EXHIBIT 13
Management's discussion and analysis of operations
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Modine Manufacturing Company finished its fiscal year ended
March 31, 1996, with an 8.5-percent sales increase to $990.5
million. Net earnings of $61.4 million, or $2.02 per share, were
higher than any time except for the record established the year before.
Income from operations was 84.1 percent of the prior year's
record. Higher material costs, increased competition in the North
American aftermarket that did not allow the pass-through of these
costs, a greater proportion of sales from Europe, new plant start-up
expenses, and the addition of several acquisitions held operating
income to 9.5 percent of sales in fiscal 1996. Operating income
rose in Europe although margins continued to be lower than in the
United States. European acquisitions made two years ago are still in
the process of being restructured and some productivity issues remain.
The company's 1995-96 revenues from its top ten customers were
38 percent of total sales, compared with 35 percent the year before.
Modine continues to have a diversified sales base -- its largest
customer represented less than seven percent of total revenues in
both fiscal 1996 and 1995.
Acquisitions and divestiture
- ----------------------------
At the end of August, Modine purchased a new plant in Richland
County, South Carolina. It will serve customers in the passenger-car
and light-truck market. The plant will produce PF (parallel-flow)
transmission oil coolers, giving the company the ability to support
the expanding use of PF products in more applications and by more
customers. The facility will begin production this summer.
A former production facility in Uden, The Netherlands, was
reactivated last year to begin producing oil coolers as well as
latent-heat batteries -- a new product line that is being
introduced to the luxury-car market in Europe.
Modine also acquired several existing companies in fiscal 1996,
the largest of which was Signet Systems, a full-service supplier of
climate-control systems and components to the automotive, truck, and
off-highway vehicle markets both in North America and Europe. On
July 31, the acquisition added nearly 400 employees located at plants
in Harrodsburg, Kentucky, and Goch, Germany, and at a sales and
engineering office in Detroit, Michigan. This strategic acquisition
of the respected, well-established, systems supplier complements
Modine's other divisions, which provide state-of-the-art heat
exchangers for similar markets and customers.
In May, Modine purchased Radiadores Montana S.A., a Spanish
manufacturer and distributor to the automotive aftermarket.
Montana also makes a variety of heat exchangers for on- and off-
highway vehicles and for industrial applications.
Also in May, Modine acquired its partner's majority ownership
of a joint-venture company in Mexico City, Mexico. The joint-venture
operation, Mexpar, a Modine licensee since 1961, had been partially
owned since 1985. Mexpar makes automotive radiators, primarily for
the aftermarket. It also serves original-equipment manufacturers of
vehicles in Mexico.
And, in November, Modine purchased the business and certain
assets of Emmett Radiator Supply, Inc., in El Paso, Texas, and
Emmett Radiator Supply, Inc., in Albuquerque, New Mexico, both of
which have become additional Modine sales branches in the aftermarket.
In a divestiture in October, Modine sold the business and assets
of its extruded copper-tubing business, located in Dowagiac, Michigan,
which it had acquired through the purchase of the Heat Transfer Division
of Sundstrand Corporation in 1990.
Fiscal-year sales by market
- ---------------------------
The worldwide passenger-car and light-truck original-equipment-
manufacturer (OEM) market was the largest market for Modine sales in
1995-96. Company shipments rose $41.4 million to customers in this
market and were about 24 percent of Modine's most recent annual sales.
New revenues from Signet plus good increases in Europe, particularly
in air-conditioning components, contributed to this growth.
OEM customers in the passenger-car market continue to stress
supplier partnerships and purchasing alliances, enhancing the
opportunities of more value-added suppliers such as Modine. The
company is working to gain more market share in the new year, both
in North America and Europe, and sees future opportunities with
Pacific Rim customers.
Aftermarket sales constituted the second-largest category in
fiscal 1996 with 23 percent of the total. A small slippage of Modine's
North American aftermarket sales from record levels was offset by growing
business in Europe, aided by the Radiadores Montana acquisition.
The North American aftermarket has been beset with increased
off-shore competition offering a few, high-volume products at very
low prices. Modine plans to increase its sales with a number of
strategies, including broader distribution, continued cost reduction,
and intensified marketing efforts, such as the introduction of a
lifetime, limited warranty for complete radiators sold by Modine
in the aftermarket.
Sales to OEMs of medium and heavy trucks were 17 percent of the
company's total business last year. Growth in Europe and new business
from Signet added to Modine's strong position in this market.
One of the major trends in the truck industry has been an OEM
emphasis on suppliers taking responsibility for systems. For Modine,
that means the entire under-hood cooling system, including radiators,
charge-air coolers, oil coolers, condensers, shrouds, surge tanks,
shutters, and numerous brackets -- in addition to Signet's climate-
control systems. This is a trend that will be accelerated as the truck
manufacturers bring out new vehicles, which plays into Modine's strength,
given the company's strong product offerings.
The largest year-over-year percentage-increase in sales was to the
off-highway equipment market, where Modine's business was up 27 percent.
The market grew to become 12 percent of the fiscal-1996 total, compared
with 10 percent in fiscal 1995. Volumes were at the highest level in the
last decade. Modine operations in both Europe and North America shared
this growth in sales to OEMs of earthmoving, construction, and agricultural
equipment.
As is the trend in other markets, Modine will be assuming more
responsibility for cooling system design in partnership with its off-
highway-equipment customers, having the competitive advantage of a full
line of product offerings and the technical expertise to design complete
systems. Stricter emissions regulations over the next five years, which
will benefit Modine because of the need for more charge-air coolers and
for more efficient heat exchangers in general, speak well for the future.
The company will take advantage of these opportunities by introducing new,
higher-efficiency products and by increasing capacity to serve our
customers' needs.
Modine's sales to the industrial market were up modestly in fiscal
1996 and continued to represent 12 percent of total revenues. The
industrial market consists of a multitude of different applications and
customers worldwide and, for the most part, tends to follow general
economic trends rather than any particular industry cycle. A large part
of Modine's industrial sales go to engine manufacturers, and a portion
of those engines are destined for large trucks; thus, the industrial
market reflects, to some degree, the North American truck industry's
production levels.
Building-HVAC sales declined to eight percent of Modine's total
revenues in fiscal 1996. This was primarily due to lower sales to
manufacturers of residential equipment, caused by large inventories of
high-efficiency furnaces and by vertical integration of some products
by various OEMs. Increasing softness in the commercial building market
also affected results.
Future growth for Modine in the residential part of this market
could come from the acceptance of PF heat exchangers and other new
products in the industry.
Sales by product in fiscal 1996
- -------------------------------
Cooling systems and modules with multiple heat exchangers continue
to show sales growth. OEM customers require more of these packaged
assemblies from suppliers, and Modine has positioned itself to take
advantage of this trend.
A Modine product line that is benefiting from the systems trend
is vehicular air-conditioning. Sales of these products -- including
condensers, evaporators, and climate-control systems -- recorded the
highest fiscal-1996 growth in both dollars and percentage. The net
increase of $45.0 million came substantially from the addition of Signet
and from continued growth in Europe. The number of new cars sold with
air-conditioning in Europe is considerably smaller than in the United
States but is expanding rapidly. Modine's prospects look good for
continued growth in this product line.
The radiator category, which includes both complete radiators and
cores, retained the largest position in total sales at 41 percent.
Excellent sales increases in the European aftermarket, combined with
good growth to European OEM customers, more than offset the small
slippage in sales in the North American aftermarket.
Sales of oil coolers continued to make up 16 percent of Modine's
total. Advances were led by revenue increases from European operations
in addition to sales of Albraze + and PF oil coolers. Future growth will
be boosted as the reactivated facility in The Netherlands and the new
plant in South Carolina are fully launched.
Charge-air coolers remained the fastest-growing product line for
Modine in the last decade with a 35-percent 10-year compound annual
growth rate. They had the second-highest percentage increase in fiscal
1996 and made up 12 percent of total sales for the year.
Building-HVAC products declined nine percent from the previous
year and decreased to eight percent of total sales in 1995-96, as
discussed earlier in this report.
Capital expenditures and R&D
- ----------------------------
Capital expenditures of $55.7 million in fiscal 1996 were
63-percent higher than the prior year and were a record for Modine.
These investments are being made to accommodate future growth,
reduce costs, and introduce new products. Significant investments
included: purchase of a new plant in South Carolina; reopening
and equipping of a plant in The Netherlands; plant expansions,
particularly in Europe; process improvements and other
productivity enhancements; tooling for new products; and
additional process equipment at a number of facilities.
Investments in property, plant, and equipment will be in the
$60-70-million range over the next several years as Modine
secures adequate plant capacity to meet customer needs. Capital
expenditures have been and are expected to be financed mostly
from cash generated internally.
Outstanding commitments for capital expenditures at March 31,
1996, were approximately $17.1 million. Most of these commitments
relate to plant expansions, process improvements, tooling for new
products, and various new equipment. About $4.5 million of the
commitments covers facility improvements and equipment upgrades
for Modine Europe locations. A year earlier, there were outstanding
commitments of $13.6 million.
Modine's investment in research and development amounted to
$14.3 million in fiscal 1996, 31-percent higher than the prior
year's total. The addition of Signet System's R&D operations was
the major portion of the increase.
Development of new or improved products and processes that
will enable Modine to remain the technological leader in heat
transfer will continue to be the most important objective of R&D.
In addition to numerous proprietary technologies, Modine owned a
total of 841 patents worldwide at the end of fiscal 1996, versus
821 the year before.
