ 8.4
Warranties recorded at time of sale 2.0 1.4
Adjustments to pre-existing warranties 0.2 0.1
Additions due to acquisition - 4.1
Settlements (2.1 ) (2.1 )
Effect of exchange rate changes 0.1 (0.3 )
Ending balance $ 9.6 $ 11.6

Nine months ended December 31,
2017 2016
Beginning balance $ 10.0 $ 8.3
Warranties recorded at time of sale 4.7 3.9
Adjustments to pre-existing warranties - -
Additions and adjustments due to acquisition (a) (1.0 ) 4.1
Settlements (4.6 ) (4.4 )
Effect of exchange rate changes 0.5 (0.3 )
Ending balance $ 9.6 $ 11.6

~~(a)~~

During fiscal 2018, the Company decreased its liability for product warranties by $1.0 million as a result of measurement period adjustments made in connection with purchase accounting for the acquisition of Luvata HTS. See Note 2 for additional information.

~~Note 14:~~

~~Indebtedness~~

~~Long-term debt consisted of the following:~~

Fiscal year
of maturity
December 31, 2017 March 31, 2017
Term loans 2022 $ 270.4 $ 268.9
6.8% Senior Notes 2021 105.0 117.0
5.8% Senior Notes 2027 50.0 50.0
Other (a) 2032 12.7 8.3
438.1 444.2
Less: current portion (37.9 ) (31.8 )
Less: unamortized debt issuance costs (5.7 ) (6.7 )
Total long-term debt $ 394.5 $ 405.7

~~(a)~~

~~Other long-term debt includes borrowings by foreign subsidiaries, capital lease obligations and other financing-type obligations.~~

Table of Contents

~~MODINE MANUFACTURING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Note 16: Leases

~~(In millions, except per share amounts)~~

~~(unaudited)~~Lease Assets and Liabilities

The following table provides a summary of leases recorded on the consolidated balance sheets.

-	Balance Sheet Location		December 31, 2020		March 31, 2020
Lease Assets
Operating lease ROU assets	Other noncurrent assets	$	56.2	$	61.4
Finance lease ROU assets (a)	Property, plant and equipment - net		8.6		8.5

Lease Liabilities
Operating lease liabilities	Other current liabilities	$	10.4	$	10.9
Operating lease liabilities	Other noncurrent liabilities		46.9		50.3
Finance lease liabilities	Long-term debt - current portion		0.4		0.4
Finance lease liabilities	Long-term debt		3.4		3.3

(a)	Finance lease right of use (“ROU”) assets were recorded net of accumulated amortization of $2.3 million and $1.8 million as of December 31, 2020 and March 31, 2020, respectively.

Components of Lease Expense

The components of lease expense were as follows:

	Three months ended December 31,				Nine months ended December 31,
	2020		2019		2020		2019
Operating lease expense (a)	$	4.8	$	5.4	$	14.9	$	15.8
Finance lease expense:
Depreciation of ROU assets		0.2		0.2		0.4		0.4
Interest on lease liabilities		0		0		0.1		0.1
Total lease expense	$	5.0	$	5.6	$	15.4	$	16.3

(a)

For the three and nine months ended December 31, 2020, operating lease expense included short-term lease expense of $0.9million and $2.7 million, respectively. For the three and nine months ended December 31, 2019, operating lease expense included short-term lease expense of $1.0 million and $2.9 million, respectively. Variable lease expense was not significant.

Table of Contents

Note 17: Indebtedness

Long-term debt consisted of the following:

_	Fiscal year of maturity	December 31, 2020			March 31, 2020
Term loans	2025	$	184.1		$	189.4
Revolving credit facility	2025		30.7			127.2
5.9% Senior Notes	2029		100.0			100.0
5.8% Senior Notes	2027		50.0			50.0
Other (a)			3.8			6.0
			368.6			472.6
Less: current portion			(22.0	)		(15.6	)
Less: unamortized debt issuance costs			(4.6	)		(5.0	)
Total long-term debt		$	342.0		$	452.0

(a)	Other long-term debt primarily includes finance lease obligations and borrowings by foreign subsidiaries.

Long-term debt, including the current portion of long-term debt, matures as follows:

Fiscal Year
Remainder of 2021	$	3.4
2022		22.0
2023		22.0
2024		22.0
2025		180.5
2026 & beyond		118.7
Total	$	368.6

Borrowings under both the revolving credit and term loan facilities bear interest at a variable rate, based upon the applicable reference rate and including a margin percentage dependent upon the Company’s leverage ratio, as described below. At December 31 ~~2017 and March 31, 2017,~~, 2020, the ~~Company had $22.7 million and $40.4 million, respectively, of short-term borrowings under its $175.0 million multi-currency~~weighted-average interest rates for revolving credit facility ~~which expires in November 2021.~~borrowings and the term loans were both 2.5 percent. At December 31, ~~2017,~~ 2020, the Company’s revolving credit facility borrowings totaled $30.7 million and domestic letters of credit totaled ~~$3.9~~$5.7 million, resulting in available ~~capacity~~borrowings under the ~~Company’s~~ revolving credit facility of ~~$148.4~~$213.6 million.

The Company also maintains credit agreements for its foreign subsidiaries, with outstanding short-term borrowings of $0.6 million and $14.8 million at December 31, 2020 and March 31, 2020, respectively. See Note 2 for information regarding short-term borrowings classified as held for sale at December 31, 2017 and March 31, 2017 of $30.8 million and $33.0 million, respectively. At December 31, 2017, the Company’s foreign unused lines of credit totaled $20.4 million. In aggregate, the Company had total available lines of credit of $168.8 million at December 31, 2017.2020.

Provisions in the Company’s ~~amended and restated~~ credit agreement, Senior Note agreements, and various foreign credit agreements require the Company to maintain compliance with various covenants and include certain cross-default clauses. Under its primary debt agreements in the U.S., the Company has provided liens on substantially all domestic assets. ~~In addition, the term loans require prepayments,~~Also, as ~~defined~~specified in the credit agreement, in the ~~event the Company’s annual excess cash flow exceeds defined levels or~~term loans may require prepayments in the event of certain asset sales. ~~The~~In addition, at the time of each incremental borrowing under the revolving credit facility, the Company is ~~also subject~~required to represent to the lenders that there has been no material adverse effect, as defined in the credit agreement, on its business, property, or results of operations.

Table of Contents

In May 2020, the Company executed amendments to its primary credit agreements in the U.S. Under the amended agreements, the leverage ratio ~~covenants, the most restrictive of which~~covenant limit has been temporarily raised. The leverage ratio covenant requires the Company to limit the ratio of its consolidated indebtedness, less a portion of its cash balance, both as defined by the credit agreements, to ~~no more than three and one-quarter times~~its consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”).The leverage ratio covenant limit for the third quarter of fiscal 2021 was 5.25 to 1. The leverage ratio covenant limit is 5.75 to 1 for the fourth quarter of fiscal 2021. In fiscal 2022, the leverage ratio covenant limit is 4.75 to 1, 3.75 to 1, and 3.50 to 1 for the first, second and third quarters, respectively, and subsequently returns to 3.25 to 1 for the fourth quarter of fiscal 2022. The Company is also subject to an interest expense coverage ratio covenant, which requires the Company to maintain Adjusted EBITDA of at least three times consolidated interest expense. The Company was in compliance with its debt covenants as of December 31 ~~2017.~~, 2020.

The Company estimates the fair value of long-term debt using discounted future cash flows at rates offered to the Company for similar debt instruments of comparable maturities. At As of December 31 ~~2017~~, 2020 and March 31, ~~2017,~~2020, the carrying value of the Company’s long-term debt approximated fair value, with the exception of the Senior Notes, which had an aggregate fair value of ~~approximately $159.0~~$140.4 million and ~~$170.0~~$131.3 million, respectively. The fair value of the Company’s long-term debt is categorized as Level 2 within the fair value hierarchy. Refer to Note 34 for the definition of a Level 2 fair value measurement.

~~Note 15:~~

~~Contingencies and Litigation~~

Note 18: Risks, Uncertainties, Contingencies and Litigation

~~Environmental~~

COVID-19

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus, COVID-19, a pandemic. The ~~United States Environmental Protection Agency has designated~~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, the Company ~~as a potentially responsible party for remediation~~experienced significant impacts on its operations. Local government requirements or customer shutdowns caused the Company to suspend production at many of ~~three sites. These sites are: Auburn Incinerator, Inc./Lake Calumet Cluster (Illinois), Cam-Or (Indiana)~~its manufacturing facilities in March and ~~a scrap metal site known as Chemetco (Illinois). In addition, Modine is voluntarily participating~~April 2020. All of the temporarily-closed facilities reopened in the ~~care~~first or second quarter and have generally returned to more normal production levels. However, since reopening, production at certain of ~~an inactive landfill owned~~our plants has been negatively affected at times by employee absences due to COVID-19. The Company is continuing to focus on protecting the ~~City~~health and wellbeing of Trenton (Missouri). These sites are not Company-owned; however, they allegedly contain materials attributable to Modine from past operations. The percentage of material allegedly attributable to Modine is relatively low. Remediation of these sites is in various stages of administrative or judicial proceedings and includes recovery of past governmental costsits employees and the ~~costs~~communities in which it operates, while also ensuring the continuity of ~~future investigations~~its business operations and ~~remedial actions. The~~timely delivery of quality products and services to its customers. Beginning largely in April 2020 and to mitigate the negative impacts of COVID-19, the Company ~~accrues for costs anticipated for the remedial settlement~~took actions including, but not limited to, production staffing adjustments, furloughs, shortened work weeks, and temporary salary reductions at all levels of the sites listed above if they are probable and can be reasonably determined. Costs anticipated for the remedial settlement of the sites listed above that are not probable or cannot be reasonably determined at this time have not been accrued; however,organization. As production has generally returned to more normal levels, the Company ~~does not believe any potential costs would be material~~reduced the extent of furloughs, shortened work weeks and salary reductions during the third quarter of fiscal 2021, yet remains focused on controlling operating and administrative expenses. Based upon its current expectations, the Company believes that its sources of liquidity will generate sufficient cash flow to meet its obligations during the ~~Company’s financial position due to its relatively small portion of contributed materials.~~next twelve months.

Table of Contents

~~MODINE MANUFACTURING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In millions, except per share amounts)~~

~~(unaudited)~~

The Company’s consolidated financial statements reflect estimates and assumptions made by management, including assumptions regarding the future impacts of the COVID-19 pandemic, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting periods presented. For example, assets particularly sensitive to assumptions that could be adversely impacted by the COVID-19 pandemic include goodwill and deferred tax assets. While the Company ~~has recorded environmental accruals for obligations assumed as~~believes it used appropriate estimates and assumptions to prepare the consolidated financial statements, actual amounts could differ materially and future events or circumstances could have a ~~result of~~potential negative effect on the assumptions used. If the Company, its ~~recent acquisition of Luvata HTS,~~suppliers, or its customers experience further shutdowns or other significant business disruptions associated with the ~~most significant of which relates~~COVID-19 pandemic, its ability to ~~historical soil and groundwater contamination remediation and monitoring for a manufacturing site~~conduct business in the ~~United States. In addition,~~manner and on the timelines presently planned could be materially and negatively impacted, which could have a material adverse effect on the Company’s business, financial position, results of operations and cash flows.

Environmental

The Company has recorded environmental investigation and remediation accruals related to ~~subsurface~~soil and groundwater contamination at manufacturing facilities in the U.S., one of which the Company currently owns and operates, and at its former manufacturing facility in the Netherlands, ~~investigative and remedial work related to a previously-owned manufacturing facility in the United States, and groundwater contamination at its manufacturing facility in Brazil,~~ along with accruals for lesser environmental matters at certain other facilities in the ~~United States.~~U.S. These accruals generally relate to facilities where past operations followed practices and procedures that were considered acceptable under then-existing regulations, or where the Company is a successor to the obligations of prior owners, and current laws and regulations require investigative and/or remedial work to ensure sufficient environmental compliance. The accruals for these environmental matters totaled ~~$17.0~~$18.4 million and ~~$16.8~~$18.2 million at as of December 31, ~~2017~~2020 and March 31, ~~2017,~~2020, respectively. As additional information becomes available, the Company will re-assess the liabilities related to these matters and revise the estimated accruals, if necessary. Based upon currently available information, the Company believes the ultimate outcome of these matters, individually and in the aggregate, will not have a material adverse effect on its financial position. However, these matters are subject to inherent uncertainties, and unfavorable outcomes could occur, including significant monetary damages.

~~Brazil Antitrust Investigation~~

As of March 31, 2017, the Company accrued $4.7 million related to alleged violations of Brazil’s antitrust regulations. During the first quarter of fiscal 2018, the Company paid $4.7 million to Brazil’s Administrative Council for Economic Defense to settle this matter.

