SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
|
For the fiscal year ended March 31, 2003 |
Commission file number 1-1373 |
MODINE MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)
|
WISCONSIN
|
39-0482000
|
|
1500 DeKoven Avenue, Racine, Wisconsin
|
53403
|
Registrant's telephone number, including area code
(262) 636-1200
Securities Registered pursuant to Section 12(g) of the Act:
Common Stock, $0.625 par value
(Title of Class)
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 [ ]
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. [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
Yes [X] No [ ]
Approximately 63.23% of the outstanding shares are held by non-affiliates. The aggregate market value of these shares was approximately $457,435,050.00 based on the market price of $21.18 per share on June 19, 2003. 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 34,160,261 at June 19, 2003.
An Exhibit index appears at pages 16-23 herein.
DOCUMENTS INCORPORATED BY REFERENCE
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 |
|
Annual Report to Shareholders for the fiscal year ended March 31, 2003 |
Part I of Form 10-K
|
|
Part II of Form 10-K
|
|
|
Part IV of Form 10-K
|
|
|
2003 Definitive Proxy Statement dated June 13, 2003 |
Part III of Form 10-K
|
TABLE OF CONTENTS
MODINE MANUFACTURING COMPANY - FORM 10-K
FOR THE YEAR ENDED MARCH 31, 2003
Cover
Table of Contents
PART I
ITEM 1
General
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 is an independent, worldwide leader in thermal management technology serving vehicular, industrial, commercial, electronic and building HVAC (heating, ventilating, air conditioning) markets. Modine develops, manufactures, and markets thermal management products, components and systems for use in various OEM (original equipment manufacturer) applications and for sale to the automotive aftermarket (as replacement parts) and to a wide array of building and other commercial markets. The primary markets consist of:
- Automobile, truck and bus manufacturers;
- Agricultural and construction equipment manufacturers;
- Heating and cooling equipment manufacturers;
- Construction contractors;
- Wholesalers of plumbing and heating equipment;
- Radiator repair shops;
- Wholesalers and installers of auto repair parts;
- Computer and server manufacturers;
- Telecommunications equipment manufacturers; and
- Industrial electronic equipment manufacturers.
We distribute our products through:
- Company salespersons;
- Independent manufacturers' representatives;
- Independent warehouse distributors;
- Mass merchandisers; and
- National accounts.
Our operations are organized on the basis of market categories or geographical responsibility, as follows:
Original Equipment, which provides heat-transfer products, generally from business units in North America, to original equipment manufacturers of on-highway and off-highway vehicles, as well as to industrial and commercial equipment manufacturers, located in North America and Europe.
The Company has assigned specific business units to a segment based principally on these defined markets and their geographical locations.
|
North America |
Europe |
South America |
Central America |
Asia/Pacific |
|
Canada
|
Austria
|
Brazil |
El Salvador |
Japan
|
Research and Development
The Company remains committed to its vision of creating value through technology. Company-sponsored research activities relate to the development of new products, processes and services, or the improvement of existing products, processes, and services. Research expenditures in fiscal 2003 amounted to $29,852,000; in fiscal 2002 amounted to $28,632,000; and in fiscal 2001 amounted to $26,985,000. There were no material expenditures on research activities that 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, Health and Safety Matters
Modine continues to refine its environmental programs. Last year, we introduced our Environmental Management System (EMS) which established a global system for responsible environmental care. Our EMS will reduce future liabilities and provide a common framework for the company's future growth. As of March 31, 2003, nine manufacturing facilities have been certified to the internationally recognized ISO14001 standard for environmental management systems. We are actively implementing our EMS at Original Equipment locations world-wide.
For the 2002 calendar year, North American locations achieved a 9% decrease in wastes (normalized for sales dollars). This is the sixth consecutive year of waste reductions, with a 56% overall decrease from 1996 to 2002. In addition, the Company's U.S. locations decreased their reported chemical releases by 29% from 2000-2001, and achieved a 71% decline in reported releases from 1996-2001.
Modine is implementing a world-wide program for monitoring its environmental performance beginning in fiscal 2004. These standardized metrics will provide us with a baseline for the continued reduction of wastes, generation of fewer greenhouse gasses, and the introduction of more environmentally friendly production materials.
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. Although there are currently no known liabilities that might have a material effect on the Company's consolidated net assets, the USEPA has designated Modine as a potentially responsible party (PRP) for remediation of four waste disposal sites. These sites are as follows: Elgin Salvage (Illinois); N.L./Taracorp (Illinois); Interstate Lead (Alabama); and H.O.D. Landfill (Illinois). These sites are not Company owned and allegedly contain wastes attributable to Modine from past operations. However, 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. These claims are in various stages of administrative or judicial proceedings and include recovery of past governmental costs and for future investigations and remedial actions. In three instances, Modine has not received, and may never receive, documentation verifying its involvement and/or its share of waste contributions to the sites. Additionally, the dollar amounts of the claims have not been specified. At the fourth site, a settlement agreement was signed in January 2002 which included a $119,000 settlement assessment. The Company accrues costs associated with environmental matters, on an undiscounted basis, when they become probable and reasonably estimable. As of March 31, 2003, March 31, 2002 and March 31, 2001, the Company had accrued $119,000, $119,000 and $21,000, respectively, in "accrued expenses and other current liabilities" on the
consolidated balance sheet to cover cleanup activities, including remediation and legal costs at the sites identified above. This accrual does not reflect any possible insurance recoveries but does reflect a reasonable estimate of cost sharing at multi-party sites. The March 31, 2003 liability, related to the N.L. Taracorp site in Illinois, is expected to be remitted as soon as a formal request for payment is received from the EPA.
An obligation may also arise when a Modine-owned facility is closed or sold. These expenditures most often relate to sites where past operations followed practices and procedures that were considered acceptable under then-existing regulations, but may require investigative and/or remedial work to ensure appropriate environmental protection. The Company investigates, and pursues where appropriate, insurance coverage to limit its risk associated with these facilities.
Two of the Company's active manufacturing facilities have been identified as requiring soil and/or groundwater remediation. Environmental liabilities recorded, at March 31, 2003, 2002, and 2001 to cover the investigative work and remediation for sites in the United States and the Netherlands, were $1.0 million, $0.8 million and $0.3 million, respectively. These liabilities are recorded in the consolidated balance sheet in "accrued expense and other current liabilities" and "other noncurrent liabilities." It is unlikely these remediation efforts will have a material effect on the Company's consolidated financial condition.
Emerging environmental regulations, as well as the Company's policy to continuously improve upon its environmental management programs, will require capital equipment expenditures over the coming years. For the fiscal year ending March 31, 2003 capital expenditures related to environmental projects were $50,000. Modine currently expects expenditures for environmentally-related capital projects to be about $0.9 million in fiscal 2004.
Environmental expenses charged to current operations, including remediation costs, solid waste disposal, and operating and maintenance costs totaled about $2.4 million for the fiscal year ending March 31, 2003. Operating expenses of some facilities may increase during fiscal year 2004 because of such charges but the competitive position of the Company is not expected to change materially. Although some environmental costs may be substantial, the Company has no reason to believe such costs vary significantly from costs incurred by other companies engaged in similar businesses.
The Health and Safety performance of the Company continues to move in a positive direction. Recordable and Lost Workday (LWDII) incident rates in North American facilities improved from the previous year by 23% and 13%, respectively. Over the past five years, Modine has experienced a 68% reduction in its recordable incident rate and a 60% reduction in its LWDII rate. The Company's McHenry, IL and Harrodsburg, KY facilities both became "STAR" plants during 2002. The Modine "STAR" is awarded to those U.S. facilities that achieve 100% compliance with the Company's 23 Health and Safety elements and attain recordable and LWDII rates below the General Industry Average for the preceding twelve month period. The Modine "STAR" program is modeled after the Occupational Safety and Health Administration's (OSHA) Voluntary Protection Program (VPP).
Employees
The number of persons employed by the Company as of March 31, 2003 was approximately 7,400.
Seasonal Nature of Business
|
Fiscal Year
|
|
|
|
|
Fiscal
|
||||
|
($ In Thousands) |
|||||||||
|
2003 |
$272,293 |
$275,308 |
$271,830 |
$272,644 |
$1,092,075 |
||||
|
2002 |
279,145 |
267,731 |
268,958 |
253,353 |
1,069,187 |
||||
|
2001 |
298,889 |
282,435 |
263,762 |
269,959 |
1,115,045 |
||||
|
2000 |
289,967 |
294.493 |
289,695 |
294,534 |
1,168,689 |
||||
|
1999 |
278,074 |
276,964 |
289,461 |
286,620 |
1,131,119 |
||||
|
Five-year
|
283,674
|
279,386 |
276,741 |
275,422 |
1,115,223 |
||||
|
Percent of Year |
25% |
25% |
25% |
25% |
100% |
||||
Working Capital Items
The Company's principal plants and other facilities during the fiscal year ended 2003, on an operating-segment basis, are as follows:
|
Type of
|
Original
|
Distributed
|
European
|
Corporate
|
|
|
Manufacturing |
14 |
11 |
9 |
- |
34 |
|
Distribution |
- |
5 |
- |
- |
5 |
|
Sales & Service Centers/Offices |
1 |
19 |
8 |
2 |
30 |
|
Sales Branches |
- |
97 |
- |
- |
97 |
|
Joint Ventures |
- |
- |
3 |
2 |
5 |
|
|
|
|
|
|
|
|
Total |
15 |
132 |
20 |
4 |
171 |
|
Type of
|
North
|
|
South
|
Asia/
|
Central
|
|
|
Manufacturing |
21 |
12 |
- |
1 |
- |
34 |
|
Distribution |
4 |
1 |
- |
- |
- |
5 |
|
Sales & Service Centers/Offices |
10 |
18 |
- |
1 |
1 |
30 |
|
Sales Branches |
97 |
- |
- |
- |
- |
97 |
|
Joint Ventures |
- |
3 |
1 |
1 |
- |
5 |
|
|
|
|
|
|
|
|
|
Total |
132 |
34 |
1 |
3 |
1 |
171 |
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. Their productive capacity is, from time to time, reduced or expanded as necessary to meet changing market conditions and Company needs. During fiscal 2003, the Company closed two manufacturing facilities in the United States and one manufacturing facility in Germany. These closings were previously announced as part of the fiscal 2002 restructuring plan. Also, during fiscal 2003, the Company completed the sale of its wholly-owned Canadian aftermarket subsidary which included two sales and service centers and one distribution location. Construction of a new assembly facility in Germany began in fiscal 2003. Operations at this facility are expected to begin during the new fiscal year. In addition, the Company completed the construction of its European Technical Center, and the construction of the European wind tunnel is underway. The Company has included in the above figures all of its Aftermarket Sales Branches, even though on an individual basis, none would be considered a principal facility.
ITEM 3
.
LEGAL PROCEEDINGS
.
Certain information required hereunder is incorporated by reference from the Company's Annual Report to Shareholders, Page 44, Note 28.
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.
Omitted as not applicable.
PART II
ITEM 5
.
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
.
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 2002-03 and 2001-02. As of March 31, 2003, shareholders of record numbered approximately 5,050; it is estimated that beneficial owners numbered about 17,000.
|
2002-03 |
2001-02 |
||||||
|
Quarter |
High |
Low |
Dividends |
High |
Low |
Dividends |
|
|
First |
$30.00 |
$22.26 |
$ .125 |
$29.00 |
$24.06 |
$ .250 |
|
|
Second |
26.00 |
17.70 |
.125 |
32.00 |
19.50 |
.250 |
|
|
Third |
20.58 |
15.65 |
.125 |
25.75 |
19.13 |
.250 |
|
|
Fourth |
19.02 |
12.46 |
.125 |
29.08 |
22.10 |
.125 |
|
|
TOTAL |
|
|
$ .500 |
|
|
$ .875 |
|
ITEM 6. SELECTED FINANCIAL DATA
|
Fiscal Year ended March 31 |
|||||
|
2003(1) |
2002(2) |
2001(3) |
2000 |
1999(4) |
|
|
|
|
|
|
|
|
|
Sales (in thousands) |
$1,092,075 |
$1,069,187 |
$1,115,045 |
$1,168,689 |
$1,131,119 |
|
Earnings before cumulative effect of accounting change (in thousands) |
|
|
|
|
|
|
Cumulative effect of change in accounting for Goodwill impairment - net of tax (in thousands) |
|
|
|
|
|
|
Net Earnings (in thousands) |
12,666 |
23,345 |
51,830 |
66,332 |
75,085 |
|
Total assets (in thousands) |
910,818 |
903,044 |
937,171 |
955,871 |
933,962 |
|
Long-term debt (in thousands) |
98,556 |
139,654 |
137,449 |
214,585 |
144,124 |
|
Dividends per share |
.50 |
.875 |
1.00 |
.92 |
.84 |
|
Net earnings per share of common stock - basic: Before cumulative effect of accounting change |
|
|
|
|
|
|
Cumulative effect of accounting change |
|
|
|
|
|
|
Net earnings - basic: |
.38 |
.70 |
1.61 |
2.05 |
2.31 |
|
Net earnings per share of common stock - diluted: Before cumulative effect of accounting change |
|
|
|
|
|
|
Cumulative effect of accounting change |
|
|
|
|
|
|
Net earnings - diluted |
.38 |
.70 |
1.58 |
2.01 |
2.25 |
(1) An impairment loss relating to goodwill in accordance with SFAS No. 142 reduced net earnings by $21.7 million and was recorded as a cumulative effect of a change in accounting. See Note 15 and Note 29 from the Company's 2003 Annual Report to Shareholders, pages 38-39 and 46, for further details.
(2) A restructuring charge reduced net earnings by $5.2 million. See Note 14 and Note 29 from the Company's 2003 Annual Report to Shareholders, pages 37-38 and 46, for further details.
(3) Patent royalty settlements added $12.7 million to net earnings. See Note 28 from the Company's 2003 Annual Report to Shareholders, pages 44-45, for further details.
(4) Proceeds from a prior year's non-strategic asset sale and from patent royalty settlements each added $2.3 million to net earnings.
Additional information concerning the comparability of net earnings presented in the table above is hereby incorporated by reference from the Company's 2003 Annual Report to Shareholders, page 21 under the caption "Net Earnings."
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 2003 Annual Report to Shareholders, pages 12-25.
ITEM 7A
.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Quantitative and Qualitative Disclosures about Market Risk" on Pages 18-19 of the Company's 2003 Annual Report to Shareholders, incorporated by reference in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in this report, for information concerning potential market risks to which the Company is exposed.
ITEM 8
.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
.
The Consolidated Statements of Earnings, and the related Consolidated Balance Sheets, Statements of Cash Flows, Shareholders' Equity, Notes to Consolidated Financial Statements, and the report of PricewaterhouseCoopers LLP dated April 30, 2003 appearing on pages 26-46 of the Company's 2003 Annual Report to Shareholders are incorporated herein by reference. With the exception of the aforementioned information, no other data appearing in the 2003 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 4-7 and pages 14, 15, 20,21,22 and 25, of the Company's definitive Proxy Statement dated June 13, 2003 under the headings "Election of Directors," "Nominees to be Elected," "Directors Continuing in Service," "Executive Compensation," "Equity Compensation" (excluding the material under the heading "Pension Plan Table") and "Section 16(a) Beneficial Ownership Reporting Compliance" is incorporated herein by reference.
|
Executive Officers of Registrant |
|||
|
|
|
|
Officer
|
|
D. R. Johnson* |
61 |
Chairman |
1988 |
|
D. B. Rayburn* |
55 |
President and Chief Executive Officer |
1991 |
|
D. R. Zakos |
49 |
Vice President, General Counsel and Secretary |
1985 |
|
B. C. Richardson** |
44 |
Vice President, Finance and Chief Financial Officer |
2003 |
|
C. R. Katzfey |
56 |
Group Vice President |
2000 |
|
K. A. Feldmann |
49 |
Group Vice President |
2000 |
|
J. R. Rulseh |
47 |
Group Vice President |
2001 |
|
A. C. DeVuono |
54 |
Vice President and Chief Technology Officer |
1996 |
|
R. L. Hetrick |
61 |
Vice President, Human Resources |
1989 |
|
R. W. Possehl |
58 |
Vice President, Administration |
1985 |
|
R. S. Bullmore |
53 |
Corporate Controller |
1983 |
|
G. A. Fahl |
48 |
Environmental, Health & Safety Officer |
1998 |
|
C. C. Harper |
49 |
Chief Information Officer |
1998 |
|
D. B. Spiewak |
49 |
Treasurer |
1998 |
|
M. C. Kelsey*** |
38 |
Senior Counsel and Assistant Secretary |
2002 |
* D. B. Rayburn was named President and Chief Executive Officer on January 15, 2003, reporting to D. R. Johnson, who continued as Chairman. On May 22, 2003, Mr. Johnson announced his retirement, effective June 30, 2003.
** B. C. Richardson was appointed Vice President, Finance and Chief Financial Officer on May 12, 2003.
*** M. C. Kelsey became an officer on April 1, 2002. Prior to that, she was Senior Counsel.
Officer positions are designated in Modine's By-Laws and the persons holding these positions are elected annually by the Board at its first meeting after the annual meeting of shareholders in July of each year.
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 B. C. Richardson, D. B. Spiewak and M. C. Kelsey.
Mr. Richardson joined Modine on May 12, 2003 as Vice President, Finance and Chief Financial Officer. Mr. Richardson came to Modine from BP Amoco, now known as BP, where he spent over 20 years in various positions. His last position at BP Amoco, which he held beginning in 2000, was Chief Financial Officer and Vice President of Performance Management and Control for BP's Worldwide Exploration and Production division.
Mr. Spiewak joined Modine as Treasurer on September 21, 1998. Mr. Spiewak came to Modine from Alliant Foodservice, Inc., formerly a part of Kraft Foods. Prior to Alliant, Mr. Spiewak spent eight years with Illinois Tool Works, Inc. as Manager, Treasury Systems.
Ms. Kelsey joined Modine as Senior Counsel on April 2, 2001. Ms. Kelsey came to Modine from Quarles & Brady, LLP, a large national law firm, where she was a partner. Ms. Kelsey was with Quarles & Brady for 12 years.
There are no arrangements or understandings between any of the above officers and any other person pursuant to which he or she was elected an officer of Modine.
Information relating to the employment agreements, termination and change-in-control arrangements is incorporated by reference from the Company's 2002-03 definitive Proxy Statement dated June 13, 2003 at pages 23-25.
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 Company incorporates by reference the information relating to stock ownership on pages 6-9 of the Company's definitive Proxy Statement dated June 13, 2003 under the headings "Principal Shareholders," and "Securities Owned by Management." The Company specifically excludes from this incorporation the information included under the heading "Corporate Governance."
ITEM 13
.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
.
The Company incorporates by reference the information contained in the Company's definitive Proxy Statement dated June 13, 2003 on page 25 under the heading "Transactions."
ITEM 14. CONTROLS AND PROCEDURES
.
Within the 90 days prior to the date of this report ("Evaluation Date"), the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's President and Chief Executive Officer and Vice President, Finance and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as defined in Exchange Act Rules 13a-14 and 15d-14. Based upon that evaluation, the President and Chief Executive Officer and Vice President, Finance and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company's periodic SEC filings. Since the Evaluation Date, there have not been any significant changes in the internal controls of the Company, or in other factors that could significantly affect these controls subsequent to the Evaluation Date.
ITEM 15
.
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, 2003, 2002, and 2001. |
|
|
Consolidated Balance Sheets at March 31, 2003 and 2002. |
|
|
Consolidated Statements of Cash Flows for the years ended March 31, 2003, 2002, and 2001. |
|
|
Consolidated Statements of Shareholders' Equity for the years ended March 31, 2003, 2002, and 2001. 29 |
|
|
Notes to Consolidated Financial Statements. 30 - 46 |
30-46 |
|
Report of Independent Accountants. 46 |
46 |
|
* Incorporated by reference from the indicated pages of the 2002-03 Annual Report to Shareholders, attached hereto as Exhibit 13. |
|
|
Page in Form 10-K |
|
|
(2) Financial Statement Schedules: |
|
|
Report of Independent Accountants on Financial Statement Schedules. |
|
|
Report of Independent Accountants |
28 |
|
Schedule II - Valuation and Qualifying Accounts for the years ended March 31, 2003, 2002, and 2001. 24 |
|
|
(3) Consent of Independent Accountants. 28 |
32 |
|
(4) Notice regarding Consent of Arthur Anderson. |
33 |
|
(5) Exhibit Index. 16 |
16 |
The following exhibits are attached for information only unless specifically incorporated by reference in this Report:
Current Reports on Form 8-K
:
The following current Reports on Form 8-K were filed by the Company during the last quarter of the fiscal year and thereafter:
January 15, 2003, announcing the promotion of David B. Rayburn to President and Chief Executive Officer, his election to the Board of Directors, and an amendment to the Company's by-laws, reflecting the increase in Directors from nine to ten.
January 15, 2003, reporting the financial results of the third fiscal quarter.
May 6, 2003, announcing the financial results for the fourth fiscal quarter and fiscal year end.
May 12, 2003, announcing the appointment of Bradley C. Richardson as Vice President, Finance and Chief Financial Officer.
May 15, 2003, announcing a Board resolution to increase dividend payments.
May 22, 2003, announcing the retirement plans of the Company's Chairman, D. R. Johnson.
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.
|
Date: June 18, 2003 |
Modine Manufacturing Company
|
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.
|
/s/ D. R. Johnson D. R. Johnson, Chairman |
June 18, 2003
|
|
/s/ D. B. Rayburn President and Chief Executive Officer |
June 18, 2003
|
|
/s/ B. C. Richardson Vice President, Finance and Chief Financial Officer |
June 18, 2003
|
|
/s/ D. R. Zakos Vice President, General Counsel and Secretary |
June 18, 2003
|
|
/s/ R. J. Doyle Director |
June 18, 2003
|
|
/s/ F. P. Incropera Director |
June 18, 2003
|
|
/s/ F. W. Jones Director |
June 18, 2003
|
|
/s/ D. J. Kuester Director |
June 18, 2003
|
|
/s/ V. L. Martin Director |
June 18, 2003
|
|
/s/ G. L. Neale
|
June 18, 2003
|
|
/s/ M. C. Williams Director |
June 18, 2003
|
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/s/ M. T. Yonker Director |
June 18, 2003
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SECTION 302 CERTIFICATION
I, David B. Rayburn, certify that:
1. I have reviewed this annual report on Form 10-K of Modine Manufacturing Company;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: June 18, 2003
/s/ D. B. Rayburn
David B. Rayburn
President and Chief Executive Officer
SECTION 302 CERTIFICATION
I, Bradley C. Richardson, certify that:
1. I have reviewed this annual report on Form 10-K of Modine Manufacturing Company;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: June 18, 2003
/s/ B. C. Richardson
Bradley C. Richardson
Vice President, Finance and Chief Financial Officer
Report of Independent Accountants on
Financial Statement Schedules
To the Board of Directors
of Modine Manufacturing Company:
Our audits of the consolidated financial statements referred to in our report dated April 30, 2003 appearing in the Fiscal 2003 Annual Report to Shareholders of Modine Manufacturing Company (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chicago, Illinois
April 30, 2003
THE FOLLOWING REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP.
SEE EXHIBIT 23(b) FOR FURTHER DISCUSSION
To the Board of Directors and Shareholders
of Thermacore International, Inc.
We have audited the accompanying consolidated balance sheets of Thermacore International, Inc. (a Pennsylvania corporation) and subsidiaries as of June 30, 2000 and 1999, and the related consolidated statements of income, shareholders' investment and cash flows for the years then ended. 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 auditing standards generally accepted by the United States. 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 financial position of Thermacore International, Inc. and subsidiaries as of June 30, 2000 and 1999, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.
As discussed in Note 1 to the consolidated statements, the Company changed its method of accounting for organizational costs in 1999 to adopt the provisions of AICPA Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities."
/s/Arthur Andersen LLP
Arthur Andersen LLP
Lancaster, PA
August 11, 2000
MODINE MANUFACTURING COMPANY AND SUBSIDIARIES
(A Wisconsin Corporation)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years ended March 31, 2003, 2002 and 2001
($ In Thousands)
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2003:
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2002:
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Valuation Allowance for Deferred Tax Assets |
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2001:
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Valuation Allowance for Deferred Tax Assets |
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(E) Includes the effect of new tax rate recently enacted in Germany.
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EXHIBIT 3(c)
RESTATED
OF
MODINE MANUFACTURING COMPANY
(as adopted July 17, 1969)
(as amended September 17, 1970)
(as amended September 16, 1971)
(as amended May 4, 1972)
(as amended March 20, 1974)
(as amended September 18, 1974)
(as amended May 19, 1976)
(as amended July 21, 1976)
(as amended May 18, 1977)
(as amended July 20, 1977)
(as amended October 18, 1978)
(as amended May 16, 1979)
(as amended July 18, 1979)
(as amended October 17, 1979)
(as amended October 15, 1980)
(as amended May 1, 1981)
(as amended May 5, 1982 to be effective July 21, 1982)
(as amended August 17, 1982)
(as amended February 18, 1987)
(as amended March 18, 1987)
(as amended July 15, 1987)
(as amended February 15, 1989)
(as amended May 19, 1993)
(as amended October 20, 1993)
(as amended November 17, 1993)
(as amended March 16, 1994 to be effective July 20, 1994)
(as amended May 17, 1995 to be effective July 19, 1995)
(as amended October 16, 1996 to be effective
October 16, 1996)
(as amended December 17, 1997)
(as amended March 18, 1998 to be effective July 15, 1998)
(as amended January 20, 1999)
(as amended March 17, 1999 to be effective July 21, 1999)
(as amended September 15, 1999)
(as amended March 15, 2000 to be effective July 19, 2000)
(as amended March 20, 2002)
(as amended May 15, 2002)
(as amended January 15, 2003)
(as amended June 18, 2003)
ARTICLE I. STOCKHOLDERS
1.01.
Annual Meeting
. The annual meeting of stockholders of the Company shall be held each year at such time and place, either within or without the State of Wisconsin, as shall be determined by the Board of Directors at a meeting prior to the date otherwise provided herein for such stockholders' meeting; in the absence or failure of the Board to designate a time and place, then at the principal office of the Company in Racine, Wisconsin, on the third Wednesday in July, at 9:30 o'clock A.M., for the purpose of election of directors and for the transaction of such other business as may properly come before the meeting.
1.02.
Special Meetings
. Special meetings of the stockholders may be called by the Chairman of the Board or the President and shall be called by the President, or Secretary at the request in writing of a majority of the Board of Directors, or at the request of stockholders owning Ten Percent (10%) or more in amount of the entire capital stock of the Company issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at all special meetings shall be confined to the purposes stated in the notice of meeting.
1.03.
Notice of Meetings
. The Company shall notify each shareholder who is entitled to vote at the meeting, and any other shareholder entitled to notice under Ch. 180, of the date, time, and place of each annual or special shareholders' meeting. In the case of special meetings, the notice shall also state the meeting's purpose. Unless otherwise required by Ch. 180, the meeting notice shall be given at least five (5) days before the meeting date. Notice may be given orally or communicated in person, by telephone, telegraph, teletype, facsimile, other form of wire or wireless communication, private carrier, or in any other manner provided by Ch. 180. Written notice, if mailed, is effective when mailed; and such notice may be addressed to the shareholder's address shown in the Company's current record of shareholders. Written notice provided in any other manner is effective when received. Oral notice is effective when communicated.
1.04.
Quorum
. A quorum at any meeting of the stockholders shall consist of a majority of the voting stock of the Company represented in person or by proxy. Unless otherwise provided in the Articles of Incorporation, by these by-laws, or by the Wisconsin Business Corporation Law, a majority of such quorum shall decide any questions that may come before the meeting. Though less than a quorum of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified.
1.05.
Order of Business
. The order and conduct of business and matters of procedure at any meeting of stockholders shall be determined by the Chairman.
1.06.
List of Stockholders
. The officer or agent having charge of the stock transfer books for shares of the Company shall, before each meeting of stockholders, make a complete list of the stockholders entitled to vote at such meeting or any adjournment thereof, with the address of and the number of shares held by each, which list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any stockholder during the whole time of the meeting for the purposes of the meeting. The original stock transfer books shall be prima facie evidence as to the stockholders entitled to examine such list or transfer books or to vote at any meeting of stockholders.
1.07.
Inspectors of Election
. Two inspectors of election shall be appointed by the Board of Directors at or before each stockholders' meeting at which an election of directors shall take place; if no such appointment shall have been made, or if the inspectors appointed by the Board shall refuse to act, or fail to attend, then the appointment shall be made by the Chairman at the meeting. The inspectors shall receive and take in charge all proxies and ballots, and shall decide all questions touching upon the qualification of voters, and validity of proxies and the acceptance and rejection of votes. In case of a tie vote by the inspectors on any questions, the Chairman shall decide.