Modine has a number of new products under development. In
the building-HVAC market, for example, the company has proceeded
to field trials of PF products for residential, room air-
conditioners in the United States. If the trials and accelerated
lab tests are successful, orders could be received for the 1997
"build season." The company is also approaching the stage for
extended field tests of an innovative design in heat exchangers
for high-efficiency residential furnaces.
Employment and plant recognition
- --------------------------------
Total worldwide employment at Modine was 7,561 on March 31,
1996, compared with 7,551 at the end of the previous fiscal year.
These employees enabled eight Modine plants to earn 11
awards from customers. Six plants also received recertifications
from their customers.
Modine's Logansport, Indiana, plant recently joined the Granada,
Spain, facility as a registered ISO 9002 producer, in addition to the
Mill, Holland, site, which is registered to ISO 9001. The International
Organization for Standardization (ISO) develops common manufacturing,
trade, and communications standards to facilitate the worldwide exchange
of goods and services.
Hundreds of employees at 22 U.S. manufacturing facilities have
participated in a five-year program by serving on their plants' waste-
minimization teams, by taking an active role in recycling, and by
implementing new processes and procedures and coming up with new
ideas to help Modine reduce its waste. They achieved a 56-percent
overall reduction in waste company-wide by the program's end, which
helped reduce costs as well as benefit the environment. These
facilities have been joined by a Canadian and Mexican plant in a
new waste-minimization program that began January 1. Our experience
has taught us to consider the effect of waste when working on a job
or when designing or starting a new process.
Accounting changes
- ------------------
In the first quarter of fiscal 1994, the company adopted FASB
Statement 109, "Accounting for Income Taxes," with a resulting
increase in earnings of $0.9 million.
Hedging and foreign-currency-exchange contracts
- -----------------------------------------------
On a limited basis, Modine enters into foreign-exchange options
and forward contracts on foreign currencies as hedges against the
impact of currency fluctuations. See Note 14 to the consolidated
financial statements.
Environmental matters
- ---------------------
During the year ended in March 1996, Modine was able to reduce
by $240,000 the reserve set up in the previous year for a Superfund
assessment.
In fiscal 1995, the company set up additional reserves of
$415,000 for a Superfund assessment and $44,000 for the estimated
total environmental cleanup cost at a specific location in Missouri.
During the prior fiscal year, Modine established reserves of
$533,000 for the estimated total environmental cleanup costs to
be incurred at specified locations in California and Illinois.
The California site has since been remediated to the satisfaction
of appropriate authorities.
It is likely that Modine will, in the future, incur additional
charges for environmental programs relating to past operations, but
such costs are unknown and indeterminable at this time. There are no
currently known, unrecorded liabilities that would have a significant
effect on the company's consolidated financial position or results of
operations.
Forward-looking statements
- --------------------------
Other than historical matters or comparative results, the matters
discussed in Management's discussion and analysis of operations and in
the Letter to shareholders, particularly the sales forecast and factors
affecting earnings, include forward-looking statements that involve
risks and uncertainties. These cautionary statements are being made
pursuant to the provisions of the Private Securities Litigation Reform
Act of 1995 and with the intention of obtaining the benefits of the "safe
harbor" provisions of the Act. Investors are cautioned that any forward-
looking statements made by Modine are not guarantees of future performance
and that actual results may differ materially from those in the forward-
looking statements as a result of various factors, including: customers'
integration of products currently being supplied by the company; the
success of Modine or its competitors in obtaining the business of the
customer base; the ability to pass on increased costs to customers;
variations in currency-exchange rates in view of a large portion of the
company's business being nondomestic; labor relations at Modine, its
customers, and its suppliers, which may affect the continuous supply of
product; and the ability to improve acquisitions' operations.
In making statements about Modine's fiscal-1997 operating results,
management has assumed relatively stable economic conditions in the
United States and worldwide, no unanticipated swings in the business
cycles affecting customer industries, and a reasonable legislative and
regulatory climate in those countries where Modine does business.
Readers are cautioned not to place undue reliance on Modine's
forward-looking statements, which speak only as of the date of this
report's writing.
Management's discussion and analysis of results of operations
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Sales
- -----
Sales for fiscal 1996 were $990.5 million, up $77.5 million or
8.5 percent from the prior year. The company's European operations
generated almost 70 percent of the sales increase, or approximately
$54.0 million, with over half of the European sales gain arising from
favorable currency-exchange rates. The acquisition of Signet Systems
as of July 31,1995, also contributed $46.7 million. There were some
fall-offs, the largest of which came as a result of the sale of the
Dowagiac copper-tubing plant in October 1995. Declines also occurred
in portions of the passenger-car and building-HVAC components.
Sales for the previous fiscal year were $913.0 million, up
$243.5 million or 36.4 percent. The full-year impact of the
prior year's European acquisitions, the strengthening value of
European currencies against the dollar, and strong sales growth
across all of Modine's domestic and other foreign operations were
the major contributors to the sales growth.
Sales for the fiscal year ended March 1994 were also up, by
$98.7 million or 17.3 percent. European acquisitions for part of
the year, together with significant sales increases to truck and
engine manufacturers as well as to the passenger-car aftermarket,
accounted for much of the growth.
Gross profit
- ------------
Gross profit was 25.8 percent for the year, 2.7 percentage
points lower than the previous year. The primary cause was increased
material costs, not all of which were recovered by price increases to
customers. Some of these costs were recovered, but with a time lag.
This continued a trend that began in the previous year but that
subsided in the fourth quarter with some decreases in raw material
costs. Also contributing to the decline were a higher percentage of
total sales by the company's European operations, and the results
from the newly acquired Signet Systems, both of which are generally
earning lower gross margins than the overall company average.
Gross-profit margin in the previous fiscal year, at 28.5 percent
of sales, was down 1.2 percent. Contributing factors included higher
raw material and labor costs in addition to generally lower gross-
profit margins at recently acquired European locations.
Gross-profit margin in fiscal 1994, at 29.7 percent, was up
1.2 percent, largely as a result of increased sales volume in most
markets Modine serves.
Selling, general, and administrative (SG&A)
- -------------------------------------------
SG&A expense for the year totaled $161.1 million, up just $12.7
million or 8.5 percent from the previous year. Included in the current
year was the eight-month effect of the Signet Systems acquisition. Other
changes were not significant. SG&A was unchanged as a percentage of sales
at 16.3 percent in both current and prior years.
SG&A expenses for the previous year totaled $148.4 million, a
$26.0-million or 21.2-percent increase. Over 70 percent of the increase
can be attributed to the full-year impact of two European acquisitions
made in fiscal 1994. SG&A declined to 16.3 percent of sales from 18.3
percent the year before.
SG&A in fiscal 1994 increased by $17.1 million or 16.2 percent
while decreasing as a percentage of sales from 18.5 percent to 18.3
percent.
Income from operations
- ----------------------
Income from operations in fiscal 1996 was $94.3 million, down
$17.8 million or 15.9 percent, primarily due to cost increases, mostly
in materials, and only partial success in recovering these cost increases
from customers.
Income from operations in fiscal 1995 and 1994 was $112.1 million
and $76.2 million, respectively. On a percentage basis, the two years
increased by 47.0 percent and 32.5 percent, respectively. Sales volume
increases and continuing control over cost increases were the main
factors leading to the improvements in both years.
Interest expense
- ----------------
Interest expense, at $6.8 million, was up $0.4 million or
6.9 percent as a result of increased borrowings related primarily
to the Signet acquisition at the end of July 1995. Overall,
interest rates were lower than the previous year.
Interest expense in the previous year grew by 6.2 percent,
due mainly to the full-year impact of foreign-denominated
borrowing made in conjunction with the prior year's acquisitions
and the declining dollar in relation to the Deutsche mark and
other European currencies. These increases were offset in part by
scheduled and discretionary reductions in domestic borrowing and
by a declining European interest-rate environment, which the
company utilized to restructure certain foreign-debt arrangements.
Interest expense in fiscal 1994 was $6.0 million. Although
outstanding debt at the end of the year increased by $32.6 million,
interest expense remained essentially unchanged from the prior year.
Scheduled repayments of domestic debt carrying higher interest rates
offset the increase in lower-rate foreign-denominated debt that was
outstanding for only four months of the year.
Other income, net
- -----------------
Other income, at $11.7 million, was $8.5-million higher than the
previous year, primarily because of an approximately $5.0-million gain
on the sale of the company's copper-tubing plant. Also included in this
category was a gain on sale of certain equipment no longer required by
the company and a number of lesser value items.
Other income of $3.2 million in the prior year was relatively
consistent when compared with the fiscal-1994 total of $2.8 million.
Provision for income taxes
- --------------------------
The company had a slightly higher effective tax rate in fiscal
1996, at 38.1 percent versus 37.1 percent a year ago. Higher tax rates
on increased foreign earnings were the primary factor.
In the prior year, the income-tax rate was 37.1 percent,
reduced mainly by two factors: the net utilization of certain
foreign operating-loss-carryforwards and a reduction in foreign
joint-venture dividends, which are taxed on receipt.
The net income-tax rate in fiscal 1994, before the effect of
FASB 109, was 41.0 percent, up from the previous year's 38.2
percent due to a one-percent increase in the U.S. federal rate
and to a larger portion of company business in foreign countries.
Change in accounting for income taxes
- -------------------------------------
In the first quarter of fiscal 1994, Modine adopted FASB 109
recognizing a gain of $0.9 million, or 3 cents per share, which
was the net impact of adopting this accounting standard.
Net earnings before the impact of accounting changes
- ----------------------------------------------------
The company had net earnings of $61.4 million (6.2 percent
of sales and 18.7 percent ROE), down $7.0 million or 10.3
percent from the previous year. The reduction was primarily due
to increased material costs and only partial success in
recovering the increases from customers, particularly in the
aftermarket, with a time lag for those costs that were recovered.