Other Litigation

In the normal course of business, the Company and its subsidiaries are named as defendants in various ~~other~~ lawsuits and enforcement proceedings by private parties, governmental agencies and/or others in which claims are asserted against Modine. The Company believes that any additional loss in excess of amounts already accrued would not have a material effect on the Company’s consolidated balance sheet, results of operations, and cash flows. In ~~the opinion of~~addition, management expects that the liabilities ~~if any,~~ which may ultimately result from such lawsuits or proceedings, ~~are~~if any, would not ~~expected to~~ have a material adverse effect on the Company’s financial position.

Table of Contents

~~Note 16:~~

Note 19: Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss were as follows:

	Three months ended December 31, 2020												Nine months ended December 31, 2020
	Foreign Currency Translation			Defined Benefit Plans			Cash Flow Hedges			Total			Foreign Currency Translation			Defined Benefit Plans			Cash Flow Hedges			Total
Beginning balance	$	(38.8	)	$	(158.4	)	$	0.4		$	(196.8	)	$	(61.4	)	$	(160.9	)	$	(1.0	)	$	(223.3	)

Other comprehensive income before reclassifications		18.0			0			0.4			18.4			40.6			0			1.5			42.1
Reclassifications:
Amortization of unrecognized net loss (a)		0			1.6			0			1.6			0			4.9			0			4.9
Realized (gains) losses - net (b)		0			0			(0.4	)		(0.4	)		0			0			0.4			0.4
Income taxes		0			(0.3	)		0			(0.3	)		0			(1.1	)		(0.5	)		(1.6	)
Total other comprehensive income		18.0			1.3			0			19.3			40.6			3.8			1.4			45.8

Ending balance	$	(20.8	)	$	(157.1	)	$	0.4		$	(177.5	)	$	(20.8	)	$	(157.1	)	$	0.4		$	(177.5	)

Three months ended
December 31, 2017

Nine months ended
December 31, 2017

Foreign
Currency
Translation

Defined
Benefit
Plans

Cash Flow
Hedges
Total
Foreign
Currency
Translation

Defined
Benefit
Plans

Cash Flow
Hedges
Total
Beginning balance $ (19.0 ) $ (133.3 ) $ - $ (152.3 ) $ (46.8 ) $ (135.0 ) $ - $ (181.8 )

Other comprehensive income before reclassifications 4.6 - 0.6 5.2 32.4 - 0.6 33.0
Reclassifications for amortization of unrecognized net loss (a) - 1.3 - 1.3 - 3.9 - 3.9
Income taxes - (0.4 ) (0.2 ) (0.6 ) - (1.3 ) (0.2 ) (1.5 )
Total other comprehensive income 4.6 0.9 0.4 5.9 32.4 2.6 0.4 35.4

Ending balance $ (14.4 ) $ (132.4 ) $ 0.4 $ (146.4 ) $ (14.4 ) $ (132.4 ) $ 0.4 $ (146.4 )

	Three months ended December 31, 2019												Nine months ended December 31, 2019
	Foreign Currency Translation			Defined Benefit Plans			Cash Flow Hedges			Total			Foreign Currency Translation			Defined Benefit Plans			Cash Flow Hedges			Total
Beginning balance	$	(60.0	)	$	(134.1	)	$	(0.5	)	$	(194.6	)	$	(42.6	)	$	(136.3	)	$	0.5		$	(178.4	)

Other comprehensive income (loss) before reclassifications		13.8			0			0.3			14.1			(3.0	)		0			(1.3	)		(4.3	)
Reclassifications:
Amortization of unrecognized net loss (a)		0			1.4			0			1.4			0			4.2			0			4.2
Realized losses - net (b)		0			0			0.5			0.5			0			0			0.7			0.7
Foreign currency translation gains (c)		0			0			0			0			(0.6	)		0			0			(0.6	)
Income taxes		0			(0.4	)		(0.2	)		(0.6	)		0			(1.0	)		0.2			(0.8	)
Total other comprehensive income (loss)		13.8			1.0			0.6			15.4			(3.6	)		3.2			(0.4	)		(0.8	)

Ending balance	$	(46.2	)	$	(133.1	)	$	0.1		$	(179.2	)	$	(46.2	)	$	(133.1	)	$	0.1		$	(179.2	)

~~Table of Contents~~

~~MODINE MANUFACTURING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In millions, except per share amounts)~~

~~(unaudited)~~

Three months ended
December 31, 2016

Nine months ended
December 31, 2016

Foreign
Currency
Translation

Defined
Benefit
Plans
Total
Foreign
Currency
Translation

Defined
Benefit
Plans
Total
Beginning balance $ (39.0 ) $ (136.5 ) $ (175.5 ) $ (36.0 ) $ (138.2 ) $ (174.2 )

Other comprehensive income (loss) before reclassifications (14.2 ) - (14.2 ) (17.2 ) - (17.2 )
Reclassifications for amortization of unrecognized net loss (a) - 1.3 1.3 - 3.9 3.9
Income taxes - (0.4 ) (0.4 ) - (1.3 ) (1.3 )
Total other comprehensive income (loss) (14.2 ) 0.9 (13.3 ) (17.2 ) 2.6 (14.6 )

Ending balance $ (53.2 ) $ (135.6 ) $ (188.8 ) $ (53.2 ) $ (135.6 ) $ (188.8 )

(a)

Amounts are included in the calculation of net periodic benefit cost for the Company’s defined benefit plans, which include pension and other postretirement plans. ~~See~~Refer to Note 45 for additional information about the Company’s pension plans.

~~Note 17:~~(b)

~~Segment Information~~Amounts represent net gains and losses associated with cash flow hedges that were reclassified to net earnings.

(c)	As a result of the sale of its investment in NEX during the second quarter of fiscal 2020, the Company wrote off $0.6 million of accumulated foreign currency translation gains.

Note 20: Segment Information

Effective April 1, 2020, the Company began managing its global automotive business separate from the other businesses within the previously-reported Vehicular Thermal Solutions (“VTS”) segment. The Company is managing the automotive business as the Automotive segment as it targets the sale or eventual exit of its underlying automotive business operations. The other businesses of the VTS segment, including the commercial vehicle and off-highway businesses, are being managed as the Heavy Duty Equipment segment. The segment realignment had no impact on the CIS and BHVAC segments or on the Company’s consolidated financial position, results of operations, and cash flows. Segment financial information for fiscal 2020 has been recast to conform to the fiscal 2021 presentation.

Each operating segment is managed by a vice president and has separate financial results reviewed by the Company’s chief operating decision maker. These results are used by management in evaluating the performance of each segment and in making decisions on the allocation of resources among the Company’s various businesses.

Table of Contents

The following is a summary of net sales, gross profit, operating income, and total assets by segment. In fiscal 2018, the Company adopted new accounting guidance related to the income statement presentation of pension and postretirement costs. Accordingly, the Company recast the comparable fiscal 2017 segment financial results to conform to the current-period presentation. See Note 1 for additional information on this new accounting guidance.segment:

	Three months ended December 31,
	2020								2019
	External Sales		Inter-segment Sales			Total			External Sales		Inter-segment Sales			Total
Net sales:
CIS	$	128.3	$	0.7		$	129.0		$	146.3	$	1.2		$	147.5
BHVAC		68.7		0			68.7			64.3		0.6			64.9
HDE		173.7		11.9			185.6			152.8		12.1			164.9
Automotive		113.6		0.3			113.9			110.0		0.5			110.5
Segment total		484.3		12.9			497.2			473.4		14.4			487.8
Corporate and eliminations		-		(12.9	)		(12.9	)		-		(14.4	)		(14.4	)
Net sales	$	484.3	$	-		$	484.3		$	473.4	$	-		$	473.4

Three months ended
December 31,

Nine months ended
December 31,

Net sales: 2017 2016 2017 2016
Americas $ 140.5 $ 123.4 $ 430.7 $ 389.4
Europe 134.6 119.8 405.4 389.7
Asia 42.8 28.6 117.7 78.2
Commercial and Industrial Solutions (a) 144.9 34.7 451.6 34.7
Building HVAC 56.1 47.2 147.9 132.8
Segment total 518.9 353.7 1,553.3 1,024.8
Corporate and eliminations (6.2 ) (3.9 ) (16.8 ) (10.1 )
Net sales $ 512.7 $ 349.8 $ 1,536.5 $ 1,014.7

	Nine months ended December 31,
	2020								2019
	External Sales		Inter-segment Sales			Total			External Sales		Inter-segment Sales			Total
Net sales:
CIS	$	382.8	$	2.8		$	385.6		$	469.9	$	3.1		$	473.0
BHVAC		178.0		0.2			178.2			168.5		1.4			169.9
HDE		449.6		25.1			474.7			526.4		42.1			568.5
Automotive		283.1		2.8			285.9			337.8		2.0			339.8
Segment total		1,293.5		30.9			1,324.4			1,502.6		48.6			1,551.2
Corporate and eliminations		-		(30.9	)		(30.9	)		-		(48.6	)		(48.6	)
Net sales	$	1,293.5	$	-		$	1,293.5		$	1,502.6	$	-		$	1,502.6

	Three months ended December 31,											Nine months ended December 31,
	2020					2019						2020						2019
	$'s		% of sales			$'s			% of sales			$'s			% of sales			$'s			% of sales
Gross profit:
CIS	$	12.6		9.8	%	$	22.7			15.4	%	$	47.4			12.3	%	$	69.9			14.8	%
BHVAC		25.7		37.3	%		23.1			35.5	%		61.9			34.7	%		54.5			32.1	%
HDE		26.0		14.0	%		16.8			10.2	%		60.9			12.8	%		71.7			12.6	%
Automotive		18.4		16.1	%		12.2			11.0	%		39.8			13.9	%		37.7			11.1	%
Segment total		82.7		16.6	%		74.8			15.3	%		210.0			15.9	%		233.8			15.1	%
Corporate and eliminations		0		0			(1.3	)		0			(0.4	)		0			(1.2	)		0
Gross profit	$	82.7		17.1	%	$	73.5			15.5	%	$	209.6			16.2	%	$	232.6			15.5	%

Table of Contents

~~MODINE MANUFACTURING COMPANY~~

	Three months ended December 31,						Nine months ended December 31,
	2020			2019			2020			2019
Operating income:
CIS	$	(1.7	)	$	8.3		$	3.9		$	25.8
BHVAC		15.8			13.5			36.0			27.6
HDE		12.8			2.8			23.6			27.2
Automotive		(124.9	)		1.6			(120.7	)		2.0
Segment total		(98.0	)		26.2			(57.2	)		82.6
Corporate and eliminations		(10.7	)		(18.0	)		(26.2	)		(50.3	)
Operating (loss) income	$	(108.7	)	$	8.2		$	(83.4	)	$	32.3

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In millions, except per share amounts)~~

~~(unaudited)~~

Three months ended
December 31,

Nine months ended
December 31,

2017 2016 2017 2016
Gross profit: $'s
% of
sales
$'s
% of
sales
$'s
% of
sales
$'s
% of
sales

Americas $ 21.7 15.4 % $ 18.4 14.9 % $ 69.7 16.2 % $ 59.5 15.3 %
Europe 17.9 13.3 % 18.6 15.5 % 56.8 14.0 % 60.3 15.5 %
Asia 8.2 19.0 % 5.0 17.6 % 21.9 18.6 % 13.1 16.7 %
Commercial and Industrial Solutions (a) 18.6 12.9 % 4.4 12.7 % 66.4 14.7 % 4.4 12.7 %
Building HVAC 19.0 33.8 % 15.3 32.4 % 45.0 30.4 % 37.1 28.0 %
Segment total 85.4 16.4 % 61.7 17.5 % 259.8 16.7 % 174.4 17.0 %
Corporate and eliminations - - (2.7 ) - 0.2 - (5.1 ) -
Gross profit $ 85.4 16.7 % $ 59.0 16.9 % $ 260.0 16.9 % $ 169.3 16.7 %

Three months ended
December 31,

Nine months ended
December 31,

Operating income: 2017 2016 2017 2016
Americas $ 8.9 $ 5.7 $ 28.8 $ 14.2
Europe 6.3 8.6 22.8 30.9
Asia 5.1 2.6 12.6 4.9
Commercial and Industrial Solutions (a) (4.6 ) (0.3 ) 14.3 (0.3 )
Building HVAC 9.2 6.7 18.6 10.4
Segment total 24.9 23.3 97.1 60.1
Corporate and eliminations (11.0 ) (16.6 ) (32.1 ) (38.7 )
Operating income $ 13.9 $ 6.7 $ 65.0 $ 21.4

December 31, 2017 March 31, 2017
Total assets:
Americas $ 275.9 $ 282.9
Europe 308.1 269.4
Asia 132.5 111.3
Commercial and Industrial Solutions 606.8 576.0
Building HVAC 88.8 85.2
Corporate and eliminations (b) 90.1 124.7
Total assets $ 1,502.2 $ 1,449.5

	December 31, 2020		March 31, 2020
Total assets:
CIS	$	601.8	$	617.7
BHVAC		106.7		102.3
HDE		428.3		417.4
Automotive (a)		161.2		272.5
Corporate and eliminations (b)		8.7		126.2
Total assets	$	1,306.7	$	1,536.1

(a)

~~The Company acquired Luvata HTS on November 30, 2016 and began operating~~

During the ~~business as its CIS segment. As~~third quarter of fiscal 2021, the Company ~~has consolidated CIS financial results since~~recorded impairment charges totaling $134.4 million within the ~~acquisition date,~~Automotive segment, primarily related to the ~~three~~property, plant and equipment of the liquid-cooled automotive business, the sale of which is pending. See Note 2 for additional information.

