SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 26, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-1373
MODINE MANUFACTURING COMPANY
(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 53403-2552
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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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NOT APPLICABLE
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(Former name or former address, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at August 5, 1999
------------------------------- -----------------------------
Common Stock, $0.625 Par Value 29,525,980
MODINE MANUFACTURING COMPANY
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
June 26 and March 31, 1999 3
Consolidated Statements of Earnings -
For the Three Months Ended
June 26, 1999 and 1998 4
Consolidated Condensed Statements of
Cash Flows - For the Three Months
Ended June 26, 1999 and 1998 5
Notes to Consolidated Condensed
Financial Statements 6-9
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 10-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 18
MODINE MANUFACTURING COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands, except per-share amounts)
June 26, 1999 and March 31, 1999
(Unaudited)
June 26, 1999 March 31, 1999
ASSETS
Current assets:
Cash and cash equivalents $ 41,919 $ 49,163
Trade receivables, less allowance for
doubtful accounts of $3,868 and $3,749 186,765 182,910
Inventories 187,900 178,949
Deferred income taxes and other current
assets 42,098 42,074
-------- --------
Total current assets 458,682 453,096
-------- --------
Noncurrent assets:
Property, plant, and equipment--net 309,518 303,764
Investment in affiliates 27,932 24,327
Goodwill and other intangible assets--net 77,924 80,411
Deferred charges and other noncurrent
assets 55,396 54,141
-------- --------
Total noncurrent assets 470,770 462,643
-------- --------
Total assets $929,452 $915,739
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Short-term debt $ 71,601 $ 68,998
Long-term debt -- current portion 4,261 4,766
Accounts payable 89,956 97,443
Accrued compensation and employee benefits 50,207 48,869
Income taxes 18,115 9,694
Accrued expenses and other current
liabilities 25,914 26,825
-------- --------
Total current liabilities 260,054 256,595
-------- --------
Noncurrent liabilities:
Long-term debt 141,517 143,838
Deferred income taxes 20,661 20,533
Other noncurrent liabilities 41,552 41,554
-------- --------
Total noncurrent liabilities 203,730 205,925
-------- --------
Total liabilities 463,784 462,520
-------- --------
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 13,528 13,543
Retained earnings 481,420 469,142
Accumulated other comprehensive loss (18,896) (18,341)
Treasury stock at cost: 796 and 817
shares, respectively (27,631) (28,198)
Restricted stock - unamortized value (1,717) (1,891)
-------- --------
Total shareholders' investment 465,668 453,219
-------- --------
Total liabilities and shareholders'
investment $929,452 $915,739
======== ========
<FN>
(See accompanying notes to consolidated financial statements.)
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
For the three months ended June 26, 1999 and 1998
(In thousands, except per-share amounts)
(Unaudited)
Three months ended June 26
--------------------------
1999 1998
-------- --------
Net sales $283,847 $273,104
Cost of sales 201,882 194,646
-------- --------
Gross profit 81,965 78,458
Selling, general, and administrative expenses 51,744 45,612
-------- --------
Income from operations 30,221 32,846
Interest expense (1,593) (1,046)
Other income --net 2,674 856
-------- --------
Earnings before income taxes 31,302 32,656
Provision for income taxes 11,793 12,576
-------- --------
Net earnings $ 19,509 $ 20,080
======== ========
Net earnings per share of common stock
- Basic $0.66 $0.68
- Assuming dilution $0.65 $0.67
======== ========
Dividends per share $0.23 $0.21
======== ========
Weighted average shares - basic 29,529 29,644
Weighted average shares - assuming dilution 29,849 30,185
======== ========
<FN>
(See accompanying notes to consolidated financial statements.)
MODINE MANUFACTURING COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
For the Three Months Ended June 26, 1999 and 1998
(Unaudited)
Three months ended June 26
--------------------------
1999 1998
-------- --------
Net cash provided by operating activities $16,431 $20,393
Cash flows from investing activities:
Expenditures for property, plant, and
equipment (22,661) (24,117)
Investment in affiliates (600) -
Proceeds from dispositions of assets 27 14
Other -- net (290) (140)
------- -------
Net cash (used for) investing activities (23,524) (24,243)
Cash flows from financing activities:
Increase in short-term debt -- net 3,587 1,694
Additions to long-term debt 5,685 8,166
Reductions of long-term debt (2,710) (1,944)
Issuance of common stock, including
treasury stock 1,063 1,323
Purchase of treasury stock (984) (4,132)
Cash dividends paid (6,792) (6,228)
------- -------
Net cash (used for) financing activities (151) (1,121)
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Net (decrease) in cash and cash equivalents (7,244) (4,971)
Cash and cash equivalents at beginning of
period 49,163 36,410
------- -------
Cash and cash equivalents at end of period $41,919 $31,439
======= =======
<FN>
(See accompanying notes to consolidated financial statements.)
