SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
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Commission file number 1-1373
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MODINE MANUFACTURING COMPANY
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(Exact name of registrant as specified in its charter)
WISCONSIN 39-0482000
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(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
1500 DeKoven Avenue, Racine, Wisconsin 53403
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (414) 636-1200
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Securities Registered pursuant to Section 12(g) of the Act:
Common Stock, $0.625 par value
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(Title of Class)
An Exhibit index appears at pages 18-25 herein.
Page 1 of 207
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past
90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Approximately 53% of the outstanding shares are held by non-
affiliates. The aggregate market value of these shares was
approximately $453,683,001 based on the market price of $28.75
per share on June 17, 1997. The remaining outstanding shares are
owned or controlled by or for directors, officers, employees,
retired employees, and their families.
The number of shares outstanding of the registrant's Common
Stock, $0.625 par value, was 29,774,110 at June 17, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
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Portions of the following documents are incorporated by reference
into the parts of this Form 10-K designated to the right of the
document listed.
Incorporated Document Location in Form 10-K
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Annual Report to Shareholders for the
fiscal year ended March 31, 1997 Part I of Form 10-K
(Item 1)
Part II of Form 10-K
(Items 7, 8)
Part IV of Form 10-K
(Item 14)
1997 Definitive Proxy Statement dated
June 6, 1997 Part III of Form 10-K
(Items 10, 11, 12, 13)
TABLE OF CONTENTS
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MODINE MANUFACTURING COMPANY - FORM 10-K
FOR THE YEAR ENDED MARCH 31, 1997
10-K Pages
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Cover
Table of Contents
Part I
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Item 1 - Business
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General, Foreign and Domestic
Operations, Competitive Position,
Customer Dependence, Backlog of
Orders, Raw Materials, Patents,
Research and Development,
Environmental Matters, Employees,
Seasonal Nature of Business,
Working Capital Items 5
Item 2 - Properties 12
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Item 3 - Legal Proceedings 13
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Item 4 - Submission of Matters To A Vote of
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Security Holders 14
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Part II
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Item 5 - Market for Registrant's Common
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Equity and Related Stockholder
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Matters 14
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Item 6 - Selected Financial Data 15
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Item 7 - Management's Discussion and
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Analysis of Financial Condition
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and Results of Operations 16
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Item 8 - Financial Statements &
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Supplementary Data 16
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10-K Pages
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Item 9 - Changes in and Disagreements
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with Accountants on Accounting
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and Financial Disclosure 16
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Part III
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Items 10 and 11 - Directors and Executive
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Officers of the Registrant; Executive
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Compensation 16
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Item 12 - Security Ownership of Certain
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Beneficial Owners and Management 18
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Item 13 - Certain Relationships and Related
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Transactions 18
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Part IV
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Item 14 - Exhibits, Financial Statement
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Schedules, and Reports on Form 8-K 18
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1) Financial Statements
2) Financial Statement Schedules
3) Consent of Independent Accountants
4) Exhibit Index
Signatures 26
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PART I
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ITEM 1. BUSINESS.
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General
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Throughout this Report, the terms "Modine," "the Company" and/or
"the Registrant" refer to Modine Manufacturing Company and
consolidated subsidiaries.
Modine was incorporated under the laws of the State of Wisconsin
on June 23, 1916.
Modine operates primarily in a single industry consisting of the
manufacture and sale of heat transfer equipment. This includes
heat exchangers for cooling all types of engines, transmissions,
auxiliary hydraulic equipment, air conditioning components used
in cars, trucks, farm and construction machinery and equipment,
and heating and cooling equipment for residential and commercial
building HVAC (heating, ventilating, air conditioning and
refrigeration equipment). The principal markets consist of
automobile, truck and bus manufacturers, farm implement
manufacturers, heating and cooling equipment manufacturers,
construction equipment manufacturers, construction contractors,
wholesalers of plumbing and heating equipment, radiator repair
shops, and wholesalers of auto repair parts. The Company
distributes its products through Company salesmen, through
independent manufacturer's representatives, independent warehouse
distributors, and mass merchandisers. No industry segment
information is required under Statement of Financial Accounting
Standards Board, Number 14 "Financial Reporting for Segments of a
Business Enterprise," since the Company operates predominantly in
a single industry.
Within this industry, the Company manufactures various products
as is demonstrated by the following table :
Years ended March 31
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1997 1996 1995 1994 1993
Radiators & Radiator 39% 41% 42% 45% 45%
Cores
Vehicular Condensers
& Evaporators 22% 18% 14% 12% 12%
Oil Coolers 16% 16% 16% 15% 13%
Charge Air Coolers 11% 12% 12% 11% 10%
Building HVAC 8% 8% 9% 11% 14%
Miscellaneous 4% 5% 7% 6% 6%
A world trend has been consolidation to fewer but larger
suppliers in the markets the Company serves. To serve its global
markets, Modine has established manufacturing operations in North
America, Europe, and Asia/Pacific. The Company's significant
international operations are located in the following countries:
North America
The Company maintains a Canadian subsidiary, Modine of Canada,
Ltd., an Ontario company, which manufactures cores for the
automotive aftermarket, and which owned 100% of The Radman
Corporation, Ltd., a Canadian federal company which licenses
certain trademarks to automotive radiator repair shops. On
April 1, 1996 the Radman Corporation, Ltd. was amalgamated with
and into Modine of Canada, Ltd. and ceased to exist as a separate
entity as of that date.