(b)

During the nine months ended December 31, ~~2016 included one month of financial results from CIS operations. During the three months ended December 31, 2017,~~2020, the Company recorded ~~restructuring expenses and an impairment charge~~income tax charges totaling ~~$9.5~~$109.9 million ~~within~~to increase the ~~CIS segment associated with the closure of a manufacturing facility in Austria. See Note 6 for additional information.~~

~~(b)~~

~~The decrease in total assets at Corporate was primarily due to a decrease in~~valuation allowance on deferred tax assets ~~resulting from the impact of tax reform~~ in the ~~U.S.~~U.S, which are recorded at Corporate. See Note 89 for additional ~~information regarding the reduction in the corporate tax rate in the U.S.~~information.

Table of Contents

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

When we use the terms “Modine,” “we,” “us,” the “Company,” or “our” in this report, we are referring to Modine Manufacturing Company. Our fiscal year ends on March 31 and, accordingly, all references to quarters refer to our fiscal quarters. The quarter ended December 31, ~~2017~~2020 was the third quarter of fiscal ~~2018.~~2021.

Pending Disposition of Liquid-cooled Automotive Business

On November ~~30, 2016,~~2, 2020, we ~~acquired Luvata Heat Transfer Solutions (“Luvata HTS”)~~entered into a definitive agreement to sell our liquid-cooled automotive business to Dana Incorporated. We expect this transaction will close during the first quarter of fiscal 2022, subject to regulatory approvals and other customary closing conditions. We do not expect significant net cash proceeds from this transaction based upon the selling price of one dollar and adjustments for ~~consideration totaling $415.6 million ($388.2 million, net of~~ cash, ~~acquired). Operating~~debt, and working capital, as ~~our Commercial and Industrial Solutions (“CIS”) segment, this business is a leading global supplier of coils, coolers and coatings to~~defined within the ~~heating, ventilation, air conditioning, and refrigeration industry. As we have consolidated CIS~~definitive agreement. We report financial results ~~since~~of the ~~acquisition date,~~liquid-cooled automotive business within the Automotive segment.

We recorded a non-cash impairment charge of $132.7 million during the third quarter of fiscal ~~2017 included one month~~2021 related to the liquid-cooled automotive business’s long-lived assets. We expect to record an additional loss on sale of ~~financial results~~approximately $15.0 million to $25.0 million when the sale is completed. It is possible that the loss on sale could differ materially from ~~CIS operations.~~

In December 2017, the Tax Cuts and Jobs Act (“U.S. tax reform”) was enacted and included numerous changes to existing U.S. tax regulations, including U.S. corporate tax rates, business deductions, and taxes on income in foreign jurisdictions. During the third quarter of fiscal 2018, we recorded provisional charges totaling $35.7 million for certain income tax effects of the U.S. tax reform. this estimate. See Note 82 of the Notes to Condensed Consolidated Financial Statements for ~~additional information.~~information regarding the accounting impacts of this pending sale.

We are also evaluating strategic alternatives for the other businesses in the Automotive segment and are committed to exiting these businesses in a manner that is in the best interest of our shareholders.

COVID-19

As the COVID-19 pandemic continues, both the health and overall well-being of our employees and delivering quality products and services to our customers remain our top priorities.

The COVID-19 pandemic has broadly impacted the global economy and our key end markets, which were most severely impacted during the first quarter of fiscal 2021. Beginning largely in April 2020 and in an effort to mitigate the negative impacts of COVID-19 on our financial results, we implemented actions, including, but not limited to, production staffing adjustments, furloughs, shortened work weeks, and temporary salary reductions at all levels of our organization. In addition, we reduced operating and administrative expenses, including travel and entertainment expenditures. We have also focused on limiting capital expenditures and, where possible, have delayed certain projects and the purchase of some program-related equipment and tooling. Our swift cost-saving actions, coupled with a slow but steady recovery in most of our key end markets, have favorably impacted our financial results. As production has generally returned to more normal levels, we reduced the extent of furloughs, shortened work weeks and salary reductions. As a result, the benefit of the cost-saving actions, primarily on selling, general and administrative (“SG&A”) expenses, was less significant during the third quarter of fiscal 2021 compared with the first and second quarters of fiscal 2021.

The full extent of the impacts of COVID-19, which will largely depend on the length and severity of the pandemic, could have a material adverse effect on our business, results of operations, and cash flows.

Table of Contents

Third Quarter Highlights

Net sales in the third quarter of fiscal ~~2018~~2021 increased ~~$162.9~~ $10.9million, or 47 2percent, from the third quarter of fiscal ~~2017,~~2020, primarily due to higher sales volume in the Heavy Duty Equipment (“HDE”) segment and a ~~$110.2 million increase in~~favorable impact of foreign currency exchange rate changes, partially offset by lower sales volume in our ~~CIS segment, which we owned for one month in~~Commercial and Industrial Solutions (“CIS”) segment. Cost of sales increased $1.7 million compared with the third quarter of ~~the prior year, and higher sales in all of our other operating segments.~~fiscal 2020. Gross profit increased ~~$26.4~~$9.2 million ~~including $14.2 million of additional contribution from our CIS segment. Selling, general~~ and ~~administrative (“~~gross margin improved 160 basis points to 17.1 percent. SG~~&A”)~~&A expenses ~~increased $10.1~~decreased $7.4 million, primarily due to ~~a $9.0~~lower project costs associated with our review of strategic alternatives for the automotive segment businesses and preparing the liquid-cooled automotive business for sale. We recorded $134.4 million ~~increase~~ of ~~SG&A expenses~~impairment charges during the third quarter in our ~~CIS segment. Restructuring expenses increased $7.8 million,~~Automotive segment, primarily ~~due to severance expenses~~ related to the ~~recent closure~~pending sale of ~~a manufacturing facility in Austria within~~ the ~~CIS segment. In addition, we recorded a $1.3~~liquid-cooled automotive business. The operating loss of $108.7 million ~~asset impairment charge related to this CIS Austria facility. Operating income~~ during the third quarter of fiscal ~~2018 increased $7.2 million to $13.9 million. Our net loss of $27.9 million~~2021 represents a ~~$29.8~~decline of $116.9 million ~~decline compared with~~from the ~~third quarter~~prior-year operating income of ~~the prior year,~~$8.2 million, primarily due to ~~$35.7 million of~~the impairment charges ~~associated with U.S. tax reform,~~in our Automotive segment and lower earnings in our CIS segment, partially offset by ~~the increase~~higher earnings in ~~operating income.~~our HDE and Building HVAC Systems (“BHVAC”) segments.

~~Year-to-Date~~Year-to-date Highlights

Net sales in the first nine months of fiscal ~~2018 increased $521.8~~2021 decreased $209.1 million, or 5114 percent, from the same period last year, primarily due to ~~$416.9 million of additional sales from our CIS segment and higher~~lower sales in ~~all~~our HDE, CIS and Automotive segments. Cost of ~~our other operating segments.~~sales decreased $186.1 million, or 15 percent, from the same period last year, primarily due to lower sales volume. Gross profit ~~increased $90.7~~decreased $23.0 million ~~including $62.0 million of additional contribution from our CIS segment.~~and gross margin improved 70 basis points to 16.2 percent. SG&A expenses ~~increased $39.1~~decreased $42.8 million, primarily due to ~~a $37.9 million increase in~~lower project costs associated with our review of strategic alternatives for the automotive segment businesses and preparing the liquid-cooled automotive business for sale. In addition, SG&A expenses benefitted from cost-reduction initiatives implemented earlier in ~~our CIS segment. Operating income~~the fiscal year in response to the negative impacts of COVID-19. The operating loss of $83.4 million during the first nine months of fiscal ~~2018 increased $43.6~~2021 represents a decline of $115.7 million ~~to $65.0 million. Our net earnings~~from the prior-year operating income of ~~$5.8~~$32.3 million, ~~decreased $1.0 million compared with the same period in the prior year,~~ primarily due to ~~$35.7~~the $134.4 million of impairment charges ~~associated with U.S. tax reform and higher interest expense,~~recorded during the third quarter of fiscal 2021, partially offset by ~~the increase in operating income.~~lower SG&A expenses.

~~Table of Contents~~

CONSOLIDATED RESULTS OF OPERATIONS

The following table presents our consolidated financial results on a comparative basis for the three and nine months ended December 31, ~~2017~~2020 and ~~2016:~~2019:

	Three months ended December 31,												Nine months ended December 31,
	2020						2019						2020						2019
(in millions)	$'s			% of sales			$'s			% of sales			$'s			% of sales			$'s			% of sales
Net sales	$	484.3			100.0	%	$	473.4			100.0	%	$	1,293.5			100.0	%	$	1,502.6			100.0	%
Cost of sales		401.6			82.9	%		399.9			84.5	%		1,083.9			83.8	%		1,270.0			84.5	%
Gross profit		82.7			17.1	%		73.5			15.5	%		209.6			16.2	%		232.6			15.5	%
Selling, general and administrative expenses		56.1			11.6	%		63.5			13.4	%		151.6			11.7	%		194.4			12.9	%
Restructuring expenses		0.9			0.2	%		2.6			0.6	%		7.0			0.5	%		6.7			0.4	%
Impairment charges		134.4			27.8	%		-			-			134.4			10.4	%		-			-
Gain on sale of assets		-			-			(0.8	)		-0.2	%		-			-			(0.8	)		-
Operating (loss) income		(108.7	)		-22.5	%		8.2			1.7	%		(83.4	)		-6.5	%		32.3			2.1	%
Interest expense		(4.6	)		-0.9	%		(5.6	)		-1.2	%		(15.2	)		-1.2	%		(17.3	)		-1.2	%
Other (expense) income – net		(0.5	)		-0.1	%		0.1			-			(1.0	)		-0.1	%		(2.3	)		-0.2	%
(Loss) earnings before income taxes		(113.8	)		-23.5	%		2.7			0.6	%		(99.6	)		-7.7	%		12.7			0.8	%
Provision for income taxes		(81.6	)		-16.8	%		(1.7	)		-0.4	%		(95.3	)		-7.4	%		(8.3	)		-0.5	%
Net (loss) earnings	$	(195.4	)		-40.3	%	$	1.0			0.2	%	$	(194.9	)		-15.1	%	$	4.4			0.3	%

Three months ended December 31, Nine months ended December 31,
2017 2016 2017 2016
(in millions) $'s % of sales $'s % of sales $'s % of sales $'s % of sales
Net sales $ 512.7 100.0 % $ 349.8 100.0 % $ 1,536.5 100.0 % $ 1,014.7 100.0 %
Cost of sales 427.3 83.3 % 290.8 83.1 % 1,276.5 83.1 % 845.4 83.3 %
Gross profit 85.4 16.7 % 59.0 16.9 % 260.0 16.9 % 169.3 16.7 %
Selling, general and administrative expenses 60.8 11.9 % 50.7 14.5 % 182.2 11.9 % 143.1 14.1 %
Restructuring expenses 9.4 1.8 % 1.6 0.5 % 11.5 0.7 % 6.0 0.6 %
Impairment charge 1.3 0.3 % - - 1.3 0.1 % - -
Gain on sale of facility - - - - - - (1.2 ) -0.1 %
Operating income 13.9 2.7 % 6.7 1.9 % 65.0 4.2 % 21.4 2.1 %
Interest expense (6.3 ) -1.2 % (4.5 ) -1.3 % (19.5 ) -1.3 % (10.5 ) -1.0 %
Other expense – net (0.3 ) -0.1 % (1.0 ) -0.3 % (2.3 ) -0.1 % (2.8 ) -0.3 %
Earnings before income taxes 7.3 1.4 % 1.2 0.3 % 43.2 2.8 % 8.1 0.8 %
(Provision) benefit for income taxes (35.2 ) -6.9 % 0.7 0.2 % (37.4 ) -2.4 % (1.3 ) -0.1 %
Net (loss) earnings $ (27.9 ) -5.5 % $ 1.9 0.5 % $ 5.8 0.4 % $ 6.8 0.7 %

Comparison of Three Months ~~Ended~~ended December 31, ~~2017~~2020 and ~~2016~~2019

Third quarter net sales of ~~$512.7~~$484.3 million were ~~$162.9~~$10.9 million, or 472 percent, higher than the third quarter of the prior year, primarily due to ~~$110.2 million of additional~~higher sales ~~from our CIS segment, which we owned for one month~~volume in the ~~third quarter of the prior year, higher sales in all of our other operating~~HDE and BHVAC segments and ~~a $15.9~~an $11.2 million favorable impact of foreign currency exchange rate ~~changes.~~

Third quarter gross profit increased $26.4 million, primarily due to $14.2 million of additional contribution from our CIS segment and higher gross profit in our Building HVAC, Americas, and Asia segments. Third quarter gross profit was favorably impacted by $2.1 million from foreign currency exchange rate changes. Gross margin declined 20 basis points to 16.7 percent, as the benefits from higher sales volume and the absence of a $2.9 million inventory purchase accounting adjustment, which was recorded at Corporate in the prior year, were offset by unfavorable sales mix, higher material costs, and the absence of favorable customer pricing settlements in Europe recorded in the prior year.