1.08.
Voting of Shares
. Each outstanding share shall be entitled to one vote upon each matter submitted to a vote at a meeting of stockholders, except to the extent that the voting rights of the shares of any class or classes are enlarged, limited or denied by the Wisconsin Business Corporation Law, the Articles of Incorporation, or the resolution of the Board of Directors creating such series of any class.
1.09.
Proxies
. At all meetings of shareholders, a shareholder entitled to vote may vote in person or by proxy appointed as provided in the Wisconsin Business Corporation Law. The means by which a shareholder or the shareholder's authorized officer, director, employee, agent or attorney-in-fact may authorize another person to act for the shareholder by appointing the person as proxy include:
(a) Appointment of a proxy in writing by signing or causing the shareholder's signature to be affixed to an appointment form by any reasonable means, including, but not limited to, by facsimile signature.
(b) Appointment of a proxy by transmitting or authorizing the transmission of an electronic transmission of the appointment to the person who will be appointed as proxy or to a proxy solicitation firm, proxy support service organization or like agent authorized to receive the transmission by the person who will be appointed as proxy. Every electronic transmission shall contain, or be accompanied by, information that can be used to reasonably determine that the shareholder transmitted or authorized the transmission of the electronic transmission. Any person charged with determining whether a shareholder transmitted or authorized the transmission of the electronic transmission shall specify the information upon which the determination is made.
An appointment of a proxy is effective when a signed appointment form or an electronic transmission of the appointment is received by the inspector of election or the officer or agent of the corporation authorized to tabulate votes. An appointment is valid for 11 months unless a different period is expressly provided in the appointment. An appointment of a proxy is revocable unless the appointment form or electronic transmission states that it is irrevocable and the appointment is coupled with an interest. The presence of a shareholder who has made an effective proxy appointment shall not of itself constitute a revocation. The Board of Directors shall have the power and authority to make rules that are not inconsistent with the Wisconsin Business Corporation Law as to the validity and sufficiency of proxy appointments.
ARTICLE II. DIRECTORS
2.01.
Number, Classification and Terms of Directors
. The number of directors shall be nine. Directors need not be stockholders.
The Board of Directors shall be divided into three classes: Each class consisting of three directors. The term of office of a director shall be three years. The classes of directors shall be staggered so that each expires in succeeding years. At each annual meeting of stockholders, the number of directors equal to the number of the class whose terms expire at the time of such meeting shall be elected to hold office until the third succeeding annual meeting and until their successors shall have been elected.
2.02.
Annual Directors' Meetings
. Annual meeting of the Board of Directors shall be held immediately following the annual meeting of stockholders. No notice of the annual meeting of the Board of Directors shall be required.
2.03.
Special Directors' Meetings
. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President, or Secretary on twenty-four (24) hours' notice to each director.
2.04.
Notice of Meetings; Waiver of Notice
. Notice of each board of directors' meeting, except meetings pursuant to Section 2.02 of these by-laws, shall be delivered to each director at his or her business address or at such other address as the director shall have designated in writing and filed with the Secretary. Notice may be given orally or communicated in person, by telephone, telegraph, teletype, facsimile, other form of wire or wireless communication, private carrier, or in any other manner provided by Ch. 180. Written notice shall be deemed given at the earlier of the time it is received or at the time it is deposited with postage prepaid in the United States mail or delivered to the private carrier. Oral notice is effective when communicated. A director may waive notice required under this section or by-law at any time, whether before or after the time of the meeting. The waiver must be in writing, signed by the director, and retained in the corporate record book. The director's attendance at or participation in a meeting shall constitute a waiver of notice of the meeting, unless the director at the beginning of the meeting or promptly upon his or her arrival objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. Neither the business to be transacted at nor the purpose of any regular or special board of directors meeting need be specified in the notice or waiver of notice of the meeting.
2.05.
Regular Meetings
. Regular meetings of the directors may be held without notice at such place and times as shall be determined from time to time by resolution of the Board of Directors.
2.06.
Quorum
. A quorum at any meeting of the Board of Directors shall consist of a majority of the entire membership of the Board. Unless otherwise provided in the Articles of Incorporation, these by-laws, or by law, a majority of such quorum shall decide all questions that may come before the meeting.
2.07.
General Powers of Directors
. The Board of Directors shall manage the business and affairs of the Company and subject to the restrictions imposed by law, by the Articles of Incorporation, or by these by-laws, may exercise all the powers, including specific powers, of the Company.
2.08.
Compensation of Directors
. The Board of Directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the Company as directors, officers or otherwise, or to delegate such authority to an appropriate committee. The Board of Directors also shall have authority to provide for or to delegate authority to an appropriate committee to provide for reasonable pensions, disability or death benefits, employee stock options, and other benefits or payments, to directors, officers and employees and to their estates, families, dependents or beneficiaries on account of prior services rendered by such directors, officers and employees to the Company.
2.09.
Resignation and Removal for Cause
. Any director, member of a committee or other officer may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the Chairman or Secretary. The acceptance of a resignation shall not be necessary to make it effective.
A director may be removed from office during the term of such office but only upon a showing of good cause, such removal to be by affirmative vote of a majority of the outstanding shares entitled to vote for the election of such director and which removal may only be taken at a special meeting of stockholders called for that purpose.
A special meeting of the stockholders as herein referred to may only be held after a hearing on the matter of cause claimed to exist has been held by the full Board of Directors of the Company at which hearing the director or directors proposed for removal shall be given an adequate opportunity for preparation and attendance in person (together with representation by counsel); provided, however, that such hearing shall be held only after written notice has been given to said director or directors proposed for removal specifying the matters of cause claimed to exist. The conclusions of said hearing shall be reported by the Board of Directors in writing accompanying the notice of the special stockholders' meeting sent to each stockholder eligible to vote at said special meeting.
2.10.
Increase or Decrease of Number of Directors
. Increase or decrease of the number of directors and classification of such directors, may only be made by amendment of these by-laws at a regular or special meeting called for that purpose, and a vacancy created by an increase in the number of directors may be filled at such meeting.
2.11.
Filling of Vacancies
. If the office of any director, member of a committee or other officer becomes vacant for any reason, including vacancies on the Board of Directors due to removal for cause, the remaining directors in office, by a majority vote, may appoint any qualified person to fill such vacancy, who shall hold office for the unexpired term and until his successor shall be duly chosen.
2.12.
Informal Action by Directors
. Any action required or permitted by the Articles of Incorporation, these by-laws or other provision of law, which might be taken at a meeting of the Board of Directors or of a lawfully constituted committee thereof, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all the directors, or by all of the members of such committee, as the case may be.
2.13.
Retirement
. Each Director shall be retired at the close of the term in which he attains the age of seventy (70) years except that this provision shall not apply to any Director who has been exempted from this provision by a resolution passed by a two-thirds vote of the Board of Directors. Upon such retirement a Director may take the status of a Director Emeritus. A Director Emeritus shall receive the notice of meetings of Directors, shall be invited to and welcome at all meetings of the Board and of the stockholders, and shall receive such compensation and such reimbursement for reasonable expenses, if any, for attendance at meetings as the Board of Directors shall determine, provided, however, that such compensation shall not exceed that received by a Director. A Director Emeritus shall attend the meetings of the Board in a consultive capacity but shall not be entitled to vote or have any duties or powers of a Director of the Company.
2.14.
Committees
. The Board of Directors may by resolution or resolutions, adopted by a majority of the total number of directors, designate one or more committees, each such committee to consist of three or more directors elected by the Board of Directors which, to the extent provided in said resolution or resolutions, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the corporation. Such committees shall have such names as may be determined from time to time by resolution adopted by the Board of Directors. A majority of the members of any such committee may determine its action unless the Board of Directors shall otherwise provide. The Board of Directors shall have power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee. The Board of Directors may elect one or more of its members as alternate members of any committee who may take the place of any absent member or members at any meeting of such committee.
ARTICLE III. OFFICERS
3.01.
Number
. The principal officers of the Company shall be a Chairman of the Board of Directors, a President, such number of Vice Presidents as the Board of Directors shall elect, a Secretary, and a Treasurer, each of whom shall be elected by the Board of Directors. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. Any two or more offices may be held by the same person, except the offices of President and Secretary and the offices of President and Vice President.
3.02.
Election and Term of Office
. The officers of the Company to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Each officer shall hold office at the pleasure of the Board of Directors or until his successor shall have been duly elected or until his prior death, resignation or removal.
3.03.
Removal
. Any officer or agent may be removed by the Board of Directors whenever in its judgment the best interests of the Company will be served thereby, but such removal shall be without prejudice to the rights provided by written contract, if any, of the person so removed. Election or appointment shall not of itself create contract rights.
3.04.
Vacancies
. A vacancy in any principal office because of death, resignation, removal, disqualification or otherwise, shall be filled by the Board of Directors for the unexpired portion of the term.
3.05.
Chairman of the Board
. The Chairman of the Board of Directors shall preside at all meetings of stockholders and directors. In his absence, the Vice Chairman of the Board, if there be one, otherwise the President, shall preside.
3.06.
President
. The President shall be the Chief Executive Officer of the Company and, subject to the control of the Board of Directors, shall in general supervise and control all of the business and affairs of the Company. He shall have authority, subject to such rules as may be prescribed by the Board of Directors, to appoint such agents and employees of the Company as he shall deem necessary, to prescribe their powers, duties and compensation, and to delegate authority to them. Such agents and employees shall hold office at the discretion of the President. He shall have authority to sign, execute and acknowledge, on behalf of the Company, all deeds, mortgages, bonds, stock certificates, contracts, leases, reports and all other documents or instruments necessary or proper to be executed in the course of the Company's regular business, or which shall be authorized by resolution of the Board of Directors; and except as otherwise provided by law or the Board of Directors, he may authorize any Vice President or other officer or agent of the Company to sign, execute and acknowledge such documents or instruments in his place and stead. In general he shall perform all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time.
3.07.
The Vice President
. In the absence of the President or in the event of his death, inability or refusal to act, or in the event for any reason it shall be impracticable for the President to act personally, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Board of Directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Any Vice President may sign, with the Secretary or Assistant Secretary, certificates for shares of the Company; and shall perform such other duties and have such authority as from time to time may be delegated or assigned to him by the Chairman, President or by the Board of Directors. The execution of any instrument of the Company by any Vice President shall be conclusive evidence, as to third parties, of his authority to act in the stead of the President.
3.08.
The Secretary
. The Secretary shall: (a) keep the minutes of the meetings of the stockholders and of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these by-laws or as required by law; (c) be custodian of the corporate records and of the seal of the Company and see that the seal of the Company is affixed to all documents the execution of which on behalf of the Company under its seal is duly authorized; (d) sign with the Chairman, President or a Vice President, certificates for shares of the Company, the issuance of which shall have been authorized by resolution of the Board of Directors; and (e) in general perform all duties incident to the office of Secretary as provided by the Wisconsin Business Corporation Law and have such other duties and exercise such authority as from time to time may be delegated or assigned to him by the Chairman, President or by the Board of Directors.
3.09.
The Treasurer
. The Treasurer shall: (a) have charge and custody of and be responsible for all funds and securities of the Company; (b) receive and give receipts for moneys due and payable to the Company from any source whatsoever, and deposit all such moneys in the name of the Company in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Section 6.07; and (c) in general perform all of the duties incident to the office of Treasurer and have such other duties and exercise such other authority as from time to time may be delegated or assigned to him by the Chairman, President or by the Board of Directors.
3.10.
Assistant Secretaries and Assistant Treasurers
. There shall be such number of Assistant Secretaries and Assistant Treasurers as the Board of Directors may from time to time authorize and designate. The Assistant Secretaries and Assistant Treasurers, in general, shall perform such duties and have such authority as shall from time to time be delegated or assigned to them by the Secretary or the Treasurer, respectively, or by the Chairman, President or the Board of Directors.
3.11.
Other Assistants and Acting Officers
. The Board of Directors shall have the power to appoint any person to act as assistant to any officer, or as agent for the Company in his stead, or to perform the duties of such officer whenever for any reason it is impracticable for such officer to act personally, and such assistant or acting officer or other agent so appointed by the Board of Directors shall have the power to perform all the duties of the office to which he is so appointed to be assistant, or as to which he is so appointed to act, except as such power may be otherwise defined or restricted by the Board of Directors.
3.12.
Salaries
. The salaries of the principal officers shall be fixed from time to time by the Board of Directors or by a duly authorized committee thereof, and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Company.
ARTICLE IV. INDEMNIFICATION BY THE COMPANY
Any person made a party to or threatened with any civil, criminal, administrative or investigative action, suit or proceeding (other than an action by or in the right of the Company) by reason of the fact that he, his testator or intestate, is or was a Director, officer or employee of the Company or is or was serving at the request of the Company as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified by the Company against the reasonable expenses, including attorneys' fees, judgments, fines, and amounts paid in settlement, actually and necessarily incurred by him in connection with such action, suit or proceeding, or in connection with any appeal therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Such right of indemnification shall not be deemed exclusive of any other right to which such Director, officer, employee or agent may otherwise be entitled.
ARTICLE V. CAPITAL STOCK
5.01
Certificates of Stock
. Certificates of stock, numbered and with the seal of the Company affixed, signed by the President, or a Vice President, and the Secretary or an Assistant Secretary, shall be issued to each stockholder certifying the number of shares owned by him in the Company. When such certificates are countersigned by a transfer agent, or registered by a registrar, the signatures of such officers may be facsimiles. A facsimile or printed seal of the Company may be affixed upon certificates of stock of the Company.
In case any officer who has signed, or whose facsimile signature has been placed upon a certificate has ceased to be an officer of the Company before such certificate has been issued, such certificate may, nevertheless, be adopted and issued and delivered by the Company as though the officer who signed such certificate or whose facsimile signature shall have been used thereon, had not ceased to be such officer with the same effect as if he were such office at the date of its issue.
5.02.
Lost Certificates
. A new certificate of stock may be issued in the place of any certificate theretofore issued by the Company, alleged to have been lost or destroyed, and the directors may, in their discretion, require the owner of the lost or destroyed certificate, or his legal representative, to give the Company a bond, in such sum as they may direct, not exceeding double the value of the stock, to indemnify the Company against any claim that may be made against it on account of the alleged loss of any such certificate or the issuance of any such new certificate.
5.03.
Transfer of Shares
. Transfer of stock shall be made only on the transfer books of the Company, kept at the office of the Company or respective transfer agents designated to transfer the stock, and before a new certificate is issued, the old certificate shall be surrendered and cancelled.
5.04.
Closing of Transfer Books
. The Board of Directors of the Company may provide that the stock transfer books be closed for a period not to exceed, in any case, fifty (50) days for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purposes. If the stock transfer books shall be closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten (10) days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders, such date in any case to be not more than seventy (70) days and, in case of a meeting of stockholders not less than ten (10) days prior to the date on which the particular action, requiring such determination of stockholders is to be taken. When a determination of stockholder, entitled to vote at any meeting of stockholders has been made as provided herein, such determination shall be applied to any adjournment thereof except when the determination has been made through the closing of the stock transfer books and the stated period of closing has expired.
5.05.
Dividends
. The Board of Directors of the Company may, from time to time, declare and the Company may pay dividends on its outstanding shares in cash, property, or its own shares, as provided by law.
ARTICLE VI. MISCELLANEOUS
6.01.
Corporate Seal
. The corporate seal shall be a round metallic disc, with the words "MODINE MANUFACTURING COMPANY, Wisconsin" around the circumference, and the words "CORPORATE SEAL" in the center. If a facsimile or printed seal is used on stock certificates, it shall be similar in content and design to the above.
6.02.
Fiscal Year
. The fiscal year of the Company shall begin on the first day of April in each year, and end on the thirty-first day of March in the following year.
6.03.
Contracts
. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or exercise or deliver any instrument in the name of and on behalf of the Company, and such authorization may be general or confined to specific instances. In the absence of other designation, all deeds, mortgages, contracts, promissory notes, and instruments of assignment or pledge made by the Company shall be executed in the name of the Company by the Chairman, President or one of the Vice Presidents and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer; the Secretary or an Assistant Secretary, when necessary or required, shall affix the corporate seal thereto; and when so executed no other party to such instrument or any third party shall be required to make any inquiry into the authority of the signing officer or officers.
6.04.
Loans
. No indebtedness for borrowed money shall be contracted on behalf of the Company and no evidence of such indebtedness shall be issued in its name unless authorized by or under the authority of a resolution of the Board of Directors. Such authorization may be general or confined to specific instances.
6.05.
Drafts, Checks, etc.
All checks, drafts or other orders for the payment of money issued in the name of the Company shall be signed by such employee or employees, agent or agents, of the Company as are appointed by the Chairman or President, and in such manner, including facsimile and printed signatures, as may be designated by the Chairman or President. In connection with the furnishing of authorizing resolution and signature card forms needed by commercial banks, the corporate Secretary, or any Assistant Secretary, is authorized to execute and certify to such forms as he may deem appropriate as adopted under the authority of this by-law and as binding upon the Company in accordance therewith, thereby empowering employees or agents appointed by the President to sign checks, drafts, or other orders for the payment of money in the name of the Company.
6.06.
Deposits
. All funds of the Company not otherwise employed shall be deposited from time to time to the credit of the Company in such banks, trust companies or other depositaries as may be selected by or under the authority of the Chairman or President. In connection with the furnishing of authorizing resolution and signature card forms, needed by such banks, trust companies or other depositaries, the corporate Secretary, or any Assistant Secretary, is authorized to execute and certify to such forms as he may deem appropriate as adopted under the authority of his by-law and as binding upon the Company in accordance therewith, thereby designating such banks, trust companies or other depositaries as may be selected by the Chairman or President, for the deposit of Company funds.
6.07.
Voting of Securities Owned by this Company
. Subject always to the specific directions of the Board of Directors, (a) any shares or other securities issued by any other corporation and owned or controlled by this Company may be voted at any meeting of security holders of such other corporation by the Chairman of this Company if he be present, or in his absence by the President or any Vice President of this Company who may be present, and (b) whenever, in the judgment of the Chairman, or in his absence, of the President or any Vice President, it is desirable for this Company to execute a proxy or written consent in respect to any shares for other securities issued by any other corporation and owned by this Company, such proxy or consent shall be executed in the name of this Company by the Chairman, President or one of the Vice Presidents of this Company, without necessity of any authorization by the Board of Directors, affixation of corporate seal or countersignature or attestation by another officer. Any person or persons designated in the manner above stated as the proxy or proxies of this Company shall have full right, power and authority to vote the shares or other securities issued by such other corporation and owned by this Company the same as such shares or other securities might be voted by this Company.
ARTICLE VII. AMENDMENTS
These by-laws may be amended, repealed or altered in whole or in part by the affirmative vote of not less than two-third (2/3) of the shares of the Company entitled to vote thereon, or by the affirmative vote of not less than two-thirds (2/3) of the full Board of Directors of the Company, at any regular meeting of the stockholders or of the Board of Directors, or any special meeting of the stockholders or Board of Directors, provided that such action has been specified in the notice of any such meeting.
Exhibit 4(a)
SPECIMEN STOCK CERTIFICATE
Size - 8 1/2 X 11 Color - Gold Front
FRONT SIDE OF CERTIFICATE:
Left Top Side of Certificate: Par Value $0.625 Per Share
Middle Top: Photograph of Arthur B. Modine
Right Top: Number of Shares, Capital Stock,
Capital Stock Incorporated under the Laws of the State of Wisconsin
This Certificate is Transferable in Minneapolis, MN or New York, NY
See reverse for certain definitions
Modine Manufacturing Company
This certifies that CUSIP 607828 10 0 is the owner of fully-paid and non-assessable shares of capital stock of Modine Manufacturing Company, transferable on the books of the company by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar. Witness the seal of the company and the signatures of its duly authorized officers affixed. Dated: /s/ D. R. Zakos s/ D. B. Rayburn
Secretary, President
Countersigned and Registered: WELLS FARGO BANK MINNESOTA, N.A
By: Transfer Agent and Registrar BY: Authorized Officer
BACK SIDE OF CERTIFICATE:
Top: : The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in common
UNIF GIFT MIN ACT - _______________Custodian __________________
(Cust) (Minor) under Uniform Gifts to Minors
Act ____________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ________________hereby sell, assign and transfer unto
Please insert Social Security of other identifying number of assignee
______________________________________
(Please print of typewrite name and address, including ZIP Code, of assignee)
______________________________________
______________________________________
______________________________________
shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint ____________________________________________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.
Dated ___________________________
Affix Medallion Signature
Guarantee imprint below
X_______________________________
(Signature)
X_______________________________
(Signature)
_________________________________
Above Signature(s) to this Assignment must correspond with the name as written upon the face of the Certificate in every particular, without alteration or enlargement, or any change whatever.
The Signature(s) must be guaranteed by an eligible Guarantor Institution such as a Securities Broker/Dealer, Commercial Bank and Trust Company, Savings and Loan Association or a Credit Union participating in a Medallion Program approved by the Securities Transfer Association, Inc.
EXHIBIT 10(c)
AGREEMENT
This Agreement made this 19
th
day of May, 2003 by and between Modine Manufacturing Company, a Wisconsin corporation, having its principal place of business in Racine, Wisconsin (hereinafter called "Modine and/or Company"), and Donald R. Johnson (hereinafter called "Employee").
WITNESSETH THAT
WHEREAS on May 15, 2003 Employee notified the Company of his intention to retire by the submission of his resignation as an Employee of the Company and as Chairman of the Board effective June 30, 2003, and
WHEREAS the Officer Nomination and Compensation Committee of the Company and Employee have agreed upon compensation payable to Employee for all services rendered to the Company through the effective date of resignation on June 30, 2003, and desire to place in writing the details of such agreement.
NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00), receipt of which is hereby acknowledged, and the mutual covenants herein exchanged, the parties hereto agree as follows:
1. Employee's employment with the Company and as a member of the Board of
Directors and Chairman of the Company shall be deemed to be terminated at the end of the business day on June 30, 2003.
2. Company shall pay and the Employee shall accept within sixty (60) days of the close of the Company's first fiscal quarter, a Management Incentive payment calculated in accordance with the Company's Management Incentive Plan in effect for fiscal 2003-2004.
3. With respect to previous grants to Employee under the Company's Stock Award Plans approved by the Board of Directors and shareholders of the Company in 1985, 1994 and 2002, the Officer Nomination and Compensation Committee hereby consents to the early retirement of Employee, (the Board of Directors at its meeting on May 15, 2003 consented to Employee's Early Retirement) so that Employee's previously granted Stock Awards will vest to Employee and be free of any further restrictions as of June 30, 2003.
4. Employee may continue to exercise, at his discretion, stock options granted to him under the 1985, 1994 and 2002 Incentive Stock Plans. Employee rights as to stock options and exercises will be governed by the relevant provisions of the stock option grant agreements.
5. Employee as a retiree of the Company shall be entitled to the Modine Retiree Health Plan currently in existence on the date of retirement subject to such changes as may be made by the Company from time to time to the Health Care Plan for all retirees.
6. Employee shall be entitled to Company paid legal services for calendar 2003 with respect to the Employee and his spouse for estate planning services.
7. Employee shall be entitled to the continuance of the current financial planning arrangement with AYCO for the calendar year 2003 at the expense of the Company.
8. Employee shall be entitled to income tax services by the attorney and/or accountant of his choice for the 2003 taxable year at the expense of the Company.
9. Employee hereby elects to receive a one-time lump sum payment of the benefit due Employee as of the close of business June 30, 2003, under the Company's Executive Supplement Retirement Plan. Company shall pay such lump sum benefit to Employee on
July 1, 2003 pursuant to Employee's election.
10. With respect to each of the payments being made by Company to Employee hereunder, Company shall withhold federal and state income taxes as follows: Federal - 27%; State - 6.75%, and any applicable FICA and Medicare taxes.
11. The Employee agrees not to disclose (either while in the Company's employ or at any time thereafter, to any person not employed by the Company, or not engaged to render services to the Company, except with the prior written consent of an officer authorized to act in the matter by the Board of Directors of the Company), any confidential information obtained by him while in the employ of the Company, including, without limitation, information relating to any of the Company's inventions, processes, formulae, plans, devices, compilations of information, methods of distribution, customers, client relationships, marketing strategies or trade secrets; provided, however, that this provision shall not preclude the Employee from use or disclosure of information known generally to the public or of information not considered confidential by persons engaged in the business conducted by the Company or any disclosure required by law or Court order. The Agreement herein made in this paragraph shall be in addition to, and not in limitation or derogation of, any obligations otherwise imposed by law upon the Employee in respect of confidential information and trade secrets of the Company, its subsidiaries and affiliates.
12. Employee agrees that until July 1, 2006 or three (3) years after conclusion of his service as a Director of the Company, whichever is later, Employee will not, directly or indirectly, own, manage, operate, participate, nor be employed by or otherwise be connected in any manner with any firm, person, corporation or enterprise which is competitive with the business of the Company. Ownership of less than five (5) percent of the stock of any publicly traded company shall not be considered a violation of the preceding.
13. In the event of a violation of either paragraphs 11 or 12, the Company shall be entitled, in addition to remedies otherwise available, to obtain and enforce injunctive relief, both preliminary and final, enjoining and restraining any such violation of threatened or intended violation.
14. Employee and the Company acknowledge that this Agreement supersedes and replaces any other agreement between them concerning the subject matter hereof including, but not limited to, that certain employment agreement entered into between Employee and the Company dated May 16, 2001, Change in Control and Termination Agreement dated May 20, 1999 and any and all rights thereunder.
15. This Agreement is made in the State of Wisconsin and shall be interpreted under the laws of Wisconsin. The provisions of this Agreement are severable and independent, and if any provision of this Agreement is found to be illegal or unenforceable for any reason, such provisions will immediately become null and void, leaving the remainder of this Agreement in full force and effect.
16. This agreement will be binding upon and inure to the benefit of the parties and their respective heirs, representatives, successors and assigns.
IN WITNESS WHEREOF the parties have hereunto executed this Agreement the day and year above written.
MODINE MANUFACTURING COMPANY
By:
/s/ G. L. Neale
G. L. Neale
Chairman of the Officer Nomination and
Compensation Committee
ATTEST:
/s/ D. R. Zakos
D. R. Zakos, Secretary
/s/ D. R. Johnson
Donald R. Johnson
DRJ BENEFITS ON RETIREMENT
MIP (assuming payout at threshold)$60,000
Stock Awards Vesting 34,600 shares
Approximate value of 2003 Financial,
Estate Planning, Tax and Legal Services $13,500
Pension Plan Serp approximately $2.8 million
/s/ D. R. Johnson
D. R. Johnson
/s/ G. L. Neale
G. L. Neale
EXHIBIT 10(j)
CHANGE IN CONTROL AND TERMINATION AGREEMENT
Modine Manufacturing Company, a Wisconsin corporation ("Employer") and A. C. DeVuono ("Executive") entered into a Change in Control and Termination Agreement, effective as of
February 26
, 1997 ("Agreement"), and Employer and Executive hereby enter into an amendment and restatement of the Agreement, effective
May 20
, 1999, which amended and restated Agreement is hereinafter set forth.
WITNESSETH
:
WHEREAS, Executive is currently employed by Employer as its Vice President, Technical Services;
WHEREAS, Employer desires to provide security to Executive in connection with Executive's employment with Employer in the event of a Change in Control affecting Employer; and
WHEREAS, Executive and Employer desire to enter into this Agreement pertaining to the terms of the security Employer is providing to Executive with respect to his employment in the event of a Change in Control;
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows:
1.
Term
. The term of this Agreement shall be the period beginning on the date hereof and terminating on the date 36 months after such date (the "Term"), provided that for each day from and after the date hereof the Term will automatically be extended for an additional day, unless either Employer or Executive has given written notice to the other party of its or his election to cease such automatic extension, in which case the Term shall be the 36-month period beginning on the date such notice is received by such other party.
2.
Definitions
. For purposes of this Agreement:
(a) "Actual Bonus" shall mean the amount of Executive's incentive bonus compensation actually payable for a calendar year under an incentive compensation plan maintained by Employer; provided, however, that such amount shall in no event be less than the highest amount payable to Executive at any time during the Term.
(b) "Affiliate" or "Associate" shall have the meaning set forth in Rule 12b-2 under the Securities Exchange Act of 1934.
(c) "Base Salary" shall mean Executive's per annum base salary at the rate in effect on the date of a termination of employment under circumstances described in subsections 3(a) or (b) below; provided, however, that such rate shall in no event be less than the highest rate in effect for Executive at any time during the Term.