Net earnings in fiscal 1995 were $68.4 million or 7.5 percent
of sales, up 58.8 percent from prior-year net earnings before FASB
109. Factors driving the increase were the wide success in domestic
and foreign markets being served by the company and the positive
contributions made by operating units acquired in Europe.
Net earnings in fiscal 1994, before the accounting change for
income taxes, were $43.1 million or 6.4 percent of sales, up $9.4
million or 27.9 percent from the previous year. Increased sales
volume was the main factor contributing to the record results.
Net earnings after the impact of accounting changes
- ---------------------------------------------------
There were no accounting changes in the current fiscal year
and net earnings remained at $61.4 million.
Net earnings in the previous year were $68.4 million, up
$24.5 million from the year before. There were no accounting
changes adopted during fiscal 1995 that impacted earnings.
Net earnings for the company in fiscal 1994, after the
effect of FASB 109 (which added $0.9 million to earnings), were
$44.0 million, up $24.0 million from the previous year when
earnings were reduced by $13.7 million for a change in accounting
for postretirement benefits other than pensions.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per-share amounts)
- -----------------------------------------------------------------------------------------
For the years ended March 31 1996 1995 1994
- -----------------------------------------------------------------------------------------
Net sales $990,493 $913,010 $669,553
Cost of sales 735,120 652,541 470,880
------------------------------------------
Gross profit 255,373 260,469 198,673
Selling, general, and administrative
expenses 161,082 148,415 122,434
------------------------------------------
Income from operations 94,291 112,054 76,239
Interest expense (6,825) (6,384) (6,009)
Other income -- net 11,683 3,157 2,796
------------------------------------------
Earnings before income taxes 99,149 108,827 73,026
Provision for income taxes 37,750 40,385 29,935
------------------------------------------
Earnings before cumulative effect of
accounting changes 61,399 68,442 43,091
Cumulative effect of change in accounting
for income taxes -- -- 899
------------------------------------------
Net earnings $ 61,399 $ 68,442 $ 43,990
------------------------------------------
Earnings per share of common stock before
cumulative effect of accounting changes $2.02 $2.24 $1.41
Cumulative effect per share of accounting
changes -- -- 0.03
------------------------------------------
Net earnings per share of common stock $2.02 $2.24 $1.44
------------------------------------------
Average common shares and common share
equivalents outstanding 30,416 30,534 30,471
<FN>
The notes to consolidated financial statements are an integral
part of these statements.
Management's discussion of financial position
- ---------------------------------------------
Current assets
- --------------
Cash and cash equivalents decreased by $14.7 million to $18.0
million. Sources and uses of cash are set forth in the accompanying
statement of cash flows.
Trade receivables, net of allowances for doubtful accounts, at
$148.0 million were up $2.7 million due to the acquisition of Signet
Systems with a partial offset from the divestiture of the extruded
copper-tubing business. Days sales outstanding remained essentially
unchanged.
Inventories increased by $13.9 million to $150.0 million,
mainly due to the Signet acquisition, partly offset by the tubing-
business divestiture. The weakening of the dollar also had an
effect on increasing the translation value of European
inventories.
Deferred income taxes and other current assets increased by
$9.1 million to $35.4 million. An increase in tooling charges
billable but not yet billed and an increase in deferred income-
tax items were the major causes of the change.
The current ratio decreased slightly to 1.9 to 1 from 2.0 to 1.
Noncurrent assets
- -----------------
Property, plant, and equipment increased by $30.5 million to
$201.3 million due to acquisitions less divestiture and to
capital expenditures during the year, which were the highest ever
and well in excess of retirements and depreciation expense.
Investment in affiliates decreased by $1.4 million,
primarily due to the 57-percent joint-venture interest in Radinam
S. A. being purchased during the year, leading to the full
consolidation of this unit. Offsetting the decrease, in part, was
the greater earnings from the company's Japanese joint venture, NEX.
Intangible assets increased by $36.4 million to $70.5 million,
due mostly to goodwill resulting from the acquisition of Signet Systems.
Deferred charges and other noncurrent assets increased by $5.3
million to $42.1 million, primarily due to continued recognition of a
surplus in the company's over-funded pension plans.
Current liabilities
- -------------------
Short-term debt and long-term debt, current portion, remained in
net almost unchanged.
Accounts payable increased by $3.1 million to $77.3 million,
primarily reflecting higher activity, partly from acquisitions.
Accrued compensation and employee benefits increased by $4.7
million to $42.9 million due mainly to increases in workers'
compensation reserves and other postretirement benefits, including
those associated with the acquisitions.
Accrued expenses and other current liabilities increased
$2.4 million to $28.2 million, mostly due to increases arising
from the newly acquired companies.
Noncurrent liabilities
- ----------------------
Long-term debt increased by $25.6 million to $87.8 million
at year end due mainly to additional borrowings as a result of
the acquisitions and to the higher level of capital expenditures.
As a percent of shareholders' investment, long-term debt was
25.1 percent, while total debt to equity was 32.3 percent.
Other noncurrent liabilities increased by $4.3 million to
$41.4 million, primarily due to increases in postretirement
benefits other than pensions associated with the Signet acquisition.
Shareholders' investment
- ------------------------
Total shareholders' investment increased by $41.1 million to
$349.4 million, with the major component being retained earnings,
which benefited from net earnings of $61.4 million (less
dividends paid of $17.8 million).
The foreign-currency translation adjustment decreased $1.7
million as European currencies strengthened against the dollar
from exchange rates at the beginning of the year.
During the year, $8.7 million was expended to acquire an
additional 278,000 treasury shares; 337,000 shares were used to
satisfy requirements for stock options, stock awards, and
employee stock-purchase plans.
During the previous year, $9.9 million was expended to
acquire an additional 336,000 treasury shares. The company used
412,000 shares, as required, for stock options, stock awards, and
employee stock-purchase plans.
In fiscal 1994, $6.8 million was expended to purchase
264,000 treasury shares, while using 349,000 shares for stock
options, stock awards, and employee stock-purchase plans.
Book value per share increased by $1.36 during the year to
$11.74. This has grown at an 11.0 percent compound annual rate
since fiscal 1986.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per-share amounts)
- ------------------------------------------------------------------------------
March 31 1996 1995
- ------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 17,958 $ 32,691
Trade receivables, less allowance for doubtful
accounts of $5,052 and $6,424 147,963 145,231
Inventories 150,000 136,114
Deferred income taxes and other current assets 35,414 26,346
-----------------------
Total current assets 351,335 340,382
Noncurrent assets:
Property, plant, and equipment -- net 201,341 170,872
Investment in affiliates 6,567 8,016
Intangible assets -- net 70,456 34,090
Deferred charges and other noncurrent assets 42,137 36,827
-----------------------
Total noncurrent assets 320,501 249,805
-----------------------
Total assets $671,836 $590,187
=======================
Liabilities and shareholders' investment
Current liabilities:
Short-term debt $ 12,500 $ 13,565
Long-term debt -- current portion 12,552 10,853
Accounts payable 77,277 74,194
Accrued compensation and employee benefits 42,941 38,285
Income taxes 7,598 7,004
Accrued expenses and other current liabilities 28,163 25,748
-----------------------
Total current liabilities 181,031 169,649
-----------------------
Noncurrent liabilities:
Long-term debt 87,809 62,220
Deferred income taxes 12,220 12,958
Other noncurrent liabilities 41,356 37,088
-----------------------
Total noncurrent liabilities 141,385 112,266
-----------------------
Total liabilities 322,416 281,915
-----------------------
Shareholders' investment:
Preferred stock, $0.025 par value,
authorized 16,000 shares,
issued -- none -- --
Common stock, $0.625 par value,
authorized 80,000 shares,
issued 30,342 shares 18,964 18,964
Additional paid-in capital 9,143 7,897
Retained earnings 339,193 296,614
Foreign-currency translation adjustment 3,435 5,159
Treasury stock at cost: 583 and
642 common shares (17,607) (16,669)
Restricted stock -- unamortized value (3,708) (3,693)
-----------------------
Total shareholders' investment 349,420 308,272
-----------------------
Total liabilities and shareholders'
investment $671,836 $590,187
=======================
<FN>
The notes to consolidated financial statements are an integral
part of these statements.
Management's discussion of cash flows
- -------------------------------------
Net cash provided by operating activities
- -----------------------------------------
Net cash from operating activities was $84.6 million, up $17.6
million from the previous year. Earnings, adjusted for noncash items,
were down $15.3 million from the prior year. This was caused by lower
earnings plus larger noncash adjustments, primarily for: depreciation
and amortization; the divestiture of the extruded copper-tubing
business; the sale of fixed assets; and the ability to reduce the
allowance for doubtful accounts. The demand for working capital was
lower than the previous year when new operations and sales growth
caused substantial increases. This difference more than offset
effects of the earnings shortfall.
The largest changes among the working-capital items were a
decrease of $12.3 million in trade receivables due to reductions
at several divisions and an increase of $6.3 million in deferred
income taxes and other current assets.
Cash flows from operating activities in the previous year
were $67.0 million, down $8.3 million. While earnings adjusted
for non-cash items were up $33.3 million, working capital items
required $36.3 million to cover the increased business level, as
opposed to the prior year's net drop in working capital items of
$5.3 million. The preponderance of the additional working-capital
requirements were to support U.S. operations.
The largest change among working-capital items in fiscal 1995
was an increase in trade receivables of $31.5 million, which was
essentially a function of increased sales volume. The overall quality
of receivables was down slightly, reflecting some longer collection
times. Inventories increased by $26.9 million as a result of increased
levels needed to support higher sales volumes and higher material costs.