The Company operates a subsidiary, Modine Transferencia de Calor,
S.A. de C.V., a Mexican company which manufactures, assembles,
and exports to the U.S., heat exchangers for a variety of non-
vehicular applications.
The Company operates Manufacturera Mexicana de Partes de
Automoviles, S.A. ("Mexpar"), a Mexican producer of radiators and
other automotive components for original equipment manufacturers
and the automotive aftermarket. Mexpar's manufacturing
facilities are located in Mexico City.
Europe
The Company operates in Europe through subsidiaries organized
into three business groups and two support groups. The three
business groups are:
(1) An automotive business unit which the Company
operates primarily through its subsidiary, Modine
Holding GmbH located in Filderstadt-Bernhausen,
Germany. This unit includes (a) Langerer & Reich
Automobiltechnik GmbH located in Pliezhausen, Germany,
which manufactures aluminum heat exchangers for the
passenger car market; (b) Modine Uden B.V. located in
Uden, The Netherlands, which was reopened during 1996-
97 and converted to the production of transmission and
engine oil coolers and latent heat batteries; and (c)
Austria Warmetauscher GmbH located in Berndorf,
Austria, which manufactures aluminum air conditioning
condensers and oil coolers for a number of European
automakers.
Early in fiscal 1998, another facility for the
European automotive market will begin assembly of
automotive cooling modules in Wackersdorf, Germany.
(2) A heavy-duty business unit which the Company
operates through Modine Holding GmbH. This unit
includes (a) Langerer & Reich GmbH located in
Bernhausen, Germany, which manufactures heat exchangers
for the truck, bus and industrial markets, and also
includes research and development and administrative
facilities; (b) Modine GmbH located in Neuenkirchen,
Germany, which manufactures copper/brass sheet metal
radiators for the European industrial and agricultural
market; and (c) Hungaro Langerer Gep. Kft., located in
Mezokovesd, Hungary.
(3) An aftermarket business unit which the Company
operates under the aegis of the automotive business
unit, but operates primarily through its subsidiary,
NRF B.V. This unit includes (a) NRF B.V. located in
Mill, The Netherlands, which produces replacement
radiator cores, sheet metal radiators, and industrial
and marine heat exchangers; and (b) Radiadores Montana
S.A. located in Granada, Spain, which manufactures and
distributes radiators, radiator cores, oil coolers,
heaters, and air conditioning condensers and
evaporators for the automotive aftermarket and for
industrial applications.
NRF also owns subsidiaries that export products
and distribute products throughout Europe.
The two support groups are: (1) European central research
group, that is similar to Modine's Research and Development
Department in Racine, Wisconsin; and (2) a European central
administration unit, that includes the functions of I/S
(Information Services); purchasing; quality and environment; and
the accounting functions of controlling, cost accounting, and
financial accounting.
The Company operates, through Signet Systems, Inc., Signet
Systems GmbH located in Goch, Germany. Signet Systems GmbH is a
supplier of climate-control systems and components to the
automotive, truck, and off-highway vehicle markets in Europe.
In the third quarter of fiscal 1996-97, Modine purchased 41.3
percent of Constructions Mecaniques Mota, S.A. (CMM), based near
Marseilles, France, with other facilities in Aubagne, France, and
Lenta, Italy. CMM is a manufacturer of tube-bundle oil coolers
and charge-air coolers for trucks and marine engine markets,
which complements Modine's other European businesses.
The European operations are organized similarly to the way the
Company is organized in the United States, which allows Modine to
be able to better serve its markets in Europe with manufacturing
in Europe.
The Company maintains sales subsidiaries and/or offices in
Austria, England, France, Italy, Germany, and The Netherlands.
The Company also maintains stocks of goods in bulk warehouses in
Birmingham, England; Rotterdam, The Netherlands; and Bremen,
Germany as reserve inventory for certain European customers.
Asia/Pacific
The Company participates (50% interest) in a joint venture with
Nippon Light Metal, Ltd., a Japanese company. The joint venture
company, Nikkei Heat Exchanger Company, Ltd., produces automotive
heat exchangers for sale to original equipment manufacturers in
the Japanese market.
The Company established a sales subsidiary in Japan, Modine Asia
K.K., in February, 1995.
In addition to normal business risks, operations outside of the
United States are subject to other risks including, but not
limited to, changing governmental laws and regulations, and
currency re-evaluations and market fluctuations.
Exports
In addition, the Company exports to foreign countries and
receives royalties from foreign licensees. Export sales as a
percentage of total sales were 11.8%, 12.9% and 13.8% for fiscal
years ended in 1997, 1996 and 1995, respectively. Estimated
after-tax earnings on export sales as a percentage of total net
earnings were 11.8%, 12.9% and 13.8% for fiscal years ended in
1997, 1996 and 1995, respectively. Royalties from foreign
licensees as a percentage of total earnings were 1.6%, 1.0% and
1.0% for the last three fiscal years, respectively.