MODINE MANUFACTURING COMPANY
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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1. The amounts of raw material, work in process and finished
goods cannot be determined exactly except by physical
inventories. Based on partial interim physical inventories
and percentage relationships at the time of complete
physical inventories, Management believes the amounts shown
below are reasonable estimates of raw material, work in
process and finished goods.
(In thousands)
------------------------------------------------------------
June 26, 1999 March 31, 1999
------------------------------------------------------------
Raw materials $ 41,655 $ 40,529
Work in process 39,291 41,863
Finished goods 106,954 96,557
-------- --------
Total inventories $187,900 $178,949
======== ========
2. Property, plant, and equipment is composed of:
(In thousands)
------------------------------------------------------------
June 26, 1999 March 31, 1999
------------------------------------------------------------
Gross, property,
plant & equipment $606,744 $594,646
Less accumulated
depreciation (297,226) (290,882)
-------- --------
Net property,
plant & equipment $309,518 $303,764
======== ========
3. Intangible assets include:
(In thousands)
------------------------------------------------------------
June 26, 1999 March 31, 1999
------------------------------------------------------------
Goodwill $91,509 $92,548
Patents and product
technology 8,389 8,389
Other intangibles 3,308 3,326
Less accumulated
amortization (25,282) (23,852)
------- -------
Net intangible assets $77,924 $80,411
======= =======
4. Segment data:
(In thousands)
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Sales Operating income
Quarter ended June 26, 1999 1998 1999 1998
-------------------------------------------------------------------------
Sales and operating income:
Original Equipment $121,073 $131,301 $ 21,109 $ 20,236
Distributed Products 84,591 70,272 7,656 9,190
European Operations 88,068 79,860 8,919 10,086
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Segment sales and
operating income 293,732 281,433 37,684 39,512
Corporate & administrative
expenses - - (7,480) (6,674)
Eliminations (9,885) (8,329) 17 8
Other items not allocated
to segments - - 1,081 (190)
------------------------------------------------------------------------
Total net sales and
income before taxes $283,847 $273,104 $31,302 $32,656
------------------------------------------------------------------------
June 26, March 31,
Period ending 1999 1999
------------------------------------------------------------------------
Assets:
Original Equipment $ 153,267 $ 157,466
Distributed Products 174,838 158,386
European Operations 235,925 237,036
Corporate & Administrative 390,060 377,592
Eliminations (24,638) (14,741)
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Total assets $ 929,452 $ 915,739
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5. Recent developments concerning legal proceedings reported in
the Modine Manufacturing Company ("Modine or the Company")
Form 10-K report for the year ended March 31, 1999, are
updated in Part II, Other Information, Item 1, Legal
Proceedings. While the outcome of these proceedings is
uncertain, in the opinion of Modine's management, any
liabilities that may result from such proceedings are not
reasonably likely to have a material effect on Modine's
liquidity, financial condition, or results of operations.
6. The computational components of basic and diluted earnings
per share are as follows:
(In thousands, except per-share amounts)
-----------------------------------------------------------------------
Three months ended June 26
1999 1998
Net earnings per share of common stock:
--------------------------------------
- basic $0.66 $0.68
- assuming dilution $0.65 $0.67
Numerator:
---------
Income available to common shareholders $19,509 $20,080
Denominator:
-----------
Weighted average shares outstanding - basic 29,529 29,644
Effect of dilutive securities - options* 320 541
------- -------
Weighted average shares outstanding -
assuming dilution 29,849 30,185
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* There were outstanding options to purchase common stock
at prices that exceeded the average market price for the
income statement period as follows:
1999 1998
------ ------
Average market price per share $30.45 $34.90
Number of shares 690 None
7. Comprehensive earnings, which represents net earnings
adjusted by the change in foreign-currency translation and
minimum pension liability recorded in shareholders' equity for
the 3 months ended June 26, 1999 and 1998, were $18,954 and
$20,470, respectively.