SG&A expenses increased $10.1 million from the third quarter of fiscal 2017 to the third quarter of fiscal 2018, primarily due to a $9.0 million increase in SG&A expenses in our CIS segment, a $1.4 million unfavorable impact of foreign currency exchange rate changes, ~~and higher compensation-related expenses,~~ partially offset by lower ~~costs incurred related to the acquisition of Luvata HTS. SG&A expenses, as a percentage of net~~ sales ~~decreased 260 basis points compared with the third quarter of the prior year.~~

~~Restructuring expenses of $9.4 million in the third quarter of fiscal 2018 increased $7.8 million compared with the prior year, primarily due to severance-related expenses~~volume in the CIS ~~segment related to the closure of a manufacturing facility in Austria~~.

~~During the third quarter of fiscal 2018, we recorded a $1.3 million impairment charge related to the closure of a CIS manufacturing facility in Austria.~~

~~Operating income of $13.9 million~~and Automotive segments. Sales in the ~~third quarter of fiscal 2018 improved $7.2~~HDE, BHVAC, and Automotive segments increased $20.7 million, ~~compared with the third quarter of fiscal 2017, primarily due to higher earnings in the Americas, Asia~~$3.8 million, and ~~Building HVAC segments.~~$3.4 million, respectively. CIS segment sales decreased $18.5 million.

Interest expense increased $1.8 million to $6.3 million in the third quarter of fiscal 2018, primarily due to the debt issued in November 2016 to finance a significant portion of our acquisition of Luvata HTS.

Table of Contents

Third quarter cost of sales increased $1.7 million. As a percentage of sales, cost of sales decreased 160 basis points to 82.9 percent. The ~~provision for income taxes was $35.2 million~~increase in ~~the third quarter~~cost of ~~fiscal 2018, compared with a benefit for income taxes of $0.7 million in the third quarter of fiscal 2017. The $35.9 million change~~sales was primarily due to ~~charges totaling $35.7 million in the third quarter of fiscal 2018 related to the recently-enacted U.S. tax reform. In addition, the tax provision in the third quarter of fiscal 2018 included~~ a ~~$2.2 million benefit from a development tax credit in Hungary.~~

~~Comparison of Nine Months Ended December 31, 2017 and 2016~~

Fiscal 2018 year-to-date net sales of $1,536.5 million were $521.8 million, or 51 percent, higher than the same period last year, primarily due to $416.9 million of additional sales from our CIS segment, higher sales in all of our other segments, and an $18.7 million favorable impact of foreign currency exchange rate changes.

Fiscal 2018 year-to-date gross profit of $260.0 million increased $90.7 million from the same period last year, due primarily to $62.0 million of incremental gross profit in our recently-acquired CIS segment and higher gross profit in our Americas, Asia, and Building HVAC segments. Year-to-date gross profit was favorably impacted by $2.4 million from foreign currency exchange rate changes. Gross margin improved 20 basis points to 16.9 percent, primarily due to higher sales volume and improved production efficiencies, partially offset by unfavorable material costs and incremental depreciation and amortization expense resulting from purchase accounting for Luvata HTS.

Fiscal 2018 year-to-date SG&A expenses increased $39.1 million from the same period last year, primarily due to a $37.9 million increase in SG&A expenses in our CIS segment, higher compensation-related expenses, and a $1.5$9.7 million unfavorable impact of foreign currency exchange rate changes, partially offset by the favorable impacts of procurement and other cost-reduction initiatives and a $3.0 million decrease in depreciation expense in the Automotive segment. In addition, program and equipment transfer costs to prepare the liquid-cooled automotive business for sale decreased approximately $1.0 million compared with the prior year.

As a result of higher sales and lower ~~costs incurred related to the acquisition~~cost of ~~Luvata HTS. SG&A expenses,~~sales as a percentage of sales, third quarter gross profit increased $9.2 million and gross margin improved 160 basis points to 17.1 percent.

Third quarter SG&A expenses decreased $7.4 million. The decrease in SG&A expenses was primarily due to lower costs recorded at Corporate associated with our review of strategic alternatives for the Automotive segment’s business operations, which decreased approximately $10.0 million. This favorable driver was partially offset by a $1.0 million unfavorable impact of foreign currency exchange rate changes and higher environmental charges in the HDE segment.

Restructuring expenses of $0.9 million during the third quarter of fiscal 2021 decreased $1.7 million, primarily due to lower restructuring expenses in the HDE segment.

Impairment charges of $134.4 million in the third quarter of fiscal 2021 primarily related to the write-down of the long-lived assets in the Automotive segment’s liquid-cooled automotive business in connection with the pending sale of that business.

The operating loss of $108.7 million represents a $116.9 million decline from the prior-year operating income of $8.2 million. The decline was primarily due to the $134.4 million of impairment charges recorded in the Automotive segment and lower earnings in the CIS segment. These negative drivers were partially offset by higher earnings in our HDE and BHVAC segments.

Interest expense decreased $1.0 million, or 18 percent, during the third quarter of fiscal 2021, primarily due to lower outstanding long-term debt and, to a lesser extent, favorable changes in interest rates.

The provision for income taxes was $81.6 million and $1.7 million in the third quarter of fiscal 2021 and 2020, respectively. The $79.9 million increase was primarily due to income tax charges totaling $116.5 million recorded in the third quarter of fiscal 2021 to increase the valuation allowances on deferred tax assets in the U.S. and in certain foreign jurisdictions, partially offset by income tax benefits totaling $37.7 million related to the impairment charges recorded earlier in the third quarter of fiscal 2021.

Comparison of Nine Months ended December 31, 2020 and 2019

Fiscal 2021 year-to-date net sales ~~decreased 220 basis points compared with~~of $1,293.5 million were $209.1 million, or 14 percent, lower than the same period last ~~year.~~year, primarily due to lower sales in our HDE, CIS and Automotive segments. Sales in these segments decreased $93.8 million, $87.4 million, and $53.9 million, respectively, and were significantly impacted by market-driven volume declines and temporary plant closures earlier in the fiscal year due to the COVID-19 pandemic. BHVAC segment sales increased $8.3 million.

Fiscal 2021 year-to-date cost of sales of $1,083.9 million decreased $186.1 million, or 15 percent, primarily due to lower sales volume. As a percentage of sales, cost of sales improved 70 basis points to 83.8 percent. The unfavorable impact of lower sales volume was more than offset by the benefits of cost-reduction initiatives implemented earlier in the fiscal year in response to lower end market demand and procurement initiatives.

Table of Contents

As a result of lower sales and lower cost of sales as a percentage of sales, fiscal 2021 year-to-date gross profit decreased $23.0 million and gross margin improved 70 basis points to 16.2 percent.

Fiscal 2021 year-to-date SG&A expenses decreased $42.8 million. The decrease in SG&A expenses was primarily due to lower costs recorded at Corporate associated with our review of strategic alternatives for the Automotive segment’s business operations, which decreased approximately $29.0 million, and lower compensation-related expenses, which decreased approximately $18.0 million. These favorable drivers were partially offset by $5.9 million of costs recorded at Corporate in connection with Mr. Burke stepping down from his position as President and CEO and the search for his successor.

Restructuring expenses of ~~$11.5~~$7.0 million during the first nine months of fiscal ~~2018~~2021 increased ~~$5.5~~$0.3 million compared with the same period last year, primarily due to ~~severance-related~~higher restructuring expenses in the CIS segment, ~~related~~partially offset by lower restructuring expenses in the Automotive segment.

The fiscal 2021 year-to-date operating loss of $83.4 million represents a $115.7 million decline from the prior-year operating income of $32.3 million. The decline was primarily due to the ~~closure~~$134.4 million of ~~a manufacturing facility~~impairment charges recorded in ~~Austria.~~the Automotive segment and lower earnings in our CIS and HDE segments. These negative drivers were partially offset by lower SG&A expenses at Corporate and higher earnings in our BHVAC segment.

~~During~~Interest expense decreased $2.1 million, or 12 percent, during the first nine months of fiscal ~~2018, we recorded a $1.3 million impairment charge related~~2021, primarily due to ~~the closure of the CIS manufacturing facility~~lower outstanding long-term debt and favorable changes in ~~Austria.~~interest rates.

~~During fiscal 2017, we sold a manufacturing facility within our Europe segment~~The provision for ~~cash proceeds of $4.3~~income taxes was $95.3 million and ~~recognized a $1.2 million gain as a result.~~

~~Operating income of $65.0~~$8.3 million during the first nine months of fiscal ~~2018 represents a $43.6~~2021 and 2020, respectively. The $87.0 million ~~improvement compared with same period last year,~~increase was primarily due to ~~$14.6~~income tax charges totaling $123.1 million ~~of incremental operating income contributed by our CIS segment and higher earnings in the Americas, Asia and Building HVAC segments.~~

~~Interest expense increased $9.0 million to $19.5 million in~~recorded during the first nine months of fiscal ~~2018, primarily due~~2021 to ~~debt issued to finance a significant portion of our acquisition of Luvata HTS.~~

~~The provision for income taxes was $37.4 million and $1.3 million~~increase the valuation allowances on deferred tax assets in the ~~first nine months of fiscal 2018~~U.S. and ~~2017, respectively. The $36.1 million increase was primarily due to $35.7 million of charges recorded~~ in ~~the third quarter of fiscal 2018 related to U.S. tax reform and increased operating earnings in the current year,~~certain foreign jurisdictions, partially offset by income tax benefits totaling $37.7 million related to the impairment charges recorded during fiscal 2021.

SEGMENT RESULTS OF OPERATIONS

Effective April 1, 2020, we began managing our global automotive business separate from the other businesses within the previously-reported Vehicular Thermal Solutions (“VTS”) segment. We have been managing the automotive business as the Automotive segment as we target the sale or eventual exit of ~~$7.9 million from a development tax credit in Hungary and a $1.8 million reduction of unrecognized tax benefits resulting from a lapse in statutes of limitations.~~its underlying automotive business operations. We ~~expect~~are managing the full-year fiscal 2018 benefit for the Hungary development tax credit to total approximately $11.0 million. We do not expect the impact of this tax credit to be significant in fiscal 2019. It is possible that we may release the tax valuation allowance (approximately $3.0 million) in a foreign jurisdiction in the fourth quarter of fiscal 2018 or in fiscal 2019. See Note 8other businesses of the ~~Notes~~VTS segment, including the commercial vehicle and off-highway businesses, as the Heavy Duty Equipment segment. We began reporting financial results for our new segment structure beginning for fiscal 2021. Segment financial information for fiscal 2020 has been recast to ~~Condensed Consolidated Financial Statements for additional information regarding U.S. tax reform~~conform to the fiscal 2021 presentation. The segment realignment had no impact on the CIS and ~~income tax valuation allowances.~~BHVAC segments.