Modine believes its international presence has positioned the
Company to profitably share in the anticipated long-term growth
of the global vehicular and industrial markets. Modine is
committed to increasing its involvement and investment in
international markets in the years ahead.
Foreign and Domestic Operations
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Financial information relating to the Company's foreign and
domestic operations, including export sales, is included in the
Company's 1997 Annual Report to Shareholders and is incorporated
herein by reference at Note 18 on Page 28 therein.
Events subsequent to the End of the Quarter
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On June 6, 1997, the Company mailed its Annual Report to
Shareholders and released its sales forecast for the upcoming
year. See Current Reports on Form 8-K at page 25 herein for
further details.
Competitive Position
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The Company competes with several manufacturers of heat transfer
products, some of which are divisions of larger companies and
some of which are independent companies. The Company also
competes for business with parts manufacturing divisions of some
of its major customers. The markets for the Company's products
are increasingly competitive and have changed significantly in
the past few years as the Company's traditional OEM customers in
the United States, faced with dramatically increased
international competition, have expanded their worldwide sourcing
of parts to better compete with lower-cost imports. These market
changes have caused the Company to experience competition from
suppliers in other parts of the world which enjoy economic
advantages such as lower labor costs, lower health care costs,
and other factors.
Customer Dependence
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Ten customers accounted for approximately 40.7% of the Company's
sales in the fiscal year ended March 31, 1997. These customers,
listed alphabetically, were: BMW, Caterpillar, Chrysler Motor
Corporation, Citroen/PSA, Fiat, Ford Motor Company, John Deere,
Navistar International, Paccar, Inc. and Volkswagen. Goods are
supplied to these customers on the basis of individual purchase
orders received from them. When it is in the customer's and the
Company's best interests, the Company utilizes long-term supply
agreements to minimize investment risks and provide a proven
source of competitively priced products. There are no other
relationships between the Company and its customers.
Backlog of Orders
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While the Company has a large backlog of orders, the backlog is
not deemed significant or material; backlog historically has had
little relation to shipments. Modine's products are produced
from readily available materials such as copper, brass, steel,
and aluminum and have a relatively short manufacturing cycle.
The Company's operating units maintain their own inventories and
production schedules. Current production capacity (including
additional capacity planned to become operational this year) is
capable of handling the sales volumes expected in fiscal 1997-98.
Raw Materials
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Copper, brass, steel, aluminum, and solder, all essential to the
business, are purchased regularly from several domestic and
foreign producers. In general, the Company does not rely on any
one supplier for these materials, which are for the most part
available from numerous sources in quantities required by the
Company. The Company normally does not experience material
shortages within its operations and believes that producers'
supplies of these materials will be adequate through the end of
fiscal year 1997.
Patents
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The Company, and certain of its wholly-owned subsidiaries, own
outright or are licensed to produce products under a number of
patents and licenses. These patents and licenses, which have
been obtained over a period of years, will expire at various
times. Because the Company is involved with many product lines,
the Company believes that its business as a whole is not
materially dependent upon any particular patent or license, or
any particular group of patents or licenses. Modine considers
each of its patents, trademarks and licenses to be of value and
aggressively defends its rights throughout the world against
infringement. See also Item 3 - Legal Proceedings.
Research and Development
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Company-sponsored research activities relate to the development
of new products, processes, or services, or the improvement of
existing products, processes, and services. Expenditures in
fiscal 1996-97 amounted to $16,877,000; in fiscal 1995-96
amounted to $14,256,000; and in fiscal 1994-95 amounted to
approximately $10,907,000. There were no significant
expenditures on research activities which were customer-
sponsored. Over the course of the last few years, the Company
has become involved in a number of industry or university
sponsored research organizations. These consortia conduct
research and provide data on technical topics deemed to be of
interest to the Company for practical applications in the markets
the Company serves. The research and data developed is generally
shared among the member companies. In addition, to achieve
efficiencies and lower developmental costs, Modine's research and
engineering groups work closely with Modine's customers on
special projects and systems designs.
Environmental Matters
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Modine has a long-standing corporate environmental policy which
demonstrates the Company's commitment to the environment and
compliance with all environmental laws and regulations. Modine
continues to appraise environmental issues and regulatory
compliance with a proactive approach. The benefits realized from
the Company's environmental programs include conserved resources,
more efficient manufacturing processes, minimized liability
exposure and reduced operational costs. Modine evaluates the
performance of the Company's environmental programs through
continuous monitoring, auditing and accounting systems. The
Company constantly examines its operations and processes to
minimize their impact on the environment. In 1996, the Company
revised its corporate waste minimization program, which
originated in 1991, to encompass all by-products of the
manufacturing process. All Modine facilities have committed to
one and five year goals for their own unique programs.
Modine accrues for environmental remediation activities relating
to past operations --- including those under the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA),
often referred to as "Superfund," and under the Resource
Conservation and Recovery Act (RCRA) --- when it is probable that
a liability has been incurred and reasonable estimates can be
made. In addition, an obligation may arise when a facility is
closed or sold. These expenditures most often relate to
facilities and sites where past operations followed practices and
procedures that were considered acceptable under then-existing
regulations, but will now require investigatory and/or remedial
work to ensure sufficient protection to the environment.