These increases were partially offset by an increase in accounts payable
of $16.9 million due to the much higher operating level than in the
previous year and to increased accrued expenses and other current
liabilities of $7.7 million.
In fiscal 1994, cash flows from operating activities were $75.2
million, up $11.5 million. The most significant changes were the
increased earnings and net working capital contributions, primarily
from inventory reductions of $9.6 million and accounts payable
increases of $7.6 million, partially offset by a trade receivables
increase of $14.3 million.
Capital expenditures
- --------------------
Capital expenditures for the year were $55.7 million, up $21.6
million from the prior year, reflecting a new facility in South
Carolina and reopening a facility in The Netherlands, along with
other capacity expansions and process improvements, both in the
United States and in Europe.
Capital expenditures in the prior fiscal year were $34.1
million, up $5.0 million from the prior year, reflecting capacity
expansions and process improvements, with an increasing emphasis
on overseas locations.
In fiscal 1994, capital expenditures were $29.2 million, up
$5.6 million, reflecting building expansions and new equipment.
Acquisitions, divestiture, sales of assets, and investments in
- --------------------------------------------------------------
affiliates
- ----------
During the year, the company acquired 100 percent of the
assets of Signet Systems, Inc., an air-conditioning systems
business located in Harrodsburg, Kentucky, and Goch, Germany, and
of Radiadores Montana, a Spanish aftermarket company. Modine also
purchased the remaining 57-percent interest in Radinam S.A., a
joint venture company in Mexico. The combined net cash price of
all acquisitions was $56.8 million. See Note 10 to the
consolidated financial statements for further details.
The company disposed of its extruded copper-tubing plant in
Dowagiac, Michigan, for $9.1 million. See Note 10.
For a combined price of $3.9 million, Modine also disposed
of other equipment that was no longer required.
During the prior year, the company disposed of its 36-percent
interest in McQuay do Brasil for $1.5 million and incurred additional
costs of $0.3 million related to the fiscal 1994 acquisitions.
In the 1994 fiscal year, Modine made two acquisitions: the
purchase of a 100-percent interest in a German limited
partnership, Langerer & Reich, and purchase of the remaining 50-
percent interest from Modine's partner in a joint-venture
company, Austria Warmetauscher GmbH, for a combined net cash
price of $18.9 million. See Note 10.
Changes in debt: short- and long-term
- -------------------------------------
In the last year, the company made $10.6 million in scheduled
and $35.3 million in discretionary repayments of long-term debt. The
company also added $70.0 million to its long-term debt during the
year, partly due to the acquisitions and partly to replace certain
portions of the long-term debt that was repaid during the year.
During the prior year, Modine made $9.8 million in scheduled
and $2.4 million in discretionary repayments of domestic long-
term debt. Approximately $9.5 million of foreign-denominated long-
term debt was converted to short-term debt, nearly equaling other
foreign short-term debt that was repaid during the year. Other
foreign long-term debt of $2.4 million was repaid while $3.4
million in new foreign debt was obtained.
In fiscal 1994, the company borrowed $32.1 million to repay
acquired debt in Germany and to increase its debt capacity. In
addition, the company made scheduled repayments of long-term debt
totaling $9.8 million.
Treasury stock -- see page 16.
- ------------------------------
Dividends paid
- --------------
Dividends for the current fiscal year were $17.8 million,
representing a rate of 60 cents per share. An increase of 8 cents
per share was declared, effective in May 1995.
Dividends during the previous fiscal year were $15.4
million, representing a rate of 52 cents per share. An increase
of 6 cents per share was effective in May 1994.
Modine paid dividends of $13.6 million during the 1994
fiscal year at the rate of 46 cents per share. An increase of
four cents per share was effective in May 1993.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
- --------------------------------------------------------------------------------------------------
For the years ended March 31 1996 1995 1994
- --------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $61,399 $ 68,442 $43,990
Adjustments to reconcile net earnings with cash provided
by operating activities:
Depreciation and amortization 39,641 34,482 28,114
Gain on sale of business (5,009) -- --
Pensions and other postretirement benefits (3,124) (2,299) (2,398)
(Gain)/loss from disposition of property, plant, and
equipment (1,852) 487 1,017
Deferred income taxes (1,759) (241) (3,474)
Provision for losses on accounts receivable (1,477) 1,375 1,267
Undistributed earnings of affiliates (1,202) (1,301) (221)
Cumulative effect of accounting changes -- -- (899)
Other -- net 1,421 2,343 2,523
----------------------------------
88,038 103,288 69,919
----------------------------------
Change in operating assets and liabilities
excluding acquisitions:
Trade receivables 12,303 (31,519) (14,328)
Inventories (3,706) (26,928) 9,560
Deferred income taxes and other current assets (6,286) (4,225) (2,807)
Accounts payable (2,716) 16,895 7,640
Accrued compensation and employee benefits 1,447 2,094 3,916
Income taxes (1,996) (327) 3,338
Accrued expenses and other current liabilities (2,504) 7,685 (1,996)
----------------------------------
Net cash provided by operating activities 84,580 66,963 75,242
----------------------------------
Cash flows from investing activities:
Expenditures for property, plant, and equipment (55,689) (34,101) (29,150)
Acquisitions, net of cash acquired (56,798) (254) (18,918)
Proceeds from sale of business 9,117 -- --
Proceeds from dispositions of assets 3,895 1,118 1,057
Investments in affiliates -- 1,500 --
(Increase) in deferred charges and other noncurrent
assets (296) (1,053) (851)
Other -- net 13 (52) 8
----------------------------------
Net cash (used for) investing activities (99,758) (32,842) (47,854)
----------------------------------
Cash flows from financing activities:
(Decrease)/increase in short-term debt -- net (2,007) (499) 3,736
Additions to long-term debt 69,967 3,392 33,158
Reductions of long-term debt (45,861) (24,053) (42,472)
Issuance of common stock, including treasury stock 5,275 5,607 4,194
Purchase of treasury stock (8,740) (9,946) (6,798)
Cash dividends paid (17,802) (15,434) (13,597)
Other -- net (9) (279) (565)
----------------------------------
Net cash provided by/(used for) financing activities 823 (41,212) (22,344)
----------------------------------
Effect of exchange-rate changes on cash (378) 1,259 (104)
----------------------------------
Net (decrease)/increase in cash and cash equivalents (14,733) (5,832) 4,940
Cash and cash equivalents at beginning of year 32,691 38,523 33,583
----------------------------------
Cash and cash equivalents at end of year $17,958 $ 32,691 $38,523
==================================
Cash paid during the year for:
Interest, net of amounts capitalized $ 6,849 $ 6,276 $ 5,534
Income taxes $37,716 $ 39,120 $29,306
<FN>
The notes to consolidated financial statements are an integral
part of these statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
(In thousands, except per-share amounts)
<CAPTION
- ---------------------------------------------------------------------------------------------------------------------
Foreign- Restricted
For the years Additional currency Treasury stock stock-
ended March 31, Common Stock paid-in Retained translation at cost unamortized
1996, 1995, and 1994 shares amount capital earnings adjustment shares amount value
- ---------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1993 30,342 $18,964 $5,217 $213,213 $1,360 (803) $(11,806) $(3,835)
Net earnings -- -- -- 43,990 -- -- -- --
Cash dividends, $0.46 per
share -- -- -- (13,597) -- -- --
Purchase of treasury stock -- -- -- -- -- (264) (6,798) --
Stock options and awards
including related tax
benefits -- -- 64 -- -- 266 3,914 (987)
Employee stock-purchase
and -ownership plans -- -- 1,176 -- -- 83 1,092 --
Foreign-currency
translation adjustment -- -- -- -- (1,174) -- -- --
Amortization of deferred
compensation under
restricted stock plans -- -- -- -- -- -- -- 952
- ---------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1994 30,342 18,964 6,457 243,606 186 (718) (13,598) (3,870)
- ---------------------------------------------------------------------------------------------------------------------
Net earnings -- -- -- 68,442 -- -- -- --
Cash dividends, $0.52 per
share -- -- -- (15,434) -- -- -- --
Purchase of treasury stock -- -- -- -- -- (336) (9,946) --
Stock options and awards
including related tax
benefits -- -- (79) -- -- 294 5,211 (851)
Employee stock-purchase
and -ownership plans -- -- 1,519 -- -- 118 1,664 --
Foreign-currency
translation adjustment -- -- -- -- 4,973 -- -- --
Amortization of deferred
compensation under
restricted stock plans -- -- -- -- -- -- -- 1,028
- ---------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1995 30,342 18,964 7,897 296,614 5,159 (642) (16,669) (3,693)
- ---------------------------------------------------------------------------------------------------------------------
Net earnings -- -- -- 61,399 -- -- -- --
Cash dividends, $0.60 per
share -- -- -- (17,802) -- -- -- --
Purchase of treasury stock -- -- -- -- -- (278) (8,740) --
Stock options and awards
including related tax
benefits -- -- 879 (704) -- 191 4,005 (1,120)
Employee stock-purchase
and -ownership plans -- -- 367 (314) -- 146 3,797 --
Foreign-currency
translation adjustment -- -- -- -- (1,724) -- -- --
Amortization of deferred
compensation under
restricted stock plans -- -- -- -- -- -- -- 1,105
- ---------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1996 30,342 $18,964 $9,143 $339,193 $3,435 (583) $(17,607) $(3,708)
- ---------------------------------------------------------------------------------------------------------------------
<FN>
The notes to consolidated financial statements are an integral
part of these statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
1. Significant accounting policies
-------------------------------
Consolidation principles: The consolidated financial
------------------------
statements include the accounts of Modine Manufacturing Company
and its wholly owned subsidiaries. Intercompany transactions and
balances have been eliminated. Operations of affiliates and
subsidiaries outside the United States and Canada are included
for periods ending one month prior to the company's year end in
order to ensure timely preparation of the consolidated financial
statements. Investments in 20-percent- to 50-percent-owned
affiliates, consisting primarily of a 50-percent ownership in
Nikkei Heat Exchanger Company, Ltd., are accounted for by the
equity method. The investments are stated at cost plus a
proportionate share of the undistributed net income. The company's
share of undistributed net income is reflected in net earnings.