Table of Contents

~~SEGMENT RESULTS OF OPERATIONS~~

Since the date we acquired Luvata HTS (November 30, 2016), we have included CIS segment financial results within our consolidated results of operations. As CIS financial results were not included in our consolidated financial statements for the full period during the three and nine months ended December 31, 2016, we have not provided separate discussion of our CIS segment below. The contributions of our CIS segment are included within the discussion of our consolidated financial results above. The following is a discussion of our segment results of operations for the three and nine months ended December 31, ~~2017~~2020 and ~~2016:~~2019:

Americas
Three months ended December 31, Nine months ended December 31,
2017 2016 2017 2016
(in millions) $'s
% of
sales
$'s
% of
sales
$'s
% of
sales
$'s
% of
sales

Net sales $ 140.5 100.0 % $ 123.4 100.0 % $ 430.7 100.0 % $ 389.4 100.0 %
Cost of sales 118.8 84.6 % 105.0 85.1 % 361.0 83.8 % 329.9 84.7 %
Gross profit 21.7 �� 15.4 % 18.4 14.9 % 69.7 16.2 % 59.5 15.3 %
Selling, general and administrative expenses 12.7 9.0 % 11.3 9.2 % 39.3 9.1 % 40.1 10.3 %
Restructuring expenses 0.1 0.1 % 1.4 1.1 % 1.6 0.4 % 5.2 1.3 %
Operating income $ 8.9 6.3 % $ 5.7 4.6 % $ 28.8 6.7 % $ 14.2 3.6 %
Commercial and Industrial Solutions

	Three months ended December 31,											Nine months ended December 31,
	2020						2019					2020					2019
(in millions)	$'s			% of sales			$'s		% of sales			$'s		% of sales			$'s		% of sales
Net sales	$	129.0			100.0	%	$	147.5		100.0	%	$	385.6		100.0	%	$	473.0		100.0	%
Cost of sales		116.4			90.2	%		124.8		84.6	%		338.2		87.7	%		403.1		85.2	%
Gross profit		12.6			9.8	%		22.7		15.4	%		47.4		12.3	%		69.9		14.8	%
Selling, general and administrative expenses		13.8			10.7	%		13.7		9.3	%		39.1		10.2	%		42.8		9.1	%
Restructuring expenses		0.5			0.4	%		0.7		0.5	%		4.4		1.1	%		1.3		0.3	%
Operating (loss) income	$	(1.7	)		-1.3	%	$	8.3		5.6	%	$	3.9		1.0	%	$	25.8		5.4	%

Comparison of Three Months ~~Ended~~ended December 31, ~~2017~~2020 and ~~2016~~2019

~~Americas~~CIS net sales ~~increased $17.1~~decreased $18.5 million, or 1413 percent, from the third quarter of fiscal ~~2017~~2020 to the third quarter of fiscal ~~2018,~~2021, primarily due to ~~higher~~lower sales volume to commercial vehicle, off-highway, and automotive customers. Gross profit increased $3.3 million and gross margin improved 50 basis points, primarily due to higher sales volume and improved production efficiencies,of data center cooling products, partially offset by ~~unfavorable material costs. SG&A expenses increased $1.4~~a $4.5 million favorable impact of foreign currency exchange rate changes. Sales to data center cooling customers decreased $18.4 million, primarily due to a lower ~~recovery~~sales to one individual customer.

CIS cost of ~~development costs and higher compensation-related expenses. Restructuring expenses~~sales decreased ~~$1.3~~$8.4 million, inor 7 percent, from the third quarter of fiscal ~~2018,~~2020 to the third quarter of fiscal 2021, primarily due to lower ~~plant consolidation costs. Operating income~~sales volume, partially offset by a $4.2 million unfavorable impact of foreign currency exchange rate changes. As a percentage of sales, cost of sales increased ~~$3.2 million~~560 basis points to ~~$8.9 million,~~90.2 percent, primarily due to the impact of lower sales volume, unfavorable sales mix, and to a lesser extent, temporary operating inefficiencies associated with plant consolidation activities in China. These negative impacts were partially offset by benefits from procurement and other cost-reduction initiatives.

As a result of the lower sales and higher cost of sales as a percentage of sales, gross profit decreased $10.1 million and gross margin declined 560 basis points to 9.8 percent.

SG&A expenses increased $0.1 million, or 140 basis points as a percentage of sales, compared with the third quarter of the prior year. The increase in SG&A expenses was primarily due to a $0.5 million unfavorable impact of foreign currency exchange rate changes, partially offset by lower compensation-related expenses.

Restructuring expenses during the third quarter of fiscal 2021 totaled $0.5 million, a decrease of $0.2 million compared with the third quarter of fiscal 2020, and primarily consisted of equipment transfer and plant consolidation costs in China.

The CIS operating loss of $1.7 million represents a $10.0 million decline from the prior-year operating income of $8.3 million and was primarily due to lower gross profit.

Comparison of Nine Months ~~Ended~~ended December 31, ~~2017~~2020 and ~~2016~~2019

~~Americas~~CIS year-to-date net sales ~~increased $41.3~~decreased $87.4 million, or 1118 percent, from the same period last year, primarily due to ~~higher~~lower sales volume ~~to off-highway and commercial vehicle customers, increased aftermarket~~associated with the impacts of the COVID-19 pandemic. In addition, sales in ~~Brazil,~~fiscal 2021 have been negatively impacted by lower sales to a significant data center customer. Sales to commercial HVAC&R and ~~a $2.0 million favorable impact of foreign currency exchange rate changes. Gross profit increased $10.2~~data center cooling customers decreased $48.1 million and ~~gross margin improved 90 basis points, primarily due to higher sales volume and improved production efficiencies, partially offset by unfavorable material costs. SG&A expenses decreased $0.8~~$41.1 million, primarily due to the absence of a $1.6 million charge recorded in the prior year related to a legal matter in Brazil, which has since been settled and paid, partially offset by legal costs incurred for an environmental matter associated with a previously-owned manufacturing facility. Restructuring expenses decreased $3.6 million, primarily due to lower plant consolidation and severance expenses. Operating income increased $14.6 million to $28.8 million, primarily due to higher gross profit and lower restructuring expenses.respectively.

Table of Contents

Europe
Three months ended December 31, Nine months ended December 31,
2017 2016 2017 2016
(in millions) $'s
% of
sales
$'s
% of
sales
$'s
% of
sales
$'s
% of
sales

Net sales $ 134.6 100.0 % $ 119.8 100.0 % $ 405.4 100.0 % $ 389.7 100.0 %
Cost of sales 116.7 86.7 % 101.2 84.5 % 348.6 86.0 % 329.4 84.5 %
Gross profit 17.9 13.3 % 18.6 15.5 % 56.8 14.0 % 60.3 15.5 %
Selling, general and administrative expenses 10.5 7.8 % 9.9 8.2 % 32.3 8.0 % 30.8 7.9 %
Restructuring expenses (income) 1.1 0.9 % 0.1 0.1 % 1.7 0.4 % (0.2 ) -0.1 %
Gain on sale of facility - - - - - - (1.2 ) -0.3 %
Operating income $ 6.3 4.6 % $ 8.6 7.2 % $ 22.8 5.6 % $ 30.9 7.9 %

~~Comparison~~CIS year-to-date cost of ~~Three Months Ended December 31, 2017 and 2016~~

~~Europe net~~ sales ~~increased $14.8~~decreased $64.9 million, or 12 percent, from the third quarter of fiscal 2017 to the third quarter of fiscal 2018, primarily due to an $11.1 million favorable impact of foreign currency exchange rate changes and higher sales volume to automotive and off-highway customers. Gross profit decreased $0.7 million and gross margin declined 220 basis points to 13.3 percent, primarily due to the absence of favorable customer pricing settlements recorded in the prior year. In addition, gross profit was favorably impacted by $1.4 million from foreign currency exchange rate changes. SG&A expenses increased $0.6 million, primarily due to a $0.9 million unfavorable impact of foreign currency exchange rate changes. Restructuring expenses increased $1.0 million in the third quarter of fiscal 2018, primarily due to higher severance expenses. Operating income of $6.3 million decreased $2.3 million, primarily due to higher restructuring expenses and lower gross profit.

~~Comparison of Nine Months Ended December 31, 2017 and 2016~~

~~Europe year-to-date net sales increased $15.7 million, or 4~~16 percent, from the same period last year, primarily due to lower sales volume. As a ~~$14.6 million favorable~~percentage of sales, cost of sales increased 250 basis points to 87.7 percent, primarily due to the impact of ~~foreign currency exchange rate changes and higher~~lower sales volume ~~to off-highway~~ and ~~automotive customers,~~unfavorable sales mix, partially offset by cost-reduction and procurement initiatives.

As a result of the ~~planned wind-down~~lower sales and higher cost of ~~certain commercial vehicle programs. Gross~~sales as a percentage of sales, gross profit decreased ~~$3.5~~$22.5 million and gross margin declined ~~150~~250 basis points to ~~14.0 percent,~~12.3 percent.

CIS year-to-date SG&A expenses decreased $3.7 million compared with the prior year. The decrease in SG&A expenses was primarily due to ~~unfavorable material costs and the absence of the favorable customer pricing settlements recorded in the prior year,~~lower compensation-related expenses, which decreased approximately $5.0 million, partially offset by improved production efficiencies. In addition, gross profit was favorably impacted by $2.0 million from foreign currency exchange rate changes. SG&A expenses increased $1.5 million, primarily due to a ~~$1.1~~$0.6 million unfavorable impact of foreign currency exchange rate ~~changes and higher compensation-related expenses.~~ changes.

Restructuring expenses during the first nine months of fiscal 2021 increased ~~$1.9~~$3.1 million compared with the prior year and primarily ~~due to higher~~consisted of severance expenses and equipment transfer ~~costs. During fiscal 2017, we sold a manufacturing facility for cash proceeds of $4.3 million~~costs related to plant consolidation activities in China and ~~recorded a $1.2 million gain as a result.~~ targeted headcount reductions in North America.

Operating income ~~of $22.8~~decreased $21.9 million ~~decreased $8.1~~to $3.9 million, primarily due to lower gross profit and higher restructuring ~~and~~expenses, partially offset by lower SG&A expenses.

Asia
Three months ended December 31, Nine months ended December 31,
2017 2016 2017 2016
(in millions) $'s
% of
sales
$'s
% of
sales
$'s
% of
sales
$'s
% of
sales

Net sales $ 42.8 100.0 % $ 28.6 100.0 % $ 117.7 100.0 % $ 78.2 100.0 %
Cost of sales 34.6 81.0 % 23.6 82.4 % 95.8 81.4 % 65.1 83.3 %
Gross profit 8.2 19.0 % 5.0 17.6 % 21.9 18.6 % 13.1 16.7 %
Selling, general and administrative expenses 3.1 7.3 % 2.4 8.4 % 9.3 7.9 % 8.2 10.4 %
Operating income $ 5.1 11.7 % $ 2.6 9.2 % $ 12.6 10.7 % $ 4.9 6.3 %
Building HVAC Systems

	Three months ended December 31,										Nine months ended December 31,
	2020					2019					2020					2019
(in millions)	$'s		% of sales			$'s		% of sales			$'s		% of sales			$'s		% of sales
Net sales	$	68.7		100.0	%	$	64.9		100.0	%	$	178.2		100.0	%	$	169.9		100.0	%
Cost of sales		43.0		62.7	%		41.8		64.5	%		116.3		65.3	%		115.4		67.9	%
Gross profit		25.7		37.3	%		23.1		35.5	%		61.9		34.7	%		54.5		32.1	%
Selling, general and administrative expenses		9.9		14.3	%		9.6		14.7	%		25.9		14.5	%		26.9		15.8	%
Operating income	$	15.8		23.1	%	$	13.5		20.8	%	$	36.0		20.2	%	$	27.6		16.2	%

~~Table of Contents~~

Comparison of Three Months ~~Ended~~ended December 31, ~~2017~~2020 and ~~2016~~2019

~~Asia~~BHVAC net sales increased ~~$14.2~~$3.8 million, or 506 percent, from the third quarter of fiscal ~~2017~~2020 to the third quarter of fiscal ~~2018,~~2021, primarily due to higher sales ~~volume~~in the U.S. and the U.K., which both increased approximately $2.0 million. The higher sales in the U.S. were primarily due to ~~off-highway customers~~higher sales of heating products, partially offset by lower sales of ventilation products. The higher sales in ~~all geographic markets~~the U.K. were primarily due to higher sales of air conditioning and ~~automotive customers in China and India. Foreign currency exchange rate changes favorably impacted~~data center cooling products.

BHVAC cost of sales increased $1.2 million, or 3 percent, from the third quarter ~~net sales by $1.5 million. Gross profit increased $3.2 million and gross margin improved 140 basis points~~of fiscal 2020 to ~~19.0 percent,~~the third quarter of fiscal 2021, primarily due to higher sales volume. As a percentage of sales, cost of sales decreased 180 basis points to 62.7 percent and was positively impacted by favorable customer pricing and sales mix.

As a result of the higher sales and lower cost of sales as a percentage of sales, gross profit increased $2.6 million and gross margin improved 180 basis points to 37.3 percent.