(d) "Beneficiary" shall mean the person or entity designated by Executive, by written instrument delivered to Employer, to receive the benefits payable under this Agreement in the event of his death. If Executive fails to designate a Beneficiary, or if no Beneficiary survives Executive, such death benefits shall be paid:
(i) to his surviving spouse; or
(ii) if there is no surviving spouse, to his living descendants
per
stirpes
; or
(iii) if there is neither a surviving spouse nor descendants, to his duly appointed and qualified executor or personal representative.
(e) A "Change in Control" shall be deemed to take place on the occurrence of any of the following events:
(1) The commencement by an entity, person or group (other than Employer or an Affiliate or Associate) of a tender offer for at least 30% of the outstanding capital stock of Employer entitled to vote in elections of directors ("Voting Power");
(2) The effective time of (i) a merger or consolidation of Employer with one or more other corporations as a result of which the holders of the outstanding Voting Power of Employer immediately prior to such merger or consolidation (other than the surviving or resulting corporation or any Affiliate or Associate thereof) hold less than 50% of the Voting Power of the surviving or resulting corporation, or (ii) a transfer of 30% of the Voting Power, or a Substantial Portion of the Property, of Employer other than to an entity of which Employer owns at least 50% of the Voting Power; or
(3) During any period of 24 months that ends during the Term, regardless of whether such period commences before or after the effective date of this Agreement, the persons who at the beginning of such 24-month period were directors of Employer cease for any reason to constitute at least a majority of the Board of Directors of Employer.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Defined Contribution Plan" shall mean any Retirement Plan that is a defined contribution plan as defined in Section 3(34) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(h) "Five-Year Average Actual Bonus" shall mean the average of Executive's Actual Bonuses (determined without reference to the proviso in subsection 2(a)) payable for the five-year period ending on December 31 of the calendar year immediately preceding the calendar year of Executive's termination of employment.
(i) "Five-Year Average Base Salary" shall mean the average of Executive's per annum Base Salary (determined without reference to the proviso in subsection 2(c)) payable for the five-year period ending on December 31 of the calendar year immediately preceding the calendar year of Executive's termination of employment.
(j) "Good Cause" shall be deemed to exist if, and only if:
(1) Executive engages in an act of dishonesty constituting a felony that results or is intended to result directly or indirectly in gain or personal enrichment at the expense of Employer; or
(2) Executive breaches any provision of Section 8 (relating to confidential information), and such breach results in a demonstrably material injury to Employer.
(k) "Good Reason" shall be deemed to exist if, and only if:
(1) there is significant change in the nature or the scope of Executive's authorities or duties;
(2) there is significant reduction in Executive's Base Salary, his opportunity to earn a bonus under an incentive bonus compensation plan maintained by Employer or his benefits; or
(3) Employer changes by 100 miles or more the principal location in which Executive is required to perform services.
(l) "Pension Plan" shall mean any Retirement Plan that is a defined benefit plan as defined in Section 3(35) of ERISA.
(m) "Retirement Plan" shall mean any qualified or supplemental employee pension benefit plan, as defined in Section 3(2) of ERISA, currently or hereinafter made available by Employer in which Executive is eligible to participate.
(n) "Severance Period" shall mean the period beginning on the date Executive's employment with Employer terminates under circumstances described in subsection 3(a) and ending on the date 24 months thereafter.
(o) "Substantial Portion of the Property of Employer" shall mean 50% of the aggregate book value of the assets of Employer and its Affiliates and Associates as set forth on the most recent balance sheet of Employer, prepared on a consolidated basis, by its regularly employed, independent, certified public accountants.
(p) "Target Bonus" shall mean the amount of Executive's target annual incentive bonus compensation for the calendar year in which the date of a termination of employment under circumstances described in subsection 3(a) below occurs, under the incentive bonus compensation plan maintained by Employer for such year; provided, however, that such amount shall in no event be less than the highest amount in effect for Executive at any time during the term.
(q) "Welfare Plan" shall mean any health and dental plan, disability plan, survivor income plan or life insurance plan, as defined in Section 3(1) of ERISA, currently or hereafter made available by Employer in which Executive is eligible to participate.
3.
Benefits Upon Termination of Employment
. (a) The following provisions will apply if a Change in Control occurs during the Term, and (i) at any time during the 24 months after the Change in Control occurs (whether during or after the expiration of the Term), the employment of Executive with Employer is terminated by Employer for any reason other than Good Cause, or Executive terminates his employment with Employer for Good Reason, or (ii) at any time during the thirteenth month after the Change in Control occurs (whether during or after the expiration of the Term), Executive terminates his employment with Employer for any reason:
(1) Employer shall pay Executive an amount equal to two times the greater of: (A) the sum of Executive's Base Salary and Target Bonus, or (B) the sum of Executive's Five-Year Average Base Salary and Five-Year Average Actual Bonus. Such amount shall be paid to Executive in a lump sum within 60 days after his date of termination of employment.
(2) Employer shall pay Executive an amount equal to the pro rata portion of the Target Bonus that is applicable to the period commencing on the first day of the calendar year in which the employment of Executive is terminated and ending on the date of such termination. Such amount shall be paid to Executive in a lump sum within 60 days after his date of termination of employment.
(3) (A) Employer shall pay to Executive a monthly Supplemental Pension Benefit in an amount equal to the amount determined pursuant to clause (i) below less the amount determined pursuant to clause (ii) below:
(i) the aggregate monthly amount of the pension benefit ("Pension") that would have been payable to Executive under all Pension Plans if that Pension were computed (A) by treating the Severance Period as service for all purposes of the Pension Plans and (B) by considering his monthly compensation during the Severance Period to be one-twelfth of his Base Salary and one-twelfth of the Target Bonus for all purposes of the Pension Plans;
(ii) the aggregate monthly amount of any Pension actually paid to Executive under all Pension Plans.
(B) The Supplemental Pension Benefit payable to Executive hereunder shall be paid (i) commencing at the later to occur of the last day of the Severance Period or the date payment of his Pension commences under the Pension Plans; and (ii) in the same form as is applicable to the Pension payable to Executive under the Pension Plans.
(C) If Executive dies prior to commencement of payment to him of his Pension under the Pension Plans, under circumstances in which a death benefit under the Pension Plans is payable to his surviving spouse or other beneficiary, then Employer shall pay a monthly Supplemental Death Benefit to Executive's surviving spouse or other beneficiary entitled to receive the death benefit payable with respect to Executive under the Pension Plans in an amount equal to the amount determined pursuant to clause (i) below less the amount determined pursuant to clause (ii) below:
(i) the aggregate monthly amount of the death benefit that would have been payable to the surviving spouse or other beneficiary of Executive under the Pension Plans if that death benefit were computed (A) by treating the Severance Period as service for all purposes of the Pension Plans and (B) by considering his monthly compensation during the Severance Period to be one-twelfth of his Base Salary and one-twelfth of the Target Bonus for all purposes of the Pension Plans;
(ii) the aggregate monthly amount of any death benefit actually paid to the surviving spouse or other beneficiary of Executive under the Pension Plans.
(D) The Supplemental Death Benefit payable with respect to Executive hereunder shall be payable at the same time, in the same form, and to the same persons as is applicable to the death benefit payable with respect to Executive under the Pension Plans.
(E) Notwithstanding the foregoing provisions, the total of the actual years of service of Executive for purposes of each of the Pension Plans and the years of service for which credit is given pursuant to subparagraphs (3)(A) and (C) shall not exceed the maximum number of years of service, if any, that can be considered pursuant to the terms of such Pension Plan.
(F) Any actuarial adjustments made under the Pension Plans with respect to the form or time of payment of a Pension or death benefit to Executive or his surviving spouse or other beneficiary under the Pension Plans shall also be applicable to the Supplemental Pension Benefit or Supplemental Death Benefit payable hereunder and shall be based upon the same actuarial assumptions as those specified in the Pension Plans.
(4) (A) For each calendar year ending during the Severance Period, Employer shall pay to Executive a Supplemental Defined Contribution Benefit in an amount equal to the amount determined pursuant to clause (i) below less the amount determined pursuant to clause (ii) below:
(i) the amount that would have been allocated to Executive's accounts under all Defined Contribution Plans ("Accounts") during such calendar year, assuming (A) that the amount of Executive's elective deferrals (as defined in Section 402(g)(3) of the Code) equals the amount of such elective deferrals Executive authorized in the calendar year immediately preceding the calendar year in which the date of commencement of the Severance Period occurs; (B) that all Employer contributions (except elective deferrals as defined in Section 402(g)(3) of the Code) were allocated to Executive's Accounts during such calendar year, in the amount that would have been allocated on behalf of Executive had Executive been actively employed during such calendar year; and (C) that Executive's rate of compensation (as defined in the applicable Defined Contribution Plan for purposes of determining Employer contributions) during such calendar year is identical to such rate of compensation on the date immediately preceding his termination of employment;
(ii) the amount, if any, actually allocated to Executive's Accounts during such year;
(B) Each Supplemental Defined Contribution Benefit shall be paid to Executive in a lump sum no later than 60 days after the end of each applicable calendar year during the Severance Period;
(C) In the event of Executive's death prior to the end of the Severance Period, the Supplemental Defined Contribution Benefit shall continue to accrue for the duration of the Severance Period on the same basis as if Executive had not died. Such Supplemental Defined Contribution Benefit shall be payable to Executive's Beneficiary at the same time and manner as such Benefit would have been paid to Executive.
(5) If upon the date of termination of Executive's employment Executive holds any options with respect to stock of Employer, all such options will immediately become vested and exercisable upon such date and will be exercisable for 36 months thereafter. Any restrictions on stock of Employer owned by Executive on the date of termination of his employment will lapse on such date.
(6) During the Severance Period, Executive and his spouse and other dependents will continue to be covered by all Welfare Plans maintained by Employer in which he and his spouse and other dependents were participating immediately prior to the date of his termination as if he continued to be an employee of Employer and Employer will continue to pay the costs of coverage of Executive and his spouse and other dependents under such Welfare Plans on the same basis as is applicable to active employees covered thereunder; provided that, if participation in any one or more of such Welfare Plans is not possible under the terms thereof, Employer will provide substantially identical benefits. For purposes of the continuation of Executive's group health plan coverage required under Code Section 4980B, to the extent permitted by the applicable group health plan, (i) the period of extended coverage referred to in Code Section 4890B(f)(2)(B)(i)(I) shall commence on the first date that follows the end of the Severance Period, and (ii) the applicable notice period provided under Code Section 4980B(f)(6)(B) shall commence on the first date that follows the end of the Severance Period.
(b) If the employment of Executive with Employer is terminated by Employer or Executive other than under circumstances set forth in subsection 3(a), Executive's Base Salary shall be paid through the date of his termination, and Employer shall have no further obligation to Executive or any other person under this Agreement. Such termination shall have no effect upon Employee's other rights, including but not limited to, rights under the Retirement Plans and the Welfare Plans.
(c) Notwithstanding anything herein to the contrary, in the event Employer shall terminate the employment of Executive for Good Cause hereunder, Employer shall give Executive at least thirty (30) days prior written notice specifying in detail the reason or reasons for Executive's termination.
(d) This Agreement shall have no effect, and Employer shall have no obligations hereunder, if Executive's employment terminates for any reason at any time other than during the 24 months following a Change in Control.
4.
Excise Tax
. (a) In the event that a Change in Control shall occur, and a final determination is made by legislation, regulation, ruling directed to Executive or Employer, by court decision, or by independent tax counsel described in subsection (b) next below, that the aggregate amount of any payment made to Executive (1) hereunder, and (2) pursuant to any plan, program or policy of Employer in connection with, on account of, or as a result of, such Change in Control ("Total Payments") will be subject to the excise tax provisions of Section 4999 of the Code, or any successor section thereof, Executive shall be entitled to receive from Employer, in addition to any other amounts payable hereunder, a lump sum payment (the "Gross-Up Payment"), sufficient to cover the full cost of such excise taxes and Executive's federal, state and local income and employment taxes on this additional payment, so that the net amount retained by Executive, after the payment of all such excise taxes on the Total Payments, and all federal, state and local income and employment taxes and excise taxes on the Gross-Up Payment, shall be equal to the Total Payments. The Total Payments, however, shall be subject to any federal, state and local income and employment taxes thereon. For this purpose, Executive shall be deemed to be in the highest marginal rate of federal, state and local taxes. The Gross-Up Payment shall be made at the same time as the payments described in subsections 3(a)(1) and (2) above.
(b) Employer and Executive shall mutually and reasonably determine the amount of the Gross-Up Payment to be made to Executive pursuant to the preceding subsection. Prior to the making of any such Gross-Up Payment, either party may request a determination as to the amount of such Gross-Up Payment. If such a determination is requested, it shall be made promptly, at Employer's expense, by independent tax counsel selected by Executive and approved by Employer (which approval shall not unreasonably be withheld), and such determination shall be conclusive and binding on the parties. Employer shall provide such information as such counsel may reasonably request, and such counsel may engage accountants or other experts at Employer's expense to the extent that they deem necessary or advisable to enable them to reach a determination. The term "independent tax counsel," as used herein, shall mean a law firm of recognized expertise in federal income tax matters that has not previously advised or represented either party. It is hereby agreed that neither Employer nor Executive shall engage any such firm as counsel for any purpose, other than to make the determination provided for herein, for three years following such firm's announcement of its determination.
(c) In the event the Internal Revenue Service subsequently adjusts the excise tax computation made pursuant to subsections 4(a) and (b) above, Employer shall pay to Executive, or Executive shall pay to Employer, as the case may be, the full amount necessary to make either Executive or Employer whole had the excise tax initially been computed as subsequently adjusted, including the amount of any underpaid or overpaid excise tax, and any related interest and/or penalties due to the Internal Revenue Service.
5.
Setoff
. No payments or benefits payable to or with respect to Executive pursuant to this Agreement shall be reduced by any amount Executive or his spouse or Beneficiary, or any other beneficiary under the Pension Plans, may earn or receive from employment with another employer or from any other source.
6.
Mitigation
. Executive shall not be required to mitigate the amount of compensation and benefits set forth above by seeking employment with others, or otherwise.
7.
Death
. If Executive's employment with Employer terminates under circumstances described in subsections 3(a) or (b), then upon Executive's subsequent death, all unpaid amounts payable to Executive under subsections 3(a)(1) or (2) or 3(b), or Section 4, if any, shall be paid to his Beneficiary, all amounts payable under subsections 3(a)(3) and (4) shall be paid pursuant to the terms of said subsections to his spouse or other beneficiary under the applicable Retirement Plan, and if subsection 3(a) applies, his spouse and other dependents shall continue to be covered under all applicable Welfare Plans during the remainder of the Severance Period, if any, pursuant to subsection 3(a)(6).
8.
Confidentiality
. Executive agrees not to disclose (during the Term or at any time thereafter) to any person not employed by the Employer, or not engaged to render services to the Employer, except with the prior written consent of an officer authorized to act in the matter by the Board of Directors of Employer, any confidential information obtained by him while in the employ of the Employer, including, without limitation, information relating to any of the Employer's inventions, processes, formulae, plans, devises, compilations of information, methods of distribution, customers, client relationships, marketing strategies or trade secrets; provided, however, that this provision shall not preclude the Executive from use or disclosure of information known generally to the public or of information not considered confidential by persons engaged in the business conducted by the Employer or from disclosure required by law or court order. The Agreement herein made in this Section 8 shall be in addition to, and not in limitation or derogation of, any obligation otherwise imposed by law upon the Executive in respect of confidential information and trade secrets of the Employer and its Affiliates.
9.
Forfeiture
. If Executive shall at any time violate any obligation of his under Section 8 in a manner that results in demonstrably material injury to the Employer, he shall immediately forfeit his right to any benefits under this Agreement, and Employer shall thereafter have no further obligation hereunder to Executive or his spouse, Beneficiary or any other person.
10.
Executive Assignment
. No interest of Executive, his spouse or any Beneficiary, or any other beneficiary under the Retirement Plans, under this Agreement, or any right to receive any payment or distribution hereunder, shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind, nor may such interest or right to receive a payment or distribution be taken, voluntarily or involuntarily, for the satisfaction of the obligations or debts of, or other claims against, Executive or his spouse, Beneficiary or other beneficiary, including claims for alimony, support, separate maintenance, and claims in bankruptcy proceedings.
11.
Benefits Unfunded
. All rights under this Agreement of Executive and his spouse, Beneficiary or other beneficiary under the Retirement Plans, shall at all times be entirely unfunded, and no provision shall at any time be made with respect to segregating any assets of Employer for payment of any amounts due hereunder. None of Executive, his spouse, Beneficiary or any other beneficiary under the Retirement Plans shall have any interest in or rights against any specific assets of Employer, and Executive and his spouse, Beneficiary or other beneficiary shall have only the rights of a general unsecured creditor of Employer. Notwithstanding the preceding provisions of this Section, the Officer Nominating and Compensation Committee of the Board of Directors of Employer, in its discretion, shall have the right, at any time and from time to time, to cause amounts payable or potentially payable to Executive or his Beneficiary hereunder to be paid to the trustee of a Rabbi Trust or any similar trust to be established by Employer ("Trust").
12.
Waiver
. No waiver by any party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of any other provisions or conditions at the same time or at any prior or subsequent time.
13.
Litigation Expenses
. Employer shall pay Executive's reasonable attorneys' fees and legal expenses in connection with any judicial proceeding to enforce, construe or determine the validity of this Agreement ("Litigation"), if Executive is a Prevailing Party in such Litigation. Executive shall be deemed a "Prevailing Party" if (a) a court enters a judgment in his favor in connection with such Litigation, or (b) Employer and Executive enter into a written agreement of settlement of such Litigation. If Executive is not a Prevailing Party in such Litigation, Employer shall pay Executive's reasonable attorney's fees and legal expenses in connection therewith, up to a maximum of $100,000.
14.
Applicable Law
. This Agreement shall be construed and interpreted pursuant to the laws of the State of Wisconsin.
15.
Entire Agreement
. This Agreement contains the entire Agreement between the Employer and Executive and supersedes any and all previous agreements; written or oral; between the parties relating to the subject matter hereof, including without limitation the Change of Control Agreement dated
February 26, 1997
between Executive and Employer. No amendment or modification of the terms of this Agreement shall be binding upon the parties hereto unless reduced to writing and signed by Employer and Executive.
16.
No Employment Contract
. Nothing contained in this Agreement shall be construed to be an employment contract between Executive and Employer.
17.
Counterparts
. This Agreement may be executed in counterparts, each of which shall be deemed an original.
18.
Severability
. In the event any provision of this Agreement is held illegal or invalid, the remaining provisions of this Agreement shall not be affected thereby.
19.
Successors
. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, representatives and successors.
20.
Employment with an Affiliate
. For purposes of this Agreement, (A) employment or termination of employment of Executive shall mean employment or termination of employment with Employer and all Affiliates, (B) Base Salary, Target Bonus, Actual Bonus, Five-Year Average Base Salary and Five-Year Average Actual Bonus shall include remuneration received by Executive from Employer and all Affiliates, and (C) the terms Defined Contribution Plan, Pension Plan, Retirement Plan and Welfare Plan maintained or made available by Employer shall include any such plans of any Affiliate of Employer.
21.
Notice
. Notices required under this Agreement shall be in writing and sent by registered mail, return receipt requested, to the following addresses or to such other address as the party being notified may have previously furnished to the other party by written notice:
If to Employer:
Modine Manufacturing Company
1500 DeKoven Avenue
Racine, WI 53403
Attention: Legal Department
If to Executive:
A. C. DeVuono
5501 Valley Trail
Racine, WI 53402
IN WITNESS WHEREOF,
Executive has hereunto set his hand, and Employer has caused these presents to be executed in its name on its behalf, all on the
day of
, 1999, effective
May 20
, 1999.
MODINE MANUFACTURING COMPANY
By:
/s/ D. R. Johnson
D. R. Johnson
Title: President and Chief Executive Officer
By:
/s/ A. C. DeVuono
A. C. DeVuono, Executive
EXHIBIT 10(y)
MODINE MANUFACTURING COMPANY
DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
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ARTICLE I
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PAGE |
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1.01 |
Establishment of Plan |
4 |
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1.02 |
Purpose of Plan |
4 |
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ARTICLE II
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2.01 |
Definitions |
5 |
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2.02 |
Construction |
6 |
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ARTICLE III
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3.01 |
Conditions of Eligibility |
7 |
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3.02 |
Commencement of Participation |
7 |
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3.03 |
Termination of Participation |
7 |
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ARTICLE IV
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4.01 |
Amount and Manner of Deferral |
8 |
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4.02 |
Cessation of Deferral |
8 |
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ARTICLE V
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5.01 |
Company Discretionary Matching Contributions |
9 |
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5.02 |
Allocation of Matching Contributions |
9 |
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ARTICLE VI
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6.01 |
Nature of Account |
10 |
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6.02 |
Credit to Deferral Contributions Account |
10 |
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6.03 |
Credit to Company Matching Contributions Account |
10 |
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6.04 |
Changes in Account |
11 |
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6.05 |
Investments |
11 |
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6.06 |
Valuation Account |
11 |
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ARTICLE VII
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7.01 |
Participant's Account |
12 |
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ARTICLE VIII
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8.01 |
For Reasons Other than Death |
13 |
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8.02 |
Upon Death |
13 |
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8.03 |
Emergencies |
15 |
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ARTICLE IX
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9.01 |
Appointment of Separate Administrator |
16 |
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9.02 |
Powers and Duties |
16 |
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9.03 |
Records and Notices |
17 |
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9.04 |
Compensation and Expenses |
17 |
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9.05 |
Limitation of Authority |
17 |
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ARTICLE X
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10.01 |
Assignment |
18 |
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10.02 |
Employment Not Guaranteed by Plan |
18 |
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10.03 |
Termination and Amendment |
18 |
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10.04 |
Contingency |
18 |
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10.05 |
Notice |
18 |
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10.06 |
Limitation on Liability |
19 |
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10.07 |
Indemnification |
19 |
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10.08 |
Headings |
19 |
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10.09 |
Severability |
19 |
INTRODUCTION
Effective March 1, 1999, Modine Manufacturing Company (the "Company") adopted a nonqualified deferred compensation plan to benefit certain of its employees by facilitating the accumulation of funds for their retirement.
This introduction and the following Articles, as amended from time to time, comprise the Plan.
ARTICLE I
Establishment of Plan and Purpose
1.01
Establishment of Plan.
Modine Manufacturing Company (the "Company") establishes the Modine Manufacturing Company Deferred Compensation Plan (the "Plan"), effective as of March 1, 1999.
1.02
Purpose of Plan.
The Plan shall permit a select group of management and highly compensated employees to enhance the security of themselves and their beneficiaries following the termination of their employment with the Company (as defined herein) by deferring until that time a portion of the compensation which may otherwise be payable to them at an earlier date and by providing for Company matching contributions on certain deferred amounts. By allowing key management employees to participate in the Plan, the Company expects the Plan to benefit it in attracting and retaining the most capable individuals to fill its executive positions.
The parties intend that the arrangements described herein be unfunded for tax purposes of Title I in the Employee Retirement Income Security Act as amended from time to time.
ARTICLE II
Definitions and Construction
As used herein, the following words shall have the following meanings:
2.01
Definitions
.
(a)
Administrator.
The person or persons selected pursuant to Article IX below to control and manage the operation and administration of the Plan.
(b)
Beneficiaries.
The spouse or descendants of Participant or any other person receiving benefits hereunder in relation to the Participant.
(c)
Company.
Modine Manufacturing Company, a Wisconsin corporation or successor thereof now or hereinafter created.
(d)
Compensation.
The Participant's base salary including amounts deferred by the Participant under this Plan or any other employee benefit plan of the Company, provided , however, that Compensation shall not include severance pay or salary continuation payments. In all cases compensation shall include only compensation paid while an employee is a Participant in the Plan.
(e)
Deferral Contributions
. The amount of deferred compensation contributed by the Participant for a calendar year pursuant to Section 4.01 herein.
(f)
Effective Date.
The effective date of this Plan shall be March 1, 1999.
(g)
Employee.
An employee of the Company.
(h)
Employment.
Employment with the Company.
(i)
Participants Account.
The account maintained for each Participant pursuant to Article VI below.
(j)
Participants
. Such management and highly compensated Employees whom the Administrator identifies as eligible to participate herein.
(k)
Plan
. The Modine Manufacturing Company Deferred Compensation Plan, as stated herein and as amended from time to time.
(l)
Plan Year.
The period beginning on the Effective Date and ending on December 31, 1999, and each 12-month period ending on each subsequent December 31.
(m)
Retirement.
As to each Participant, the termination of employment on or after the later of attaining age 65.
(n)
Unforeseeable Emergency.
An Unforeseeable Emergency is a severe financial hardship to a Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in section 152(a) of the Code) of the Participant, loss of the Participant's property due to casualty or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.
2.02
Construction.
The laws of the State of Wisconsin, as amended from time to time, shall govern the construction and application of this Agreement. Words used in the masculine gender shall include the feminine and words used in the singular shall include the plural, as appropriate. The words "hereof," "herein", "hereunder" and other similar compounds of the word "here" shall refer to the entire Agreement, not to a particular section. All references to statutory sections shall include the section so identified as amended from time to time or any other statute of similar import. If any provisions of the Internal Revenue Code, Employee Retirement Income Security Act or other statutes or regulations render any provisions of this Plan unenforceable, such provision shall be of no force and effect only to the minimum extent required by such law.
ARTICLE III
Eligibility
3.01
Conditions of Eligibility.
The Administrator shall, from time to time, specify the management and highly compensated Employees eligible to participate herein on Appendix A.
3.02
Commencement of Participation.
An individual identified as eligible to participate herein shall, by electing to participate substantially in the form of Appendix B attached hereto, commence participation as of either the first day of any Plan Year beginning on or after the later of (i) March 1, 1999 or (ii) his identification as eligible for participation.
3.03
Termination of Participation.
An individual's right to participate herein shall cease as of the earlier of the termination of his Employment or action by the Administrator removing him from the Employees eligible to participate herein.
If an individual's right to participate terminates during a Plan Year, his Compensation for such year shall include only Compensation otherwise earned by him before the cessation of his eligibility to defer.
ARTICLE IV
Deferral of Compensation
4.01
Amount and Manner of Deferral
. Prior to the beginning of any Plan Year beginning on or after the Effective Date, a Participant may submit to the Administrator a written election substantially in the form of Appendix B attached hereto indicating the portion of the Participant's Compensation for such Plan Year which he or she elects to defer hereunder which election shall become irrevocable immediately upon commencement of the Plan Year. Participant elections will be limited to 10% of Compensation. The Company shall, consistent with that election, defer such portion of the Participant's Compensation earned in such Plan Year.
If a Participant elects to defer a portion of his or her Compensation under the Plan, the Company (a) shall commence the Participant's deferral into this Plan when the maximum permitted amount has been deferred into the Modine 401(k) Retirement Plan for Salaried Employees and (b) shall reduce the Participant's Compensation by the amount deferred hereunder.
4.02
Cessation of Deferral
. In the event of an Unforeseeable Emergency, a participant may request in writing that deferrals elected by that Participant hereunder shall cease for the then current Plan Year. Such Unforeseeable Emergency must inflict hardship upon the Participant and must arise from causes beyond the Participant's control. The Administrator shall, in its reasonable judgment, determine whether such an Unforeseeable Emergency exists. Circumstances that will constitute an Unforeseeable Emergency shall depend on the facts of each case, consistent with the provisions of Treasury Regulation Section 1.457-2(h)(4) and (5). If the Administrator determines that such an Unforeseeable Emergency does exist, the deferrals for that Plan Year shall cease as to that Participant. If the administrator determines that no such emergency exists, the deferrals shall continue as originally elected.
If a Participant, consistent with the immediately preceding paragraph, ceases deferrals in a Plan year, the Participant may not resume deferrals hereunder (if otherwise eligible to do so) until the Plan Year following the Plan Year in which the cessation occurred.
ARTICLE V
Company Contributions
5.01
Company Discretionary Matching Contributions.
Subject to the right of the Company to alter, amend or terminate the Plan, for each payroll period the Company may, but is not required to contribute, a matching contribution to the Plan in an amount, if any, to be determined in the absolute discretion of the Board of Directors of the Company by resolution adopted on or before the last day of the calendar year. In the event the Board of Directors does not specifically authorize a matching contribution to the Plan, the Company shall be under no obligation to make any discretionary contributions pursuant to this section 5.01.
5.02
Allocation of Matching Contributions
. The matching contributions made by the Company pursuant to Section 5.01 above shall be allocated among Participants in the ratio that the eligible deferrals of each Participant bears to the eligible deferrals of all Participants for that payroll period. Eligible deferrals shall be such amount of deferrals as determined from time to time by the Board of Directors in its absolute discretion.