8. In June 1999, the Financial Accounting Standards Board
issued SFAS No.137 deferring the effective date of SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities."
The statement is now effective for fiscal years beginning after
June 15, 2000. Modine will adopt SFAS No. 133 beginning April 1,
2001. Adoption of this statement is not expected to have a
material effect on Modine's financial position or results of
operations.
9. The accompanying consolidated financial statements, which
have not been audited by independent certified public
accountants, were prepared in conformity with generally accepted
accounting principles and such principles were applied on a basis
consistent with the preparation of the consolidated financial
statements in Modine's March 31, 1999 Annual Report filed with
the Securities and Exchange Commission. The financial
information furnished includes all normal recurring accrual
adjustments that are, in the opinion of Management, necessary for
a fair statement of results for the interim period. Results for
the first three months of fiscal 2000 are not necessarily
indicative of the results to be expected for the full year.
10. Certain notes and other information have been condensed or
omitted from these interim financial statements which consolidate
both domestic and foreign wholly-owned subsidiaries. Therefore,
such statements should be read in conjunction with the
consolidated financial statements and related notes contained in
Modine's 1999 Annual Report to shareholders which statements and
notes were incorporated by reference in Modine's Form 10-K Report
for the year ended March 31, 1999.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
---------------------------------------------
The following discussion and analysis provides information that
Management believes is relevant to an assessment and
understanding of Modine's consolidated results of operations and
financial condition. This discussion should be read in conjunction
with the consolidated financial statements and notes thereto.
RESULTS OF OPERATIONS
- ---------------------
Comparison of the First Quarter of 1999-2000 with the First
- -----------------------------------------------------------
Quarter of 1998-99
- ------------------
Record first quarter net sales of $283.8 million were a 4%
improvement over the $273.1 million reported in the first quarter
of last year.
Diversification of markets again allowed Modine to increase total
revenues despite a major slump in industry sales to the off-
highway market in the original equipment and European operations
segments. Modine's shipments to both the agricultural - and
construction-equipment customers had the greatest quarter-over-
quarter decrease. Revenues from the automotive aftermarket in
the distributed products segment had the largest quarterly
growth, due mainly to the acquisition of Core Holdings. Sales to
OEM customers in the medium -and heavy-truck market recorded the
second highest growth, most of which came from the original
equipment segment in North America. Overall revenues from the
European operations segment grew 10% despite a small negative
currency-translation effect from a stronger U.S. dollar. Sales
to the automotive market in Europe remained strong.
Gross margin, as a percentage of sales, was 28.9%. This was a
slight improvement over the 28.7% earned in the first quarter of
the previous year. Improvements in portions of the original
equipment segment (truck and automotive markets) offset lower
margins earned in the distributed products segment (aftermarket),
original equipment segment (construction and agricultural
markets), and European operations segment.
Selling, general and administrative expenses of $51.7 million
increased 13.4% over last year's first quarter while increasing
to 18.2% from 16.7% as a percentage of sales. A significant
factor contributing to the increase was the inclusion of the Core
Holdings acquisition (October 1998) business activity in the
current year's quarter. Without the effect of the Core
activity, selling, general and administrative expenses would have
grown by only 2.0% in absolute dollars.
Average outstanding debt levels increased $94.0 million, or
approximately 79%, from the same quarter a year ago while
interest expense increased 52%, or $0.5 million. Prior year
acquisition activity and capital expenditures to build
infrastructure were the main contributors to the increase in
borrowing levels. Interest expense grew at a slower rate, in
part, due to higher capitalized interest associated with capital
projects. Net non-operating income grew by $1.8 million from the
same quarter of the previous year. Additional royalty income
from an expanding number of worldwide licensing agreements for
Modine's proprietary, PF technology was the main factor
contributing to the increase.
Also contributing to the growth in non-operating earnings were
higher earnings from unconsolidated affiliates located in France
and Brazil.
The provision for income taxes in the current quarter was $11.8
million (a 37.7% effective rate) compared to last years' first
quarter expense of $12.6 million (or 38.5% effective rate). The
favorable rate decline was mainly due to the differential in
foreign tax rates.
Net earnings for the quarter of $19.5 million were the second highest
in our history at $0.66 basic, and $0.65 diluted earnings per share
compared to last year's first quarter net earnings of $20.1 million,
or $0.68 basic and $0.67 diluted. Return on shareholders' investment
was 17 percent during the three-month period and, again, was near the
middle of our target range of 15-20 percent.