SG&A expenses increased ~~by $0.7~~$0.3 million ~~compared with~~from the prior year, yet decreased ~~110~~40 basis points as a percentage of sales. The increase in SG&A expenses was primarily due to higher compensation-related expenses, ~~incurred in support~~including commission expenses.

Table of ~~the recent business growth.~~ Contents

Operating income of ~~$5.1~~$15.8 million increased ~~$2.5~~$2.3 million during the quarter, primarily due to higher gross profit.

Comparison of Nine Months ~~Ended~~ended December 31, ~~2017~~2020 and ~~2016~~2019

~~Asia~~BHVAC year-to-date net sales increased ~~$39.5~~$8.3 million, or 515 percent, from the same period last year, primarily due to higher sales ~~volume~~volume. Compared with the first nine months of the prior year, sales increased $9.2 million in the U.K. and decreased $0.9 million in the U.S. The higher sales in the U.K. were primarily due to ~~off-highway customers~~higher sales of data center products. The lower sales in ~~all geographic markets~~the U.S. resulted primarily from the negative impacts of the COVID-19 pandemic and ~~automotive customers in China~~decreased sales of ventilation products, partially offset by higher sales of heating products.

BHVAC year-to-date cost of sales increased $0.9 million from the same period last year. As a percentage of sales, cost of sales decreased 260 basis points to 65.3 percent and ~~India. Gross~~was positively impacted by favorable customer pricing, sales mix and cost-reduction initiatives.

As a result of higher sales and lower cost of sales as a percentage of sales, gross profit increased ~~$8.8~~$7.4 million and gross margin improved ~~190~~260 basis points to ~~18.6 percent, primarily due to higher sales volume.~~34.7 percent.

BHVAC year-to-date SG&A expenses ~~increased by $1.1~~decreased $1.0 million, ~~compared with the prior year, yet decreased 250~~or 130 basis points as a percentage of ~~sales.~~sales, from the prior year. The ~~increase~~decrease in SG&A expenses was ~~primarily~~primary due to ~~higher compensation-related~~lower travel expenses.

Operating income of ~~$12.6~~$36.0 million increased ~~$7.7~~$8.4 million compared with the same period last year, primarily due to higher gross ~~profit.~~profit and lower SG&A expenses.

Building HVAC
Three months ended December 31, Nine months ended December 31,
2017 2016 2017 2016
(in millions) $'s
% of
sales
$'s
% of
sales
$'s
% of
sales
$'s
% of
sales

Net sales $ 56.1 100.0 % $ 47.2 100.0 % $ 147.9 100.0 % $ 132.8 100.0 %
Cost of sales 37.1 66.2 % 31.9 67.6 % 102.9 69.6 % 95.7 72.0 %
Gross profit 19.0 33.8 % 15.3 32.4 % 45.0 30.4 % 37.1 28.0 %
Selling, general and administrative expenses 9.8 17.4 % 8.5 18.0 % 26.4 17.8 % 26.0 19.6 %
Restructuring expenses - - 0.1 0.2 % - - 0.7 0.5 %
Operating income $ 9.2 16.5 % $ 6.7 14.2 % $ 18.6 12.6 % $ 10.4 7.8 %
Heavy Duty Equipment

	Three months ended December 31,										Nine months ended December 31,
	2020					2019					2020					2019
(in millions)	$'s		% of sales			$'s		% of sales			$'s		% of sales			$'s		% of sales
Net sales	$	185.6		100.0	%	$	164.9		100.0	%	$	474.7		100.0	%	$	568.5		100.0	%
Cost of sales		159.6		86.0	%		148.1		89.8	%		413.8		87.2	%		496.8		87.4	%
Gross profit		26.0		14.0	%		16.8		10.2	%		60.9		12.8	%		71.7		12.6	%
Selling, general and administrative expenses		13.2		7.1	%		12.6		7.7	%		35.4		7.4	%		42.3		7.4	%
Restructuring expenses		-		-			1.4		0.8	%		1.9		0.4	%		2.2		0.4	%
Operating income	$	12.8		6.8	%	$	2.8		1.7	%	$	23.6		5.0	%	$	27.2		4.8	%

Comparison of Three Months ~~Ended~~ended December 31, ~~2017~~2020 and ~~2016~~2019

~~Building HVAC~~HDE net sales increased ~~$8.9~~$20.7 million, or 1913 percent, from the third quarter of fiscal ~~2017~~2020 to the third quarter of fiscal 2018, primarily due to higher ventilation and heating product sales in North America, higher ventilation product sales in the U.K., and a $1.3 million favorable impact of foreign currency exchange rate changes. Gross profit increased $3.7 million and gross margin improved 140 basis points to 33.8 percent,2021, primarily due to higher sales volume ~~favorable~~to global off-highway customers. Sales to off-highway and commercial vehicle customers increased $16.7 million and $3.8 million, respectively. Geographically, sales ~~mix,~~increased most significantly in Asia.

HDE cost of sales increased $11.5 million, or 8 percent, from the third quarter of fiscal 2020 to the third quarter of fiscal 2021, primarily due to higher sales volume. As a percentage of sales, cost of sales decreased 380 basis points to 86.0 percent and was favorably impacted by the higher sales volume, cost savings from procurement and other cost-reduction initiatives, and, to a lesser extent, improved ~~production efficiencies in~~operating efficiencies.

As a result of the ~~U.K.~~ higher sales and lower cost of sales as a percentage of sales, gross profit increased $9.2 million and gross margin improved 380 basis points to 14.0 percent.

Table of Contents

SG&A expenses increased ~~$1.3~~$0.6 million, yet decreased 60 basis points as a percentage of sales, compared with the third quarter of the prior year. The increase in SG&A expenses was primarily due to ~~higher compensation-related~~environmental charges related to a previously-owned U.S. manufacturing facility, which increased $0.4 million.

Restructuring expenses ~~including commission~~decreased $1.4 million compared with the third quarter of fiscal 2020, primarily due to lower severance expenses ~~resulting from the increased sales.~~ related to targeted headcount reductions.

Operating income of ~~$9.2~~$12.8 million increased ~~$2.5~~$10.0 million during the quarter, primarily due to higher gross profit ~~partially offset by higher SG&A~~and lower restructuring expenses.

Comparison of Nine Months ~~Ended December 31, 2017~~ended September 30, 2020 and ~~2016~~2019

~~Building HVAC~~HDE year-to-date net sales ~~increased $15.1~~decreased $93.8 million, or 1116 percent, from the same period last year, primarily due to ~~higher ventilation~~lower sales volume resulting from the impacts of the COVID-19 pandemic, which were most severe in the Americas and ~~heating product~~Europe during the first half of the fiscal year. Sales to commercial vehicle and automotive and light vehicle customers decreased $57.2 million and $15.2 million, respectively.

HDE year-to-date cost of sales decreased $83.0 million, or 17 percent, primarily due to lower sales volume. As a percentage of sales, cost of sales decreased 20 basis points to 87.2 percent. The significant unfavorable impact of the lower sales volume was more than offset by favorable impacts from improved operating efficiencies and cost savings from procurement and other cost-reduction initiatives.

As a result of the lower sales and lower cost of sales as a percentage of sales, gross profit decreased $10.8 million and gross margin improved 20 basis points to 12.8 percent.

HDE year-to-date SG&A expenses decreased $6.9 million from the prior year. The decrease in SG&A expenses was primarily due to lower compensation-related expenses, which decreased approximately $6.0 million, and cost-reduction initiatives, including lower travel expenses.

Restructuring expenses during the first nine months of fiscal 2021 totaled $1.9 million, a decrease of $0.3 million compared with the same period last year, and primarily consisted of severance expenses resulting from targeted headcount reductions in North ~~America,~~America.

Operating income of $23.6 million decreased $3.6 million compared with the same period last year, primarily due to lower gross profit, partially offset by lower SG&A expenses.

Table of Contents

Automotive

	Three months ended December 31,												Nine months ended December 31,
	2020						2019						2020						2019
(in millions)	$'s			% of sales			$'s			% of sales			$'s			% of sales			$'s			% of sales
Net sales	$	113.9			100.0	%	$	110.5			100.0	%	$	285.9			100.0	%	$	339.8			100.0	%
Cost of sales		95.5			83.9	%		98.3			89.0	%		246.1			86.1	%		302.1			88.9	%
Gross profit		18.4			16.1	%		12.2			11.0	%		39.8			13.9	%		37.7			11.1	%
Selling, general and administrative expenses		8.5			7.4	%		11.2			10.2	%		25.5			8.9	%		33.6			9.9	%
Restructuring expenses		0.4			0.4	%		0.2			0.2	%		0.6			0.2	%		2.9			0.8	%
Impairment charges		134.4			118.0	%		-			-			134.4			47.0	%		-			-
Gain on sale of assets		-			-			(0.8	)		-0.8	%		-			-			(0.8	)		-0.2	%
Operating (loss) income	$	(124.9	)		-109.7	%	$	1.6			1.4	%	$	(120.7	)		-42.2	%	$	2.0			0.6	%

Comparison of Three Months ended December 31, 2020 and 2019

Automotive net sales increased $3.4 million, or 3 percent, from the third quarter of fiscal 2020 to the third quarter of fiscal 2021, primarily due to a $6.7 million favorable impact of foreign currency exchange rate changes, partially offset by lower sales volume. Compared with the prior year, sales increased $3.8 million and $2.0 million in Europe and Asia, respectively, and decreased $2.4 million in the Americas.

Automotive cost of sales decreased $2.8 million, or 3 percent, from the third quarter of fiscal 2020 to the third quarter of fiscal 2021. As a percentage of sales, cost of sales decreased 510 basis points to 83.9 percent. Compared with the prior year, cost of sales was favorably impacted by lower depreciation expenses, which decreased approximately $3.0 million, cost savings from procurement and other cost-reduction initiatives, and improved operating efficiencies. The lower depreciation expenses resulted from the Company ceasing depreciation of the long-lived assets within the liquid-cooled automotive business when it was classified as held for sale in November 2020. Foreign currency exchange rate changes negatively impacted cost of sales by $5.7 million.

As a result of the higher sales and lower cost of sales as a percentage of sales, gross profit increased $6.2 million and gross margin improved 510 basis points to 16.1 percent.

SG&A expenses decreased $2.7 million compared with the third quarter of the prior year. The decrease in SG&A expenses was primarily due to lower compensation-related expenses, which decreased approximately $2.0 million.

Restructuring expenses during the third quarter of fiscal 2021 totaled $0.4 million and primarily consisted of severance expenses resulting from targeted headcount reductions in Europe.

Impairment charges during the third quarter of fiscal 2021 totaled $134.4 million and primarily related to assets in the liquid-cooled automotive business. Upon classifying this business as held for sale during the third quarter, we identified an implied loss in excess of the carrying value of its long-lived assets. Accordingly, we reduced the liquid-cooled automotive business’s long-lived assets, primarily property, plant and equipment, to zero.

During the third quarter of fiscal 2020, we completed the sale of a previously-closed manufacturing facility in Germany and, as a result, recorded a gain of $0.8 million.

The Automotive operating loss of $124.9 million in the third quarter of fiscal 2021, as compared with operating income of $1.6 million in the third quarter of the prior year, was significantly impacted by the large impairment charges associated with the liquid-cooled automotive business and, to a much lesser extent, higher gross profit and lower SG&A expenses.

Table of Contents

Comparison of Nine Months ended December 31, 2020 and 2019

Automotive year-to-date net sales decreased $53.9 million, or 16 percent, from the same period last year, primarily due to lower sales volume largely resulting from the impacts of the COVID-19 pandemic, partially offset by a ~~$0.9~~$9.7 million favorable impact of foreign currency exchange rate changes. Sales in Europe and North America decreased $46.8 million and $13.0 million, respectively. Sales in Asia increased $5.9 million.

Automotive year-to-date cost of sales decreased $56.0 million, or 19 percent, from the prior year, primarily due to lower sales volume, partially offset by an $8.2 million unfavorable impact of foreign currency exchange rate changes. ~~Gross~~As a percentage of sales, cost of sales decreased 280 basis points to 86.1 percent and was favorably impacted by improved operating efficiencies, cost savings from procurement initiatives, and lower depreciation expenses of approximately $4.0 million, partially offset by the unfavorable impact of lower sales volume.

As a result of the lower sales and lower cost of sales as a percentage of sales, gross profit increased ~~$7.9~~$2.1 million and gross margin improved ~~240~~280 basis points to ~~30.4 percent,~~13.9 percent.

Automotive year-to-date SG&A expenses decreased $8.1 million compared with the prior year. The decrease in SG&A expenses was primarily due to ~~higher sales volume. SG&A~~lower compensation-related expenses, ~~increased $0.4 million, yet~~which decreased ~~180 basis points as a percentage of sales.~~ approximately $8.0 million.