ARTICLE VI
Account
6.01
Nature of Account.
Only for the purpose of measuring payments due Participants hereunder, the Company shall maintain on behalf of each Participant an Account including a Deferral Contributions Account to which the Company shall credit amounts deferred under Section 4.01 and a Company Contributions Account to which the Company shall credit amounts contributed under Section 5.01.
The Account hereunder and assets, if any and of any nature acquired by the Company to measure a Participant's benefits hereunder, shall not constitute or be treated for any reason as a trust for, property of or a security interest for the benefit of a Participant, his Beneficiaries or any other person. The Participants and the Company acknowledge that the Plan constitutes a promise by the Company to pay benefits to the Participants or their beneficiaries, that Participants' rights hereunder are limited to those of general unsecured creditors of the Company and that the establishment of the Plan, the deferral of all or any portion of a Participant's Compensation, and the acquisition of assets to measure a Participant's benefits hereunder do not prevent any property of the Company from being subject to the right of all of the Company's creditors. The Company shall contribute all contributions hereunder to a trust created by the Company and any assets held by the trust to assist it in meeting its obligations under the Plan will conform to the terms of the Internal Revenue Service's model trust, as described in Revenue Procedure 92-64.
6.02
Credit to Deferral Contribution Account
. As of the last day of each Plan Year, the Company shall credit to the Deferral Contributions Account of each Participant the amount, if any, of that Participant's Compensation deferred for such Plan Year (even if calculated and otherwise paid following the close of that Plan Year). If the Administrator in its discretion so elects, the Company may credit to a Participant's Account during a Plan Year such amounts representing Compensation otherwise payable before the end of the Plan Year. In such instances, the Company shall credit such amounts to Participants' Accounts as the amounts would otherwise become payable and shall do so on a uniform and nondiscriminatory basis for all Participants.
6.03
Credit to Company Contributions Account
. As of the last day of each Plan Year, the Company shall credit to the Company Contributions Account of each Participant the amount, if any, of Company Matching Contributions under Section 5.01. If the Administrator in its discretion so elects, the Company may credit to a Participant's Account during a Plan Year such amounts representing Company Matching Contributions on Deferral Contributions from Compensation otherwise payable before the end of the Plan Year. In such instances, the Company shall credit such amounts to Participants' Accounts as the Deferral Contributions are made and shall do so on a uniform and nondiscriminatory basis for all Participants.
6.04
Changes in Account.
If a Participant defers the receipt of Compensation under this Plan, the Participant's Account shall record the receipt of all contributions, as indicated from time to time. The Participant's Account shall reflect the income and losses and increase or decrease in value experienced by assets specified on Appendix B. A Participant's Account shall also reflect expenses generated by, and related to, the investment choices the Company makes for his Account.
6.05
Investments.
(a) The trustee of the Trust established pursuant to 6.01 above shall invest all assets contributed under this Plan, and earnings thereon, in accordance with the Trust Agreement.
(b) A Participant may request his or her preferences for the investment of assets of his or her Account in one or more investment alternatives made available by the Administrator. The Participant may change his or her investment preference as of any January 1, April 1, July 1 or October 1 by delivering a new investment request as specified on Appendix B at least 10 days prior to such effective date. The Trustee shall attempt to invest amounts credited to the Participant's Trust Account pursuant to his or her request, but the Trustee shall have final investment discretion with respect to all Accounts.
(c) No individual may commence participation herein without first submitting a request pursuant to this subsection 6.05. A Participant or, following his death his Beneficiaries, may continue submitting elections hereunder until the distribution of all amounts from his or her Account. All elections must be in writing and must be signed by the Administrator.
6.06
Valuation of Account
. Within 90 days after the last day of each Plan Year and such other dates selected by the Administrator, the Company shall provide each Participant or his Beneficiaries a statement indicating the balance of his Account as of the last day of such Plan Year or other applicable period reflecting the amount of Deferral Contributions and Company Matching Contributions if any, together with all other changes in value during such period. Participants who disagree with the information provided in such statements must submit objections, in writing, to the Administrator within 90 days of receipt of such statements.
ARTICLE VII
Vesting
7.01
Participant's Account.
Subject to the rights of the Company's creditors as set forth in Section 6.01 above, the Participant's Account, including the Deferral Contributions Account and the Company Matching Contributions Account of that Participant, shall at all times be non-forfeitable.
ARTICLE VIII
Distributions
8.01
For Reasons Other Than Death
. The Company shall pay an amount equaling the balance of a Participant's Account to him in a single lump sum or installments as previously elected by the Participant, either commencing as soon as possible, but no later than 120 days following the end of the Plan Year during which occurs the earliest of the following:
(a) His or her Retirement.
(b) The determination of Disability by the Employer. For purposes of this Plan, Disability means a physical or mental condition of a Participant resulting from bodily injury, disease or mental disorder which renders the Participant permanently incapable of continuing his or her then existing position of employment with the Company. The determination of Disability shall be determined by the Administrator in accordance with uniform principles consistently applied and based on evidence the Administrator deems necessary.
(c) The termination of employment of the Participant for any reason.
A Participant may change his or her form of payment, by filing a Form of Payment Election, at any time at least one year prior to the occurrence of the distributable event set forth above. Any such payment shall reduce the balance in his Account.
8.02 Upon Death.
(a) Upon a Participant's death, either before or after his Retirement, with a balance remaining in his Account, the Company shall pay an amount equaling the balance of his Account to the beneficiary or beneficiaries specified by the Participant or, if none, to his surviving spouse or, if none, to his estate. Each Participant may designate a beneficiary or beneficiaries to receive the unpaid balance of his Account upon his death and may revoke or modify such designation at any time and from time to time by submitting to the Administrator a Beneficiary Designation substantially in the form attached hereto as Appendix B.
(b) If a Participant's death occurs prior to the payment of any amounts to him hereunder, other than payments for emergencies, and:
(i) payments are to be made to his estate, such payments shall occur in six annual installments beginning with a payment on the first day of the sixth month immediately following the Participant's death of an amount equal to the estate and inheritance taxes attributed to the value of the balance of the Account with the remainder thereof paid within the first 120 days in each of the five consecutive Plan Years beginning immediately thereafter. The amount of each such subsequent payment shall equal the quotient obtained upon dividing the balance in the Account as of the first day of the Plan Year of payment by the number of installments then remaining to be paid (including the installment then being paid) in equal installments, or
(ii) if payments are to be made to a beneficiary other than his estate, such payments shall occur in five annual installments payable within the first 120 days of the Plan Year immediately following the Participant's death and the first 120 days of each of the four Plan years immediately thereafter.
The amount of each such payment shall equal the quotient obtained upon dividing the balance in the Account as of the first day of the Plan year of payment by the number of installments then remaining to be paid (including the installment then being paid).
(c) If a Participant's death occurs after the payment of any amount to him hereunder, other than payments for Emergencies under 8.03, payments to his or her Beneficiary shall occur in the same form, and be calculated in the same manner, as paid to the Participant prior to death by merely substituting the new recipient for the Participant.
(d) Notwithstanding any other provision of this Sec. 8.02, if, upon a Participant's or Beneficiary's death, the Plan (or any Trust related to it) receives the proceeds of a policy insuring the life of the deceased, the Company shall, as soon as practicable, pay over such proceeds to the appropriate Beneficiary or estate and such amount shall reduce the balance to be paid hereunder. In the event that policy proceeds are greater than the Participant's Account balance, such excess shall accrue to the benefit of the Participant.
(e) If a Beneficiary survives a Participant but dies prior to receipt of the entire amount in the Account due him or her, the Company shall, as soon as practicable, pay to the estate of the Beneficiary in a lump sum the entire remaining, balance herein due the Beneficiary.
(f) The Administrator shall reduce the balance in the deceased Participant's Account by the amount of any payment pursuant to this section 8.02 immediately upon the occurrence of such payment.
8.03
Emergencies
. In the event of an Unforeseeable Emergency either before or after the commencement of payments hereunder, a Participant or Beneficiary may request in writing that all or any portion of the benefits due him hereunder be paid in one or more installments prior to the normal time for payment of such amount. The Administrator shall, in its reasonable judgment, determine whether the applicant could not address the emergency through reimbursement or compensation by insurance or otherwise, by liquidation of other assets (provided such liquidation, in itself. would not create a financial hardship). Only if the Administrator determines that such an Unforeseeable Emergency exists, the Company shall pay to the Participant or Beneficiary, as the case may be, an amount equal to the lesser of (a) the amount requested or (b) the amount reasonably necessary to alleviate the hardship. The Administrator shall use its reasonable discretion to determine when the payments shall be made and shall immediately reduce the balance in the recipient's Account by the amount of such payment.
ARTICLE IX
Administration of the Plan
9.01
Appointment of Separate Administrator.
The Company shall, in writing, appoint a separate Administrator. Any person including, but not limited to, Employees shall be eligible to serve as Administrator. Two or more persons may form a committee to serve as Administrator. Persons serving as Administrator may resign by written notice to the Company and the Company may appoint or remove such persons. An Administrator consisting of more than one person shall act by a majority of its members at the time in office, either by vote at a meeting or in writing without a meeting. An Administrator consisting of more than one person may authorize any one or more of its members to execute any document or documents on behalf of the Administrator, in which event the Administrator shall notify the Company of the member or members so designated. The Company shall accept and rely upon any document executed by such member or members as representing action by the Administrator until the Administrator shall file with the Company a written revocation of such designation. No person serving as Administrator shall vote or decide upon any matter relating solely to himself or solely to any of his or her rights or benefits pursuant to the Plan.
9.02
Powers and Duties.
The Administrator shall administer the Plan in accordance with its terms. The Administrator shall have full and complete authority and control with respect to Plan operations and administration unless the Administrator allocates and delegates such authority or control pursuant to the procedures stated in subsection b or c below. Any decisions of the Administrator or its delegate shall be final and binding upon all persons dealing with the Plan or claiming any benefit under the Plan. The Administrator shall have all powers that are necessary to manage and control Plan operations and administration including, but not limited to, the following:
(a) To employ such accountants, counsel or other persons as it deems necessary or desirable in connection with Plan administration. The Company shall bear the costs of such services and other administrative expenses.
(b) To designate in writing persons other than the Administrator to perform any of its powers and duties hereunder.
(c) To allocate in writing any of its powers and duties hereunder to those persons who have been designated to perform Plan responsibilities.
(d) The discretionary authority to construe and interpret the Plan, including the power to construe disputed provisions.
(e) To resolve all questions arising in the administration. interpretation and application of the Plan including, but not limited to, questions as to the eligibility or the right of any person to a benefit.
(f) To adopt such rules, regulations, forms and procedures from time to time as it deems advisable and appropriate in the proper administration of the Plan.
(g) To prescribe procedures to be followed by any person in applying for distributions pursuant to the Plan and to designate the forms or documents, evidence and such other information as the Administrator may reasonably deem necessary, desirable or convenient to support an application for such distribution.
(h) To apply consistently and uniformly the rules, regulations and determinations to all Participants and beneficiaries in similar circumstances.
9.03
Records and Notices
. The Administrator shall keep a record of all its proceedings and acts and shall maintain all such books of accounts, records and other data as may be necessary for proper plan administration. The Administrator shall notify the Company of any action taken by the Administrator which affects the Trustee's Plan obligations or rights and, when required, shall notify any other interested parties.
9.04
Compensation and Expenses
. The Company shall pay the expenses incurred by the Administrator in the proper administration of the Plan. An Administrator who is an Employee shall not receive any additional fee or compensation for services rendered as an Administrator.
9.05
Limitation of Authority
. The Administrator shall not add to, subtract from or modify any of the terms of the Plan, change or add to any benefits prescribed by the Plan, or waive or fail to apply any Plan requirement for benefit eligibility.
ARTICLE X
General Provisions
10.01
Assignment.
No Participant or Beneficiary may sell, assign, transfer encumber or otherwise dispose of the right to receive payments hereunder. A Participant's rights to benefit payments under the Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of the Participant or the Participant's beneficiary.
10.02
Employment Not Guaranteed by Plan
. The establishment of this Plan, its amendments and the granting of a benefit pursuant to the Plan shall not give any Participant the right to continued Employment or limit the right of the Company to dismiss or impose penalties upon the Participant or modify the terms of Employment of any Participant.
10.03
Termination and Amendment
. The Company may at any time and from time to time terminate, suspend, alter or amend this Plan and no Participant or any other person shall have any right, title, interest or claim against the Company, its directors, officers or employees for any amounts, except that (i) Participant shall be fully vested in his Account hereunder as of the date on which the Plan is terminated or suspended, (ii) no amendment shall reduce a Participant's then existing non-forfeitable interest in the Plan, and (iii) (unless the Company and Participant agree to the contrary) such amount shall (a) continue to fluctuate pursuant to the investment election then in effect and (b) be paid to the Participant or his Beneficiaries at the time and in the manner provided by Article VII above.
10.04
Contingency
. The Company may apply for private rulings from the United States Department of Labor as to the exemption of the arrangement described herein from the reporting and disclosure requirements of ERISA and from the Internal Revenue Service as to the deductibility from taxable income of benefits paid hereunder or the exclusion of amounts deferred hereunder from the taxable income of Participant until paid. If the Company applies for a private letter ruling from the Department of Labor or Internal Revenue Service and does not receive a satisfactory reply thereto, the Company may deem this Plan terminated in which event the parties shall treat all amounts deferred hereunder as immediately payable to the Participants and all parties' rights and obligations hereunder shall thereupon cease.
10.05
Notice.
Any and all notices, designations or reports provided for herein shall be in writing and delivered personally or by registered or certified mail, return receipt requested, addressed, in the case of the Company, its Board of Directors or Administrator, to the Company's principal business office and, in the case of a Participant or Beneficiary, to his home address as shown on the records of the Company.
10.06
Limitation on Liability
. In no event shall the Company, Administrator or any employee, officer or director of the Company incur any liability for any act or failure to act unless such act or failure to act constitutes a lack of good faith, willful misconduct or gross negligence with respect to the Plan.
10.07
Indemnification
. The Company shall indemnify the Administrator and any employee, officer or director of the Company against all liabilities arising by reason of any act or failure to act unless such act or failure to act is due to such person's own gross negligence or willful misconduct or lack of good faith in the performance of his duties to the Plan or Trust Fund. Such indemnification shall include, but not be limited to, expenses reasonably incurred in the defense of any claim, including reasonable attorneys and legal fees, and amounts paid in any settlement or compromise; provided, however, that indemnification shall not occur to the extent that it is not permitted by applicable law. Indemnification shall not be deemed the exclusive remedy of any person entitled to indemnification pursuant to this section. The indemnification provided hereunder shall continue as to a person who has ceased acting as a director, officer, member, agent or employee of the Administrator or as an officer, director or employee of the Company and such person's rights shall inure to the benefit of his heirs and representatives.
10.08
Headings
. All articles and section headings in this Plan are intended merely for convenience and shall in no way be deemed to modify or supplement the actual terms and provisions stated thereunder.
10.09
Severability
. Any provision of this Plan prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. The illegal or invalid provisions shall be fully severable and this Plan shall be construed and enforced as if the illegal or invalid provisions had never been inserted in this Plan.
IN WITNESS WHEREOF, the Company, by its duly appointed officer. has caused this Plan to be executed and thereby established and its seal to be hereunto affixed as of the 20th day of January, 1999.
MODINE MANUFACTURING COMPANY
By:
/s/ D. R. Johnson
D. R. Johnson, President
and Chief Executive Officer
Attest:
By:
/s/ W. E. Pavlick
W. E. Pavlick, Secretary
FIRST AMENDMENT
TO THE
MODINE MANUFACTURINIG COMPANY
DEFERRED COMPENSATION PLAN
WHEREAS, the Company established the Modine Manufacturing Company Deferred Compensation Plan effective March 1, 1999; and
WHEREAS, it is the desire of the Company to amend such Plan as hereinafter set forth.
NOW, THEREFORE, the Company does hereby adopt this First Amendment to the Modine Manufacturing Company Deferred Compensation Plan to be effective as of January 1, 2001.
ARTICLE VII of the Plan is amended to read as follows in its entirety:
ARTICLE VII
Vesting
7.01 Participant's Deferral Contributions Account. Subject to the rights of the Company's creditors as set forth in Section 6.01 above, the Participant's Deferral Contributions Account shall at all times be nonforfeitable.
7.02 Participant's Company Matching Contributions Account. Subject to the rights of the Company's creditors as set forth in Section 6.01 above, the Participant's Company Matching Contributions Account shall become nonforfeitable (vested) as follows:
(a) The Deferral Contributions Account of a Participant whose Employment Commencement Date was prior to January 1, 2001, shall at all times be nonforfeitable.
(b) The Deferral Contributions Account of a Participant whose Employment Commencement Date was on or after January 1, 2001, shall become nonforfeitable (vested) only when such Participant has accumulated at least 3 years of service with the Company.
7.03 Forfeiture of Nonvested Balance. The nonvested portion of a Participant's Company Matching Contributions Account, as determined in accordance with Section 7.02(b), shall be forfeited as soon as administratively practical after the last day of the Plan Year in which the Participant terminates from employment with the Company. The amount forfeited shall be used to reduce the Company's contributions under Section 5.01, unless there are no such discretionary contributions in the following Plan Year, in which event, the amount forfeited shall be used to pay Plan expenses. However, if the Participant returns to the employment of the Employer prior to incurring five (5) consecutive years of Breaks in Service, the forfeited nonvested balance shall be restored to the Participant's Company Matching Contributions Account.
For the purposes of this ARTICLE VII, the provisions relating to "vesting" in the Modine 401(k) Retirement Plan for Salaried Employees shall apply and shall be incorporated into this Plan by reference, except as to any specific provisions of this Plan which are in addition to or different from the provisions of such Retirement Plan, in which event the provisions of this Plan shall apply.
Except as expressly amended herein, the Modine Manufacturing Company Deferred Compensation Plan shall remain in full force and effect.
MODINE MANUFACTURING COMPANY
/s/ D. R. Johnson
ATTEST:
/s/ D. R. Zakos
SECOND AMENDMENT
TO
THE MODINE MANUFACTURING COMPANY
DEFERRED COMPENSATION PLAN
WHEREAS, the Company established the Modine Manufacturing Compensation Plan effective March 1, 1999; and adopted a First Amendment thereto effective January 1, 2001; and
WHEREAS, it is the desire of the Company to again amend such Plan as hereinafter set forth.
NOW, THEREFORE, the Company does hereby adopt this Second Amendment to the Modine Manufacturing Company Deferred Compensation Plan to be effective as of January 1, 2002.
Section 2.01 (c) of the Plan is amended to read as follows in its entirety:
(c)
Company.
Modine Manufacturing Company, a Wisconsin corporation or successor thereof now and or hereinafter created, and any subsidiary or affiliate thereof.
Except as expressly amended herein, the Modine Manufacturing Company Deferred Compensation Plan shall remain in full force and effect.
MODINE MANUFACTURING COMPANY
BY: /s/ D. R. Johnson
ATTEST:
/s/ D. R. Zakos
EXHIBIT 10(eee)
MODINE MANUFACTURING COMPANY
BOARD OF DIRECTORS
DEFERRED COMPENSATION PLAN
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MODINE MANUFACTURING COMPANY
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Page |
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ARTICLE I
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1.01 |
Establishment of Plan |
4 |
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1.02 |
Purpose of Plan |
4 |
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ARTICLE II
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2.01 |
Definitions |
5 |
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2.02 |
Construction |
6 |
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ARTICLE III
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3.01 |
Conditions of Eligibility |
7 |
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3.02 |
Commencement of Participation |
7 |
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3.03 |
Termination of Participation |
7 |
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ARTICLE IV
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4.01 |
Amount and Manner of Deferral |
8 |
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4.02 |
Cessation of Deferral |
8 |
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ARTICLE V
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5.01 |
Nature of Account |
8 |
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5.02 |
Credit to Deferral Contributions Account |
9 |
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5.03 |
Changes in Account |
9 |
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5.04 |
Investments |
9 |
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5.05 |
Valuation Account |
10 |
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ARTICLE VI
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6.01 |
Participant's Deferral Contributions Account |
11 |
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ARTICLE VII
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7.01 |
For Reasons Other than Death |
11 |
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7.02 |
Upon Death |
12 |
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7.03 |
Emergencies |
13 |
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ARTICLE VIII
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8.01 |
Appointment of Separate Administrator |
14 |
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8.02 |
Powers and Duties |
14 |
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8.03 |
Records and Notices |
15 |
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8.04 |
Compensation and Expenses |
15 |
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8.05 |
Limitation of Authority |
15 |
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ARTICLE IX
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9.01 |
Assignment |
16 |
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9.02 |
Board Membership Not Guaranteed by Plan |
16 |
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9.03 |
Termination and Amendment |
16 |
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9.04 |
Contingency |
16 |
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9.05 |
Notice |
16 |
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9.06 |
Limitation on Liability |
17 |
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9.07 |
Indemnification |
17 |
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9.08 |
Headings |
17 |
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9.09 |
Severability |
17 |
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APPENDIX B-2
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Effective January 1, 2003, Modine Manufacturing Company (the "Company") adopted a deferred compensation plan to benefit members of its Board of Directors by facilitating deferrals of their directors fees, signed this 12
th
day of November, 2002.
This introduction and the following Articles, as amended from time to time, comprise the Plan.
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ARTICLE I
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ARTICLE II |
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Definitions and Construction |
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As used herein, the following words shall have the following meanings: |
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2.01 Definitions. |
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(a)
Administrator.
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The person or persons selected pursuant to Article VIII below to control and manage the operation and administration of the Plan. |
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(b)
Beneficiaries.
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The spouse or descendants of the Participant or any other person receiving benefits hereunder in relation to the Participant. |
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(c)
Board Member.
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A member of the Board of Directors of Modine Manufacturing Company. |
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(d) Company |
Modine Manufacturing Company, a Wisconsin corporation or successor thereof now or hereinafter created, and any domestic subsidiary or affiliate thereof. |
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(e) Compensation. |
The Participant's fees for his or her services as a Board Member. |
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(f) Deferral Contributions. |
The amount of Compensation contributed by the Participant for a calendar year pursuant to Section 4.01 herein. |
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(g) Effective Date. |
The effective date of this Plan shall be January 1, 2003. |
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(h) Employee. |
Any employee with the Company |
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(i) Participant's Account. |
The account maintained for each Participant pursuant to Article V below. |
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(j) Participants . |
Such Board Members as are eligible to participate herein. |
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(k) Plan . |
The Modine Manufacturing Company Board of Directors Deferred Compensation Plan, as stated herein and as amended from time to time. |
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(l) Plan Year. |
The period beginning on the original Effective Date and ending on December 31, 2003, and each 12-month period ending on each subsequent December 31. |
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(m) Retirement. |
The attainment of Emeritus Status. |
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(n) Unforeseeable Emergency. |
An Unforeseeable Emergency is a severe financial hardship to a Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in section 152(a) of the Code) of the Participant, loss of the Participant's property due to casualty or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. |
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2.02
Construction
. The laws of the State of Wisconsin, as amended from time to time, shall govern the construction and application of this Agreement. Words used in the masculine gender shall include the feminine and words used in the singular shall include the plural, as appropriate. The words "hereof," "herein," "hereunder" and other similar compounds of the word "here" shall refer to the entire Agreement, not to a particular section. All references to statutory sections shall include the section so identified as amended from time to time or any other statute of similar import. If any provisions of the Internal Revenue Code, Employee Retirement Income Security Act or other statutes or regulations render any provisions of this Plan unenforceable, such provision shall be of no force and effect only to the minimum extent required by such law.
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ARTICLE III |
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Eligibility |
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ARTICLE IV
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ARTICLE V |
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Accounts |
5.01
Nature of Account.
Only for the purpose of measuring payments due Participants hereunder, the Company shall maintain on behalf of each Participant an Account including a Deferral Contributions Account to which the Company shall credit amounts deferred under Section 4.01.
The Account hereunder and assets, if any and of any nature acquired by the Company to measure a Participant's benefits hereunder, shall not constitute or be treated for any reason as a trust for, property of or a security interest for the benefit of a Participant, his Beneficiaries or any other person. The Participants and the Company acknowledge that the Plan constitutes a promise by the Company to pay benefits to the Participants or their Beneficiaries, that Participants' rights hereunder are limited to those of general unsecured creditors of the Company and that the establishment of the Plan, the deferral of all or any portion of a Participant's Compensation, and the acquisition of assets to measure a Participant's benefits hereunder do not prevent any property of the Company from being subject to the right of all of the Company's creditors. The Company shall contribute all contributions hereunder to a trust created by the Company and any assets held by the trust to assist it in meeting its obligations under the Plan will conform, in all material respects, to the terms of the Internal Revenue Service's model trust, as described in Revenue Procedure 92-64.
5.02
Credit to Deferral Contribution Account
. As of the last day of each Plan Year, the Company shall credit to the Deferral Contributions Account of each Participant the amount, if any, of that Participant's Compensation deferred for such Plan Year (even if calculated and otherwise paid following the close of that Plan Year). If the Administrator in its discretion so elects, the Company may credit to a Participant's Account during a Plan Year such amounts representing Compensation otherwise payable before the end of the Plan Year. In such instances, the Company shall credit such amounts to Participants' Accounts as the amounts would otherwise become payable and shall do so on a uniform and nondiscriminatory basis for all Participants.
5.03
Changes in Account.
If a Participant defers the receipt of Compensation under this Plan, the Participant's Account shall record the receipt of all contributions, as indicated from time to time. The Participant's Account shall reflect the income and losses and increase or decrease in value experienced by assets specified by a Participant on such form as may be provided by the Administrator. A Participant's Account shall also reflect expenses generated by, and related to, the investment choices the Company makes for his Account.
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(a) |
The trustee of the Trust established pursuant to 5.01 above shall invest all assets contributed under this Plan, and earnings thereon, in accordance with the Trust Agreement.
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(b) |
A Participant may request his or her preferences for the investment of assets of his or her Account in one or more investment alternatives made available by the Administrator. The Participant may change his or her investment preference as of any January 1, April 1, July 1 or October 1 by delivering a new investment request as specified by a Participant on such form as may be provided by the Administrator at least 10 days prior to such effective date. The Trustee shall attempt to invest amounts credited to the Participant's Account pursuant to his or her request, but the Trustee shall have final investment discretion with respect to all Accounts.
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(c) |
No individual may commence participation herein without first submitting a request pursuant to this Section 5.04. A Participant or, following his death his Beneficiaries, may continue submitting elections hereunder until the distribution of all amounts from his or her Account. All elections must be in writing and must be signed by the Administrator. |
5.05
Valuation of Account.
Within 90 days after the last day of each Plan Year and such other dates selected by the Administrator, the Company shall provide each Participant or his Beneficiaries a statement indicating the balance of his Account as of the last day of such Plan Year or other applicable period reflecting the amount of Deferral Contributions, together with all other changes in value during such period. Participants who disagree with the information provided in such statements must submit objections, in writing, to the Administrator within 90 days of receipt of such statements.
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ARTICLE VI |
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Vesting |
6.01
Participant's Deferral Contributions Account.
Subject to the rights of the Company's creditors as set forth in Section 5.01 above, the Participant's Deferral Contributions Account shall at all times be non-forfeitable.
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ARTICLE VII |
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Distributions |
7.01
For Reasons Other Than Death
. The Company shall pay an amount equaling the balance of a Participant's Account to him in a single lump sum or installments as previously elected by the Participant, either commencing as soon as possible, but no later than 120 days following the end of the Plan Year during which occurs the earliest of the following:
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(a) |
His or her Retirement.
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(b) |
The determination of Disability by the Company. For purposes of this Plan, Disability means a physical or mental condition of a Participant resulting from bodily injury, disease or mental disorder which renders the Participant permanently incapable of continuing his or her then existing position of membership on the Company's Board of Directors. The determination of Disability shall be determined by the Administrator in accordance with uniform principles consistently applied and based on evidence that the Administrator deems necessary.
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(c) |
The termination of membership on the Company's Board of Directors of the Participant for any reason.
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A Participant may change his or her form of payment, by filing a Form of Payment Election, at any time at least one year prior to the occurrence of the distributable event set forth above. Any such payment shall reduce the balance in his Account.
7.02 Upon Death
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(a) |
Upon a Participant's death, either before or after his Retirement, with a balance remaining in his Account, the Company shall pay an amount equaling the balance of his Account to the Beneficiary or Beneficiaries specified by the Participant or, if none, to his surviving spouse or, if none, to his estate. Each Participant may designate a Beneficiary or Beneficiaries to receive the unpaid balance of his Account upon his death and may revoke or modify such designation at any time and from time to time by submitting to the Administrator a Beneficiary Designation substantially in the form attached hereto as Appendix B-2.