Outlook for the Remainder of the Year
- -------------------------------------
As Management looks out over the balance of the fiscal year, with the
continued downturn in the worldwide agricultural and construction
markets and milder weather patterns that impact our aftermarket
business, and the accompanying price pressure as a result of seasonal
inventory builds, we expect sales to increase about four percent and
earnings to be flat on a year-over-year basis. This forecast assumes
no acquisitions. In fiscal 1999-2000, we intend to continue laying
the foundation for faster growth that we expect to begin next year.
We are confident in our ability to grow both sales and earnings more
rapidly in the future. These forward-looking statements regarding
sales and earnings are subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected.
See "Important Factors and Assumptions Regarding Forward-Looking
Statements" attached hereto as Exhibit 99 and incorporated herein by
reference.
FINANCIAL CONDITION
- -------------------
Comparison between June 26, 1999 and March 31, 1999
- ---------------------------------------------------
Current assets
- --------------
Cash and cash equivalents of $41.9 million decreased $7.2 million
from the March 31, 1999 balance. Cash provided by operating
activities and increased borrowing during the quarter were more
than offset by capital expenditures and the quarterly dividend
payment.
Trade receivables of $186.8 million were up $3.9 million (2%)
over year-end primarily due to increased sales volumes (up 1%
over the previous quarter), and normal seasonal promotions.
Inventory levels grew $9.0 million to $187.9 million compared to
year-end. This increase was principally in finished goods levels
in the Distributed Products segment. This can be attributed to
normal seasonal activity, which includes the Core Holdings
acquisition made last October.
The current ratio of 1.8 to 1 with net working capital of $198.6
million remains virtually unchanged from March 1999 levels.
Higher accounts receivables, inventory, and lower accounts
payable were principally offset by higher income taxes payable
and lower cash and cash equivalents at the end of the period.
Noncurrent assets
- -----------------
Net property, plant and equipment of $309.5 million grew $5.8 million
over year-end. Capital expenditures during the quarter exceeded
depreciation, retirements, and foreign currency translation. Continuing
facility construction and expansion costs in the Netherlands, Italy and
Germany, ongoing costs associated with the implementation of SAP
financial systems in North America, construction of a just-in-time
assembly plant in Toledo, Ohio for a DaimlerChrysler program, and
costs associated with equipping the new Technical Center in Racine
were among the items contributing to the increase shown. Outstanding
commitments for capital expenditures were $32.2 million at June 26,
1999. Approximately two-thirds of the commitments relate to Modine's
European operations. The outstanding commitments will be financed
through a combination of funds generated from continuing operations
and third party borrowing as required.
Investments in unconsolidated affiliates of $27.9 million was
$3.6 million higher than year-end primarily a result of favorable
Brazilian exchange rates in connection with our investment in
Radiadores Visconde, Ltda.
Intangible assets decreased by $2.5 million. Amortization and foreign
currency translations were the main items contributing to the change.
Deferred charges and other noncurrent assets increased $1.3 million.
The net increase is primarily the result of continuing recognition of
the surplus in Modine's overfunded pension plans.
Current Liabilities
- -------------------
Accounts payable and other current liabilities of $166.1 million
were $7.1 million lower than March 1999. Normal timing
differences in the level of operating activity were responsible
for the decrease. Accrued income taxes increased $8.4 million
from timing differences in making estimated payments and certain
federal tax benefits.
Debt
- ----
Outstanding debt decreased by $0.2 million from the March 1999
balance of $217.6 million. Additional short-term borrowing of
$3.6 million and net long-term borrowing of $3.0 was more than
offset by foreign exchange rate impact of a stronger dollar.
Consolidated available lines of credit were unchanged during the
quarter. Domestically, Modine's multi-currency revolver is fully
utilized. Foreign unused lines of credit were $2.0 million. Total
debt as a percentage of shareholders' equity decreased from 48.0%
to 46.7%.
Shareholders' Investment
- ------------------------
Total shareholders' investment increased by $12.4 million to a
total of $465.7 million. The net increase resulted primarily
from net earnings of $19.5 million for the first three months.
Offsetting items included an unfavorable foreign currency
translation impact of $0.6 million during the quarter and
dividends paid to shareholders of $6.8 million.
Year 2000 Remediation Program
- -----------------------------
General: In response to the Year 2000 issue, the Company
-------
initiated a number of projects in early 1997 to identify, evaluate,
and implement changes to its existing computerized business systems.