Restructuring expenses ~~decreased $0.7~~during the first nine months of fiscal 2021 totaled $0.6 million, ~~due to~~a decrease of $2.3 million compared with the ~~absence of severance expenses incurred~~same period in the prior year. ~~Operating~~The decrease was primarily driven by lower severance expenses in Europe resulting from fewer targeted headcount reductions.

The Automotive operating loss of $120.7 million during the first nine months of fiscal 2021, as compared with operating income of ~~$18.6~~$2.0 million ~~increased $8.2 million, primarily due~~during the same period last year, was significantly impacted by the large impairment charges associated with the liquid-cooled automotive business during the third quarter of fiscal 2021 and, to a much lesser extent, higher gross ~~profit.~~profit and lower SG&A expenses and restructuring charges.

~~Table of Contents~~

Liquidity and Capital Resources

Our primary sources of liquidity are cash flow from operating activities, our cash and cash equivalents atof $72.9 million as of December 31, ~~2017 of $47.8 million,~~2020, and an available borrowing capacity of ~~$168.8~~$213.6 million under ~~lines of~~our revolving credit ~~provided by banks in the United States and abroad.~~facility. Given our extensive international operations, approximately ~~$46.0~~$59.0 million of our cash and cash equivalents ~~are~~is held by our non-U.S. subsidiaries. Amounts held by non-U.S. subsidiaries are available for general corporate use; however, these funds may be subject to foreign withholding taxes if repatriated.

In response to the COVID-19 pandemic, we have taken actions to reduce operating and administrative expenses, conserve cash and maximize liquidity. In addition, as described below, we have focused on reducing our capital expenditures and executed amendments to our primary credit agreements to provide financial covenant flexibility during fiscal 2021 and 2022. We ~~have not encountered,~~believe our sources of liquidity, including cash flow from operations, our cash and ~~do not expect~~cash equivalents, and access to ~~encounter, any difficulty meeting~~both committed and uncommitted credit facilities, will provide sufficient cash flow to meet our obligations during the ~~liquidity requirements~~next twelve months and beyond. However, we are continuing to monitor the impacts of COVID-19 on our ~~global operations.~~business and the credit and financial markets.

Table of Contents

Net Cash Provided by Operating Activities

Net cash provided by operating activities for the nine months ended December 31, ~~2017~~2020 was ~~$105.6~~$146.5 million, which ~~was~~represents a ~~$70.6~~$100.6 million increase compared with the same period in the prior year. This increase in operating cash flow was primarily resulted from an increase in operating earnings, including contributions from our CIS segment, lower payments for restructuring expenses and costs associated with the acquisition and integration of Luvata HTS in the current year, anddue to favorable net changes in working ~~capital.~~capital and lower payments for separation and project costs associated with our review of strategic alternatives for the automotive businesses. The favorable changes in working capital during the first nine months of fiscal 2021, compared with the same period in the prior year, included lower inventory levels and lower payments for incentive compensation, employee benefits, income taxes and payroll taxes. In addition, we have deferred payments of U.S. payroll taxes, as permitted by the Coronavirus Aid, Relief and Economic Security Act. We plan to resume payment of these payroll taxes during the fourth quarter of fiscal 2021.

Capital Expenditures

In response to the economic impacts of the COVID-19 pandemic, we have been focused on reducing our capital expenditures and, where possible, have delayed certain projects and the purchase of certain program-related equipment and tooling in our vehicular businesses. Capital expenditures of ~~$55.0~~$23.7 million during the first nine months of fiscal ~~2018 increased $9.0~~2021 decreased $34.5 million compared with the same period in the prior year, primarily due to capital expenditures by our recently-acquired CIS segment, equipment purchases to expand our manufacturing capacity in China, and tooling and equipment purchases to support new product launches.year.

Debt

Our ~~debt~~credit agreements require us to maintain compliance with various ~~covenants. The term loans require prepayments,~~covenants, including a leverage ratio covenant and an interest expense coverage ratio covenant discussed further below. Also, as ~~defined~~specified in the credit agreement, in the ~~event our annual excess cash flow exceeds defined levels or~~term loans may require prepayments in the event of certain asset sales. In addition, at the time of each incremental borrowing under the revolving credit facility, we must represent to the lenders that there has been no material adverse effect, as defined in the credit agreement, on our business, property, or results of operations.

In May 2020, we executed amendments to our primary ~~debt~~credit agreements in the U.S.~~, we are subject~~ to provide additional covenant flexibility in light of the risks and uncertainties associated with the COVID-19 pandemic. Under the amended agreements, the leverage ratio ~~covenants, the most restrictive of which~~covenant limit has been temporarily raised. The leverage ratio covenant within our primary credit agreements requires us to limit our consolidated indebtedness, less a portion of our cash balance, both as defined by the credit ~~agreement,~~agreements, in relation to ~~no more than three and one-quarter times~~our consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”). The leverage ratio covenant limit is 5.75 to 1 for the fourth quarter of fiscal 2021. In fiscal 2022, the leverage ratio covenant limit is 4.75 to 1, 3.75 to 1, and 3.50 to 1 for the first, second and third quarters, respectively, and subsequently returns to 3.25 to 1 for the fourth quarter of fiscal 2022. We are also subject to an interest expense coverage ratio covenant, which requires us to maintain Adjusted EBITDA of at least three times consolidated interest expense. At

As of December 31, ~~2017,~~2020, we were in compliance with our debt covenants; our leverage ratio and interest coverage ratio ~~was 2.5~~were 1.9 and ~~7.9,~~8.7, respectively. We ~~were~~expect to remain in compliance with our debt covenants ~~as of December 31, 2017 and expect to remain in compliance~~ during ~~the balance of~~ fiscal ~~2018~~2021, fiscal 2022 and beyond.

~~Shelf Registration Statement~~Share Repurchase Program

~~We filed~~On November 5, 2020, we announced our Board of Directors approved a ~~shelf registration statement with the Securities and Exchange Commission,~~two-year, $50.0 million share repurchase program, which ~~was declared effective as of June 26, 2017. The shelf registration statement~~ allows us to ~~offer and sell, from time to time,~~repurchase shares of our common stock through solicited and ~~certain~~unsolicited transactions in the open market or in privately-negotiated or other ~~equity or debt securities in one or more offerings in amounts,~~transactions, at such times and prices and onupon such other terms ~~that~~as we ~~determine at the time of any such offering, with an aggregate initial offering price of up to $200.0 million.~~

~~Contractual Obligations~~

~~Other than the transition tax liability recorded as a result of U.S. tax reform, as discussed in Note 8 of the Notes to Condensed Consolidated Financial Statements, there~~deem appropriate. To date, we have not ~~been any material changes in the Company’s contractual obligations since March 31, 2017, as reported in Item 7. in Part II.~~repurchased shares under this program. Our decision whether and to what extent to repurchase shares under this program will depend on a number of ~~the Company’s Annual Report on Form 10-K.~~factors, including business conditions, other cash priorities, and stock price.

Table of Contents

Forward-Looking Statements

This report, including, but not limited to, the discussion under Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains statements, including information about future financial performance, accompanied by phrases such as “believes,” “estimates,” “expects,” “plans,” “anticipates,” “intends,” and other similar “forward-looking” statements, as defined in the Private Securities Litigation Reform Act of 1995. Modine’s actual results, performance or achievements may differ materially from those expressed or implied in these statements, because of certain risks and uncertainties, including, but not limited to, those described under “Risk Factors” in Item 1A. in Part I. of the Company’s Annual Report on Form 10-K for the year ended March 31, ~~2017.~~2020. Other risks and uncertainties include, but are not limited to, the following:

Market Risks:

Economic, social and political conditions, changes, challenges and unrest, particularly in the geographic, product and financial markets where we and our customers operate and compete, including, in particular, foreign currency exchange rate fluctuations, tariffs, inflation, changes in interest rates, recession and recovery therefrom, restrictions and uncertainty associated with cross-border trade, and, in particular, the continuing recovery and/or instability of certain markets in which we operate in China and North America, and the general uncertainties about the impact of regulatory and/or policy changes, including those related to tax and trade, that have been or may be implemented in the United States, as well as continuing uncertainty regarding the longer-term implications of “Brexit”;

The impact of the COVID-19 pandemic on the national and global economy, our business, suppliers, customers, and employees;

·	The impact of potential increases in commodity prices, including our ability to successfully manage our exposure and/or pass increasing prices of aluminum, copper, steel and stainless steel (nickel) on to customers, as well as the inherent lag in timing of such pass-through arrangements; and

Economic, social and political conditions, changes, challenges and unrest, particularly in the geographic, product and financial markets where we and our customers operate and compete, including, in particular, foreign currency exchange rate fluctuations; tariffs (and any potential trade war resulting from tariffs or retaliatory actions); inflation; changes in interest rates; recession and recovery therefrom; restrictions and uncertainty associated with cross-border trade, public health crises, such as pandemics and epidemics, including the ongoing COVID-19 pandemic; and the general uncertainties about the impact of regulatory and/or policy changes, including those related to tax and trade, the COVID-19 pandemic and other matters, that have been or may be implemented in the U.S. or abroad, as well as continuing uncertainty regarding the short- and long-term implications of “Brexit”;

~~The impact of current~~The impact of potential price increases associated with raw materials, including aluminum, copper, steel and stainless steel (nickel), and other purchased components including, but not limited to, increases in the underlying material cost based upon the London Metal Exchange and related premiums or fabrication costs. These prices may be impacted by a variety of factors, including changes in trade laws and tariffs, the behavior of our suppliers and significant fluctuations in demand. This risk includes our ability to successfully manage our exposure and our ability to adjust product pricing in response to price increases, whether through our quotation process or through contract provisions for prospective price adjustments, as well as the inherent lag in timing of such contract provisions; and future environmental laws and regulations on our business and the businesses of our customers, including our ability to take advantage of opportunities to supply alternative new technologies to meet environmental and/or energy standards and objectives.

The impact of current and future environmental laws and regulations on our business and the businesses of our customers, including our ability to take advantage of opportunities to supply alternative new technologies to meet environmental and/or energy standards and objectives.

Operational Risks:

Our ability to integrate the former Luvata HTS operations into Modine, realize cost and revenue synergies in accordance with our expectations, and effectively manage any unanticipated risks that arise, while also maintaining stability within the acquired business and appropriate focus on the rest of Modine’s business;

The overall health and continually increasing price-down focus of our vehicular customers in light of economic and market-specific factors, the concentration of sales within our CIS segment attributable to one customer, and the potential impact on us from any deterioration in the stability or performance of any of our major customers;

·	The overall health and continually increasing price-down focus of our vehicular customers in light of economic and market-specific factors, and the potential impact on us from any deterioration in the stability or performance of any of our major customers;

Our ability to maintain current customer programs and compete effectively for new business, including our ability to offset or otherwise address increasing pricing pressures from competitors and price reduction and overall service pressures from customers, particularly in the face of macro-economic instability;

·	~~Unanticipated product or manufacturing difficulties or inefficiencies, including unanticipated program launch and product transfer challenges and warranty claims;~~

·	~~Unanticipated delays or modifications initiated by major customers with respect to product launches, product applications or requirements;~~

Table of Contents

·	Unanticipated problems with suppliers meeting our time, quantity, quality and price demands, and the overall health of our suppliers, particularly in light of continuing economic challenges in some areas of the world in which we and our suppliers operate;

The impact of any problems with suppliers meeting our time, quantity, quality and price demands, and the overall health of our suppliers, including their ability and willingness to supply our volume demands if their production capacity becomes constrained;

Our ability to consistently structure our operations in order to develop and maintain a competitive cost base with appropriately skilled and stable labor, while also positioning ourselves geographically, so that we can continue to support our customers with the technical expertise and market-leading products they demand and expect from Modine;

·	Costs and other effects of the investigation and remediation of environmental contamination; particularly when related to the actions or inactions of others and/or facilities over which we have no control;

The impact of product or manufacturing difficulties or operating inefficiencies, including any program launch and product transfer challenges and warranty claims and delays or inefficiencies resulting from restrictions imposed in response to the COVID-19 pandemic;

·	Increasingly complex and restrictive laws and regulations, including those associated with being a U.S. public company and others present in various jurisdictions in which we operate, and the costs associated with compliance therewith;

The impact of any delays or modifications initiated by major customers with respect to program launches, product applications or requirements;

·	~~Work stoppages or interference at our facilities or those of our major customers and/or suppliers;~~

·	~~The constant and increasing pressures associated with healthcare and associated insurance costs; and~~

Our ability to effectively and efficiently reduce our cost structure in response to sales volume declines and to complete restructuring activities and realize the anticipated benefits of those activities;

·	~~Costs and other effects of unanticipated litigation, claims, or other obligations.~~

Costs and other effects of the investigation and remediation of environmental contamination, particularly when related to the actions or inactions of others and/or facilities over which we have no control;

~~Strategic Risks:~~Our ability to recruit and maintain talent, including personnel in managerial, leadership and administrative functions, in light of tight global labor markets;

·	Our ability to successfully take advantage of our increased presence in the “industrial” markets, with our Commercial and Industrial Solutions and Building HVAC businesses, while maintaining appropriate focus on the market opportunities presented by our vehicular business; and

Our ability to protect our proprietary information and intellectual property from theft or attack by internal or external sources;

·	~~Our ability to identify and execute additional growth and diversification opportunities in order to position us for long-term success.~~

The impact of any substantial disruption or material breach of our information technology systems, and any related delays, problems or costs;

~~Financial Risks:~~Increasingly complex and restrictive laws and regulations, including those associated with being a U.S. public company and others present in various jurisdictions in which we operate, and the costs associated with compliance therewith;

Our ability to fund our global liquidity requirements efficiently for Modine’s current operations, particularly those in our Asia business segment, and meet our long-term commitments in the event of an unexpected disruption in or tightening of the credit markets or extended recessionary conditions in the global economy;

Work stoppages or interference at our facilities or those of our major customers and/or suppliers;

·	~~The impact of potential increases in interest rates, particularly in LIBOR~~The constant and increasing pressures associated with healthcare and associated insurance costs; and ~~EURIBOR in relation to our variable-rate debt obligations;~~

·	~~Our ability to maintain our leverage ratio (net debt divided by Adjusted EBITDA, as defined in our credit agreements) in our target range of 1.5 to 2.5 in an efficient manner;~~

Costs and other effects of litigation, claims, or other obligations.