Seven of the Company's manufacturing facilities currently have
been identified as requiring soil and/or groundwater remediation.
Because of the joint and several liability of former landowners,
contractual obligations, and certain state programs that provide
for partial reimbursement of certain remediation costs, it is
unlikely these remediation efforts will have a material effect on
the Company's consolidated financial condition.
Although there are no currently known liabilities that might have
a material effect on the Company's consolidated net assets, the
Environmental Protection Agency ("EPA") has designated Modine as
a potentially responsible party ("PRP") for remediation of eleven
waste disposal sites. These sites are not company-owned and
allegedly contain wastes attributable to Modine from past
operations. For the eleven sites currently known, the Company's
potential liability will be significantly less than the total
site remediation because the percentage of material attributable
to Modine is relatively low ("de minimis"), there may be
insufficient documentation linking Modine to the site, and the
other PRPs have the financial resources to meet their
obligations.
Recent environmental legislation will require significant capital
equipment expenditures over the next four to five years. For the
fiscal year ending March 31, 1997 capital expenditures related to
environmental projects were $0.6 million. These environmental
expenditures include capital outlays to retrofit existing
facilities, as well as those associated with new facilities and
other compliance costs. Modine currently expects expenditures
for environmentally related capital projects to be about $3.5
million in 1997-98. A major portion of these additional costs
can be attributed to wastewater treatment system upgrades at two
Modine manufacturing facilities. These upgrades are necessary to
accommodate an increase in wastewater generation due to expanded
production and to insure compliance with wastewater discharge
permits.
Environmental expenses charged to current operations, including
remediation costs, totaled about $2.3 million for the fiscal year
ending March 31, 1997. These expenses include: operation and
maintenance costs for solid-waste treatment, storage, and
disposal; for costs incurred in conducting environmental-
compliance activities; and for other matters. Operating expenses
of some facilities may increase during fiscal year 1997-98
because of such charges but the competitive position of the
Company is not expected to change materially.
Although environmental costs are substantial, the Company has no
reason to believe such costs vary significantly from similar
costs incurred by other companies engaged in similar businesses.
Employees
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The number of persons employed by the Company at March 31, 1997,
was approximately 7,900.
Seasonal Nature of Business
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In recent years the Company's business has become more continuous
and less seasonal. However, a degree of seasonality may still be
experienced since the Aftermarket, Commercial Products, Heating,
and Signet Systems Divisions are affected by weather patterns,
constructions starts, and other factors. Sales to original
equipment manufacturers are dependent upon the demand for new
vehicles and equipment. The following quarterly net sales detail
illustrates the degree of fluctuation for the past five years:
Fiscal Fiscal
Year First Second Third Fourth Year
Ended Quarter Quarter Quarter Quarter Total
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March 31
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($ In Thousands)
1997 $248,514 $254,224 $252,972 $243,336 $999,046
1996 239,216 254,292 252,817 244,168 990,493
1995 208,436 221,760 240,505 242,309 913,010
1994 147,171 156,964 172,351 193,067 669,553
1993 133,817 144,603 146,591 145,828 570,839
Five-year $195,431 $206,369 $213,047 $213,741 $828,588
Average
Percent 23% 25% 26% 26% 100%
of Year
Working Capital Items
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The Company's products for the original equipment market are
manufactured on an as ordered basis. Therefore, large
inventories of such products are not necessary, nor is the amount
of products returned significant. In the HVAC and aftermarket
areas, due to the distribution systems and seasonal sales
programs, varying levels of finished goods inventory are
necessary. This inventory is spread throughout the distribution
systems. In these areas, in general, the industry and the
Company make use of extended terms of payment for customers on a
limited and/or seasonal basis.
ITEM 2. PROPERTIES.
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The Company's general offices, along with laboratory,
experimental and tooling facilities, are maintained in Racine,
Wisconsin. Additional technical support functions are located in
Harrodsburg, Kentucky and Bernhausen, Germany. Almost all of the
Company's manufacturing and larger distribution centers are owned
outright. A few manufacturing facilities and numerous regional
sales and service centers, distribution centers and offices are
occupied under various lease arrangements.
In December 1996, Modine announced that it plans to expand its
existing testing capabilities in Racine, Wisconsin. The Company
will invest approximately $32 million over two and one-half years
in this project, which will include a climatic vehicular wind
tunnel, a test vehicle preparation site, and incorporation of the
existing vehicular wind tunnel into the new structure.
The Company's facilities, on a geographic basis, are as follows:
Type of North Asia/
Facility America Europe Pacific Total
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Manufacturing 21 11 32
Distribution 3 1 4
Sales & Service
Centers/Offices 14 15 1 30
Joint Ventures 3 1 4
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Total 38 30 2 70
Total square footage of the 70 facilities is approximately
7,327,000 square feet.
The Company currently uses its facilities for the purposes as
noted above.
The Company's facilities, in general, are well maintained and
conform to the sales, distribution, or manufacturing operations
for which they are being used, and their productive capacity is,
from time to time, adjusted and expanded as necessitated by
product market considerations and customer growth.
ITEM 3. LEGAL PROCEEDINGS.