Each of the projects followed a four-phase approach, which included
inventory, assessment, remediation or replacement, and system
integration testing. All of the Year 2000 efforts were carried on
globally, and plans, executive sponsorship and funding were put in
place to address the effort. A number of the Company's current
systems were already Year 2000 compliant and where third party
software was being utilized, upgrades to the vendor's Year 2000
compliant versions have been completed or are in process. In
addition to business systems, additional programs to ensure supplier
continuity and process capability were initiated. All of the above
projects were funded through normal operating cash flow. The total
cost associated with the required modifications was not material to
the Company's consolidated results of operations and financial position.
Business Systems: In North America, the conversion and
----------------
remediation effort of the Company's internally developed systems was
addressed by an external party. The systems conversion and testing of
all critical systems was completed by May 8, 1999, and was conducted by
Modine internal staff. Computer hardware and LAN infrastructure were
also converted to ensure compliance in its business system and desktop
operations. The year 2000 costs for North America were $5.7 million.
Other accomplishments in North America included the conversion of
business systems in Mexico and Canada to achieve year 2000 compliance
through a controlled series of system migration and software upgrades.
Outside North America, Year 2000 compliance was achieved by
replacing current applications with SAP, a Year 2000 compliant
package of integrated manufacturing and financial software. Also
included were hardware migrations, LAN e-mail and desktop upgrades
and replacements. The Company's Year 2000 European cost for
remediation is approximately $4.6 million, of which 96% has been
expended. Remediation of critical systems has been completed
successfully at all sites. One non-critical project remains and
is scheduled for a third calendar quarter 1999 completion.
Suppliers & Customers: With respect to suppliers, the
---------------------
Company has surveyed its material and service suppliers to
determine whether they are actively involved in Year 2000
remediation projects that will ensure that services to Modine will
continue without interruption to any of Modine's business processes.
The Company has since developed a second, more detailed survey that
has been resent to our suppliers to gain better insight into their
actual Year 2000 status. To date, 91% of the surveys have been
returned. To validate our supplier responses, we also have
conducted a series of on-site supplier Y2K audits. Those
suppliers not able to validate their Y2K readiness, have been
directed to retain an additional 30 days of inventory.
With our dependency on customers for sales and cash flow, Year
2000 interruptions in our customers' operations could result in
reduced sales, increased inventory or receivable levels and cash
flow reductions. While these events are possible, our customer
base is broad enough to minimize the effects of a single
occurrence.
Facilities & Embedded Systems: In addition, for non-IT
-----------------------------
areas, a major effort to assess Modine's production facilities to
include embedded systems is in process and is being conducted by a
third party consulting firm specializing in this type of activity.
The facilities evaluation was completed in the fourth calendar
quarter of 1998. Dependent upon formal risk assessments by
facility and corporate teams, recommended actions included
testing, repair, replacement, upgrading, and/or retirement of
specific systems or components. Modine completed its systems
remediation efforts of critical activities by the second quarter
of 1999. Cost for the inventory assessment was $300,000.
Remediation costs were $250,000.
Customer Audit: Modine has been asked and has participated
--------------
in independent and specific customer audits to ensure Y2K
compliance to our customer base. Modine has fared well in those
reviews and is actively involved in keeping the exchange of
information on going between Modine and its customer base.
Risks & Contingency Planning: The failure to correct a
----------------------------
material Year 2000 problem could result in an interruption of the
Company's business activities or operations. Modine's Year 2000
projects were designed and are being implemented to significantly
reduce that possibility. Despite the significant efforts to
address Year 2000 concerns, the Company could potentially
experience disruptions to some of its operations, including those
resulting from non-compliant systems used by its suppliers and
customers. To alleviate those concerns, Modine has developed and
implemented contingency plans in the critical areas of the
business. We have already developed operational and supplier
contingency plans for all our manufacturing and distribution
facilities and plan to continue refining our systems contingency
plans throughout 1999, wherever the risk warrants it.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In the normal course of business, Modine 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 Modine. While the
outcome of these proceedings is uncertain, in the opinion of
Modine's Management and counsel, any liabilities that may result
from such proceedings are not reasonably likely to have a
material effect on Modine's liquidity, financial condition or
results of operations. Many of the pending damage claims are
covered by insurance and, in addition, Modine 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 November 1991 lawsuit.