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(b) |
If a Participant's death occurs prior to the payment of any amounts to him hereunder, other than payments for emergencies, and:
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(i) Payments are to be made to his estate, such payments shall occur in six annual installments beginning with a payment on the first day of the sixth month immediately following the Participant's death of an amount equal to the estate and inheritance taxes attributed to the value of the balance of the Account with the remainder thereof paid within the first 120 days in each of the five consecutive Plan Years beginning immediately thereafter. The amount of each such subsequent payment shall equal the quotient obtained upon dividing the balance in the Account as of the first day of the Plan Year of payment by the number of installments then remaining to be paid (including the installment then being paid) in equal installments, or
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(ii) If payments are to be made to a Beneficiary other than his estate, such payments shall occur in five annual installments payable within the first 120 days of the Plan Year immediately following the Participant's death and the first 120 days of each of the four Plan years immediately thereafter. The amount of each such payment shall equal the quotient obtained upon dividing the balance in the Account as of the first day of the Plan year of payment by the number of installments then remaining to be paid (including the installment then being paid).
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(c) |
If a Participant's death occurs after the payment of any amount to him hereunder, other than payments for Emergencies under Section 7.03, payments to his or her Beneficiary shall occur in the same form, and be calculated in the same manner, as paid to the Participant prior to death by merely substituting the new recipient for the Participant. |
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(d) |
Notwithstanding any other provision of this Section 7.02, if upon a Participant's or Beneficiary's death, the Plan (or any Trust related to it) receives the proceeds of a policy insuring the life of the deceased, the Company shall, as soon as practicable, pay over such proceeds to the appropriate Beneficiary or estate and such amount shall reduce the balance to be paid hereunder. In the event that policy proceeds are greater than the Participant's Account balance, such excess shall accrue to the benefit of the Participant. |
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(e) |
If a Beneficiary survives a Participant but dies prior to receipt of the entire amount in the Account due him or her, the Company shall, as soon as practicable, pay to the estate of the Beneficiary in a lump sum the entire remaining balance herein due the Beneficiary. |
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(f) |
The Administrator shall reduce the balance in the deceased Participant's Account by the amount of any payment pursuant to this Section 7.02 immediately upon the occurrence of such payment. |
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7.03
Emergencies.
In the event of an Unforeseeable Emergency either before or after the commencement of payments hereunder, a Participant or Beneficiary may request in writing that all or any portion of the benefits due him hereunder be paid in one or more installments prior to the normal time for payment of such amount. The Administrator shall, in its reasonable judgment, determine whether the applicant could not address the emergency through reimbursement or compensation by insurance or otherwise, by liquidation of other assets (to the extent such liquidation, in itself, would not create a financial hardship). Only if the Administrator determines that such an Unforeseeable Emergency exists, the Company shall pay to the Participant or Beneficiary, as the case may be, an amount equal to the lesser of (a) the amount requested or (b) the amount reasonably necessary to alleviate the hardship. The Administrator shall use its reasonable discretion to determine when the payments shall be made and shall immediately reduce the balance in the recipient's Account by the amount of such payment.
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ARTICLE VIII
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8.01
Appointment of Separate Administrator.
The Company shall, in writing, appoint a separate Administrator. Any person including, but not limited to, Employees shall be eligible to serve as Administrator. Two or more persons may form a committee to serve as Administrator. Persons serving as Administrator may resign by written notice to the Company and the Company may appoint or remove such persons. An Administrator consisting of more than one person shall act by a majority of its members at the time in office, either by vote at a meeting or in writing without a meeting. An Administrator consisting of more than one person may authorize any one or more of its members to execute any document or documents on behalf of the Administrator, in which event the Administrator shall notify the Company of the member or members so designated. The Company shall accept and rely upon any document executed by such member or members, as representing action by the Administrator until the Administrator shall file with the Company a written revocation of such designation. No person serving as Administrator shall vote or decide upon any matter relating solely to himself or solely to any of his or her rights or benefits pursuant to the Plan.
8.02
Powers and Duties.
The Administrator shall administer the Plan in accordance with its terms. The Administrator shall have full and complete authority and control with respect to Plan operations and administration unless the Administrator allocates and delegates such authority or control pursuant to the procedures stated in subsection (b) or (c), below. Any decisions of the Administrator or its delegate shall be final and binding upon all persons dealing with the Plan or claiming any benefit under the Plan. The Administrator shall have all powers that are necessary to manage and control Plan operations and administration including, but not limited to, the following:
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(a) |
To employ such accountants, counsel or other persons as it deems necessary or desirable in connection with Plan administration. The Company shall bear the costs of such services and other administrative expenses.
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(b) |
To designate in writing persons other than the Administrator to perform any of its powers and duties hereunder.
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(c) |
To allocate in writing any of its powers and duties hereunder to those persons who have been designated to perform Plan responsibilities.
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(d) |
The discretionary authority to construe and interpret the Plan, including the power to construe disputed provisions.
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(e) |
To resolve all questions arising in the administration, interpretation and application of the Plan including, but not limited to, questions as to the eligibility or the right of any person to a benefit.
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(f) |
To adopt such rules, regulations, forms and procedures from time to time as it deems advisable and appropriate in the proper administration of the Plan.
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(h) |
To apply consistently and uniformly the rules, regulations and determinations to all Participants and beneficiaries in similar circumstances. |
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8.03
Records and Notices.
The Administrator shall keep a record of all its proceedings, acts, and shall maintain all such books of accounts, records and other data as may be necessary for proper plan administration. The Administrator shall notify the Company of any action taken by the Administrator which affects the Trustee's Plan obligations or rights and, when required, shall notify any other interested parties.
8.04
Compensation and Expenses.
The Company shall pay the expenses incurred by the Administrator in the proper administration of the Plan. An Administrator who is an Employee shall not receive any additional fee or compensation for services rendered as an Administrator.
8.05
Limitation of Authority.
The Administrator shall not add to, subtract from or modify any of the terms of the Plan, change or add to any benefits prescribed by the Plan, or waive or fail to apply any Plan requirement for benefit eligibility.
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ARTICLE IX
|
9.01
Assignment.
No Participant or Beneficiary may sell, assign, transfer encumber or otherwise dispose of the right to receive payments hereunder. A Participant's rights to benefit payments under the Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of the Participant or the Participant's Beneficiary.
9.02
Board Membership Not Guaranteed by Plan.
The establishment of this Plan, its amendments and the granting of a benefit pursuant to the Plan shall not give any Participant the right to continued membership on the Company's Board of Directors, nor limit the right of the Company to dismiss or impose penalties upon the Participant.
9.03
Termination and Amendment.
The Company may at any time and from time to time terminate, suspend, alter or amend this Plan and no Participant or any other person shall have any right, title, interest or claim against the Company, its directors, officers or employees for any amounts, except that (i) Participant shall be fully vested in his Account hereunder as of the date on which the Plan is terminated or suspended, (ii) no amendment shall reduce a Participant's then existing non-forfeitable interest in the Plan, and (iii) (unless the Company and Participant agree to the contrary) such amount shall (a) continue to fluctuate pursuant to the investment election then in effect and (b) be paid to the Participant or his Beneficiaries at the time and in the manner provided by Article VI above.
9.04
Contingency.
The Company may apply for private rulings from the United States Department of Labor as to the exemption of the arrangement described herein from the reporting and disclosure requirements of ERISA and from the Internal Revenue Service as to the deductibility from taxable income of benefits paid hereunder or the exclusion of amounts deferred hereunder from the taxable income of Participant until paid. If the Company applies for a private letter ruling from the Department of Labor or Internal Revenue Service and does not receive a satisfactory reply thereto, the Company may deem this Plan terminated in which event the parties shall treat all amounts deferred hereunder as immediately payable to the Participants and all parties' rights and obligations hereunder shall thereupon cease.
9.05
Notice.
Any and all notices, designations or reports provided for herein shall be in writing and delivered personally or by registered or certified mail, return receipt requested, addressed, in the case of the Company, its Board of Directors or Administrator, to the Company's principal business office and, in the case of a Participant or Beneficiary, to his home address as shown on the records of the Company.
9.06
Limitation on Liability.
In no event shall the Company, Administrator or any employee, officer or director of the Company incur any liability for any act or failure to act unless such act or failure to act constitutes a lack of good faith, willful misconduct or gross negligence with respect to the Plan.
9.07
Indemnification.
The Company shall indemnify the Administrator and any employee, officer or director of the Company against all liabilities arising by reason of any act or failure to act unless such act or failure to act is due to such person's own gross negligence or willful misconduct or lack of good faith in the performance of his duties to the Plan or Trust Fund. Such indemnification shall include, but not be limited to, expenses reasonably incurred in the defense of any claim, including reasonable attorneys and legal fees, and amounts paid in any settlement or compromise; provided, however, that indemnification shall not occur to the extent that it is not permitted by applicable law. Indemnification shall not be deemed the exclusive remedy of any person entitled to indemnification pursuant to this section. The indemnification provided hereunder shall continue as to a person who has ceased acting as a director, officer, member, agent or employee of the Administrator or as an officer, director or employee of the Company and such person's rights shall inure to the benefit of his heirs and representatives.
9.08
Headings.
All articles and section headings in this Plan are intended merely for convenience and shall in no way be deemed to modify or supplement the actual terms and provisions stated thereunder.
9.09
Severability.
Any provision of this Plan prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. The illegal or invalid provisions shall be fully severable and this Plan shall be construed and enforced as if the illegal or invalid provisions had never been inserted in this Plan.
IN WITNESS WHEREOF, the Company, by its duly appointed officer has caused this Plan to be executed and thereby established and its seal to be hereunto affixed as of the day and year first above written.
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MODINE MANUFACTURING COMPANY
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Executive Officer |
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Attest:
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BY: s/ D. R. Zakos |
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D. R. Zakos, Secretary
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APPENDIX B-2
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THIS AGREEMENT
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RECITALS:
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A. |
The Participant has been and is providing service as a member of the Company's Board of Directors and has not, voluntarily or involuntarily, terminated such service;
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B. |
The Company desires to retain the services of the Participant and to induce him/her to continue his/her service as a Board Member by providing him/her with a deferred compensation plan;
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C. |
The Company has established the Modine Manufacturing Company Board of Directors Deferred Compensation Plan (the "Plan"); and |
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D. |
The Participant desires to participate in the Plan.
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AGREEMENTS
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NOW, THEREFORE
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1. |
The parties acknowledge that the Plan, attached as Appendix I, is incorporated as part of this Agreement.
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2. |
The Participant irrevocably directs the Company to defer ______% of Compensation prior to any pretax and after tax reductions and prior to any tax withholding.
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3. |
The Participant's direction under Paragraph 2 of this Agreement is generally irrevocable and can only be modified or revoked, prior to commencement of the calendar year or in the event of an Emergency as provided in Section 4.02 of the Plan.
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4. |
The parties acknowledge that the amount and payment of benefits resulting from the deferral of Compensation pursuant to this Agreement shall be determined exclusively pursuant to the terms of the Plan. The value of the Account shall be established pursuant to Article 5 of the Plan.
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5. |
The Participant hereby authorizes the Administrator to reduce the accumulation of his/her Account by the expenses of investment if any.
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6. |
The parties acknowledge that this Agreement shall not be construed as giving the Participant the right to continue as a member of the Board of Directors of the Company or as otherwise limiting the right of the Company to modify the terms of service of the Participant.
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7. |
The Participant directs that any benefits payable pursuant to the Plan upon his/her death be paid to the following primary beneficiaries if they survive the Participant, otherwise to the following contingent beneficiaries: |
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Primary Beneficiaries: |
Percentage of Benefit: |
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Contingent Beneficiaries: |
Percentage of Benefits |
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Distribution Option
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Participant's Election
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(a) Lump sum distribution to be paid as soon as possible but not later than 120 days following the end of the Plan Year which occurs after the earlier of (i) Retirement, (ii) Disability (as defined in the Plan) of the Participant, or (iii) Termination of services as a member of the Company's Board of Directors. |
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Management's Discussion and Analysis
Overview
The Company has certain foreign-denominated long-term debt obligations that are sensitive to foreign currency exchange rates. The following table presents the future principal cash flows and weighted average interest rates by expected maturity dates. The fair value of long-term debt is estimated by discounting the future cash flows at rates offered to the company for similar debt instruments of comparable maturities. The carrying value of the debt approximates fair value. As of March 31, 2003, the foreign-denominated long-term debt matures as follows:
(Dollars in thousands)
Interest Rate Risk
(Dollars in thousands)
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Years ending March31 |
2004 |
2005 |
2006 |
2007 |
2008 |
There-after |
Total |
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Fixed rate (U.S.$) |
$10,494 |
$ -- |
$ -- |
$ -- |
$ -- |
$ -- |
$10,494 |
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Average interest rate |
5.00% |
-- |
-- |
-- |
-- |
-- |
-- |
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Fixed rate (euro) |
2,046 |
3,028 |
58,118 |
3,621 |
3,621 |
8,126 |
78,560 |
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Average interest rate |
5.46% |
5.49% |
5.20% |
4.08% |
4.08% |
4.08% |
-- |
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Floating rate (GBP) |
152 |
160 |
168 |
176 |
185 |
353 |
1,194 |
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Average interest rate |
5.00% |
5.00% |
5.00% |
5.00% |
5.00% |
5.00% |
-- |
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Variable rate (U.S.$) |
-- |
-- |
18,000 |
-- |
3,000 |
-- |
21,000 |
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Average interest rate |
-- |
-- |
2.85% |
-- |
3.70% |
-- |
-- |
Credit Risk
Credit risk is the possibility of loss from a customer's failure to make payment according to contract terms. The Company's principal credit risk consists of outstanding trade receivables. Prior to granting credit, each customer is evaluated, taking into consideration the customer's financial condition, past payment experience and credit information. After credit is granted the Company actively monitors the customer's financial condition and developing business news. Approximately 52 percent and 49 percent of the trade receivables balance at March 31, 2003 and 2002, respectively, was concentrated in the Company's top ten customers. Modine's history of incurring credit losses from customers has not been material.
Economic Risk
Economic risk is the possibility of loss resulting from economic instability in certain areas of the world. The Company is continuing to monitor economic conditions in Brazil and the effect on the Company's equity investment in its 50 percent owned affiliate. Year-to-date, the exchange rate between the U.S. dollar and the Brazilian real has declined by more than 50 percent. The Company will continue to assess Brazil's economic and political stability to determine if any future actions or investment write-downs are warranted.
Commodity Price Risk
The Company is dependent upon the supply of certain raw materials in the production process and has from time to time entered into firm purchase commitments for copper and aluminum alloy. The company does not use forward contracts to hedge against changes in certain specific commodity prices of the purchase commitments outstanding.
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 20 to the 2003 consolidated financial statements for additional details.
Sales
Sales of $1.09 billion, for the fiscal year ended March 31, 2003, including a favorable foreign currency exchange impact of $34.3 million, are discussed in detail in the preceding section of management's discussion and analysis.
For the fiscal year ended March 31, 2002, sales were $1.07 billion, down $45.9 million or four percent from the prior year. Foreign currency translation had an unfavorable impact of $9.6 million, primarily due to a stronger U.S. dollar-to-euro relationship when compared to the prior year. Without the currency exchange impact, total worldwide sales declined by $36.3 million. Sales to U.S. customers were 53 percent of the total sales, while exports from the U.S. and sales from Modine's international locations accounted for the other 47 percent. Sales to Modine's top ten customers accounted for 51 percent of the Company's total sales. Sales in the Original Equipment markets fell $10.3 million or two percent. Lower sales in several markets, including the heavy-duty truck, construction, and industrial markets were partially offset by higher sales to the automotive market. Distributed Products segment sales were down $43.5 million or ten percent, due to lower automotive aftermarket sales and a significant decline in sales to the electronics markets due to a dramatic fall-off in the semi-conductor and telecommunications equipment industries. The European Operations segment registered less than a one-percent decline in overall sales. Lower volumes in the off-highway market and unfavorable currency translation effects offset improved sales volume, in local currency, recorded by the OEM-automotive market.
For the year ended March 31, 2001, sales of $1.12 billion were down $53.6 million or five percent from the preceding year. Weaker European currencies had a negative translation effect on the sales of approximately $53.2 million compared with the prior year. Excluding the impact of the change in currency exchange rates, total worldwide consolidated sales were essentially unchanged. Sales in the Original Equipment North America segment fell 11 percent on lower heavy-truck and light-vehicle market sales. Distributed Products segment sales were down three percent with a soft North American aftermarket and negative translation effect on the segment's European operations being partially offset by stronger electronics cooling product sales. The European Operations segment produced increased sales to both OEM-automotive and off-highway markets but the translation effect offset much of the gain. Net sales from U.S. facilities accounted for 65 percent of consolidated revenues for the year, with approximately 18 percent of that amount being exported. Overall, 53 percent of net sales were to U.S. customers and 47 percent to non-U.S. customers.
Gross Profit
The current year gross profit of $272.7 million increased to 25 percent of sales from the $258.9 million or 24 percent of sales last year. Higher sales volumes, better asset utilization and cost reductions, many generated by the restructuring actions initiated last year, were the most significant factors contributing to the improvement in fiscal 2003. Gross profit, in absolute dollars, was up in both the Original Equipment and European Operations segments while the Distributed Products segment showed a decline for the year.
In fiscal 2002, gross profit of $258.9 million declined to 24 percent of sales from the $291.8 million or 26 percent of sales in the preceding year. Lower sales volumes, significant pricing pressures, increasing purchased component content, and closure costs outside of the restructuring, all contributed to the lower return. Included in gross profit was a $4.2 million benefit from a reduction in workers' compensation insurance reserves as a result of the Company's improving experience. Gross profit, in dollars, was down all across the Company, reflecting the weakened worldwide economies, except for the North American automotive market, where the Company was able to gain additional business.
In fiscal 2001 gross profit was $291.8 million, (26 percent of sales) compared with $324.0 million (28 percent of sales) in the previous year. The principal factors responsible for the margin reduction were lower sales volume, increased material costs pursuant to higher commodity prices, continuing pricing pressures, incremental costs in support of new business, and the one-time costs of exiting an unprofitable product line in Europe. Improvements were recorded in the European Operations segment, despite the recognition of the exiting costs, but those gains were more than offset by lower gross-profit returns in the other reporting segments.
Selling, General, and Administrative (SG&A) Expenses
In fiscal 2003, selling, general and administrative (SG&A) expenses grew by $0.7 million to $221.2 million. As a percentage of sales, SG&A declined to 20 percent from 21 percent in the prior year. Higher compensation and related benefit costs together with increased research and development costs were partially offset by the elimination of goodwill amortization as prescribed under SFAS No. 142, lower advertising and sales promotion costs, and a lower provision for doubtful accounts.
For fiscal 2002, SG&A expense dropped $7.7 million to $220.5 million, but increased to 21 percent of sales from 20 percent in the prior year. Reductions in compensation and related benefit costs, along with lower sales promotion and distribution costs more than offset the $3.4 million in Thermacore acquisition costs and increases in depreciation and amortization, research and development expenditures, and a higher bad-debt expense level.
SG&A expense of $228.2 million in fiscal 2001 was virtually identical to the preceding year and remained at 20 percent of sales. The year included substantially higher research and development expenditures, and severance charges related to staffing reductions as the Company reacted to the slowing economy, which were offset by a reduction in bad-debt expense and other expenses.
Restructuring Charges
In fiscal 2003, Modine recorded $1.6 million in income from adjustments made to the initial restructuring estimates to reflect lower than anticipated post-closing and other miscellaneous expenses. These changes were due in part to two of the facilities identified in the restructuring plan being sold or rented earlier than originally anticipated.
In the third quarter of fiscal 2002, the Company initiated a restructuring plan to reduce costs and increase future operating efficiency. Charges of $7.5 million were recognized for plans to close manufacturing facilities in North America and Europe and for other personnel reductions in both areas. Additional information is detailed in Note 14 to the 2003 consolidated financial statements.
Income from Operations
Income from operations in fiscal 2003 of $53.1 million increased $22.2 million from the previous year. Higher gross profit together with the $9.1 million favorable change in year-over-year restructuring costs were the main factors leading to the improvement shown for the year.
Income from operations in fiscal 2002 of $30.9 million declined $32.7 million from the preceding year. The reduction in gross profit discussed earlier carried down to operating income as the $7.7 million reduction in SG&A expense was offset by the $7.5 million restructuring charge.
In fiscal 2001, income from operations of $63.6 million declined $32.2 million from the previous year. The 34-percent reduction was driven primarily by lower sales volume, increased material costs pursuant to higher commodity prices, negative currency translation, incremental costs in support of new business, the costs of exiting an unprofitable product line in Europe, and staff-reduction costs.
Interest Expense
Interest expense of $6.0 million for 2003 was down $1.8 million from fiscal 2002. Lower borrowing levels and more favorable interest rates were the primary reasons for the decline.
For fiscal 2002, interest expense of $7.8 million was down $1.0 million from the preceding year. Reduced levels of short-term borrowings and lower interest rates provided the benefit, which was partially offset by a $1.5 million reduction in the amount of interest capitalized.
In fiscal 2001, interest expense declined slightly from the previous year to $8.8 million. Higher interest rates offset most of the benefit from reductions in the level of debt outstanding and higher amounts of capitalized interest.
Patent Settlements
In fiscal 2001, agreements were reached with Showa Aluminum Corporation and Mitsubishi Motors, which resulted in $17.0 million of patent-settlement income for past use of Modine's PF (parallel flow) technology.
Additional information is provided in Note 28 to the 2003 consolidated financial statements.
Other Income, Net
Other income in the current fiscal year decreased by $9.1 million. A year-over-year reduction of $7.7 million in gains recorded from the sale of property, equipment and business was the main factor leading to the decrease shown. In addition, a $1.7 million loss on the sale of the Company's Canadian subsidiary was recognized in the current year. A reduction in royalty income from licensees was also responsible for a $2.2 million reduction in other income. Approximately $1.9 million of the reduction was from three Japanese companies that previously had been making royalty payments for the use of the Company's PF technology.
In fiscal 2002, other income increased by $4.5 million to $12.7 million. The increase was primarily the result of a $3.5 million gain on the sale of one of the Company's aircraft and the disposal of some excess real estate.
Other income in fiscal 2001 grew by $3.9 million to $8.2 million. The increase was driven by higher equity earnings from affiliates, the remaining gain from the earlier sale of a facility in Michigan, and increased profit from tooling sales.
Provision for Income Taxes
The effective tax rate attributable to earnings before income taxes and the cumulative effect of accounting change decreased by 4.2 percentage points to 37.6 percent. The lower rate is the result of year-over-year changes with respect to non-deductible costs associated with goodwill amortization and non-deductible costs incurred in the acquisition of Thermacore in fiscal 2002.
The effective tax rate for fiscal 2002 rose by 2.7 percentage points to 41.8 percent. This percentage increase over the preceding year was influenced by upward pressure from nondeductible costs associated with the acquisition of Thermacore and increased nondeductible goodwill amortization, offset by downward pressure from foreign tax rate differentials.
The effective tax rate for fiscal 2001 rose by 7.7 percentage points to 39.1 percent. The significantly higher effective tax rate, compared with the year before, related to prior year changes in a net operating loss carryforward at a foreign subsidiary and to foreign tax rate differentials.
Earnings Before the Cumulative Effect of Accounting Change
Earnings before the cumulative effect of the accounting change of $34.4 million were $11.1 million higher than reported fiscal 2002 earnings of $23.3 million. On a per-share basis before the cumulative effect of the accounting change, diluted earnings per share were $1.02 per share in the current year, a $0.32 increase over the prior-year diluted earnings per share of $0.70. Cost improvements from the restructuring initiative started in November 2001, improved gross margins in two business segments, discontinuance of goodwill amortization, lower restructuring charges, no acquisition costs in the current year, and lower interest expense were all items contributing to the earnings improvement before the accounting change.
Cumulative Effect of Accounting Change
In fiscal 2003, the Company recorded a $21.7 million after-tax goodwill impairment charge to earnings for its aftermarket business unit. This charge resulted from the transitional impairment testing required under SFAS No. 142 "Goodwill and Other Intangible Assets."
Net Earnings
Net earnings in the current year declined to $12.7 million ($0.38 per diluted share) from $23.3 million ($0.70 per diluted share) in the previous year. Net earnings for fiscal 2003 declined to one percent as a percent of sales. Return on average shareholders' equity (ROE) dropped to two percent for the year. The major factor influencing the decrease in reported earnings was the $21.7 million, net of taxes, goodwill impairment charge recorded by the Company's aftermarket business unit. Continued competitive pressures in the aftermarket and depressed conditions in the electronics market diminished the improved results in markets served by the Original Equipment and European Operations business segments.
Net income in fiscal 2003 included the after-tax impact of the $21.7 million cumulative effect of the accounting change, $0.8 million in restructuring and other closure costs, $1.0 million of losses generated from the sale of the Company's Canadian subsidiary and Knoxville, Tennessee manufacturing plant, and similarly net income in fiscal 2002 included $8.7 million in restructuring charges and plant closure costs, $4.0 million in favorable accrual adjustments to workers' compensation, $3.1 million in Thermacore acquisition costs, $4.6 million in goodwill amortization and a $1.9 million gain from the sale of a Company aircraft.
Net earnings declined 55 percent in fiscal 2002 to $23.3 million ($0.70 per diluted share) from $51.8 million ($1.58 per diluted share) in the prior year. ROE slipped to five percent and net earnings as a percent of sales to two percent. Reductions in SG&A expense, the additional North American automotive business and the favorable impact on the workers' compensation liabilities and the aircraft sale were more than offset by the lower sales volumes, pricing pressures, increased purchased component content, and the restructuring and other closure costs.
Net income in fiscal 2002 included the after-tax effects of $8.7 million of restructuring and other closure costs, $3.1 million in Thermacore acquisition costs, the reduction in the workers' compensation accrual of $4.0 million and the $1.9 million gain on the aircraft sale, and likewise net income in fiscal 2001 included the $12.7 million after-tax effect in patent settlements income recorded in fiscal 2001.
Net earnings in fiscal 2001 fell 22 percent to $51.8 million ($1.58 per diluted share) from $66.3 million ($2.01 per diluted share). ROE declined to ten percent. Net earnings declined as a percent of sales to five percent in fiscal 2001. The reduction in net earnings was the result of the lower sales volume, pricing pressures, higher material costs as a percentage of sales, negative currency translation, incremental costs in support of new business, costs of exiting an unprofitable product line, and staff-reduction costs, which were partially offset by the patent settlements received.
Current Assets
Cash and cash equivalents increased by $1.8 million to $77.2 million. Details of the sources and uses of funds can be found in management's discussion of cash flows and the accompanying consolidated statement of cash flows.
Trade receivables, net of allowances for doubtful accounts, at $161.3 million, were down $1.1 million from one year ago. This reduction was achieved even with a $19.3 million year-over-year fourth quarter sales increase coming primarily from the European Operations and Original Equipment (North America) segments. Days sales outstanding were reduced by five days from the previous year as management continued to focus its efforts on improving working capital utilization.
Inventory levels grew by $9.1 million in the current fiscal year to $130.8 million. Higher inventory levels in the U.S. aftermarket operations were offset partially by less significant changes in other domestic and foreign operating units. A higher seasonal buildup of air conditioning components for the summer cooling season is responsible for a large portion of the increase in the U.S. aftermarket. The number of days of inventory on hand was reduced by one day from the prior year-end even though overall dollar levels increased for the year.
Deferred income taxes and other current assets grew by $1.5 million to $48.0 million. The largest item contributing to the change was an increase in income tax prepayments of $4.6 million. Also contributing to the overall change were supplier payments received in the current year for negotiated warranty claims.
The current ratio of 2.2-to-1 decreased from last year's 2.4-to-1. Increases in cash, inventories and other current assets were more than offset by a decrease in trade accounts receivable and increases in accounts payable, accrued expenses, debt due within a year and foreign income taxes payable.
Noncurrent Assets
Net property, plant, and equipment of $361.6 million increased by $21.2 million in fiscal 2003. Depreciation expense of $53.3 million exceeded capital spending by $2.8 million. Major additions during the year included construction costs of a new assembly plant in Europe to service new and existing programs with BMW, continued work on the administration building and technical center in Europe and preparation for new customer programs in the North American original equipment markets which include the use of EGR technology. Also included in the capital expenditures total for the year were improvements in manufacturing processes and new equipment.