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In the normal course of business, the Company and its
subsidiaries are named as defendants in various lawsuits and
enforcement proceedings by private parties, the Occupational
Safety and Health Administration, the Environmental Protection
Agency, other governmental agencies, and others in which claims,
such as personal injury, property damage, or antitrust and trade
regulation issues, are asserted against the Company. While the
outcome of these proceedings is uncertain, in the opinion of the
Company's management and counsel, any liabilities that may result
from such proceedings are not reasonably likely to have a
material effect on the Company's liquidity, financial condition
or results of operations. Many of the pending damage claims are
covered by insurance and, in addition, the Company from time to
time establishes reserves for uninsured liabilities.
The Mitsubishi and Showa Litigation
-----------------------------------
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.
Other previously reported legal proceedings have been settled or
the issues resolved so as to not merit further reporting.
Under the rules of the Securities and Exchange Commission,
certain environmental proceedings are not deemed to be ordinary
or routine proceedings incidental to the Company's business and
are required to be reported in the Company's annual and/or
quarterly reports. The Company is not currently a party to any
such proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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Omitted as not applicable.
PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
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STOCKHOLDER MATTERS.
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The Company's Common Stock is quoted on the National Association
of Securities Dealers' Automated Quotation system ("NASDAQ") as a
National Market issue. The Company's trading symbol is "MODI."
The table below shows the range of high and low bid information
for the Company's Common Stock for fiscal years 1996-97 and
1995-96. As of April 1, 1997, shareholders of record numbered
approximately 6,157; it is estimated that beneficial owners
numbered at least 13,000.
1996-97 1995-96
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Quarter High Low Dividends High Low Dividends
First $29.75 $24.50 $.17 $39.75 $31.50 $.15
Second 28.00 25.00 .17 40.50 28.75 .15
Third 27.25 23.75 .17 32.00 24.00 .15
Fourth 29.75 24.50 .17 26.50 22.50 .15
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TOTAL $.68 $.60
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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, $145,950,000 was
available for these purposes at March 31, 1997. (However, these
restricted payments may not exceed $30,000,000 in any fiscal year.)
In October 1986, the Company adopted a shareholder rights plan and
issued one right for each share of common stock. The rights are not
currently exercisable but will become exercisable 10 days after a
shareholder has acquired 20 percent or more, or commenced a tender or
exchange offer for 30 percent or more, of the Company's common stock.
Each right will initially entitle the holder to purchase a unit of 1/100
Preferred Series A Participating Stock. During fiscal 1996-1997, the
Company amended the Plan increasing the price from $21.25 to $95.00 per
unit. 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 shareholder 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. On
January 18, 1995, the Board of Directors of the Company authorized an
amendment to the Rights Agreement by extending the final expiration date
of the Rights from October 27, 1996 to October 27, 2006. Accordingly,
the Rights expire on October 27, 2006, unless previously redeemed.
ITEM 6. SELECTED FINANCIAL DATA.
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Fiscal Year ended March 31
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1997 1996 1995 1994 1993
Sales (in
thousands) $999,046 $990,493 $913,010 $669,553 $570,839
Net earnings
(in thousands) 63,763 61,399 68,442 43,990*** 19,987**
Total assets
(in thousands) 694,955 671,836 590,187 509,981 405,187
Long-term debt
(in thousands) 85,197 87,809 62,220 77,646 52,350
Dividends per share* .68 .60 .52 .46 .42
Net earnings per
share* 2.10 2.02 2.24 1.44*** .66**
* Adjusted for stock splits and stock dividends.
** Includes recognition of an accounting change from the
adoption of FAS 106, resulting in a one-time after-tax
expense of $13,700,000, or $.46 per share.
***Includes recognition of an accounting change from the
adoption of FAS 109, resulting in a one-time after-tax
benefit of $899,000, or $.03 per share.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------ -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS.
-----------------------------------
Certain information required hereunder is incorporated by
reference from the Company's 1996-97 Annual Report to
Shareholders, pages 4, 7, 8, 11, 12, 13, 14, 15, 16 and 18,
attached as Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------ -------------------------------------------
The report of Coopers & Lybrand L.L.P. dated May 1, 1997, the
Consolidated Statements of Earnings, and the related Consolidated
Balance Sheets, Cash Flows, Shareholders' Investment, and Notes
to Consolidated Financial Statements, appearing on pages 15, 17,
19, 20, and 21-29 of the Company's 1996-97 Annual Report to
Shareholders are incorporated herein by reference. With the
exception of the aforementioned information, no other data
appearing in the 1996-97 Annual Report to Shareholders is deemed
to be filed as part of this Annual Report on Form 10-K.
Individual financial statements of the Registrant are omitted
because the Registrant is primarily an operating company, and the
subsidiaries included in the consolidated financial statements
are wholly-owned.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ------ ------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE.
-----------------------------------
There were no disagreements on accounting or financial
disclosures between the Company and its auditors.
PART III
--------
ITEMS 10 and 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE
- --------------- ---------------------------------------
REGISTRANT; EXECUTIVE COMPENSATION.