In August, 1997, the ITC issued an Order excluding from U.S.
import Showa condensers that infringe Modine Manufacturing
Company's parallel-flow patent. The ITC's Order covers
condensers, their parts, and certain products including them,
such as air-conditioning kits and systems. It directs the U.S.
Customs Service to exclude from importation into the United
States such products manufactured by Showa Aluminum Corporation
of Japan and Showa Aluminum Corporation of America. The decision
is based on a Modine U.S. patent covering condensers with tube
hydraulic diameters less than 0.04822 inches. The Showa
companies must certify to Customs officials that any condenser
items imported by them do not infringe Modine's parallel-flow
patent. The Showa companies must also file annual reports with
the ITC regarding their sales of Showa parallel-flow condensers
in the United States. In July, 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. In October of
1997, Modine was issued a Japanese patent covering parallel-flow
air-conditioning condensers having tube hydraulic diameters less
than 0.070 inches. In August of 1998, the Company filed a patent
infringement suit in Japan against Showa with respect to this
patent seeking an injunction and damages. Several patents have
been issued to Modine by the European Patent Office, one having
been rejected at the opposition level, which is being appealed.
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
The following are the results of voting by stockholders present or
represented at the Annual Meeting of Stockholders on July 21, 1999:
1. Election of Directors. The following were elected to
---------------------
serve as directors of the Company until 2002 (R. T. Savage until
2000) or until their successors are elected:
Votes For Votes Withheld
---------- --------------
Richard T. Savage 25,010,099 467,007
Vincent L. Martin 25,023,629 453,478
Marsha C. Williams 25,028,717 448,390
2. Re-Approval of the 1994 Incentive Compensation Plan.
---------------------------------------------------
The stockholders re-approved the Plan. There were 20,489,505
votes re-approving the Plan; 4,621,093 votes against; and 188,181
votes abstaining.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
--------
The following exhibits are included for information only unless
specifically incorporated by reference in this report:
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
3 Restated By-Laws (as amended) (filed
by reference to the Registrant's
Annual Report on Form 10-K for the
fiscal year ended March 31, 1999).
4(a) Rights Agreement dated as of October 16,
1986 between the Registrant and First
Chicago Trust Company of New York
(Rights Agent) (filed by reference
to the Registrant's Annual Report on
Form 10-K for the fiscal year ended
March 31, 1997).
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).
4(b)(iv) Rights Agreement Amendment No. 4 dated
as of November 10, 1997 between the
Registrant and Norwest Bank Minnesota,
N.A., (Rights Agent) (filed by
reference to the exhibit contained
within the Registrant's Quarterly Report
on Form 10-Q dated December 26, 1997).
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
Reference Number
per Item 601 of
Regulation S-K Page
- ---------------- ----
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. The Registrant
agrees to furnish copies of such
instruments to the Commission upon request.
10* Change in Control and Termination Agreement
dated as of May 20, 1999 between the
Registrant and D. R. Johnson, President
and Chief Executive Officer of the
Registrant. 19
Note: Mr. D. B. Rayburn, Executive Vice
----
President, Original Equipment, has a Change
of Control and Termination Agreement dated
as of May 20, 1999. This Agreement is not
materially different than the Agreement with
Mr. Johnson.
Note: Messrs. M. G. Baker, L. D. Howard, and
----
V. S. Frangopoulos (other named executive
officers of the Registrant) also have entered
into Change of Control and Termination
Agreements dated as of May 20, 1999. These
agreements are not materially different than
the Agreement with Mr. Johnson except in the
following respects: (a) 24-month Severance
Period; and (b) a 13th month "window" in which
the named executive officer can terminate and
receive severance.
27* Financial Data Schedule (electronic
transmission only).
99* Important Factors and Assumptions
Regarding Forwarding-Looking Statements. 34
*Filed herewith.
(b) Reports on Form 8-K:
The Company filed one Form 8-K to report that certain forward
looking statements regarding forecasts of sales and earnings
growth are subject to certain risks and uncertainties as
explained therein. This Report is dated June 10, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MODINE MANUFACTURING COMPANY
(Registrant)
By: A. D. REID
--------------------------------------
A. D. Reid, Vice President,
Finance and Chief Financial Officer
(Principal Financial Officer)
Date: August 5, 1999 By: W. E. PAVLICK
---------------------------------------
W. E. Pavlick, Senior Vice President,
General Counsel and Secretary