Use of estimates: The preparation of the consolidated
----------------
financial statements requires the use of certain estimates and
assumptions by management in determining the company's assets,
liabilities, revenue, expenses, and related disclosures. Actual
results could differ from those estimates.
Translation of foreign currencies: Assets and liabilities
---------------------------------
of foreign subsidiaries and equity investments are translated into
U.S. dollars at year-end exchange rates and income and expense items
are translated at the average exchange rates for the year. Resulting
translation adjustments are reported as a separate component of
shareholders' investment. Translation adjustments relating to
countries with highly inflationary economies and foreign-currency
transaction gains or losses are included in net earnings.
Financial instruments: Foreign-exchange options and forward
---------------------
contracts on foreign currencies are entered into by the company as
hedges against the impact of currency fluctuations on certain sales
and purchase transactions and are not used to engage in speculation.
Gains and losses are recognized when these instruments are settled.
Postemployment benefits: The company adopted Financial
-----------------------
Accounting Standards Board (FASB) Statement No. 112, "Employers'
Accounting for Postemployment Benefits," in fiscal 1995. This
statement requires recognition of the cost of certain
postemployment benefits after employment but before retirement on
an accrual basis during the years that employees earn the benefits.
Implementation of this statement did not have a material impact on
the company's financial conditions or results of operations.
Income taxes: The company adopted FASB Statement No. 109,
------------
"Accounting for Income Taxes," effective as of the beginning of
fiscal 1994. Deferred tax liabilities and assets are determined
based on the difference between the amounts reported in the
financial statement and the tax bases of assets and liabilities
using enacted tax rates in effect in the years in which the
differences are expected to reverse.
Cash equivalents: For purposes of the cash flows statement,
----------------
the company considers all highly liquid investments with a
maturity of three months or less to be cash equivalents.
Inventories: Inventories are valued at the lower of cost,
-----------
on a first-in, first-out basis, or market value.
Property, plant, and equipment: These assets are stated at
------------------------------
cost. Depreciation is provided using, principally, declining-
balance methods for machinery and equipment, and the straight-
line method for buildings and other assets over their expected
useful lives. Maintenance and repair costs are charged to
earnings as incurred. Costs of improvements are capitalized.
Upon the sale or other disposition of an asset, the cost and
related accumulated depreciation are removed from the accounts
and the gain or loss is included in net earnings.
Intangible assets: The excess of cost over fair value of the
-----------------
net assets of businesses acquired is amortized using the straight-
line method over various periods not exceeding forty years. Costs
of acquired patents and product technology are amortized using
the straight-line method over the shorter of their estimated
useful life or 15 years.
Environmental expenditures: Environmental expenditures
--------------------------
related to current operations that qualify as property, plant,
and equipment or that substantially increase the economic value
or extend the useful life of an asset are capitalized and all
other expenditures are expensed as incurred. Environmental
expenditures that relate to an existing condition caused by past
operations are expensed. Liabilities are recorded when
environmental assessments and/or remedial efforts are probable
and the costs can be reasonably estimated.
Accounting principles to be adopted: In 1995, the Financial
------------------------------------
Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." This statement will be adopted by the company in
the fiscal year beginning April 1, 1996. Implementation of this
statement is not expected to have a material impact on the
consolidated financial statements.
In 1995, the FASB also issued SFAS No. 123, "Accounting for
Stock Based Compensation." Under the accounting and disclosure
requirements promulgated in the statement, the company must adopt
the provisions in its fiscal year beginning April 1, 1996. The
company is currently evaluating the accounting and disclosure
alternatives provided for under the provisions of the statement.
At this time, management has not selected the planned method of
adoption and therefore cannot reasonably estimate the probable
impact, if any, on the consolidated statements.
Reclassifications: Certain prior-year amounts have been
------------------
reclassified to conform with the fiscal-1996 presentation.
2. Research and development costs
------------------------------
Research and development costs charged to operations totaled
$14,256,000 in fiscal 1996, $10,907,000 in fiscal 1995, and
$9,509,000 in fiscal 1994.
3. Pension Plans
-------------
Domestic qualified defined-benefit plans: The company has
----------------------------------------
several noncontributory, defined-benefit, pension plans that
cover most of its domestic employees. The benefits provided are
based primarily on years of service and average compensation for
the salaried plans and on that basis or a monthly retirement
benefit amount for various hourly plans. Funding policy for
domestic qualified plans is to contribute annually not less than
the minimum required by applicable law and regulation, nor more
than the maximum amount that can be deducted for federal income-
tax purposes. Fiscal-1996 results include plans of the company's
Signet acquisition and the effects of the Dowagiac divestiture.
Net pension credits, computed using the projected unit
credit method, include the following components:
(In thousands)
- -----------------------------------------------------------------------------
Years ended March 31 1996 1995 1994
- -----------------------------------------------------------------------------
Benefits earned during the year $ 4,035 $ 3,532 $ 3,238
Interest accrued on benefits
earned in prior years 6,720 5,978 5,419
Actual return on assets 2,941 (21,470) (15,124)
Net amortization and deferral 16,982) 9,209 4,114
- -----------------------------------------------------------------------------
Net pension (credit) $(3,286) $(2,751) $(2,353)
- -----------------------------------------------------------------------------
Actuarial assumptions:
Discount rate (to calculate
present value of future
benefits) 7.5% 7.5% 7.5%
Average salary-growth rate 5.5% 5.5% 5.5%
Return on plan assets 9.0% 9.0% 9.0%
- -----------------------------------------------------------------------------
Funded status of the plans at March 31, 1996 and 1995:
(In thousands)
- -----------------------------------------------------------------------------
Assets exceed Accumulated
accumulated benefits
March 31, 1996 benefits exceed assets
- -----------------------------------------------------------------------------
Actuarial present value of benefit
obligations:
Vested $(64,865) $(42)
Nonvested (4,532) --
----------------------------
Accumulated benefit obligation (69,397) (42)
Effect of projected salary increases (28,295) --
----------------------------
Projected benefit obligation (97,692) (42)
Less: Plan assets at fair value 150,253 38
----------------------------
Plan assets in excess of/(less than)
projected benefit obligation 52,561 (4)
Adjusted for items not yet recognized
in earnings:
Unrecognized net benefit (asset)/
obligation remaining from initial
adoption of FASB Statement No. 87 (513) --
Effect of benefit changes on
prior years' service cost 1,229 --
Remaining unrecognized net (gain)/loss (13,571) 5
Adjustment to recognize minimum liability -- (5)
- ---------------------------------------------------------------------------
Prepaid/(accrued) pension expense
included in balance sheets $ 39,706 $(4)
- -----------------------------------------------------------------------------
(In thousands)
- -----------------------------------------------------------------------------
Assets exceed Accumulated
accumulated benefits
March 31, 1995 benefits exceed assets
- -----------------------------------------------------------------------------
Actuarial present value of benefit
obligations:
Vested $(56,120) $(1,204)
Nonvested (5,674) (395)
----------------------------
Accumulated benefit obligation (61,794) (1,599)
Effect of projected salary increases (22,853) --
----------------------------
Projected benefit obligation (84,647) (1,599)
Less: Plan assets at fair value 150,931 1,388
----------------------------
Plan assets in excess of/(less than)
projected benefit obligation 66,284 (211)
Adjusted for items not yet recognized
in earnings:
Unrecognized net benefit (asset)/
obligation remaining from initial
adoption of FASB Statement No. 87 (2,348) (17)
Effect of benefit changes on
prior years' service cost 811 312
Remaining unrecognized net (gain)/loss (30,296) 430
Adjustment to recognize minimum liability -- (725)
- ---------------------------------------------------------------------------
Prepaid/(accrued) pension expense
included in balance sheets $ 34,451 $ (211)
- -----------------------------------------------------------------------------
As of March 31, 1996 and 1995, the plans held 2,137,000 and
2,315,000 shares, respectively, of Modine common stock.
Defined-benefit plans of foreign subsidiaries: The company's recently
---------------------------------------------
acquired foreign subsidiaries have defined-benefit plans and/or termination
indemnity plans covering substantially all of their eligible employees. The
benefits under these plans are based on years of service and final average
compensation levels. Funding is limited to statutory requirements.
(In thousands)
- -----------------------------------------------------------------------------
Year ended March 31 1996 1995
- -----------------------------------------------------------------------------
Expense recognized $ 1,148 $ 705
Accumulated benefit obligation 11,342 10,351
Projected benefit obligation 12,738 11,290
Fair value of plan assets 459 --
- -----------------------------------------------------------------------------
Actuarial assumptions:
Discount rate (to calculate present
value of future benefits) 7.5%-12.5% 7.5%
Average salary-growth rate 3.0%-8.5% 3.0%-5.5%
- -----------------------------------------------------------------------------
Domestic qualified defined-contribution plans: The company has several
---------------------------------------------
401(k) and savings plans that cover most of its domestic employees. These
plans provide company matching under various formulas. The cost of the
company's contributions to the plans (including stock purchase plans
detailed in note 17) for fiscal 1996, 1995, and 1994 were $6,454,000,
$5,871,000, and $5,099,000, respectively.