Equity investments in affiliates of $22.4 million decreased $2.6 million in the current year. A $5.7 million foreign-currency translation decline recorded by the Company on its 50-percent equity investment in Radiadores Visconde, Ltda., in Brazil was the major factor leading to the overall decline for the year. This currency decline relative to the U.S. dollar occurred due to political unrest and financial uncertainties in the Brazilian economy. Recently, this situation has improved and the real has strengthened against the U.S. dollar. Another item reducing the overall investment balance was a dividend from Nikkei Heat Exchanger Co., Ltd. (NEX) in the current year. Positively impacting the investment balance were equity earnings of $1.9 million recorded in fiscal 2003. The reported equity earnings includes no goodwill amortization expense in the current year as the Company ceased amortizing goodwill recorded on its equity investments in accordance with SFAS No. 142 "Goodwill and Other Intangible Assets."
Goodwill at $31.6 million was $21.4 million lower than the previous year. This reduction occurred in conjunction with the adoption of SFAS No. 142 and the transitional impairment testing that resulted in a $22.8 million non-cash impairment charge against goodwill in the aftermarket reporting unit. This charge was accounted for as a cumulative effect of an accounting change, retroactive to the first quarter of fiscal 2003. The remaining change for the year resulted from foreign currency translation.
Other intangible assets of $4.5 million were $2.4 million higher than last year, largely as a result of a $2.9 million increase in the intangible pension asset. Other changes resulted from $0.4 million of amortization for the year and from foreign currency translation.
Deferred charges and other noncurrent assets of $73.4 million decreased $3.3 million over the prior period, with decreases of $1.4 million in pension assets and $2.0 million in deferred tax assets accounting for virtually all of the change for the year.
Current Liabilities
Short-term debt and the current portion of long-term debt, totaling $12.7 million, increased by $1.9 million from the prior year. Reclassification of $10.0 million from long-term debt to debt due within a year for the remaining payment due on the Radiadores Visconde, Ltda. equity investment, and a $7.2 million repayment on debt incurred to finance the construction of the Pontevico, Italy manufacturing facility were the primary factors responsible for the net increase shown for the year. The remaining changes resulted from discretionary short-term debt repayments, scheduled repayments of debt due within a year and foreign currency translation.
Accounts payable increased by $13.4 million to $93.5 million. Higher inventories, variations in the timing of purchasing activities and foreign currency translation were some of the factors contributing to the overall increase.
Accrued expenses and other current liabilities grew by $3.1 million to $32.1 million. Higher warranty accruals were the main factor influencing the increase. One of the principal reasons for the increase was the implementation of new statistical estimating techniques in the U.S. aftermarket for determining warranty accruals.
Noncurrent Liabilities
Long-term debt decreased by $41.1 million to $98.6 million at year-end. In April 2002, the Company entered into a new credit facility and initially borrowed $64.0 million. The proceeds were used to pay down two existing credit facilities totaling $63.6 million. Later in the fiscal year, the Company reduced its borrowings against the new credit facility by $46.0 million. The remaining net reduction in long-term debt consists of the reclassification of certain debt due within twelve months, including the $10.0 million due in fiscal 2004 for the equity investment in Radiadores Visconde, Ltda., some minor changes in borrowing at the Company's foreign subsidiaries and offsetting foreign currency translation as the euro strengthened against the dollar during the fiscal year, thereby increasing the dollar value of euro-denominated borrowings.
As a percent of shareholders' equity, long-term debt was 18.6 percent at year-end. Total debt-to-equity was 21.0 percent, down 8.1 percentage points from fiscal 2002.
Other non-current liabilities at $51.2 million were $10.5 million higher than last year. The change is primarily the result of an increase in recorded pension liabilities of $9.8 million for the year. This increase is the direct result of lower investment returns earned by the Company over the past several years, consistent with the overall declines in the bond and stock markets.
Shareholders' Equity
Total shareholders' equity of $530.4 million increased $14.4 million over the prior period. The major changes were in retained earnings and accumulated other comprehensive loss and as a result of stock transactions. Net earnings added $12.7 million in the year while $17.3 million in dividends and shareholders' rights redemption payments contributed to the net decline in retained earnings of $4.8 million from the prior year. Common stock and related paid-in-capital increases for the year totaled $5.4 million. This increase resulted from common shares issued to satisfy stock options exercises, stock awards, and employee stock-purchase plans.
Accumulated other comprehensive loss of $18.7 million decreased $14.8 million over the prior year. The most significant component was the foreign currency translation adjustment, which decreased by $20.5 million. Gains from the euro strengthening against the dollar during the year were offset in part by translation losses recorded on the Company's equity investment in its Brazilian affiliate and by the unfavorable foreign currency effects on the Company's foreign-denominated borrowings. Additionally, a $5.7 million minimum pension liability charge to equity was recorded for the period.
In fiscal 2003, the treasury stock activity consisted of offsetting purchases and uses, each totaling $1.1 million or 45,000 shares. As in the past, treasury shares were used to satisfy requirements for stock option exercises. In addition, 302,000 new shares of common stock were issued to satisfy stock option exercises, stock awards, and employee stock-purchase plans. The number of shares of common stock outstanding at year-end increased to 33,773,000 shares.
During fiscal 2002, $1.3 million was expended to acquire 46,000 treasury shares while $17.9 million of treasury stock (586,000 shares) was used to satisfy requirements for stock options and employee stock-purchase plans. In addition, 80,000 new shares of common stock were issued to satisfy stock option exercises and employee stock-purchase plans. In April 2001, 3,327,000 common shares were issued in conjunction with the pooling transaction with Thermacore International, Inc. The number of shares of common stock outstanding at March 31, 2002 increased to 33,471,000 shares.
During fiscal 2001, $5.2 million was expended to acquire 199,000 treasury shares while $16.0 million of treasury stock (468,000 shares) was used to satisfy requirements for stock options and employee stock-purchase plans. In addition, 426,000 new shares of common stock were issued to satisfy stock option exercises. The number of shares of common stock outstanding at March 31, 2001, including the shares issued in the pooling transaction mentioned above, totaled 32,851,000 shares.
Book value per share increased two-percent, or $0.28, during fiscal 2003 to $15.70.
Net Cash Provided by Operating Activities
Net cash provided by operating activities in fiscal 2003 was $113.3 million, down $18.1 million from the prior year record of $131.4 million. Major items contributing to the overall change were lower earnings after the cumulative effect of the accounting change, increased inventories compared to a significant reduction in the prior year and lower non-cash restructuring charges. These items were offset in part by the non-cash expense of $22.8 million from the cumulative effect of an accounting change upon adoption of SFAS No. 142, increases in deferred income taxes and non-cash losses reported on the disposition of property, plant, and equipment.
Net cash provided by operating activities in fiscal 2002 was a record $131.4 million, up $5.6 million from the prior year. Major items contributing to the overall change were the reduced working-capital requirements as a result of the Company's continued programs in this area and higher non-cash depreciation and amortization adjustments, which were partially offset by lower earnings. Working-capital requirements included a non-cash restructuring charge of $5.6 million. Further details regarding restructuring charges recorded in fiscal 2002 can be found in Note 14 to the 2003 consolidated financial statements.
Net cash provided by operating activities in fiscal 2001 was $125.8 million, up $35.7 million from the prior year. Major items contributing to the overall change were the reduced working-capital requirements as a result of the Company's programs in this area and a favorable non-cash adjustment for deferred income taxes, both offset partially by lower earnings.
Capital Expenditures
Capital expenditures for fiscal 2003 were $50.5 million, $14.8 million higher than the prior year. Major areas of capital spending included: a new assembly plant under construction in Europe to supply BMW programs; continued expenditures for the new technical center and administration building in Europe; and costs associated with the purchase of new equipment and process improvements throughout the world.
Capital expenditures for fiscal 2002 were $35.8 million, $37.1 million lower than the prior year, a direct result of management's initiative to reduce capital spending. Major areas of capital spending included: on-going construction and equipment costs of a new technical center in Europe; continued production and administrative facility expansion in Europe; and costs associated with the purchase of equipment and tooling for new customer programs.
Capital expenditures for fiscal 2001 were $72.9 million, $20.3 million lower than the prior year. They included: on-going construction and equipment costs of a new technical center in Europe; continued production and administrative facility expansion in Europe; costs associated with the purchase of equipment and tooling for new customer programs; facility improvements at existing locations; and additional equipment costs for the technical center in Racine.
Acquisitions and Investments in Affiliates
During fiscal 2001, Modine invested $0.2 million to acquire the remaining 50-percent share of Daikin-Modine, Inc., a former joint venture between Modine and Daikin Industries, Ltd. Separately, Modine received a return of capital of $0.5 million from another joint venture, Nikkei Heat Exchanger Company Ltd. (NEX). See Note 12 to the 2003 consolidated financial statements for further detail.
Proceeds from the Sale of Business and Disposition of Assets
During fiscal 2003, Modine received proceeds of $2.0 million from the sale of its wholly-owned Canadian aftermarket subsidiary, Modine of Canada, Ltd. In addition, the Company received $3.1 million in proceeds from the disposition of other assets that included the sale of its facility located in Knoxville, Tennessee for $2.3 million and various equipment related to the restructuring plan announced in fiscal 2002.
During fiscal 2002, Modine received proceeds from the disposition of assets of $6.6 million. The major items included the sale of an aircraft for $4.1 million and various real estate for $2.1 million.
Cash Changes in Debt: Short- and Long-Term
In fiscal 2003, Company debt decreased $55.8 million, due to repayments of $55.0 million of long-term debt and all outstanding short-term debt. Improved working capital and closely monitored capital-expenditure requirements allowed for the reduction of outstanding debt. In April 2002, Modine entered into a new $150.0 million multi-currency, revolving credit facility. Initially, $64.0 million was borrowed against this new facility and used to pay down existing debt. See Note 18 to the 2003 consolidated financial statements for further detail.
In fiscal 2002, Company debt decreased $29.2 million, primarily due to discretionary repayments of $26.5 million of short-term debt and $2.7 million of long-term debt. Lower working capital and capital-expenditure requirements allowed for the reduction of outstanding debt. Total debt assumed as part of the Thermacore acquisition was $14.0 million. The majority of the debt assumed was refinanced with available lines of credit at more favorable interest rates.
In fiscal 2001, Company debt decreased $37.2 million, primarily due to discretionary repayments of $40.0 million of domestic long-term debt. The reduction in debt was a result of the patent settlement proceeds received and of reduced working-capital and capital-expenditure requirements.
Treasury Stock
Treasury stock activity is detailed in the Shareholders' Equity section of management's discussion and analysis, with additional detail provided in Note 23 to the 2003 consolidated financial statements.
Dividends Paid and Shareholders' Rights Redemption
Dividends for fiscal 2003 totaled $16.8 million, or 50 cents per share. This is a decrease of 37.5 cents per share compared to the previous year and includes a full year at the 12.5 cents quarterly rate, which was effective in the fourth quarter of fiscal 2002. Dividends for fiscal 2002 totaled $29.0 million, or 87.5 cents per share. This is a decrease of 12.5 cents per share from the previous year and includes one quarterly dividend at the reduced rate of 12.5 cents per quarter. Dividends in fiscal 2001 were $29.3 million, representing $1.00 per share, and increased 8 cents per share over the previous year.
The Shareholder Rights Plan ("Poison Pill") was terminated during fiscal 2003 by redeeming the rights through a cash payment of $.0125 per share, or $0.4 million. See Note 24 to the 2003 consolidated financial statements for further detail.
Liquidity
The Company expects to meet its future operating and capital-expenditure needs primarily through a combination of current cash balances, internally generated funds and external financing arrangements. The Company expects to make scheduled debt repayments in fiscal 2004 with internally generated funds. The Company believes that its internally generated cash flow, together with access to external resources, will be sufficient to satisfy existing commitments and plans. In addition, management believes it is positioned to provide the necessary financial resources to take advantage of potential strategic business opportunities that arise within fiscal 2004. In April 2002, Modine entered into a new $150.0 million multi-currency, revolving credit facility. Worldwide Modine had approximately $143.4 million in unused lines of credit at March 31, 2003. See Note 18 to the 2003 consolidated financial statements for further detail.
The following tables represent our obligations and commitments to make future payments under contracts, such as debt and lease agreements, and under contingent commitments, such as debt guarantees, as of March 31, 2003. See Note 28 to the 2003 consolidated financial statements for further detail.
Contractual Obligations
(In thousands)
|
March 31, 2003 |
Total |
Less than 1 year |
1-3 years |
4-5 years |
After 5 years |
|
Long-term debt |
$111,248 |
$12,692 |
$79,474 |
$10,603 |
$ 8,479 |
|
Operating leases |
22,671 |
7,795 |
8,341 |
4,255 |
2,280 |
|
Capital expenditure commitments |
37,004 |
37,004 |
-- |
-- |
-- |
|
Other long-term obligations |
3,612 |
38 |
76 |
76 |
3,422 |
|
Total contractual obligations |
$174,535 |
$57,529 |
$87,891 |
$14,934 |
$14,181 |
Other Commercial Commitments
(In thousands)
|
March 31, 2003 |
Total |
Less Than 1 year |
1-3 years |
4-5 years |
After 5 years |
|
Maximum loan commitment |
$132,633 |
$ -- |
$132,000 |
$ -- |
$ 633 |
|
Standby letters of credit |
4,290 |
-- |
4,290 |
-- |
-- |
|
Maximum guarantees |
10,800 |
-- |
-- |
-- |
10,800 |
|
Surety bonds |
505 |
505 |
-- |
-- |
-- |
|
Total other commercial commitments |
$148,228 |
$505 |
$136,290 |
$ -- |
$11,433 |
Forward-Looking Statements
Consolidated Statements of Earnings
(In thousands, except per-share amounts)
|
For the years ended March 31 |
2003 |
2002 |
2001 |
|
Net sales |
$1,092,075 |
$1,069,187 |
$1,115,045 |
|
Cost of sales |
819,368 |
810,291 |
823,220 |
|
Gross profit |
272,707 |
258,896 |
291,825 |
|
Selling, general, and administrative expenses |
221,170 |
220,486 |
228,187 |
|
Restructuring charges |
(1,555) |
7,540 |
-- |
|
Income from operations |
53,092 |
30,870 |
63,638 |
|
Interest expense |
(6,026) |
(7,793) |
(8,784) |
|
Patent settlements |
-- |
-- |
16,959 |
|
Other income -- net |
7,961 |
17,033 |
13,250 |
|
Earnings before income taxes and the cumulative effect of accounting change |
55,027 |
40,110 |
85,063 |
|
Provision for income taxes |
20,669 |
16,765 |
33,233 |
|
Earnings before cumulative effect of accounting change |
34,358 |
23,345 |
51,830 |
|
Cumulative effect of change in accounting for: Goodwill impairment (net of $1,136 income tax benefit) |
(21,692) |
-- |
-- |
|
Net earnings |
$ 12,666 |
$ 23,345 |
$ 51,830 |
|
Net earnings per share of common stock - basic: |
|||
|
Before cumulative effect of accounting change |
$1.03 |
$0.70 |
$1.61 |
|
Cumulative effect of accounting change |
(0.65) |
-- |
-- |
|
Net earnings -- basic |
$0.38 |
$0.70 |
$1.61 |
|
Net earnings per share of common stock - diluted: |
|||
|
Before cumulative effect of accounting change |
$1.02 |
$0.70 |
$1.58 |
|
Cumulative effect of accounting change |
(0.64) |
-- |
-- |
|
Net earnings -- diluted |
$0.38 |
$0.70 |
$1.58 |
The notes to consolidated financial statements are an integral part of these statements.
Consolidated Balance Sheets
(In thousands, except per-share amounts)
|
March 31 |
2003 |
2002 |
|
Assets |
||
|
Current assets: |
||
|
Cash and cash equivalents |
$ 77,243 |
$ 75,402 |
|
Trade receivables, less allowance for doubtful accounts of $2,687 and $3,217 |
161,319 |
162,462 |
|
Inventories |
130,812 |
121,663 |
|
Deferred income taxes and other current assets |
47,992 |
46,443 |
|
Total current assets |
417,366 |
405,970 |
|
Noncurrent assets: |
||
|
Property, plant, and equipment -- net |
359,758 |
340,388 |
|
Property held for sale |
1,847 |
-- |
|
Investment in affiliates |
22,389 |
24,981 |
|
Goodwill |
31,593 |
52,969 |
|
Other intangible assets -- net |
4,513 |
2,085 |
|
Deferred charges and other noncurrent assets |
73,352 |
76,651 |
|
Total noncurrent assets |
493,452 |
497,074 |
|
Total assets |
$910,818 |
$903,044 |
|
Liabilities and shareholders' equity |
||
|
Current liabilities: |
||
|
Short-term debt |
$ -- |
$ 726 |
|
Long-term debt -- current portion |
12,692 |
10,030 |
|
Accounts payable |
93,506 |
80,112 |
|
Accrued compensation and employee benefits |
47,577 |
46,797 |
|
Income taxes |
7,394 |
4,799 |
|
Accrued expenses and other current liabilities |
32,094 |
29,040 |
|
Total current liabilities |
193,263 |
171,504 |
|
Noncurrent liabilities: |
||
|
Long-term debt |
98,556 |
139,654 |
|
Deferred income taxes |
37,370 |
35,127 |
|
Other noncurrent liabilities |
51,242 |
40,760 |
|
Total noncurrent liabilities |
187,168 |
215,541 |
|
Total liabilities |
380,431 |
387,045 |
|
Shareholders' equity: |
||
|
Preferred stock, $0.025 par value, authorized 16,000 shares, issued -- none |
-- |
-- |
|
Common stock, $0.625 par value, authorized 80,000 shares, issued 34,045 and 33,743 shares |
21,278 |
21,089 |
|
Additional paid-in capital |
24,360 |
19,166 |
|
Retained earnings |
514,109 |
518,900 |
|
Accumulated other comprehensive loss |
(18,713) |
(33,494) |
|
Treasury stock at cost: 272 and 272 common shares |
(7,044) |
(6,976) |
|
Restricted stock -- unamortized value |
(3,603) |
(2,686) |
|
Total shareholders' equity |
530,387 |
515,999 |
|
Total liabilities and shareholders' equity |
$910,818 |
$903,044 |
The notes to consolidated financial statements are an integral part of these statements.
Consolidated Statements of Cash Flows
(In thousands)
|
For the years ended March 31 |
2003 |
2002 |
2001 |
|
Cash flows from operating activities: |
|||
|
Net earnings |
$ 12,666 |
$ 23,345 |
$ 51,830 |
|
Adjustments to reconcile net earnings with cash provided by operating activities: |
|||
|
Depreciation and amortization |
54,810 |
63,508 |
51,908 |
|
Loss on sale of business |
1,726 |
-- |
-- |
|
Pensions |
(2,829) |
(3,257) |
(2,779) |
|
Loss/(gain) from disposition of property, plant, and equipment |
1,565 |
(4,630) |
2,505 |
|
Deferred income taxes |
7,820 |
2,515 |
9,972 |
|
Provision for losses on accounts receivable |
1,233 |
2,086 |
(1,311) |
|
Undistributed (earnings) of affiliates, net of dividends received |
(1,402) |
(1,827) |
(1,509) |
|
Restructuring |
(1,555) |
5,609 |
-- |
|
Cumulative effect of change in accounting |
22,828 |
-- |
-- |
|
Other -- net |
2,828 |
3,581 |
642 |
|
99,690 |
90,930 |
111,258 |
|
|
Change in operating assets and liabilities excluding acquisitions: |
|||
|
Trade receivables |
9,082 |
10,676 |
10,846 |
|
Inventories |
(3,420) |
28,362 |
17,300 |
|
Other current assets |
(323) |
9,395 |
(8,409) |
|
Accounts payable |
8,584 |
1,353 |
(5,999) |
|
Accrued compensation and employee benefits |
(3,759) |
(7,324) |
860 |
|
Income taxes |
1,739 |
(1,316) |
(1,161) |
|
Accrued expenses and other current liabilities |
1,714 |
(672) |
1,069 |
|
Net cash provided by operating activities |
113,307 |
131,404 |
125,764 |
|
Cash flows from investing activities: |
|||
|
Expenditures for property, plant, and equipment |
(50,519) |
(35,763) |
(72,890) |
|
Acquisitions, net of cash acquired |
-- |
-- |
249 |
|
Proceeds from sale of business |
1,954 |
-- |
-- |
|
Proceeds from dispositions of assets |
3,138 |
6,605 |
815 |
|
Investments in affiliates |
-- |
74 |
345 |
|
Increase in deferred charges and other noncurrent assets |
(623) |
(750) |
(1,492) |
|
Other -- net |
9 |
-- |
(944) |
|
Net cash used for investing activities |
(46,041) |
(29,834) |
(73,917) |
|
Cash flows from financing activities: |
|||
|
(Decrease)/increase in short-term debt -- net |
(814) |
(26,532) |
14,665 |
|
Additions to long-term debt |
66,762 |
54,771 |
47,183 |
|
Reductions of long-term debt |
(121,762) |
(57,479) |
(99,064) |
|
Issuance of common stock, including treasury stock |
3,844 |
12,447 |
10,607 |
|
Purchase of treasury stock |
(1,135) |
(1,293) |
(5,167) |
|
Cash dividends paid |
(16,834) |
(28,981) |
(29,307) |
|
Shareholders' rights redemption |
(420) |
-- |
-- |
|
Net cash (used for) financing activities |
(70,359) |
(47,067) |
(61,083) |
|
Effect of exchange-rate changes on cash |
4,934 |
(845) |
(262) |
|
Net increase/(decrease) in cash and cash equivalents |
1,841 |
53,658 |
(9,498) |
|
Cash and cash equivalents at beginning of year |
75,402 |
21,744 |
31,242 |
|
Cash and cash equivalents at end of year |
$ 77,243 |
$ 75,402 |
$ 21,744 |
|
Cash paid during the year for: |
|||
|
Interest, net of amounts capitalized |
$ 6,020 |
$ 6,639 |
$ 8,467 |
|
Income taxes |
$ 14,898 |
$ 10,058 |
$ 29,674 |
The notes to consolidated financial statements are an integral part of these statements.
Consolidated Statements of Shareholders' Equity
(In thousands, except per-share amounts)
|
For the years ended March 31 2003, 2002 and 2001 |
Common stock |
Additional paid-in capital |
Retained earnings |
Accumulated other comprehensive income/(loss) |
Treasury stock |
Restricted stock--unamortized value |
Total |
|
Balance, March 31, 2000 |
$20,773 |
$15,707 |
$513,002 |
$(21,623) |
$(34,394) |
$(1,922) |
$491,543 |
|
Net earnings |
-- |
-- |
51,830 |
-- |
-- |
-- |
51,830 |
|
Other comprehensive (loss): |
|||||||
|
Foreign-currency translation |
-- |
-- |
-- |
(2,288) |
-- |
-- |
(2,288) |
|
Minimum pension liability (net of tax benefit of $149) |
-- |
-- |
-- |
260 |
-- |
-- |
260 |
|
Total comprehensive income |
-- |
-- |
-- |
-- |
-- |
-- |
49,802 |
|
Cash dividends, $1.00 per share |
-- |
-- |
(29,307) |
-- |
-- |
-- |
(29,307) |
|
Purchase of treasury stock |
-- |
-- |
-- |
-- |
(5,167) |
-- |
(5,167) |
|
Stock options and awards including related tax benefits |
266 |
1,761 |
(5,028) |
-- |
10,005 |
-- |
7,004 |
|
Employee stock-purchase and -ownership plans |
-- |
-- |
(1,844) |
-- |
5,992 |
-- |
4,148 |
|
Amortization of deferred compensation under restricted stock plans |
-- |
-- |
-- |
-- |
-- |
674 |
674 |
|
Balance, March 31, 2001 |
21,039 |
17,468 |
528,653 |
(23,651) |
(23,564) |
(1,248) |
518,697 |
|
Net earnings |
-- |
-- |
23,345 |
-- |
-- |
-- |
23,345 |
|
Other comprehensive (loss): |
|||||||
|
Foreign-currency translation |
-- |
-- |
-- |
(9,131) |
-- |
-- |
(9,131) |
|
Minimum pension liability (net of tax benefit of $449) |
-- |
-- |
-- |
(712) |
-- |
-- |
(712) |
|
Total comprehensive income |
-- |
-- |
-- |
-- |
-- |
-- |
13,502 |
|
Cash dividends, $0.875 per share |
-- |
-- |
(28,981) |
-- |
-- |
-- |
(28,981) |
|
Purchase of treasury stock |
-- |
-- |
-- |
-- |
(1,293) |
-- |
(1,293) |
|
Stock options and awards including related tax benefits |
42 |
1,309 |
(2,577) |
-- |
9,124 |
(2,294) |
5,604 |
|
Employee stock-purchase and -ownership plans |
8 |
389 |
(1,540) |
-- |
8,757 |
-- |
7,614 |
|
Amortization of deferred compensation under restricted stock plans |
-- |
-- |
-- |
-- |
-- |
856 |
856 |
|
Balance, March 31, 2002 |
21,089 |
19,166 |
518,900 |
(33,494) |
(6,976) |
(2,686) |
515,999 |
|
Net earnings |
-- |
-- |
12,666 |
-- |
-- |
-- |
12,666 |
|
Other comprehensive (loss): |
|||||||
|
Foreign-currency translation |
-- |
-- |
-- |
20,450 |
-- |
-- |
20,450 |
|
Minimum pension liability (net of taxes of $4,056) |
-- |
-- |
-- |
(5,669) |
-- |
-- |
(5,669) |
|
Total comprehensive income |
-- |
-- |
-- |
-- |
-- |
-- |
27,447 |
|
Cash dividends, $0.50 per share |
-- |
-- |
(16,834) |
-- |
-- |
-- |
(16,834) |
|
Shareholders' rights redemptio $0.0125 per share |
-- |
-- |
(420) |
-- |
-- |
-- |
(420) |
|
Purchase of treasury stock |
-- |
-- |
-- |
-- |
(1,135) |
-- |
(1,135) |
|
Stock options and awards including related tax benefits |
186 |
5,071 |
(203) |
-- |
1,067 |
(2,015) |
4,106 |
|
Employee stock-purchase and -ownership plans |
3 |
123 |
-- |
-- |
-- |
-- |
126 |
|
Amortization of deferred compensation under restricted stock plans |
-- |
-- |
-- |
-- |
-- |
1,098 |
1,098 |
|
Balance, March 31, 2003 |
$21,278 |
$24,360 |
$514,109 |
$(18,713) |
$ (7,044) |
$(3,603) |
$530,387 |
The notes to consolidated financial statements are an integral part of these statements.