----------------------------------
The information about directors and executive officers and
executive compensation on pages 2 - 4 and pages 8, 9, 12, and 13,
of the Company's definitive Proxy Statement dated June 6, 1997
under the headings "Election of Directors", "Nominees to be
Elected," "Directors Continuing in Service," and "Executive
Compensation" attached to this report is incorporated herein by
reference, but excluding the Officer Nomination and Compensation
Committee Report on Executive Compensation and the Performance
Graph on pages 10 - 12.
Executive Officers of Registrant
Officer
Name Age Position Since
- ---- --- -------- -------
R. T. Savage 58 Chairman and Chief Executive 1981
Officer
D. R. Johnson 55 President and Chief Operating 1988
Officer
W. E. Pavlick 63 Senior Vice President, General
Counsel and Secretary 1979
V. S. Frangopoulos 61 Group Vice President, Off-Highway 1981
Products
M. G. Baker 57 Group Vice President, Distributed 1987
Products
L. D. Howard 53 Group Vice President, Europe 1991
D. B. Rayburn 49 Group Vice President, Highway 1991
Products
J. H. Firestone 59 Vice President, Quality & 1990
Environment
J. J. Hankey 47 Vice President and General Manager,
Commercial Products Division 1992
R. L. Hetrick 55 Vice President, Human Resources 1989
R. W. Possehl 52 Vice President, Administration 1985
A. D. Reid 55 Vice President, Finance and Chief
Financial Officer 1985
A. C. De Vuono 48 Vice President, Technical Services 1996
R. S. Bullmore 47 Corporate Controller 1983
R. M. Gunnerson 48 Treasurer 1977
D. R. Zakos 43 Associate General Counsel and
Assistant Secretary 1985
There are no family relationships among the executive officers
and directors. All of the above officers have been employed by
Modine in various capacities during the last five years, except
A. C. DeVuono. Mr. DeVuono joined Modine on March 4, 1996, as
Director, Technical Services. He was promoted to Vice President
Technical Services in October, 1996. Before joining Modine, he
was a staff scientist at the Lawrence Berkeley National
Laboratory of the University of California. Prior to that, he
spent 10 years with Battelle Memorial Institute in Columbus,
Ohio, as a principal research scientist, and also has previous
affiliations with the teaching faculties of Ohio State University
and the University of Illinois. There are no arrangements or
understandings between any of the above officers and any other
person pursuant to which he was elected an officer of Modine.
Officers are elected annually at the first meeting of the Board
of Directors after the Annual Meeting of Shareholders. Mr.
Savage and Mr. Johnson have employment agreements with the
Company.
As of February 26, 1997, the Company entered into change-in-
control agreements (the "Change-in-Control Agreements") with
other key employees (except with Messrs. Savage and Johnson).
The Change-in-Control Agreements provide a severance payment to
the executive if the Company terminates the executive's
employment or the executive voluntarily terminates the
executive's employment within ninety days after a "Pre-Condition"
has occurred (as that term is defined in the Change-in-Control
Agreements). Each executive officer (except Messrs. Savage and
Johnson) is eligible to receive twenty-four months' annual base
compensation and a bonus amount as defined in the Change-in-
Control Agreements, plus applicable benefits and credited service
for pension purposes for the twenty-four month period.
The Company's stock option and stock award plans contain certain
provisions relating to change-in-control or other specified
transactions that may, if authorized by the Officer Nomination
and Compensation Committee of the board, accelerate or otherwise
release shares granted or awarded under those plans.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
- ------- ---------------------------------------------------
MANAGEMENT.
----------
The information relating to stock ownership on pages 5 - 7 of the
Company's definitive Proxy Statement dated June 6, 1997 under the
headings "Principal Shareholders and Share Ownership of Directors
and Executive Officers, "Principal Shareholders," and "Securities
Owned by Management" attached to this report is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- ------- ----------------------------------------------
The information required by this item is incorporated by
reference from the Company's definitive Proxy Statement dated
June 6, 1997 on page 15 under the heading "Transactions" attached
to this report.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
- ------- -------------------------------------------------------
FORM 8-K.
--------
(a) The following documents are filed as part of this Report:
Page in
Annual Report*
-------------
(1) Financial Statements:
Consolidated Statements of Earnings for the
years ended March 31, 1997, 1996, and 1995 15
Page in
Annual Report*
-------------
Consolidated Balance Sheets at March 31, 1997
and 1996 17
Consolidated Statements of Cash Flows for the
years ended March 31, 1997, 1996, and 1995 19
Consolidated Statements of Shareholders'
Investment for the years ended March 31,
1997, 1996, and 1995 20
Notes to Consolidated Financial Statements 21 - 28
Independent Auditors' Report 29
* Incorporated by reference from the indicated
pages of the 1996-97 Annual Report to Shareholders
Page in
Form 10-K
---------
(2) Financial Statement Schedules:
Report of Independent Accountants on
Financial Statement Schedules for the
three years ended March 31, 1997 28
Schedule II - Valuation and Qualifying
Accounts for the years ended March 31,
1997, 1996 and 1995 201
(3) Consent of Independent Accountants 182
(4) Exhibit Index 19
(b) All other schedules have been omitted as they are not
applicable, not required, or because the required information is
included in the financial statements.