4. Postretirement benefits other than pensions
-------------------------------------------
The company and certain of its domestic subsidiaries, including
its Signet acquisition, provide selected healthcare and life-insurance
benefits for retired employees. Designated employees may become eligible
for those benefits when they retire.
Postretirement benefit expense:
(In thousands)
- -------------------------------------------------------------------------
Year ended March 31 1996 1995 1994
- -------------------------------------------------------------------------
Service cost $ 293 $ 214 $ 306
Interest cost 1,525 1,202 1,318
Net amortization (582) (657) (439)
- -------------------------------------------------------------------------
Net periodic postretirement
benefit cost $1,236 $ 759 $1,185
- -------------------------------------------------------------------------
Postretirement benefit liability:
(In thousands)
- -------------------------------------------------------------------------
March 31 1996 1995
- -------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $17,199 $12,157
Fully eligible active plan participants 2,287 1,794
Other active plan participants 3,547 2,858
Total accumulated postretirement benefit
obligation 23,033 16,809
Net gains/(losses) 845 1,069
Unamortized net reduction in obligation 3,981 5,365
- -------------------------------------------------------------------------
Accrued postretirement benefit obligation $27,859 $23,243
- -------------------------------------------------------------------------
The accumulated postretirement benefit obligation declined at April 1,
1993, due to an amendment of certain of the company's retiree medical
coverage programs. An annual limit on the company's liability (a "cap") was
established that maximizes future costs at 200 percent of fiscal 1993 costs.
The effect of this is being amortized as an offset to expense in fiscal 1994
and in future years. The obligation was further reduced as a result of
comparable benefit limitations negotiated during fiscal 1994. This reduction
is being amortized as an offset to expense in fiscal 1995 and also in future
years. The Signet acquisition added to the fiscal-1996 obligation while the
Dowagiac divestiture reduced it.
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.5 percent at March 31, 1996 and 1995. The projected
healthcare costs trend rates used were 10-11 percent for fiscal 1996, 11 per-
cent for fiscal 1995, and 12 percent for fiscal 1994, trending down gradually
to 5 percent over several years. The effects of these assumption changes on
accrued postretirement benefit cost and related expense are being amortized.
The healthcare-cost trend-rate assumption can have a significant effect
on the amounts reported. Increasing the assumed healthcare-cost trend rates
by one percentage point in each year would have increased the accumulated
postretirement benefit obligation by $1,440,000 as of March 31, 1996, and
the net periodic postretirement benefit cost for fiscal 1996 by $96,000.
5. Leases
------
The company leases various facilities and equipment. Rental expense
under operating leases totaled $12,211,000 in fiscal 1996, $10,750,000 in
fiscal 1995, and $5,540,000 in fiscal 1994.
Future minimum rental commitments at March 31, 1996, under
noncancelable leases were:
- -------------------------------------------------------------------------
Year ended March 31 (In thousands)
- -------------------------------------------------------------------------
1997 $8,603 2000 $2,679
1998 5,546 2001 2,541
1999 3,743 2002 and beyond 687
- -------------------------------------------------------------------------
Total future minimum rental commitments $23,799
- -------------------------------------------------------------------------
6. Income Taxes
------------
The company adopted FASB Statement No. 109 effective April 1, 1993.
The cumulative effect of the adoption was to increase net income for the
fiscal year ended March 31, 1994, by $899,000.
Income-tax expense attributable to income from operations consists of:
(In thousands)
- ---------------------------------------------------------------------------
Years ended March 31 1996 1995 1994
- ---------------------------------------------------------------------------
Federal:
Current $29,497 $32,745 $27,355
Deferred (979) (748) (3,720)
State 5,646 6,203 4,371
Foreign:
Current 4,613 1,678 1,234
Deferred (1,027) 507 (204)
- ---------------------------------------------------------------------------
Totals charged to earnings $37,750 $40,385 $29,036
- ---------------------------------------------------------------------------
Income-tax expense attributable to income from operations differed from
the amounts computed by applying the statutory U.S. federal income-tax rate
as a result of the following:
- ---------------------------------------------------------------------------
Years ended March 31 1996 1995 1994
- ---------------------------------------------------------------------------
Statutory federal tax 35.0% 35.0% 35.0%
State taxes, net of federal benefit 3.6 3.4 3.6
Taxes on non-U.S. earnings and losses 0.7 (0.6) 2.3
Other (1.2) (0.7) (1.1)
- ---------------------------------------------------------------------------
Effective tax rate 38.1% 37.1% 39.8%
- ---------------------------------------------------------------------------
The significant components of deferred income-tax expense
attributable to income from operations are as follows:
(In thousands)
- ---------------------------------------------------------------------------
Years ended March 31 1996 1995 1994
- ---------------------------------------------------------------------------
Pensions $ 1,790 $1,591 $ 1,383
Depreciation (260) (754) (722)
Inventories (812) (465) 389
Employee benefits (727) (976) (1,892)
Other (1,997) 363 (3,082)
- ---------------------------------------------------------------------------
Totals charged to earnings $(2,006) $ (241) $(3,924)
- ---------------------------------------------------------------------------
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as
follows:
(In thousands)
- ---------------------------------------------------------------------------
March 31 1996 1995
- ---------------------------------------------------------------------------
Deferred tax assets:
Accounts receivable $ 1,458 $ 1,970
Inventories 3,998 3,401
Plant and equipment 712 --
Employee benefits 17,730 16,951
Net operating-loss and tax-credit
carry-forwards 4,177 2,783
Environmental -- 131
Other 5,539 3,884
------------------
Total gross deferred assets 33,614 29,120
Less valuation allowance 3,900 2,782
------------------
Net deferred tax assets 29,714 26,338
Deferred tax liabilities:
Pension 15,735 13,918
Plant and equipment 8,279 8,369
Other 927 1,522
------------------
Total gross deferred tax liabilities 24,941 23,809
- ---------------------------------------------------------------------------
Net deferred tax asset $ 4,773 $ 2,529
- ---------------------------------------------------------------------------
The valuation allowance for deferred tax assets as of April 1, 1995,
was $2,782,000. The valuation allowance increased by $1,118,000 for the
year ended March 31, 1996.
At March 31, 1996, the company had net foreign-tax-credit carry-
forwards for federal income-tax purposes of approximately $201,000, of
which $67,000 expire in 1997, $38,000 expire in 1998 and $96,000 expire
in 1999.
The undistributed earnings of certain foreign subsidiaries and
joint-venture companies totaled $30,989,000 as of March 31, 1996. The
earnings are considered permanently reinvested in foreign operations
and, therefore, no provision has been made for any U.S. taxes.
7. Cash and cash equivalents
-------------------------
Under the company's cash management system, certain cash balances
reflect credit balances to the extent that checks written have not yet
been presented for payment. These credit balances, included in accounts
payable, were approximately $10,046,000, $9,657,000, and $3,383,000 at
March 31, 1996, 1995, and 1994, respectively.
All the short-term investments at March 31, 1996, 1995, and 1994,
were of a duration of less than three months and were treated as cash
equivalents, which approximate fair value.
8. Inventories
-----------
Inventories include:
(In thousands)
- -------------------------------------------------------------------------
March 31 1996 1995
- -------------------------------------------------------------------------
Raw materials $ 38,307 $ 37,279
Work in process 47,794 40,879
Finished goods 63,899 57,956
- -------------------------------------------------------------------------
Total inventories $150,000 136,114
- -------------------------------------------------------------------------
9. Property, plant, and equipment
------------------------------
Property, plant, and equipment is composed of:
(In thousands)
- -------------------------------------------------------------------------
March 31 Depreciable lives 1996 1995
- -------------------------------------------------------------------------
Land -- $ 5,217 $ 4,568
Buildings and improvements 10-40 years 104,901 100,640
Machinery and equipment 3-12 years 234,614 218,229
Office equipment 5-14 years 34,375 31,409
Transportation equipment 3-7 years 16,194 11,422
Construction in progress -- 38,580 20,250
----------------------
433,881 386,518
Less accumulated depreciation 232,540 215,646
- ------------------------------------------------------------------------
Net property, plant, and equipment $201,341 $170,872
- -------------------------------------------------------------------------
Depreciation expense was $34,962,000, $31,410,000, and $25,429,000
for the fiscal years ended 1996, 1995, and 1994, respectively.
10. Acquisitions and divestiture
----------------------------
Acquisitions: In the first quarter of fiscal 1996, the company made
two small acquisitions. Effective April 1, 1995, the company, through its
wholly owned subsidiary NRF Holding B.V., acquired Radiadores Montana S.A.
based in Granada, Spain. Montana is a manufacturer and distributor to the
automotive aftermarket, producing radiators and radiator cores, oil coolers,
heaters, and air-conditioning condensers and evaporators for on- and off-
highway vehicles and for industrial applications. At the end of May, the
company acquired its partner's 57-percent ownership in the joint-venture
company Radinam S.A., which owns Mexpar (Manufacturera Mexicana de Partes
de Automoviles S.A. de C.V.), a radiator manufacturer in Mexico City.
Mexpar produces automotive radiators primarily for the aftermarket and
also serves original-equipment manufacturers of vehicles in Mexico.
As of July 31, the company acquired the business, assets, and certain
liabilities of the Signet Systems Division from The Equion Corporation. The
acquisition included the main plant in Harrodsburg, Kentucky, an operation
in Goch, Germany, and a sales and engineering office in Detroit, Michigan.
Signet is a full-service supplier of climate-control systems and components
to the automotive, truck, and off-highway vehicle markets in North America
and Europe.