Notes To Consolidated Financial Statements
(In thousands, except per-share amounts)
|
Years ended March 31 |
2003 |
2002 |
2001 |
|
Net earnings before cumulative effect of accounting change as reported |
$34,358 |
$23,345 |
$51,830 |
|
Net earnings before cumulative effect of accounting change pro forma |
32,299 |
19,472 |
48,489 |
|
Net earnings as reported |
$12,666 |
$23,345 |
$51,830 |
|
Net earnings pro forma |
10,607 |
19,472 |
48,489 |
|
Net earnings per share-before cumulative effect of accounting change (basic) as reported |
$1.03 |
$0.70 |
$1.61 |
|
Net earnings per share-before cumulative effect of accounting change (basic) pro forma |
0.97 |
0.58 |
1.51 |
|
Net earnings per share (basic) as reported |
$0.38 |
$0.70 |
$1.61 |
|
Net earnings per share (basic) pro forma |
0.32 |
0.58 |
1.51 |
|
Net earnings per share-before cumulative effect of accounting change (diluted) as reported |
$1.02 |
$0.70 |
$1.58 |
|
Net earnings per share before cumulative effect of accounting change (diluted) pro forma |
0.96 |
0.58 |
1.48 |
|
Net earnings per share (diluted) as reported |
$0.38 |
$0.70 |
$1.58 |
|
Net earnings per share (diluted) pro forma |
0.31 |
0.58 |
1.48 |
The fair value of the option grants in fiscal 2003, 2002, and 2001, was estimated using the Black-Scholes option-pricing model. The weighted average of the fair value per option and the valuation assumptions are as follows:
(In dollars)
|
Years ended March 31 |
2003 |
2002 |
2001 |
|
Fair value per option |
$5.72 |
$6.79 |
$7.57 |
|
Valuation assumptions: |
|||
|
Risk-free interest rate |
3.8% |
4.2% |
5.3% |
|
Stock volatility |
36.5% |
33.9% |
32.4% |
|
Dividend yield |
3.0% |
3.0% |
2.8% |
|
Expected option life--years |
6.0 |
6.0 |
5.5 |
Accounting standards changes and new pronouncements
The change in benefit obligations and plan assets as well as the funded status of Modine's pension and other postretirement plans were as follows:
(In thousands)
|
Pensions |
Other post-retirement |
|||
|
Years ended March 31 |
2003 |
2002 |
2003 |
2002 |
|
Change in benefit obligation: |
||||
|
Benefit obligation at beginning of year |
$171,114 |
$163,905 |
$30,522 |
$24,774 |
|
Service cost |
5,625 |
5,655 |
376 |
407 |
|
Interest cost |
12,289 |
11,771 |
2,414 |
2,179 |
|
Plan amendments |
1,978 |
1,776 |
-- |
-- |
|
Actuarial (gain)/loss |
16,063 |
(4,639) |
9,302 |
5,394 |
|
Benefits paid |
(8,888) |
(6,744) |
(3,448) |
(2,753) |
|
Curtailment loss |
-- |
-- |
(17) |
-- |
|
Contributions by plan participants |
-- |
-- |
661 |
521 |
|
Currency-translation adjustment |
2,498 |
(610) |
-- |
-- |
|
Benefit obligation at end of year |
$200,679 |
$171,114 |
$39,810 |
$30,522 |
|
Change in plan assets: |
||||
|
Fair value of plan assets at beginning of year |
$199,870 |
$207,458 |
$ -- |
$ -- |
|
Actual return on plan assets |
(15,267) |
(4,779) |
-- |
-- |
|
Employer contributions |
1,894 |
3,886 |
2,787 |
2,232 |
|
Contributions by plan participants |
-- |
-- |
661 |
521 |
|
Benefits paid |
(8,888) |
(6,744) |
(3,448) |
(2,753) |
|
Currency-translation adjustment |
(133) |
(49) |
-- |
-- |
|
Fair value of plan assets at end of year |
$177,476 |
$199,870 |
$ -- |
$ -- |
|
Funded status: |
||||
|
Funded status at end of year |
$(23,203) |
$ 28,756 |
$(39,810) |
$(30,522) |
|
Unrecognized net loss |
73,263 |
21,879 |
14,793 |
5,956 |
|
Unrecognized prior service cost |
4,340 |
3,391 |
(511) |
(1,166) |
|
Unrecognized net transition obligation |
59 |
153 |
-- |
-- |
|
Net amount recognized |
$ 54,459 |
$ 54,179 |
$(25,528) |
$(25,732) |
|
Amounts recognized in the balance sheet consist of: |
||||
|
Prepaid benefit cost |
$ 65,257 |
$ 66,621 |
$ -- |
$ -- |
|
Accrued benefit liability |
(24,069) |
(13,804) |
(25,528) |
(25,732) |
|
Intangible asset |
2,891 |
73 |
-- |
-- |
|
Accumulated other comprehensive income |
10,380 |
1,289 |
-- |
-- |
|
Net amount recognized |
$ 54,459 |
$ 54,179 |
$(25,528) |
$(25,732) |
Costs for Modine's pension and other post-retirement benefit plans include the following components:
(In thousands)
|
Years ended March 31 |
2003 |
2002 |
2001 |
|
Pensions: |
|||
|
Components of net periodic benefit cost (gain): |
|||
|
Service cost |
$ 5,625 |
$ 5,655 |
$ 5,653 |
|
Interest cost |
12,289 |
11,771 |
11,257 |
|
Expected return on plan assets |
(20,428) |
(19,712) |
(18,649) |
|
Amortization of: |
|||
|
Unrecognized net loss (gain) |
6 |
53 |
(18) |
|
Unrecognized prior service cost |
536 |
504 |
371 |
|
Unrecognized net obligation |
159 |
122 |
125 |
|
Adjustment for settlement/curtailment |
-- |
881 |
660 |
|
Net periodic benefit cost (gain) |
$(1,813) |
$ (726) |
$ (601) |
|
Other post-retirement plans: |
|||
|
Components of net periodic benefit cost: |
|||
|
Service cost |
$ 376 |
$ 407 |
$ 312 |
|
Interest cost |
2,414 |
2,179 |
1,777 |
|
Amortization of: |
|||
|
Unrecognized net loss (gain) |
448 |
305 |
(46) |
|
Unrecognized prior service cost |
(462) |
(462) |
(462) |
|
Net periodic benefit cost |
$ 2,776 |
$ 2,429 |
$ 1,581 |
The following weighted--average assumptions were used to determine Modine's obligation under the plans:
|
2003 |
2002 |
|||
|
Years ended March 31 |
U.S. plans |
Foreign plans |
U.S. plans |
Foreign plans |
|
Pensions: |
||||
|
Discount rate |
6.75% |
6.33% |
7.50% |
7.17% |
|
Expected return on plan assets |
8.75% |
9.19% |
9.00% |
11.33% |
|
Rate of compensation increase |
4.00% |
2.61% |
4.00% |
3.05% |
|
Other post-retirement plans: |
||||
|
Discount rate |
6.75% |
7.50% |
||
|
Rate of compensation increase |
4.00% |
4.00% |
||
With regard to the post-retirement plans, for measurement purposes for pre-65 benefits and post-65 benefits, a 9 percent health care cost rate was assumed for fiscal year 2003 and a 10 percent rate for fiscal year 2002. This rate is projected to decline gradually to 5 percent in fiscal year 2007 and remain at that level thereafter.
Assumed health care cost trend rates affect the amounts reported for the health care plan. A one percentage point change in assumed health care cost trend rates would have the following effects:
(In thousands)
|
One percentage point |
||
|
Year ended March 31, 2003 |
increase |
decrease |
|
Effect on total of service and interest cost |
$ 104 |
$ (99) |
|
Effect on post-retirement benefit obligation |
1,384 |
(1,318) |
Note 4 Leases
|
Years ending March 31 |
|||
|
2004 |
$7,795 |
2007 |
$ 2,385 |
|
2005 |
5,288 |
2008 |
1,870 |
|
2006 |
3,053 |
2009 and beyond |
2,280 |
|
Total future minimum rental commitments |
$22,671 |
||
Note 5 Other income--net
|
Years ended March 31 |
2003 |
2002 |
2001 |
|
Royalty income |
$ 2,653 |
$ 4,843 |
$ 3,143 |
|
Equity in earnings of non-consolidated affiliates |
1,921 |
2,579 |
2,324 |
|
Interest income |
1,426 |
1,010 |
1,511 |
|
(Loss) gain on sale of property, equipment, and business |
(1,655) |
6,086 |
2,135 |
|
Other non-operating income |
3,616 |
2,515 |
4,137 |
|
Total other income--net |
$ 7,961 |
$17,033 |
$13,250 |
Note 6 Income taxes
|
Years ended March 31 |
2003 |
2002 |
2001 |
|
Components of earnings before income taxes: |
|||
|
United States |
$17,768 |
$23,882 |
$62,100 |
|
Foreign |
37,259 |
16,228 |
22,963 |
|
Total earnings before income taxes |
$55,027 |
$40,110 |
$85,063 |
|
Income tax expense: |
|||
|
Federal: |
|||
|
Current |
$ 1,795 |
$ 5,488 |
$ 9,954 |
|
Deferred |
3,251 |
2,401 |
6,674 |
|
State: |
|||
|
Current |
1,512 |
718 |
1,281 |
|
Deferred |
386 |
251 |
729 |
|
Foreign: |
|||
|
Current |
9,669 |
8,640 |
12,221 |
|
Deferred |
4,056 |
(733) |
2,374 |
|
Totals charged to earnings |
$20,669 |
$16,765 |
$33,233 |
Income tax expense attributable to earnings before income taxes and cumulative effect of accounting change 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 |
2003 |
2002 |
2001 |
|
Statutory federal tax |
35.0% |
35.0% |
35.0% |
|
State taxes, net of federal benefit |
2.6 |
1.9 |
1.7 |
|
Goodwill amortization |
-- |
3.1 |
1.0 |
|
Nondeductible acquisition costs |
-- |
2.4 |
-- |
|
Taxes on non-U.S. earnings and losses |
0.6 |
(1.4) |
(0.2) |
|
Other |
(0.6) |
0.8 |
1.6 |
|
Effective tax rate |
37.6% |
41.8% |
39.1% |
The significant components of deferred income tax expense attributable to earnings from continuing operations before income taxes are as follows:
(In thousands)
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 |
2003 |
2002 |
|
Deferred tax assets: |
||
|
Accounts receivable |
$ 517 |
$ 892 |
|
Inventories |
5,085 |
5,134 |
|
Plant and equipment |
703 |
995 |
|
Employee benefits |
19,021 |
17,770 |
|
Net operating loss, capital loss and credit carryforwards |
8,081 |
8,395 |
|
Restructuring costs |
167 |
1,673 |
|
Other, principally accrued liabilities |
15,093 |
8,455 |
|
Total gross deferred assets |
48,667 |
43,314 |
|
Less valuation allowance |
1,495 |
557 |
|
Net deferred tax assets |
47,172 |
42,757 |
|
Deferred tax liabilities: |
||
|
Pension |
27,768 |
26,115 |
|
Plant and equipment |
25,277 |
21,438 |
|
Other |
6,490 |
3,337 |
|
Total gross deferred tax liabilities |
59,535 |
50,890 |
|
Net deferred tax (liability)/asset |
$(12,363) |
$ (8,133) |
The valuation allowance for deferred tax assets as of April 1, 2002, was $557,000. The valuation allowance increased by $938,000 during the year and relates primarily to foreign net operating loss carryforward activities.
At March 31, 2003, the company had tax loss carryforwards of $21,578,000 existing in jurisdictions outside of the United States. If not utilized against taxable income, the tax losses will expire as follows:
(In thousands)
Years ending March 31
|
2004 |
$ 418 |
2008 |
$ 2,879 |
|
2005 |
1,427 |
2009 |
482 |
|
2006 |
2,363 |
2010 |
471 |
|
2007 |
1,614 |
No expiration date |
11,924 |
At March 31, 2003, the company had domestic capital loss carryforwards of $1,945,000. If not utilized against capital gains, the capital loss will expire in the year ended March 31, 2008.
The company had available at March 31, 2003, AMT credit carryforwards of approximately $108,000 which may be used indefinitely to reduce regular federal income taxes.
As of March 31, 2003, the company has provided $522,000 of U.S. tax on undistributed earnings of certain subsidiaries and equity investment companies considered not permanently reinvested. Undistributed earnings considered permanently reinvested in foreign operations totaled $160,558,000 and no provision has been made for any U.S. taxes that would be payable upon the distribution of such earnings.
Note 7 Earnings per share
|
Years ended March 31 |
2003 |
2002 |
2001 |
|
Net earnings per share of common stock--basic: |
|||
|
Before cumulative effect of accounting change |
$1.03 |
$0.70 |
$1.61 |
|
Cumulative effect of accounting change |
(0.65) |
-- |
-- |
|
Net earnings--basic |
$0.38 |
$0.70 |
$1.61 |
|
Net earnings per share of common stock--assuming dilution: |
|||
|
Before cumulative effect of accounting change |
$1.02 |
$0.70 |
$1.58 |
|
Cumulative effect of accounting change |
(0.64) |
-- |
-- |
|
Net earnings--assuming dilution |
$0.38 |
$0.70 |
$1.58 |
|
Numerator: |
|||
|
Net earnings available to common shareholders: |
|||
|
Before cumulative effect of accounting change |
$34,358 |
$23,345 |
$51,830 |
|
Cumulative effect of accounting change |
(21,692) |
-- |
-- |
|
Net earnings available to common shareholders |
$12,666 |
$23,345 |
$51,830 |
|
Denominator: |
|||
|
Weighted average shares outstanding--basic |
33,652 |
33,132 |
32,258 |
|
Effect of dilutive securities--options |
106 |
274 |
601 |
|
Weighted average shares |
|||
|
outstanding--assuming dilution |
33,758 |
33,406 |
32,859 |
|
There were outstanding options to purchase common stock excluded from the dilutive calculation because their prices exceeded the average market price for the earnings statement periods as follows: |
|||
|
Average market price per share |
$20.81 |
$25.65 |
$25.19 |
|
Number of shares |
2,468 |
1,246 |
1,438 |
Note 8 Cash and cash equivalents
|
March 31 |
2003 |
2002 |
|
Raw materials |
$ 25,274 |
$ 25,370 |
|
Work in process |
28,868 |
31,673 |
|
Finished goods |
76,670 |
64,620 |
|
Total inventories |
$130,812 |
$121,663 |
Note 10 Property, plant, and equipment
|
March 31 |
Depreciable lives |
2003 |
2002 |
|
Land |
-- |
$ 7,816 |
$ 7,384 |
|
Buildings and improvements |
10-40 years |
209,404 |
196,663 |
|
Machinery and equipment |
3-12 years |
417,456 |
399,161 |
|
Office equipment |
3-14 years |
73,853 |
69,462 |
|
Transportation equipment |
3-7 years |
10,035 |
9,442 |
|
Construction in progress |
-- |
38,483 |
20,783 |
|
757,047 |
702,895 |
||
|
Less accumulated depreciation |
397,289 |
362,507 |
|
|
Net property, plant, and equipment |
$359,758 |
$340,388 |
Net property held for sale is comprised of:
(In thousands)
|
March 31 |
2003 |
2002 |
|
Location: |
||
|
LaPorte, IN |
$1,009 |
$ -- |
|
St. Paul, MN |
838 |
-- |
|
Net property held for sale |
$1,847 |
$ -- |
In the third quarter of fiscal 2002, the Company initiated a restructuring plan, as described in Note 14 to the financial statements, that included manufacturing facilities located in LaPorte, Indiana and St. Paul, Minnesota. The Company is actively marketing these properties and expects that the facilities will be sold in the upcoming year. The assets, which are recorded in the Original Equipment segment, consist of land, buildings and associated improvements, and are recorded at their respective carrying values at the time they were classified as property held for sale. These carrying values currently are below the estimated fair values of the properties less the costs to sell the properties.
Depreciation expense was $53,330,000, $53,587,000, and $44,359,000 for the fiscal years ended 2003, 2002, and 2001, respectively.
Gains or (losses) recorded for disposals or impairment charges to property, plant, and equipment are recorded under the earnings statement caption of other income--net. These amounts totaled ($1,565,000), $4,630,000, and ($932,000) for fiscal years ending March 31, 2003, 2002, and 2001, respectively.
Note 11 Investment in affiliates
|
March 31 |
Percent-owned |
2003 |
2002 |
|
Net investment in affiliates: |
|||
|
Radiadores Visconde, Ltda. (Brazil) |
50% |
$11,694 |
$16,112 |
|
Nikkei Heat Exchanger Company, Ltd. (Japan) |
50% |
5,269 |
4,534 |
|
Constructions Mechaniques Mota, S.A. (France) |
41% |
5,426 |
4,335 |
|
Total net investment in affiliates |
$22,389 |
$24,981 |
At March 31, 2003 and 2002, the investment in Radiadores Visconde, Ltda. exceeded the Company's share of the underlying net assets by $4,347,000 and $6,565,000, respectively. The investment in Construction Mechaniques Mota, S.A. exceeded the Company's share of the underlying assets by $1,354,000 and $1,089,000, respectively. The fluctuations in these values were the result of exchange rate changes between the local currency and the U.S. dollar. The investment in Nikkei Heat Exchanger Company, Ltd. is equal to the Company's investment in the underlying assets. Goodwill, recognized on these investments, was being amortized on a straight-line basis over 15 years prior to the adoption of SFAS No. 142. With the adoption of SFAS No. 142 on April 1, 2002, amortization was discontinued in accordance with the provisions of the statement.
The results of operations for Radiadores Visconde, Ltda. and Nikkei Heat Exchanger Company, Ltd. are reported in the consolidated financial statements using a one-month reporting delay. Operating results for Construction Mechaniques Mota, S.A. are included using a three-month delay. Equity in earnings from non-consolidated affiliates is reported under "other income--net" on the statements of earnings. Earnings for fiscal 2003, 2002, and 2001 were $1,921,000, $2,579,000, and $2,324,000, respectively.
Note 12 Acquisitions
On April 27, 2001, Modine acquired Thermacore International, Inc. (Thermacore) in a business combination accounted for as a pooling of interests. Thermacore, which produces advanced cooling solutions for equipment in the computer, telecommunications, medical, aerospace, networking and power-semiconductor markets, became a wholly owned subsidiary of Modine through the initial exchange of approximately 3,327,000 shares of Modine common stock for all the outstanding common and preferred stock of Thermacore International, Inc. In addition, approximately 294,000 shares of Modine common stock were allocated to cover outstanding Thermacore stock options, which were converted to Modine stock options as part of the transaction. The accompanying financial statements are based upon the assumption that the companies were combined for fiscal 2002, and the financial statements of prior periods have been restated to give effect to the combination. Prior to the date of the combination, there were no business transactions between Modine and Thermacore. No significant adjustments have been made to conform the accounting policies of the companies. No adjustments to retained earnings were required to conform Thermacore to Modine's March 31 fiscal year-end. Previously reported results of operations have been consolidated by combining quarterly operating results reported by Thermacore for the period April 1, 2000 - March 31, 2001.
Summarized results of operations of the separate companies for the period prior to acquisition, April 1, 2001 through April 27, 2001 and included in fiscal 2002 operations are as follows:
(In thousands)
|
April 1-27, 2001 |
Modine |
Thermacore |
|
Net sales |
$85,613 |
$ 3,496 |
|
Net earnings (loss) |
3,368 |
(1,655) |
Included in the operating results shown for April of 2001 are $351,000 and $2,209,000 in after-tax acquisition costs recorded for Modine and Thermacore, respectively.
Following is a reconciliation of the accounts of net sales and net earnings previously reported for the twelve-month period ended March 31, 2001 with the restated amounts.
(In thousands)
|
Twelve months ended March 31 |
2001 |
|
Net sales: |
|
|
Modine |
$1,059,041 |
|
Thermacore |
56,004 |
|
Combined |
$1,115,045 |
|
Net earnings: |
|
|
Modine |
$ 47,605 |
|
Thermacore |
4,225 |
|
Combined |
$ 51,830 |
In June of 2000, Modine purchased the remaining 50-percent share of Daikin-Modine, Inc., from its joint venture partner, Daikin Industries, Ltd. The joint venture was established in June of 1998 to develop, manufacture, and market commercial, unitary, air-conditioning systems. Investment capital provided by Modine in fiscal 2000 totaled $2,700,000. The purchase of the remaining 50-percent interest for $200,000 resulted in a "bargain purchase" and, as such, the value of the acquired property, plant, and equipment was reduced proportionately by the amount of the bargain element. The value of the assets acquired, after giving effect to the bargain element and excluding cash acquired of $449,000, was $1,186,000. Liabilities assumed in the transaction were $1,346,000. Net cash received from the acquisition was $249,000. The continuing operation has been integrated into Modine's Commercial HVAC&R Division and its operating results reported in the Distributed Products reporting segment since the purchase of the remaining 50-percent share. This investment, accounted for as a purchase transaction, did not have a material effect on the consolidated results of operations and, accordingly, pro-forma information is not presented.
Note 13 Divestitures
In fiscal 2002, the Company adopted a plan to close or sell its wholly-owned Canadian aftermarket subsidiary reported as part of the Company's Distributed Products segment. In connection with the plan, the Company determined that the carrying values of some of the underlying assets exceeded their fair values. Consequently, the Company recorded an impairment loss of $1,851,000, which represents the excess of the carrying values of the assets over the estimated fair values, less costs to sell. An impairment loss of $1,572,000, representing fixed assets and inventory, was charged to cost of sales and $279,000, representing a write-off of goodwill on the subsidiary's books, was charged to selling, general and administrative expense.
On July 31, 2002, the Company completed the sale of its wholly-owned Canadian aftermarket subsidiary, Modine of Canada, Ltd. The net cash sales price of the transaction totaled approximately $1,954,000 and resulted in a $1,726,000 ($1,268,000 after-tax) pretax loss that was charged to other income--net during the second quarter of fiscal 2003. This pre-tax loss consisted of cumulative currency translation recorded from the time of Modine's original investment in Canada and other losses that were realized upon the sale. The final sales price and loss recorded on the sale of business are subject to final settlement with the purchaser.
Note 14 Restructuring and plant closures
In the third quarter of fiscal 2002, Modine initiated a restructuring plan to reduce costs and increase future operating efficiency by consolidating a portion of its operations. This restructuring plan included the closure of three manufacturing plants in North America located in LaPorte, Indiana; Knoxville, Tennessee; and St. Paul, Minnesota. The facility located in St. Paul, which has ceased production, manufactured products for the Company's HVAC market. The facilities located in LaPorte and Knoxville, which have both ceased production, manufactured products for customers in the Company's heavy-duty and industrial markets. The Knoxville facility was sold during the third quarter of fiscal 2003. Modine has relocated the production of the majority of the products previously made in these three facilities to other Company locations. The Company, however, ceased the production of air turnover units, building evaporator units, and indirect fired heating units previously produced at the St. Paul facility and has also rationalized certain heavy-duty and industrial customer relationships as part of the restructuring process. Separate personnel reductions were also initiated as part of the restructuring plan at three other U.S. facilities, located in Harrodsburg, Kentucky; Trenton, Missouri; and the Company's corporate headquarters in Racine, Wisconsin. Included in the European portion of the restructuring plan is a plant closure taking place in Bernhausen, Germany, which has ceased production, and personnel reductions at the Company's manufacturing facility in Granada, Spain. Modine discontinued the assembly of air conditioning equipment, previously performed at the Bernhausen facility for off-highway equipment manufacturers, as part of the restructuring. Final personnel reductions at the above-named manufacturing facilities have occurred, with the exception of legal restrictions imposed by foreign countries beyond the Company's control.
Anticipated total staff reductions, as estimated at the end of the fiscal 2003, are 310 employees. The final number of U.S. employees terminated, as a result of the restructuring program, was 246 employees. As a result of employees who were relocated to other Company facilities or left the Company prior to receiving separation benefits, the remaining accrual relating to termination costs was reduced by $354,000 during fiscal 2003 in the U.S. In addition, the severance accrual in Europe was increased by $42,000 during fiscal 2003. Of the total number of employees affected, 301 employees were terminated as of the end of fiscal 2003 and, thus far, have received benefit payments of $3,269,000. The balance in the reserve for termination benefits at March 31, 2003 is $489,000.
In addition to the costs of terminating employees, the other principal costs of the restructuring plan accrued at March 31, 2002 were estimated at $1,526,000. Upon reconsideration of the remaining "other" restructuring liabilities recorded during the third quarter of fiscal 2002, it was determined that $1,007,000 did not meet the requirements of an incremental cost and thus should not have been accrued as part of the EITF 94-3 restructuring charge taken in the third quarter of fiscal 2002 and should instead have been expensed as incurred. As a result, $1,007,000 was reversed during fiscal 2003. In addition, accrual adjustments of $236,000 were taken during fiscal 2003, primarily resulting from the reversal of estimated asset disposal costs at the Knoxville and LaPorte facilities. During fiscal 2003, cash payments of $226,000 were made. The remaining $29,000 liability consists of lease cancellation charges.
The following table displays the components of the accrued restructuring liability:
(In thousands)
|
2003 |
2002 |
|
|
Termination Benefits: |
||
|
Balance at April 1, 2002 and November 1, 2001 |
$ 4,042 |
$5,938 |
|
Reclassification from other restructuring charges |
28 |
-- |
|
Adjustments |
(312) |
(993) |
|
Payments |
(3,269) |
(903) |
|
Balance at March 31 |
$ 489 |
$4,042 |
|
Other Restructuring Charges: |
||
|
Balance at April 1, 2002 and November 1, 2001 |
$ 1,526 |
$2,569 |
|
Reclassification to termination benefits |
(28) |
-- |
|
Non-cash Goodwill Impairment |
-- |
(1,043) |
|
Adjustments |
(1,243) |
-- |
|
Payments |
(226) |
-- |
|
Balance at March 31 |
$ 29 |
$1,526 |
In addition to the restructuring costs, other closure-related and business rationalization costs recorded during fiscal 2003 included $1,456,000 in accelerated depreciation in conjunction with the reduction of the useful lives of some of the assets at the facilities to be closed. Furthermore, a positive adjustment of $78,000 was made relating to a revised estimate of pension curtailment expense. Additional obsolete inventory expenses of $220,000 and miscellaneous shut-down-related costs of $1,192,000 were incurred by the North American facilities. All closure-related and business rationalization costs incurred during fiscal 2003 have been recognized as expense in the cost of sales caption in the earnings statement.
The following table provides a summary of restructuring and one-time closure/business rationalization costs recorded related to the program announced in the third quarter of fiscal 2002:
(In thousands)
Other closure costs were recorded on the financial statement as follows:
(In thousands)
|
Year Ended March 31 |
2003 |
2002 |
Cumulative Charge |
|
Cost of sales |
$2,790 |
$4,828 |
$7,618 |
|
Selling, general and administrative |
-- |
381 |
381 |
|
Other income--net |
-- |
221 |
221 |
|
Total |
$2,790 |
$5,430 |
$8,220 |
Note 15 Goodwill
|
Years ended March 31 |
2003 |
2002 |
2001 |
|
Reported net earnings |
$12,666 |
$23,345 |
$51,830 |
|
Effect of change in accounting |
21,692 |
-- |
-- |
|
Add-back goodwill amortization, net of tax |
-- |
4,640 |
4,640 |
|
Adjusted net earnings |
$34,358 |
$27,985 |
$56,470 |
|
Reported basic earnings per share |
$ .38 |
$.70 |
$1.61 |
|
Effect of change in accounting |
.65 |
-- |
-- |
|
Add-back goodwill amortization |
-- |
.14 |
.14 |
|
Adjusted basic earnings per share |
$1.03 |
$.84 |
$1.75 |
|
Reported diluted earnings per share |
$ .38 |
$.70 |
$1.58 |
|
Effect of change in accounting |
.64 |
-- |
-- |
|
Add-back goodwill amortization |
-- |
.14 |
.14 |
|
Adjusted diluted earnings per share |
$1.02 |
$.84 |
$1.72 |
In accordance with the provisions of SFAS No. 142, in the second quarter of fiscal 2003 the Company tested its goodwill for impairment in all its reporting units. It was determined that the aftermarket reporting unit's carrying amount exceeded its fair value, which was estimated based on the present value of expected future cash flows. This resulted in a $21,692,000 (net of a $1,136,000 income tax benefit) non-cash write-off of goodwill in the aftermarket reporting unit. The charge was accounted for as a cumulative effect of an accounting change, retroactive to the first quarter of the current fiscal year. Modine reviewed the carrying value assigned to goodwill in the aftermarket reporting unit with respect to market conditions and expectations of future operating performance. These factors indicated that a permanent impairment in value existed in the respective business. Modine's goodwill impairment charge was calculated based on an independent valuation of the underlying business. The goodwill impairment charge does not impact the company's cash flow, liquidity or compliance with financial covenants.
With the adoption of SFAS No. 142, goodwill related to specific operating segments has been reallocated from the corporate and administrative assets as of the beginning of the fiscal year and the prior period has been reclassified for comparison purposes.
Changes in the carrying amount of goodwill during fiscal 2003, by segment and in the aggregate, are summarized in the following table:
(In thousands)
Note 16 Other intangible assets
|
March 31 |
2003 |
2002 |
||
|
Gross carrying value |
Accumulated amortization |
Gross carrying value |
Accumulated amortization |
|
|
Amortized Intangible Assets: |
||||
|
Patents and product technology |
$3,951 |
$2,388 |
$3,951 |
$2,126 |
|
Non-compete agreements |
2,182 |
2,124 |
2,182 |
2,007 |
|
Other intangibles |
118 |
118 |
201 |
189 |
|
6,251 |
4,630 |
6,334 |
4,322 |
|
|
Unamortized Intangible Asset: |
||||
|
Pension asset |
2,892 |
-- |
73 |
-- |
|
Total intangible assets |
$9,143 |
$4,630 |
$6,407 |
$4,322 |
The amortization expense for other intangible assets for the fiscal years ended 2003, 2002, and 2001, was $382,000, $2,152,000, and $893,000, respectively. Total estimated annual amortization expense expected for the fiscal years 2004 through 2008 are as follows:
(In thousands)
|
Years ending March 31 |
|||
|
2004 |
$321 |
2007 |
$263 |
|
2005 |
263 |
2008 |
259 |
|
2006 |
263 |
Note 17 Deferred charges and other noncurrent assets
|
March 31 |
2003 |
2002 |
|
Prepaid pension costs -- qualified and nonqualified plans |
$65,257 |
$66,622 |
|
Other noncurrent assets |
8,095 |
10,029 |
|
Total deferred charges and other noncurrent assets |
$73,352 |
$76,651 |
Note 18 Indebtedness
|
Type of issue |
Interest rate percentage at March 31, 2003 |
Fiscal year of maturity |
2003 |
2002 |
|
Denominated in U.S. dollars: |
||||
|
Fixed rate -- |
||||
|
Notes |
5.00 |
2004 |
$10,494 |
$ 10,877 |
|
Revenue bonds |
-- |
2003 |
-- |
50 |
|
Variable rate -- |
||||
|
Note |
2.18 |
2006 |
18,000 |
25,000 |
|
Revenue bonds |
1.32 |
2008 |
3,000 |
3,000 |
|
Denominated in foreign currency: |
||||
|
Fixed rate -- |
||||
|
Notes and other debt |
3.25-6.08 |
2004-2012 |
78,560 |
63,409 |
|
Weighted average interest rate |
5.47 |
|||
|
Variable rate -- |
||||
|
Notes and other debt |
5.00 |
2010 |
1,194 |
47,348 |
|
111,248 |
149,684 |
|||
|
Less current portion |
12,692 |
10,030 |
||
|
Total |
$98,556 |
$139,654 |
Certain of Modine's financing agreements require it to maintain specific financial ratios and place certain limitations on dividend payments and the acquisition of treasury stock. Other loan agreements give certain existing unsecured lenders security equal to any future secured borrowing. Modine is in compliance with these covenants at March 31, 2003.