·	~~Costs arising from the integration of Luvata HTS;~~

·	~~The impact of foreign currency exchange rate fluctuations, particularly the value of the euro, Brazilian real, and British pound, relative to the U.S. dollar;~~

·	~~The effects of the recently-enacted U.S. tax reform legislation on our business, some of which are uncertain and may be material; and~~

Table of Contents

·	~~Our ability to effectively realize the benefits of tax assets in various jurisdictions in which we operate.~~

Strategic Risks:

~~In addition~~Our ability to successfully complete the ~~risks set forth above, we are subject~~pending sale of our liquid-cooled automotive business, including the receipt of governmental and third-party approvals and satisfaction of other closing conditions, and our ability to successfully exit our other ~~risks~~automotive businesses in a manner that is in the best interest of our shareholders;

Our ability to successfully realize anticipated benefits from our increased “industrial” market presence, with our CIS and ~~uncertainties~~BHVAC businesses, while maintaining appropriate focus on the market opportunities presented by our HDE and Automotive businesses;

Our ability to identify and execute growth and diversification opportunities in order to position us for long-term success; and

The potential impacts from any actions by activist shareholders, including disruption of our business and related costs.

Financial Risks:

Our ability to fund our global liquidity requirements efficiently for Modine’s current operations and meet our long-term commitments in the event of disruption in or tightening of the credit markets or extended recessionary conditions in the global economy;

The impact of potential increases in interest rates, particularly in LIBOR and the Euro Interbank Offered Rate (“EURIBOR”) in relation to our variable-rate debt obligations, and of the continued uncertainty around the utilization of LIBOR or alternative reference rates;

Our ability to comply with the financial covenants, as ~~identified~~amended, in our ~~public filings with~~credit agreements, including our leverage ratio (net debt divided by Adjusted EBITDA, as defined in our credit agreements) and our interest coverage ratio (Adjusted EBITDA divided by interest expense, as defined in our credit agreements);

The potential unfavorable impact of foreign currency exchange rate fluctuations on our financial results; and

Our ability to effectively realize the ~~U.S. Securities and Exchange Commission. We~~benefits of deferred tax assets in various jurisdictions in which we operate.

Forward-looking statements are as of the date of this report; we do not assume any obligation to update any forward-looking statements.

Table of Contents

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

The Company’s quantitative and qualitative disclosures about market risk are incorporated by reference from Part II, Item 7A. of the Company’s Annual Report on Form 10-K for the year ended March 31, ~~2017.~~2020. The Company’s market risks have not materially changed since the fiscal ~~2017~~2020 Form 10-K was filed.

Item 4.

Controls and Procedures.

Evaluation Regarding Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report on Form 10-Q, management of the Company, ~~carried out an evaluation~~ under the supervision, and with the participation, of the Company’s President and Chief Executive Officer and Vice President, Finance and Chief Financial Officer, ofevaluated the effectiveness of the Company’s disclosure controls and procedures, at a reasonable assurance level, as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)~~, with the participation of the Company’s management.~~. Based upon that evaluation, the President and Chief Executive Officer and Vice President, Finance and Chief Financial Officer have concluded that the design and operation of the Company’s disclosure controls and procedures ~~are~~were effective, at a reasonable assurance level, as of December 31, ~~2017.~~2020.

Changes in Internal Control Over Financial Reporting

~~As part of its post-closing integration activities for the Luvata HTS acquisition, the Company is engaged~~There have been no changes in assessing, refining and harmonizing the internal controls and processes of the acquired business with those of the Company. This customary integration-related process has resulted in a change in the Company’s internal control over financial reporting during the third quarter of fiscal ~~2018~~2021 that ~~has~~have materially affected, or isare reasonably likely to materially affect, the Company’s internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

~~PART II.~~Item 6.

~~OTHER INFORMATION~~Exhibits.

(a) Exhibits:

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds.~~

~~ISSUER PURCHASES OF EQUITY SECURITIES~~

~~The following describes the Company’s purchases of common stock during the third quarter of fiscal 2018:~~

~~Period~~	~~Total Number of~~ ~~Shares Purchased~~	~~Average~~ ~~Price Paid~~ ~~Per Share~~	~~Total Number of~~ ~~Shares Purchased~~ ~~as Part of Publicly~~ ~~Announced Plans~~ ~~or Programs~~	~~Maximum~~ ~~Number (or~~ ~~Approximate Dollar~~ ~~Value) of Shares~~ ~~that May Yet Be~~ ~~Purchased Under the~~ ~~Plans or Programs~~
~~October 1 – October 31, 2017~~	~~_______~~	~~_______~~	~~_______~~	~~_______~~

~~November 1 – November 30, 2017~~	~~_______~~	~~_______~~	~~_______~~	~~_______~~

~~December 1 – December 31, 2017~~	~~2,438 (a)~~	~~$22.60~~	~~_______~~	~~_______~~

~~Total~~	~~2,438 (a)~~	~~$22.60~~	~~_______~~	~~_______~~

~~(a)~~

Consists of shares delivered back to the Company by employees and/or directors to satisfy tax withholding obligations that arise upon the vesting of stock awards. The Company, pursuant to its equity compensation plans, gives participants the opportunity to turn back to the Company the number of shares from the award sufficient to satisfy tax withholding obligations that arise upon the termination of restrictions. These shares are held as treasury shares.

~~Table of Contents~~

~~Item 6.~~

~~Exhibits.~~

~~(a)~~

~~Exhibits~~:

Exhibit No.	Description	Incorporated Herein By Reference To	Filed Herewith

*2.1	Securities and Asset Purchase Agreement, dated as of November 2, 2020, by and between the Company and Dana Incorporated	Exhibit 2.1 to Registrant’s Current Report on Form 8-K dated November 2, 2020

10.1	[Corrected] Offer Letter dated as of November 10, 2020, by and between the Company and Mr. Brinker		X

10.2	Form of Make-Whole RSU Award Agreement with Neil Brinker		X

10.3	Form of Make-Whole Performance Cash Award Agreement with Neil Brinker		X

31.1	Rule 13a-14(a)/15d-14(a) Certification of ~~Thomas A. Burke,~~Neil D. Brinker, President and Chief Executive Officer.		X

31.2	Rule 13a-14(a)/15d-14(a) Certification of Michael B. Lucareli, Vice President, Finance and Chief Financial Officer.		X

32.1	Section 1350 Certification of ~~Thomas A. Burke,~~Neil D. Brinker, President and Chief Executive Officer.		X

32.2	Section 1350 Certification of Michael B. Lucareli, Vice President, Finance and Chief Financial Officer.		X

101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).		X

101.SCH	Inline XBRL Taxonomy Extension Schema		X

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document		X

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document		X

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document		X

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document		X

104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).		X

* Schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K because they are not material and would likely cause competitive harm to the Company if publicly disclosed.

Table of Contents

SIGNATURE

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

MODINE MANUFACTURING COMPANY

~~(Registrant)~~

~~By:~~ ~~/s/ Michael B. Lucareli~~

~~Michael B. Lucareli, Vice President, Finance and~~

Chief Financial Officer*

~~Date: January 31, 2018~~

(Registrant)

*	~~Executing as both the principal financial officer and a duly authorized officer of the Company~~

By: /s/ Michael B. Lucareli

Michael B. Lucareli, Vice President, Finance and

Chief Financial Officer*

Date: February 5, 2021

* Executing as both the principal financial officer and a duly authorized officer of the Company

3342

Cash and cash equivalents	$	27.4
Trade accounts receivable		86.1
Inventories		55.0
Property, plant and equipment		120.4
Intangible assets		130.2
Goodwill		151.9
Other assets		39.1
Accounts payable		(73.7	)
Accrued compensation and employee benefits		(24.3	)
Deferred income taxes		(39.5	)
Pensions		(14.3	)
Other liabilities		(42.7	)
Purchase price	$	415.6

	Three months ended December 31, 2016		Nine months ended December 31, 2016
Net sales	$	439.5	$	1,393.3
Net earnings attributable to Modine		8.5		26.8
Net earnings per share attributable to Modine shareholders:
Basic	$	0.17	$	0.54
Diluted		0.17		0.53

	December 31, 2017		March 31, 2017
Raw materials and work in process	$	140.0	$	127.7
Finished goods		46.8		40.8
Total inventories	$	186.8	$	168.5

	December 31, 2017			March 31, 2017
Gross property, plant and equipment	$	1,266.2		$	1,177.6
Accumulated depreciation		(774.9	)		(718.6	)
Net property, plant and equipment	$	491.3		$	459.0

	Asia		Building HVAC		CIS		Total
Goodwill, March 31, 2017	$	0.5	$	13.7	$	150.9	$	165.1
Acquisition (a)		-		-		1.3		1.3
Effect of exchange rate changes		-		0.8		5.0		5.8
Goodwill, December 31, 2017	$	0.5	$	14.5	$	157.2	$	172.2

Fiscal Year	Estimated Amortization Expense
Remainder of 2018	$	2.4
2019		9.6
2020		9.5
2021		8.9
2022		8.7
2023 & Beyond		93.4

	Three months ended December 31, 2017												Nine months ended December 31, 2017
	Foreign Currency Translation			Defined Benefit Plans			Cash Flow Hedges			Total			Foreign Currency Translation			Defined Benefit Plans			Cash Flow Hedges			Total
Beginning balance	$	(19.0	)	$	(133.3	)	$	-		$	(152.3	)	$	(46.8	)	$	(135.0	)	$	-		$	(181.8	)

Other comprehensive income before reclassifications		4.6			-			0.6			5.2			32.4			-			0.6			33.0
Reclassifications for amortization of unrecognized net loss (a)		-			1.3			-			1.3			-			3.9			-			3.9
Income taxes		-			(0.4	)		(0.2	)		(0.6	)		-			(1.3	)		(0.2	)		(1.5	)
Total other comprehensive income		4.6			0.9			0.4			5.9			32.4			2.6			0.4			35.4

Ending balance	$	(14.4	)	$	(132.4	)	$	0.4		$	(146.4	)	$	(14.4	)	$	(132.4	)	$	0.4		$	(146.4	)

Building HVAC
	Three months ended December 31,										Nine months ended December 31,
	2017					2016					2017					2016
(in millions)	$'s		% of sales			$'s		% of sales			$'s		% of sales			$'s		% of sales
Net sales	$	56.1		100.0	%	$	47.2		100.0	%	$	147.9		100.0	%	$	132.8		100.0	%
Cost of sales		37.1		66.2	%		31.9		67.6	%		102.9		69.6	%		95.7		72.0	%
Gross profit		19.0		33.8	%		15.3		32.4	%		45.0		30.4	%		37.1		28.0	%
Selling, general and administrative expenses		9.8		17.4	%		8.5		18.0	%		26.4		17.8	%		26.0		19.6	%
Restructuring expenses		-		-			0.1		0.2	%		-		-			0.7		0.5	%
Operating income	$	9.2		16.5	%	$	6.7		14.2	%	$	18.6		12.6	%	$	10.4		7.8	%