In the third quarter of fiscal 1994, the company acquired the entire
equity interest in Heinrich Langerer Verwaltungsgesellschaft mbH and
Langerer & Reich GmbH & Co. (collectively "Langerer & Reich") and certain
specified liabilities. The acquisition included plant, equipment, and
certain real property located in Pliezhausen, Germany, and the equipment
and leasehold interest in certain real property located in Filderstadt-
Bernhausen, Germany. The acquisition also includes the equity interest
held by Langerer & Reich in Hungaro Langerer Gepjarmutechnikai Kft., a
Hungarian joint venture. Langerer & Reich manufactures copper/brass and
aluminum heat exchangers for the truck, bus, and industrial markets and
aluminum heat exchangers for the passenger-car market.
In the fourth quarter of fiscal 1994, the company acquired its
partner's (Austria Metall AG) 50-percent ownership in the joint venture
company Austria Warmetauscher GmbH (AWG). The AWG facility manufactures
aluminum air-conditioning condensers and oil coolers for a number of
European auto makers.
The combined adjusted purchase price of all the fiscal-1996
acquisitions totaled $64,210,000 and was paid for with cash
provided by operations, with new and existing unsecured revolving
credit arrangements, and promissory notes to Equion Corporation
totaling $5,000,000. Combined goodwill and other intangibles created
by the acquisition were $41,187,000 and $14,000 respectively. Goodwill
is being amortized on a straight-line basis over 15 years.
The combined adjusted cash-purchase price of the fiscal-1994
acquisitions totaled $20,012,000 and was paid for with cash provided
by operations. Goodwill acquired in the acquisitions was $17,648,000
and is being amortized over 15 years on a straight-line basis.
The results of operations are included in the consolidated
financial statements since the respective effective dates of
acquisition. The foreign operations are reported using a one-
month delay, which is consistent with the company's policy for
reporting operations outside the United States and Canada. All of
the acquisitions have been accounted for using the purchase
method. The company had used the equity method to account for its
interest in Radinam S.A. and AWG prior to majority ownership.
The company continues to use the plants, machinery and equipment,
and other assets acquired in these acquisitions for the
manufacture of heat-transfer products.
Details of businesses acquired in purchase transactions were
as follows:
(In thousands)
- -------------------------------------------------------------------------
Year ended March 31 1996 1994
- -------------------------------------------------------------------------
Value of assets acquired, including
intangibles, excluding cash acquired
of $2,412 and $840 respectively $89,096 $83,954
Liabilities assumed and created (29,036) (62,069)
Equity investment in affiliates (3,262) (2,713)
- -------------------------------------------------------------------------
Net cash paid for acquisitions $56,798 $19,172
- -------------------------------------------------------------------------
Divestiture: In October 1995, the company completed the sale of its
-----------
copper-extrusion business in Dowagiac, Michigan, to National Tube Holding
Company, Inc., of Birmingham, Alabama. Modine recognized a pretax gain of
$5,009,000, including $1,430,000 from the curtailment and settlement of
certain pension and benefit obligations, negotiated subsequent to the sale.
On a pro-forma basis, the unaudited consolidated results of operations
would have been as follows had the current year acquisitions and disposal
occurred on April 1, 1994:
(Dollars in thousands, except per-share amounts)
- -------------------------------------------------------------------------
Year ended March 31 (unaudited) 1996 1995
- -------------------------------------------------------------------------
Net sales $1,001,007 $976,653
Net earnings 59,807 65,588
Net earnings per share:
Primary $1.97 $2.15
Fully diluted 1.97 2.14
- -------------------------------------------------------------------------
The pro-forma financial information presented above is for informational
purposes only and does not necessarily reflect the results of operations
that would have occurred had the divestiture and acquisitions, completed
in fiscal 1996, taken place on the date assumed above, nor are those results
necessarily indicative of the results of future combined operations.
11. Intangible assets
-----------------
Intangibles include:
(In thousands)
- -----------------------------------------------------------------------
March 31 1996 1995
- -----------------------------------------------------------------------
Goodwill $69,973 $29,335
Patents and product technology 8,389 8,389
Other intangibles 783 3,930
- -----------------------------------------------------------------------
79,145 41,654
Less accumulated amortization 8,689 7,564
- -----------------------------------------------------------------------
Net intangible assets $70,456 $34,090
- -----------------------------------------------------------------------
Amortization expense for intangible assets was $3,574,000, $2,044,000,
and $1,733,000 for the fiscal years ended 1996, 1995, and 1994, respectively.
12. Deferred charges and other noncurrent assets
--------------------------------------------
Deferred charges and other noncurrent assets include:
(In thousands)
- -------------------------------------------------------------------------
March 31 1996 1995
- -------------------------------------------------------------------------
Prepaid pension costs -- qualified and
nonqualified plans $40,319 $35,404
Other noncurrent assets 1,818 1,423
- -------------------------------------------------------------------------
Total deferred charges and other
noncurrent assets $42,137 $36,827
- -------------------------------------------------------------------------
13. Indebtedness
------------
Long-term debt at March 31, 1996 and 1995, includes:
(In thousands)
- -----------------------------------------------------------------------------
Fiscal
Interest rate at year of
Type of issue March 31, 1996 maturity 1996 1995
- -----------------------------------------------------------------------------
Denominated in
U.S. dollars:
Fixed rate --
Notes and other debt 9.25%-9.70% 1998 $19,000 $28,400
Weighted average
interest rate
March 31, 1996 9.32%
Revenue bonds 7.50% 2003 2,150 2,531
Variable rate --
Notes 6.17-8.25% 1997-1998 6,000 1,500
Weighted average
interest rate
March 31, 1996 7.73%
Revenue bonds 3.40%-3.90% 2008-2016 5,940 5,940
Weighted average
interest rate
March 31, 1996 3.50%
Denominated in
foreign currency:
Fixed rate -- notes
and other debt 7.52%-11.00% 1997-2006 362 637
Weighted average
interest rate
March 31, 1996 8.88%
Variable rate -- notes
and other debt 1.04%-10.85% 1998-2001 66,900 34,065
-----------------
Weighted average
interest rate
March 31, 1996 3.92%
100,352 73,073
Capital-lease obligation 9 --
-----------------
100,361 73,073
Less current portion 12,552 10,853
- -----------------------------------------------------------------------------
Total $87,809 $62,220
- -----------------------------------------------------------------------------
In conjunction with the acquisition of the Signet Systems Division,
Modine entered into a $25,000,000 revolving credit agreement that is
currently scheduled to mature in fiscal year 1999. At March 31, 1996,
$6,458,000 was utilized, with $18,542,000 available for use. Additionally,
two notes, totaling $5,000,000, were issued to the seller, with final payment
scheduled in fiscal year 1998.
Certain of the company's loan agreements limit the use of retained
earnings for the payment of cash dividends and the acquisition of treasury
stock. Under the most restrictive, $120,399,000 was available for these
purposes at March 31, 1996. (However, these restricted payments may not
exceed $30,000,000 in any fiscal year.) Other loan agreements give certain
existing unsecured lenders security equal to any future secured borrowing.
The fair value of long-term debt was established by reference to the
public market for corporate securities. The estimated fair value of total
long-term debt including current portion was $101,165,000 at March 31, 1996,
and $74,111,000 at March 31, 1995.
Long-term debt matures as follows:
- --------------------------------------------------------------------------
Year ended March 31 (In thousands)
- --------------------------------------------------------------------------
1997 $12,552 2000 $3,713
1998 38,299 2001 1,367
1999 37,993 2002 and beyond 6,437
- --------------------------------------------------------------------------
At March 31, 1996, the company had approximately $17,742,000 in
unutilized bank lines of credit available. These lines of credit do
not require compensating balances; however, a nominal commitment fee
is paid. A maximum of $13,572,000 in short-term bank borrowings were
outstanding during the year ended March 31, 1996. The weighted average
interest rate on short-term borrowings was 3.97 percent at March 31,
1996, and 5.68 percent at March 31, 1995.
14. Foreign-exchange contracts/derivatives
--------------------------------------
The company uses derivative financial instruments in a limited way
as a tool to manage the company's financial risk. Their use is restricted
primarily to hedging assets and obligations already held by the company and
they generally are used to protect cash of the company rather than generate
income or engage in speculative activity. Leveraged derivatives are
prohibited by company policy.
The company from time to time enters into foreign-currency-exchange
contracts, generally with terms of 90 days or less, to hedge specific
foreign-currency-denominated transactions. The effect of this practice
is to minimize the impact of foreign-exchange-rate movements on the
company's operating income. The company's foreign-currency-exchange
contracts do not subject the company to risk due to exchange-rate
movements because gains and losses on these contracts offset gains and
losses on the assets and liabilities being hedged.
As of March 31, 1996 and 1995, the parent company had approximately
$3,604,000 and $3,088,000, respectively, in outstanding contracts,
composed of $3,604,000 and $3,004,000 of forward foreign-exchange
contracts denominated in French francs and fiscal 1995's $84,000 in
forward copper contracts. The difference between these contracts' values
and the fair value of these instruments in the aggregate was not material.
Certain subsidiaries have transactions in currencies other than their
functional currencies and, from time to time, enter into forward and
option contracts to hedge the purchase of inventory or to sell non-
functional currency receipts. Non-U.S. dollar financing transactions
through intercompany loans or local borrowings in the corresponding
currency generally are effective as hedges of long-term investments.
See also footnote number 13.