The following exhibits are attached for information only unless
specifically incorporated by reference in this Report:
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
2 Not applicable.
3(a) Restated Articles of Incorporation (as
amended) (filed by reference to the
Registrant's Annual Report on Form 10-K
for the fiscal year ended March 31, 1994).
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
3(b) Restated By-Laws (as amended) (filed by
reference to the Registrant's Quarterly
Report on Form 10-Q dated September 26, 1996).
4(a) Specimen Uniform Denomination Stock
Certificate of the Registrant (filed by
reference to the Registrant's Annual
Report on Form 10-K for the fiscal year
ended March 31, 1993).
*4(b) Rights Agreement dated as of October 16,
1986 between the Registrant and First
Chicago Trust Company of New York (Rights
Agent) 29
4(b)(i) Rights Agreement Amendment No. 1 dated
as of January 18, 1995 between the
Registrant and First Chicago Trust
Company of New York (Rights Agent)
(filed by reference to the exhibit
contained within the Registrant's
Current Report on Form 8-K dated
January 13, 1995.)
4(b)(ii) Rights Agreement Amendment No. 2 dated
as of January 18, 1995 between the
Registrant and First Chicago Trust
Company of New York (Rights Agent)
(filed by reference to the exhibit
contained within the Registrant's
Current Report on Form 8-K dated
January 13, 1995.)
4(b)(iii) Rights Agreement Amendment No. 3
dated as of October 15, 1996, between
the Registrant and First Chicago Trust
Company of New York (Rights Agent)
(filed by reference to the exhibit
contained within the Registrant's
Quarterly Report on Form 10-Q dated
December 26, 1996.)
Note: The amount of long-term debt authorized
----
under any instrument defining the rights of
holders of long-term debt of the Registrant,
other than as noted above, does not exceed ten
percent of the total assets of the Registrant
and its subsidiaries on a consolidated basis.
Therefore, no such instruments are required to
be filed as exhibits to this Form 10-K. The
Registrant agrees to furnish copies of such
instruments to the Commission upon request.
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
9 Not applicable.
*10(a) Director Emeritus Retirement Plan
(effective April 1, 1992). 83
10(b) 1978 Incentive Stock Plan (as amended)
(filed by reference to the Registrant's
Annual Report on Form 10-K for the
fiscal year ended March 31, 1993).
*10(c) Employment agreement between the Registrant
and R. T. Savage. 98
10(c)(i) Employment agreement between the Registrant
and D. R. Johnson (filed by reference to
the Registrant's Quarterly Report on Form
10-Q dated November 1, 1996).
*10(d) 1985 Incentive Stock Plan (as amended). 123
10(e) 1985 Stock Option Plan for Non-Employee
Directors (as amended) (filed by reference
to the Registrant's Annual Report on Form
10-K for the fiscal year ended March 31,
1994).
10(f) Pension and Disability Plan For Salaried
Employees of Modine Manufacturing Company
(as amended) (filed by reference to the
Registrant's Annual Report on Form 10-K
for the fiscal year ended March 31, 1994).
10(g) Executive Supplemental Retirement Plan (as
amended) (filed by reference to the
Registrant's Annual Report on Form 10-K
for the fiscal year ended March 31, 1995).
10(h) Modine Manufacturing Company Executive
Supplemental Stock Plan (as amended)
(filed by reference to the Registrant's
Annual Report on Form 10-K for the
fiscal year ended March 31, 1994).
*10(i) Director Emeritus Agreement between the
Registrant and Bernard H. Regenburg. 128
10(j) 1992 Stock Award Plan [a part of the
1985 Incentive Stock Plan].
Note: The 1992 Plan is not materially
----
different from the 1987 Stock Award Plan
filed with the Registrant's Annual Report
on Form 10-K for the fiscal year 1993.
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
10(k) 1993 Stock Award Plan [a part of the 1985
Incentive Stock Plan].
Note: The 1993 Plan is not materially
----
different from the 1987 Stock Award Plan
filed with the Registrant's Annual Report
on Form 10-K for the fiscal year 1993.
10(l) 1994 Stock Award Plan [a part of the
1985 Incentive Stock Plan].
Note: The 1994 Plan is not materially
----
different from the 1987 Stock Award Plan
filed with the Registrant's Annual Report
on Form 10-K for the fiscal year 1993.
*10(m) 1994 Incentive Compensation Plan
(as amended). 130
*10(n) 1994 Stock Option Plan for Non-
Employee Directors (as amended). 138
10(o) 1995 Stock Award Plan [a part of the
1994 Incentive Compensation Plan]
(filed by reference to the exhibit
contained within the Registrant's
Annual Report on Form 10-K for the
fiscal year 1995).
10(p) 1995 Stock Option Agreements (incentive
and non-qualified) [a part of the 1994
Incentive Compensation Plan] (filed by
reference to the exhibit contained
within the Registrant's Annual Report
on Form 10-K for the fiscal year 1995).
10(q) 1995 Stock Option Agreement [a part of
the 1994 Stock Option Plan for Non-Employee
Directors] (filed by reference to the
exhibit contained within the Registrant's
Annual Report on Form 10-K for the fiscal
year 1995).