The fair value of long-term debt is estimated by discounting the future cash flows at rates offered to the company for similar debt instruments of comparable maturities. At March 31, 2003 and 2002, the carrying value of Modine's long-term debt approximates fair value.
Long-term debt matures as follows:
(In thousands)
|
Years ending March 31 |
|||
|
2004 |
$12,692 |
2007 |
$3,797 |
|
2005 |
3,188 |
2008 |
6,806 |
|
2006 |
76,286 |
2009 and beyond |
8,479 |
In April of 2002, Modine entered into a $150,000,000 multi-currency, revolving credit facility with a syndicate of banks that will mature in April 2005. Initially, Modine borrowed $64,000,000 against this new facility, which was used to pay off existing debt. At the same time, Modine terminated credit facilities with two separate banks. The indebtedness incurred by the company under the credit facility is secured by a guarantee from all domestic subsidiaries and a pledge of 65 percent of the voting stock of material foreign subsidiaries. The terms of this credit facility contain various restrictive financial covenants relating to maximum debt-to-EBITDA, minimum interest coverage ratio and a minimum level of net worth. In addition, the credit facility contains limitations on investments, liens, dividends and other indebtedness. Borrowings under the credit facility bear interest at a rate of LIBOR plus a spread based on certain financial criteria, or the prime rate at Modine's option. Financing fees will be amortized over the life of the facility.
Modine also maintains credit agreements with banks abroad. The foreign unused lines of credit at March 31, 2003, were approximately $11,418,000. Domestic unused lines of credit at March 31, 2003, were approximately $132,000,000. There was no short-term bank borrowing outstanding during the year ended March 31, 2003. The weighted average interest rate on short-term borrowings was 5.05 percent at March 31, 2002.
Interest expense charged to earnings was as follows:
(In thousands)
|
Years ended March 31 |
2003 |
2002 |
2001 |
|
Gross interest cost |
$6,197 |
$8,013 |
$10,468 |
|
Capitalized interest on major construction projects |
(171) |
(220) |
(1,684) |
|
Interest expense |
$6,026 |
$7,793 |
$ 8,784 |
Note 19 Financial instruments/concentrations of credit risk
Note 21 Product warranties, guarantees, and other commitments
Product warranties
: Modine provides product warranties for specific product lines and accrues for estimated future warranty costs in the period in which the sale is recorded. Warranty expense estimates are forecasts based on the best information available using statistical analysis of both historical and current claim data.
Changes in the warranty liability included:
(In thousands)
|
Balance, March 31, 2002 |
$ 9,093 |
|
Accruals for warranties issued in current year |
10,514 |
|
Accruals related to pre-existing warranties |
1,979 |
|
Settlements made |
(9,582) |
|
Effect of exchange-rate changes on the warranty liability |
966 |
|
Balance, March 31, 2003 |
$12,970 |
Indemnification Agreements
Note 22 Other noncurrent liabilities
|
March 31 |
2003 |
2002 |
|
Pensions |
$23,111 |
$13,274 |
|
Post-retirement benefits other than pensions |
22,472 |
22,818 |
|
Other |
5,659 |
4,668 |
|
Total other noncurrent liabilities |
$51,242 |
$40,760 |
Note 23 Common and treasury stock
|
Common stock |
Treasury stock at cost |
|||
|
shares |
amount |
shares |
amount |
|
|
Balance March 31, 2000 |
33,237 |
$20,773 |
(1,081) |
$(34,394) |
|
Purchase of treasury stock |
-- |
-- |
(199) |
(5,167) |
|
Stock options and awards including related tax benefits |
426 |
266 |
296 |
10,005 |
|
Employee stock-purchase and -ownership plans |
-- |
-- |
172 |
5,992 |
|
Balance March 31, 2001 |
33,663 |
21,039 |
(812) |
(23,564) |
|
Purchase of treasury stock |
-- |
-- |
(46) |
(1,292) |
|
Stock options and award including related tax benefits |
68 |
42 |
296 |
9,124 |
|
Employee stock-purchase and -ownership plans |
12 |
8 |
290 |
8,756 |
|
Balance March 31, 2002 |
33,743 |
21,089 |
(272) |
(6,976) |
|
Purchase of treasury stock |
-- |
-- |
(45) |
(1,135) |
|
Stock options and awards including related tax benefits |
297 |
186 |
45 |
1,067 |
|
Employee stock-purchase and -ownership plans |
5 |
3 |
-- |
-- |
|
Balance March 31, 2003 |
34,045 |
$21,278 |
(272) |
$ (7,044) |
Note 24 Shareholder rights plan
|
March 31 |
2003 |
2002 |
|
Unrealized foreign-currency-translation adjustments |
$(12,039) |
$(32,489) |
|
Minimum pension-liability adjustments |
(6,674) |
(1,005) |
|
Accumulated other comprehensive (loss) |
$(18,713) |
$(33,494) |
Note 26 Stock option, award, and purchase plans
|
Shares (in thousands) |
Weighted-average exercise price per share |
|
|
Outstanding March 31, 2000 |
3,118 |
$21.86 |
|
Granted |
434 |
22.64 |
|
Exercised |
(723) |
9.60 |
|
Forfeitures |
(74) |
23.58 |
|
Outstanding March 31, 2001 |
2,755 |
25.15 |
|
Granted |
571 |
23.44 |
|
Exercised |
(289) |
16.73 |
|
Forfeitures |
(27) |
29.25 |
|
Outstanding March 31, 2002 |
3,010 |
25.60 |
|
Granted |
360 |
18.93 |
|
Exercised |
(233) |
15.98 |
|
Forfeitures |
(210) |
26.97 |
|
Outstanding March 31, 2003 |
2,927 |
$25.44 |
Options outstanding and exercisable as of March 31, 2003:
|
Range of exercise prices |
Weighted-average years of remaining life |
Weighted-average exercise price per share |
Shares (in thousands) |
|
$ 4.95 - 14.99 |
6.7 |
$11.82 |
141 |
|
15.00 - 24.99 |
8.1 |
21.72 |
1,213 |
|
25.00 - 34.99 |
4.7 |
29.53 |
1,573 |
|
Total outstanding and exercisable |
$25.44 |
2,927 |
A further 3,383,000 shares were available for the granting of additional options or awards at March 31, 2003.
Note 27 Segment and geographic information
Modine's product line consists of heat-transfer components and systems. Modine serves the vehicular, industrial, commercial, and building-HVAC original-equipment and replacement markets and the electronics cooling markets. Modine operates in three business segments, which are organized on the basis of market categories or geographical responsibility. They are as follows: 1) Original Equipment, which provides heat-transfer products, generally from business units in North America, to original-equipment manufacturers of on-highway and off-highway vehicles, as well as to industrial- and commercial-equipment manufacturers, located primarily in North America; 2) Distributed Products, which provides heat-transfer products primarily for the North American and European vehicular replacement markets and the North American building-HVAC market from business units located in North America and Europe, and electronics cooling products for the computer and telecommunications equipment markets in North America, Europe, and Asia from business units in those three areas; and 3) European Operations, which provides heat-transfer products, primarily to European original-equipment manufacturers of on-highway and off-highway vehicles and industrial equipment manufacturers. Modine has assigned specific business units to a segment based principally on these defined markets and their geographical location. Each of Modine's segments is individually managed and has separate financial results reviewed by its chief operating decision makers. These results are used by management in evaluating the performance of each business segment, and in making decisions on the allocation of resources among the Company's various businesses. Modine evaluates segment performance based on operating income and the return on capital employed. The significant accounting policies of the segments are the same as those of Modine as a whole.
Totals presented are inclusive of all adjustments needed to reconcile to the data provided in Modine's consolidated financial statements and related notes.
Segment data: In the first quarter of fiscal 2002, Modine acquired Thermacore International, Inc. in a business combination accounted for as a pooling of interests. Thermacore activity is included in the Distributed Products segment for all years being reported in the accompanying tables. Two additional changes made by management in the first quarter of fiscal 2002 were to relocate the Goch, Germany facility previously reported in the Original Equipment segment to the European Operations segment and the Emporia, Kansas facility previously reported in the Distributed Products segment to the Original Equipment segment. These revisions were made to align the plants with the current management reporting structure. The corresponding prior years' data has been reclassified to reflect the effects of these changes.
(In thousands)
|
Years ended March 31 |
2003 |
2002 |
2001 |
|
Sales: |
|||
|
Original Equipment |
$ 469,383 |
$ 456,994 |
$ 467,288 |
|
Distributed Products |
348,799 |
377,328 |
420,843 |
|
European Operations |
333,028 |
300,815 |
302,780 |
|
Segment sales |
1,151,210 |
1,135,137 |
1,190,911 |
|
Eliminations |
(59,135) |
(65,950) |
(75,866) |
|
Total net sales |
$1,092,075 |
$1,069,187 |
$1,115,045 |
|
Operating income: |
|||
|
Original Equipment |
$ 76,415 |
$ 66,235 |
$ 82,189 |
|
Distributed Products |
3,432 |
7,213 |
20,866 |
|
European Operations |
37,422 |
21,740 |
28,744 |
|
Segment operating income |
117,269 |
95,188 |
131,799 |
|
Corporate & administrative expenses |
(64,311) |
(64,462) |
(68,292) |
|
Eliminations |
134 |
144 |
131 |
|
Other items not allocated to segments |
1,935 |
9,240 |
21,425 |
|
Earnings before income taxes |
$ 55,027 |
$ 40,110 |
$ 85,063 |
Intersegment sales are accounted for based on an established markup over production costs.
Operating income for the reportable segments excludes all general corporate and administrative expenses except for certain expenses allocated for use of the Company aircraft, technical center, and general building use. Functions included in corporate and administrative expenses include: certain research and development costs, the engine products development group, information technology, quality assurance, legal, finance, human resources, environmental, amortization of goodwill in fiscal 2001 and 2002 from acquisitions that benefit the entire Company, and other general corporate expenses.
Other items not allocated to segments include patent settlements and running royalties, interest income and expenses, equity in the earnings of affiliates, gain on the sale of one of the Company's aircraft and dividend income.
(In thousands)
|
Years ended March 31 |
2003 |
2002 |
2001 |
|
Assets: |
|||
|
Original Equipment |
$211,187 |
$231,553 |
$224,691 |
|
Distributed Products |
199,975 |
224,973 |
263,281 |
|
European Operations |
285,068 |
212,131 |
216,553 |
|
Corporate & administrative |
233,750 |
251,685 |
246,581 |
|
Eliminations |
(19,162) |
(17,298) |
(13,935) |
|
Total assets |
$910,818 |
$903,044 |
$937,171 |
|
Capital expenditures: |
|||
|
Original Equipment |
$ 9,472 |
$ 40,616 |
$ 15,139 |
|
Distributed Products |
5,879 |
6,662 |
11,316 |
|
European Operations |
20,024 |
21,923 |
28,159 |
|
Corporate & administrative |
15,144 |
(33,438) |
18,276 |
|
Eliminations |
-- |
-- |
-- |
|
Total capital expenditures |
$ 50,519 |
$ 35,763 |
$ 72,890 |
|
Depreciation and amortization expense: |
|||
|
Original Equipment |
$ 20,272 |
$ 21,946 |
$ 15,167 |
|
Distributed Products |
33,802 |
14,435 |
11,990 |
|
European Operations |
13,414 |
12,745 |
11,569 |
|
Corporate & administrative |
10,286 |
14,517 |
13,323 |
|
Eliminations |
(141) |
(135) |
(141) |
|
Total depreciation and amortization expense |
$ 77,633 |
$ 63,508 |
$ 51,908 |
Assets: Corporate assets include cash and cash equivalents, accounts and notes receivable, investments in affiliates, intangibles, and significant long-lived assets. Eliminations consist primarily of intracompany loans and receivables.
With the adoption of SFAS No. 142, goodwill related to specific operating segments was reallocated at the beginning of fiscal 2003 and the prior periods have been restated for comparison purposes. A total of $25,064,000 of net goodwill was reassigned from the Corporate & Administrative segment, of which $20,344,000 was transferred to the Original Equipment segment, $2,706,000 was transferred to the Distributed Products segment, and $2,014,000 was transferred to the European Operations segment. In addition to the reallocation in fiscal 2003, goodwill relating to the Distributed Products segment was impaired for $22,828,000. Additional information is detailed in Note 15 to the consolidated financial statements.
In fiscal 2003, assets included in the European Operations segment increased significantly from fiscal 2002 due to the strengthening of the euro against the U.S. dollar by approximately 20 percent.
Capital Expenditures
: The Company reports its segment data, including information with respect to capital expenditures, in the same manner as such information is presented to the chief operating decision maker. In the majority of cases, capital projects in North America are coordinated through engineering staff located at the corporate facilities in Racine, Wisconsin. While these projects are in progress they are maintained in the Corporate construction in progress account. Upon completion of the projects, the assets are transferred to the appropriate segment to be put into service. In fiscal 2002, the Company significantly reduced its capital spending compared to previous years. As a result, transfers made to the operating segments exceeded capital spending recorded in the Corporate construction in progress account. Consequently, the Corporate & Administrative operations had a net reduction of $33,438,000 in fiscal 2002.
Depreciation and Amortization Expense
: In fiscal 2003, goodwill relating to the Distributed Products segment was impaired, thereby increasing the expense $22,828,000 over fiscal 2002. Additional information is detailed in Note 15 to the consolidated financial statements.
(In thousands)
|
Years ended March 31 |
2003 |
2002 |
2001 |
|
Sales to unaffiliated customers from company facilities located in: |
|||
|
United States |
$ 684,301 |
$ 686,182 |
$ 727,590 |
|
Germany |
235,637 |
221,077 |
220,217 |
|
Other countries |
172,137 |
161,928 |
167,238 |
|
Net sales |
$1,092,075 |
$1,069,187 |
$1,115,045 |
|
Long-lived assets: |
|||
|
United States |
$ 313,817 |
$ 351,641 |
$ 383,909 |
|
Germany |
113,234 |
86,578 |
85,092 |
|
Other countries |
66,933 |
59,523 |
60,913 |
|
Eliminations |
(531) |
(668) |
(774) |
|
Total long-lived assets |
$ 493,453 |
$ 497,074 |
$ 529,140 |
Sales
Note 29 Quarterly financial data (unaudited)
|
Fiscal 2003 quarters ended |
June |
Sept. |
Dec. |
March |
|
Net sales |
$272,293 |
$275,308 |
$271,830 |
$272,644 |
|
Gross profit |
68,553 |
67,514 |
67,636 |
69,004 |
|
Earnings before cumulative effect of accounting change |
10,385 |
6,270 |
9,612 |
8,091 |
|
Cumulative effect of change in accounting for: |
||||
|
Goodwill impairment (net of $1,136 income tax benefit) |
(21,692) |
-- |
-- |
-- |
|
Net earnings (loss) (a) (b) (c) (d) |
(11,307) |
6,270 |
9,612 |
8,091 |
|
Net earnings per share of common stock--basic: |
||||
|
Before cumulative effect of accounting change |
$ 0.31 |
$0.19 |
$0.29 |
$0.24 |
|
Cumulative effect of accounting change |
(0.65) |
-- |
-- |
-- |
|
Net earnings (loss)--basic |
$(0.34) |
$0.19 |
$0.29 |
$0.24 |
|
Net earnings per share of common stock--diluted: Before cumulative effect of accounting change |
$ 0.31 |
$0.19 |
$0.29 |
$0.24 |
|
Cumulative effect of accounting change |
(0.64) |
-- |
-- |
-- |
|
Net earnings (loss)--diluted |
$(0.33) |
$0.19 |
$0.29 |
$0.24 |
|
Fiscal 2002 quarters ended |
June |
Sept. |
Dec. |
March |
|
Net sales |
$279,145 |
$267,731 |
$268,958 |
$253,353 |
|
Gross profit |
72,477 |
63,580 |
65,366 |
57,473 |
|
Net earnings (e) (f) (g) |
10,218 |
6,829 |
1,252 |
5,046 |
|
Net earnings per share of common stock |
||||
|
: Basic |
$0.31 |
$0.21 |
$0.04 |
$0.15 |
|
Assuming dilution |
0.31 |
0.20 |
0.04 |
0.15 |
(a) The 1st quarter of fiscal 2003 includes an impairment loss relating to goodwill in accordance with SFAS No. 142 of $22,828,000 ($21,692,000 after-tax). Also recorded in the 1st quarter were reductions to the restructuring and other closure expenses totaling $309,000 ($196,000 after-tax).
(b) The 2nd quarter of fiscal 2003 includes a loss on the sale of the company's wholly owned Canadian aftermarket subsidiary, Modine of Canada, Ltd. totaling $1,726,000 ($1,268,000 after-tax). Also recorded in the 2nd quarter were net additional restructuring and other closure expenses totaling $605,000 ($389,000 after-tax).
(c) The 3rd quarter of fiscal 2003 includes a gain on the sale of the Company's facility in Knoxville, Tennessee totaling $417,000 ($255,000 after-tax). Also recorded in the 3rd quarter were net additional restructuring and other closure expenses totaling $717,000 ($438,000 after-tax).
(d) The 4th quarter of fiscal 2003 includes reductions to the restructuring and other closure expenses totaling $222,000 ($143,000 after-tax).
(e) The 1st quarter of fiscal 2002 includes acquisition expenses of $3,105,000 ($2,865,000 after-tax) related to the Thermacore International, Inc. pooling transaction.
(f) The 3rd quarter of fiscal 2002 includes $12,333,000 ($8,275,000 after-tax) in restructuring and other closure expenses. Also recorded in the 3rd quarter was a reduction to the workers' compensation insurance reserves, due to a change in accounting estimate, increasing earnings by $6,504,000 ($3,974,000 after-tax).
(g) The 4th quarter of fiscal 2002 includes the gain on the sale of one of the Company's aircraft totaling $3,500,000 ($1,879,000 after-tax). Also recorded in the 4th quarter were additional restructuring and other closure expenses totaling $637,000 ($375,000 after-tax).
To the Shareholders and Board of Directors Modine Manufacturing CompanyRacine, Wisconsin
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, cash flows, and shareholders' equity present fairly, in all material respects, the financial position of Modine Manufacturing Company and its subsidiaries at March 31, 2003 and March 31, 2002, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2003 in conformity with accounting principles generally accepted in the United States of America. 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. The consolidated financial statements give retroactive effect to the merger of Thermacore International, Inc. on April 27, 2001 in a transaction accounted for as a pooling of interest, as described in Note 12 to the consolidated financial statements. We did not audit the financial statements of Thermacore International, Inc., which statements reflect total revenues of $56,005,487 for the year ended March 31, 2001. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for Thermacore International, Inc., is based solely on the report of other auditors. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 15 to the consolidated financial statements, on April 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets."
PricewaterhouseCoopers LLPChicago, IllinoisApril 30, 2003
EXHIBIT 21
The table below indicates each of the Registrant's subsidiaries, each subsidiary's jurisdiction of incorporation, and the percentage of its voting securities owned by the Registrant or its subsidiaries.
|
Subsidiaries |
State or country of incorporation or organization |
Percentage of voting securities |
Owned by |
|
Industrial Airsystems, Inc. |
Minnesota |
100% |
Registrant |
|
Manufacturera Mexicana de Partes
|
Mexico |
100% |
Registrant (1) |
|
Modine, Inc. |
Delaware |
100% |
Registrant |
|
Modine Acquisition Corp. |
Delaware |
100% |
Registrant |
|
Modine Aftermarket Holdings, Inc. |
North Carolina |
100% |
Registrant |
|
Modine Asia K.K. |
Japan |
100% |
Registrant |
|
Modine Austria Ges.m.b.H |
Austria |
100% |
Registrant |
|
Modine Holding Ltda. (2) |
Brazil |
99.9% |
Modine, Inc. (3) |
|
Modine National Sales, Ltd. |
Canada |
100% |
Registrant |
|
Modine Climate Systems Inc. |
Kentucky |
100% |
Registrant |
|
Modine Export Sales Corp. |
Barbados |
100% |
Registrant |
|
Modine Foundation, Inc. |
Wisconsin |
100% |
Registrant |
|
Modine Manufacturing Company
|
Wisconsin |
100% |
Registrant |
|
Modine of Puerto Rico, Inc. |
Delaware |
100% |
Registrant |
|
Radman, Inc. |
Michigan |
100% |
Registrant |
|
Modine Holding GmbH |
Germany |
100% |
Modine, Inc. |
|
Modine Transferencia de Calor,
|
Mexico |
99.6% |
Modine, Inc. (3) |
|
NRF B.V. |
The Netherlands |
100% |
Modine, Inc. |
|
Modine Climate Systems GmbH |
Germany |
100% |
Modine Climate Systems Inc. |
|
Modine Automobiltechnik GmbH |
Germany |
100% |
Modine Holding GmbH |
|
Modine Bernhausen GmbH |
Germany |
100% |
Modine Holding GmbH |
|
Modine Europe GmbH |
Germany |
100% |
Modine Holding GmbH |
|
Modine Grundstucksverwaltungs GmbH |
Germany |
100% |
Modine Holding GmbH |
|
Modine Hungaria Kft. |
Hungary |
100% |
Modine Holding GmbH |
|
Modine Kirchentellinsfurt GmbH |
Germany |
100% |
Modine Holding GmbH |
|
Modine Montage GmbH |
Germany |
100% |
Modine Holding GmbH |
|
Modine Neuenkirchen GmbH |
Germany |
100% |
Modine Holding GmbH |
|
Modine Pontevico S.r.l. |
Italy |
100% |
Modine Holding GmbH |
|
Modine Tubingen GmbH |
Germany |
100% |
Modine Holding GmbH |
|
Modine Uden B.V. |
The Netherlands |
100% |
Modine Holding GmbH |
|
NRF B.V.B.A. |
Belgium |
100% |
NRF B.V. |
|
NRF Deutschland GmbH |
Germany |
100% |
NRF B.V. |
|
NRF Espania S.A. |
Spain |
100% |
NRF B.V. |
|
NRF France SARL |
France |
100% |
NRF B.V. |
|
NRF Handelgesellschaft mbH |
Austria |
100% |
NRF B.V. |
|
NRF Italia SRL |
Italy |
100% |
NRF B.V. |
|
NRF Poland Spolka Z.O.O. |
Poland |
100% |
NRF B.V. |
|
NRF Switzerland AG |
Switzerland |
100% |
NRF B.V. |
|
NRF UK Ltd. |
United Kingdom |
100% |
NRF B.V. |
|
Thermacore International, Inc. |
Pennsylvania |
100% |
Registrant |
|
Thermacore, Inc. |
Pennsylvania |
100% |
Thermacore International, Inc. |
|
Thermal Corp. |
Delaware |
100% |
Thermacore, Inc. |
|
MR 1, Inc. |
Pennsylvania |
100% |
Thermacore, Inc. |
|
Thermacore Korea, Ltd. |
Korea |
100% |
Thermal Corp. |
|
Thermacore Taiwan, Inc. |
Taiwan |
50% 50% |
Thermal Corp. Thermacore, Inc. |
|
Thermacore Europe Limited |
United Kingdom |
100% |
Thermal Corp. |
(1) Less than one percent of Mexpar is held by Modine, Inc.
(2) Modine Holding Ltda. Owns a 50% share of Radiadores Visconde S/A, formerly known as Modine do Brasil Ltda.
(3) Balance of voting securities held by the Registrant
EXHIBIT 23(a)
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (File Numbers 1-1373, 2-63714, 2-86984, 2-87299, 2-86985, 33-1764, 33-58544, 2-55398, 33-66436, 33-66438, 33-66442, 33-66440, 33-54719, 33-54721, 33-54723, 33-54725, 333-29789, 333-52639, 333-66111, 333-66115, 333-66109, 333-71523, 333-40374, 333-63600, 333-56648, 333-97013, 333-100770, 333-100771, 333-100772, and 333-102124) of Modine Manufacturing Company of our report dated April 30, 2003 relating to the financial statements, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated April 30, 2003 relating to the financial statement schedule, which appears in this Form 10-K.
/s/PricewaterhouseCoopers LLP
Chicago, Illinois
June 18, 2003
EXHIBIT 23(b)
Section 11(a) of the Securities Act of 1933, as amended (the "Securities Act"), provides that if any part of a registration statement at the time such part becomes effective contains an untrue statement of a material fact or an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring a security pursuant to such registration statement (unless it is proved that at the time of such acquisition such person knew of such untruth or omission) may sue, among others, every accountant who has consented to be named as having prepared or certified any part of the registration statement, or as having prepared or certified any report or valuation which is used in connection with the registration statement, with respect to the statement in such registration statement, report or valuation which purports to have been prepared or certified by the accountant.
The Company's Form 10-K for the fiscal year ended March 31, 2003, is incorporated by reference into the Company's filings on Form S-8 (File Nos. 1-1373, 2-63714, 2-86984, 2-87299, 2-86985, 33-1764, 33-58544, 2-55398, 33-66436, 33-66438, 33-66442, 33-66440, 33-54719, 33-54721, 33-54723, 33-54725, 333-29789, 333-52639, 333-66111, 333-66115, 333-66109, 333-71523, 333-40374, 333-63600, 333-56648, 333-97013, 333-100770, 333-100771, 333-100772 and 333-102124, collectively the "Registration Statements") and, for purposes of determining any liability under the Securities Act, is deemed to be a new registration statement for each Registration Statement into which it is incorporated by reference.
With this Form 10-K, the Company files the previously issued report of Arthur Andersen LLP dated August 11, 2000 relating to Thermacore International, Inc., which was acquired by the Company on April 27, 2001 in a business combination accounted for as a pooling of interests. After reasonable efforts, the Company has not been able to obtain Arthur Andersen's written consent to the incorporation by reference into the Registration Statements of Arthur Andersen's report with respect to Thermacore's financial statements as of June 30, 2000 and 1999 and for the years then ended. Under these circumstances, Rule 437a under the Securities Act permits the Company to file this Form 10-K without a written consent from Arthur Andersen. As a result, however, Arthur Andersen will not have any liability under Section 11(a) of the Securities Act for any untrue statements of a material fact contained in the financial statements audited by Arthur Andersen or any omissions of a material fact required to be stated therein. Accordingly, you would be unable to assert a claim against Arthur Andersen under Section 11(a) of the Securities Act for any purchases of the securities under the Registration Statements made on or after the date the Form 10-K was filed with the Securities and Exchange Commission. To the extent provided in Section 11(b)(3)(C) of the Securities Act, however, other persons who are liable under Section 11(a) of the Securities Act, including the Company's officers and directors, may still rely on Arthur Andersen's original audit reports as being made by an expert for purposes of establishing a due diligence defense under Section 11(b) of the Securities Act.
Exhibit 99a - Appendix
APPENDIX
Page 19 of Annual Report
|
Sales by Market
|
|
|
Cars and Light Trucks |
31% |
|
Aftermarket |
21% |
|
Medium and Heavy Trucks |
19% |
|
Off-Highway Equipment |
11% |
|
Industrial Equipment |
8% |
|
Building HVAC |
6% |
|
Electronics |
3% |
|
Miscellaneous |
1% |
Page 19 of Annual Report
|
Sales by Product
|
|
|
Modules/Packages |
28% |
|
Radiators |
26% |
|
Oil Coolers |
15% |
|
Charge-Air Coolers |
9% |
|
Vehicular Air Conditioning |
7% |
|
Building HVAC |
6% |
|
Electronics |
3% |
|
Miscellaneous |
4% |
|
EGR Coolers |
2% |
EXHIBIT 99(b)
In connection with the Annual Report of Modine Manufacturing Company (the "Company") on Form 10-K for the period ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, D. B. Rayburn, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ D. B. Rayburn
President and Chief Executive Officer June 18, 2003 |
This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
EXHIBIT 99 (c)
In connection with the Annual Report of Modine Manufacturing Company (the "Company") on Form 10-K for the period ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, B.C. Richardson, Vice President, Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ B. C. Richardson
and Chief Financial Officer June 18, 2003 |
This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.