15. Other noncurrent liabilities
----------------------------
Other noncurrent liabilities include:
(In thousands)
- -------------------------------------------------------------------------
March 31 1996 1995
- -------------------------------------------------------------------------
Postretirement benefits other than pensions $26,263 $22,316
Pensions 12,912 12,741
Other 2,181 2,031
- -------------------------------------------------------------------------
Total other noncurrent liabilities $41,356 $37,088
- -------------------------------------------------------------------------
16. Shareholder rights plan
-----------------------
Each share of the company's common stock carries one right that
entitles the holder to purchase a unit of 1/100 Preferred Series A
Participating Stock at $21.25 per unit. The rights are not currently
exercisable but will become exercisable 10 days after a shareholder has
acquired 20 percent or more, or has commenced a tender or exchange offer
for 30 percent or more, of the company's common stock. In the event of
certain mergers, sales of assets, or self-dealing transactions involving
a 20-percent-or-more shareholder, each right not owned by such 20-percent-
or-more holder will be modified so that it will then be exercisable for
common stock having a market value of twice the exercise price of the
right. The rights are redeemable in whole by the company, at a price of
$0.0125 per right, at any time before 20 percent or more of the company's
common stock has been acquired. The rights expire on October 27, 2006,
unless previously redeemed.
17. Stock option and purchase plans
-------------------------------
Stock option plans: In July of 1978, 1985, and 1994, shareholders
------------------
approved plans providing for the granting of options to officers, other
key employees, and, in 1985 and 1994, to non-employee directors to
purchase common stock of the company. Options granted under the plans
are either nonqualified or incentive stock options and carry a price
equal to the market price on the date of grant. Both incentive stock
options and nonqualified stock options terminate 10 years after date of
grant.
The 1978, 1985, and 1994 Incentive Stock Plans also provide
for the granting of stock awards. Shares are awarded to the
employee at no cost and are placed in escrow until certain
employment restrictions lapse. The value of shares awarded is
amortized over the seven-year restriction period. The amounts
charged to operations in fiscal 1996, 1995, and 1994 were
$1,105,000, $1,028,000, and $952,000, respectively.
Following is a summary of activity under the two plans.
- --------------------------------------------------------------------------
Shares Option/award
(in thousands) price range
- --------------------------------------------------------------------------
Outstanding March 31, 1993 1,767 $3.825-18.25
- --------------------------------------------------------------------------
Granted:
Incentive and nonqualified 248 20.625-30.00
Restricted stock awards 33 0
Exercised (267) 0-12.50
- --------------------------------------------------------------------------
Outstanding March 31, 1994 1,781 5.594-30.00
- --------------------------------------------------------------------------
Granted:
Incentive and nonqualified 268 28.00-28.50
Restricted stock awards 31 0
Exercised (297) 0-18.25
Expired (17) 3.825
- --------------------------------------------------------------------------
Outstanding March 31, 1995 1,766 5.594-30.00
- --------------------------------------------------------------------------
Granted:
Incentive and nonqualified 313 22.75-33.375
Restricted stock awards 50 0
Exercised (193) 0-30.00
- --------------------------------------------------------------------------
Outstanding March 31, 1996 1,936 $7.188-33.375
- --------------------------------------------------------------------------
A further 2,883,000 shares were available for the granting
of additional options or awards at March 31, 1996.
Stock purchase plans: The company also has adopted several
--------------------
defined-contribution stock purchase plans. The plans permit
employees to make monthly investments at current market prices
based on a specified percentage of compensation. The company
matches a portion of the employees' contribution.
Activity in the plans for fiscal 1996, 1995, and 1994
resulted in the purchase of 590,000, 589,000, and 593,000 shares
of company stock, respectively. These purchases were made from
the employee pension plan trusts, private purchases, and treasury
shares. It is anticipated that future purchases will be made from
all three sources at the discretion of the plans' administrative
committees. Costs of the company's contributions to the plans for
fiscal 1996, 1995, and 1994 were $6,110,000, $5,871,000, and
$5,099,000, respectively.
18. Segment and geographic area information
---------------------------------------
The company operates predominantly in a single industry, the
production and sale of heat-transfer equipment. Information about
the company by geographic operating area is presented below:
(In thousands)
- ----------------------------------------------------------------------------
Years ended March 31 1996 1995 1994
- ----------------------------------------------------------------------------
Sales to unaffiliated customers
from company facilities
located in:
United States $684,289 $667,433 $574,895
Europe 285,800 227,704 77,340
Canada and Latin America 20,404 17,873 17,318
- ----------------------------------------------------------------------------
Net sales $990,493 $913,010 $669,553
- ----------------------------------------------------------------------------
Sales between geographic areas:
United States $ 4,615 $ 2,401 $ 1,558
Europe 125 87 186
Canada and Latin America 4,021 2,520 1,299
- ----------------------------------------------------------------------------
Total inter-area sales $ 8,761 $ 5,008 $ 3,043
- ----------------------------------------------------------------------------
Operating profit or loss:
United States $ 97,113 $115,713 $ 96,507
Europe 8,861 7,861 (1,520)
Canada and Latin America 917 1,840 1,010
Corporate, eliminations, and other (7,742) (16,587) (22,971)
- ----------------------------------------------------------------------------
Earnings before income taxes $ 99,149 $108,827 $ 73,026
- ----------------------------------------------------------------------------
Identifiable assets:
United States $476,390 $411,811 $343,020
Europe 169,211 135,239 113,273
Canada and Latin America 24,932 16,067 13,722
Corporate, eliminations, and other 1,303 27,070 39,966
- ----------------------------------------------------------------------------
Total assets $671,836 $590,187 $509,981
- ----------------------------------------------------------------------------
Included in the United States sales to unaffiliated customers are
export sales of $127,335,000, $126,409,000, and $95,699,000, in fiscal
1996, 1995, and 1994, respectively, the majority to customers in Europe.
During the last three fiscal years, no single customer has accounted for
more than 10 percent of revenues.
19. Contingencies and litigation
----------------------------
In the normal course of business, the company and its subsidiaries
have been named as defendants in various lawsuits and enforcement
proceedings in which claims are asserted against the company by private
parties, the Occupational Safety and Health Administration, the
Environmental Protection Agency, other governmental agencies, and
others. The company is also subject to other liabilities that arise
in the ordinary course of its business. Based on the information
available, the company does not expect that any unrecorded liability
related to these matters would have a material effect on the
consolidated financial statements.
In November 1991, the company filed a lawsuit against Mitsubishi
Motor Sales of America, Inc., and Showa Aluminum Corporation, alleging
infringement of the company's patent on parallel-flow air-conditioning
condensers. The suit seeks an injunction to prohibit continued
infringement, an accounting for damages, a trebling of such damages
for willful infringement, and reimbursement of attorneys' fees. In
December 1991, the company submitted a complaint to the U.S.
International Trade Commission (ITC) requesting that the ITC ban
the import and sale of parallel-flow air-conditioning condensers
and systems or vehicles that contain them, which are the subject
of the aforementioned lawsuit. In July 1993, the ITC reversed an
earlier ruling by a hearing officer and upheld, as valid and
enforceable, the company's basic patent on parallel-flow air-
conditioning condensers. The ITC also ruled that specific condensers
from the two Japanese companies did not infringe the company's patent.
Each of the parties appealed, to the U.S. Court of Appeals for the
Federal Circuit, the portion of the ITC opinion adverse to them. In
February 1996, the U.S. Court of Appeals for the Federal Circuit,
upheld the patent as valid and enforceable and remanded the case to
the ITC for a determination with respect to Showa infringement. In
July of 1994, Showa filed a lawsuit against the company alleging
infringement by the company of certain Showa patents pertaining to
condensers. (In June, 1995, the company filed a motion for partial
summary judgment against such lawsuit.) In December of 1994, the
company filed another lawsuit against Mitsubishi and Showa
pertaining to a newly issued patent on parallel-flow air-
conditioning condensers. Both 1994 suits have been stayed pending
the outcome of re-examination in the U.S. Patent Office of the
patents involved. All legal and court costs associated with these
cases have been expensed as they were incurred.
20. Quarterly financial data (unaudited)
------------------------------------
Quarterly financial data are summarized below:
(In thousands, except per-share amounts)
- -----------------------------------------------------------------------------
Fiscal 1996 quarters ended June Sept. Dec. March
- -----------------------------------------------------------------------------
Net sales $239,216 $254,292 $252,817 $244,168
Gross profit 60,882 67,937 63,815 62,739
Net earnings 15,983 16,736 14,855 13,825
Net earnings per share
of common stock $0.52 $0.55 $0.49 $0.46
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Fiscal 1995 quarters ended June Sept. Dec. March
- -----------------------------------------------------------------------------
Net sales $208,436 $221,760 $240,505 $242,309
Gross profit 56,542 63,969 67,646 72,312
Net earnings 14,830 16,801 17,413 19,398
Net earnings per share
of common stock $0.49 $0.55 $0.57 $0.63
- -----------------------------------------------------------------------------
Independent auditors' report
To the Shareholders and Board of Directors
Modine Manufacturing Company
Racine, Wisconsin
We have audited the accompanying consolidated balance sheets of
Modine Manufacturing Company and Subsidiaries as of March 31,
1996 and 1995, and the related consolidated statements of
earnings, shareholders' investment, and cash flows for each of
the three years in the period ended March 31, 1996. These
financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Modine Manufacturing Company and
Subsidiaries as of March 31, 1996, and 1995, and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended March 31, 1996, in conformity
with generally accepted accounting principles.
As discussed in notes 1 and 6 to the consolidated financial
statements, the company changed its method of accounting for
income taxes in fiscal 1994.
COOPERS & LYBRAND LLP
Coopers & Lybrand LLP
Chicago, Illinois
May 1, 1996