10(r) 1996 Stock Award Plan [a part of the 1994
Incentive Compensation Plan] (filed by
reference to the exhibit contained within
the Registrant's Annual Report on Form 10-K
for the fiscal year 1996).
10(s) 1996 Stock Option Agreements (incentive
and non-qualified) [a part of the 1994
Incentive Compensation Plan] (filed by
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
reference to the exhibit contained within
the Registrant's Annual Report on Form 10-K
for the fiscal year 1996).
10(t) 1996 Stock Option Agreement [a part of the
1994 Stock Option Plan for Non-Employee
Directors].
Note: The 1996 Stock Option Agreement is
----
not materially different from the 1995 Non-
Employee Directors Stock Option Agreement
filed with the Registrant's Annual Report
on Form 10-K for the fiscal year 1995.
10(u) 1997 Stock Award Plan [a part of the
1994 Incentive Compensation Plan].
Note: The 1997 Stock Award Plan is not
----
materially different from the 1996 Stock
Award Plan filed with the Registrant's
Annual Report on Form 10-K for the
fiscal year 1996.
10(v) 1997 Stock Option Agreements (incentive
and non-qualified) [a part of the 1994
Incentive Compensation Plan].
Note: The 1997 Stock Option Agreements
----
are not materially different from the
1996 Stock Option Agreements filed with
the Registrant's Annual Report on Form
10-K for the fiscal year 1996.
10(w) 1997 Stock Option Agreement [a part of
the 1994 Stock Option Plan for Non-Employee
Directors].
Note: The 1997 Stock Option Agreement is
----
not materially different from the 1995
Non-Employee Directors Stock Option
Agreement filed with the Registrant's
Annual Report or Form 10-K for the
fiscal year 1995.
*11 Statement re: computation of per
share earnings. 143
12 Not applicable.
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
*13 1996-97 Annual Report to Shareholders.
Except for the portions of the Report
expressly incorporated by reference,
the Report is furnished solely for the
information of the Commission and is
not deemed "filed" as a part hereof. 144
16 Not applicable.
18 Not applicable.
*21 List of subsidiaries of the
Registrant. 180
22 Not applicable.
*23 Consent of independent accountants. 182
24 Not applicable.
*27 Financial Data Schedule 183
28 Not applicable.
*99 Definitive Proxy Statement of the
Registrant dated June 6, 1997. Except
for the portions of the Proxy Statement
expressly incorporated by reference, the
Proxy Statement is furnished solely for
the information of the Commission and is
not deemed "filed" as a part hereof. 184
None Appendix (filed pursuant to Item
304 of Regulation S-T). 202
Note: All Exhibits filed herewith are current
----
to the end of the reporting period of the Form
10-K (unless otherwise noted).
* Filed herewith.
Current Reports on Form 8-K:
- ---------------------------
A Current Report on Form 8-K, dated June 6, 1997, was filed by
the Company. This report, filed in connection with the Company's
mailing of its Annual Report to Shareholders and its sales
forecast for the upcoming year contained therein, includes as
exhibits (1) the news release containing the sales forecast and
(2) a statement of the important factors and assumptions
regarding forward-looking statements.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Modine Manufacturing Company
Date: June 18, 1997 By: R. T. SAVAGE
-------------------------------
R. T. Savage, Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities indicated.
R. T. SAVAGE June 18, 1997
- ------------------------------------ -------------
R. T. Savage, Chairman, Chief Date
Executive Officer and Director
D. R. JOHNSON June 18, 1997
- ------------------------------------ -------------
D. R. Johnson, President and Date
Chief Operating Officer
A. D. REID June 18, 1997
- ------------------------------------ -------------
A. D. Reid, Vice President, Finance Date
and Chief Financial Officer
W. E. PAVLICK June 18, 1997
- ------------------------------------- -------------
W. E. Pavlick, Senior Vice President, Date
General Counsel and Secretary
R. J. DOYLE June 18, 1997
- ------------------------------------- -------------
R. J. Doyle, Director Date
T. J. GUENDEL June 18, 1997
- ------------------------------------- -------------
T. J. Guendel, Director Date
F. W. JONES June 18, 1997
- ------------------------------------- -------------
F. W. Jones, Director Date
D. J. KUESTER June 18, 1997
- ------------------------------------- -------------
D. J. Kuester, Director Date
V. L. MARTIN June 18, 1997
- ------------------------------------- -------------
V. L. Martin, Director Date
G. L. NEALE June 18, 1997
- ------------------------------------- -------------
G. L. Neale, Director Date
S. W. TISDALE June 18, 1997
- ------------------------------------- -------------
S. W. Tisdale, Director Date
M. T. YONKER June 18, 1997
- ------------------------------------- -------------
M. T. Yonker, Director Date
Coopers
& Lybrand L.L.P.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Modine Manufacturing Company
Our report on the consolidated financial statements of Modine
Manufacturing Company and Subsidiaries has been incorporated by
reference in this Form 10-K from the 1997 annual report to
shareholders of Modine Manufacturing Company and Subsidiaries on
page 29 herein. In connection with our audits of such financial
statements, we have also audited the related financial statement
schedules listed in the index on page 19 of this Form 10-K.
In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND LLP
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
May 1, 1997