☑ |
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
WISCONSIN
|
39-0482000
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
1500 DeKoven Avenue, Racine, Wisconsin
|
53403
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Large Accelerated Filer ☐
|
Accelerated Filer ☑
|
Non-accelerated Filer ☐ (Do not check if a smaller reporting company)
|
Smaller reporting company ☐
|
Emerging growth company ☐
|
PART I. FINANCIAL INFORMATION
|
||
Item 1.
|
Financial Statements. |
1
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations. |
18
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk. |
24
|
Item 4.
|
Controls and Procedures. |
24
|
PART II. OTHER INFORMATION
|
||
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds. |
25
|
Item 6.
|
Exhibits. |
26
|
27
|
PART I. |
FINANCIAL INFORMATION
|
Three months ended June 30,
|
||||||||
2017
|
2016
|
|||||||
Net sales
|
$
|
515.5
|
$
|
347.2
|
||||
Cost of sales
|
427.0
|
284.9
|
||||||
Gross profit
|
88.5
|
62.3
|
||||||
Selling, general and administrative expenses
|
59.2
|
44.2
|
||||||
Restructuring expenses
|
1.7
|
2.3
|
||||||
Operating income
|
27.6
|
15.8
|
||||||
Interest expense
|
(6.6
|
)
|
(3.0
|
)
|
||||
Other expense – net
|
(0.9
|
)
|
(0.9
|
)
|
||||
Earnings before income taxes
|
20.1
|
11.9
|
||||||
Provision for income taxes
|
(2.7
|
)
|
(3.0
|
)
|
||||
Net earnings
|
17.4
|
8.9
|
||||||
Net earnings attributable to noncontrolling interest
|
(0.4
|
)
|
(0.3
|
)
|
||||
Net earnings attributable to Modine
|
$
|
17.0
|
$
|
8.6
|
||||
Net earnings per share attributable to Modine shareholders:
|
||||||||
Basic
|
$
|
0.34
|
$
|
0.18
|
||||
Diluted
|
$
|
0.34
|
$
|
0.18
|
||||
Weighted-average shares outstanding:
|
||||||||
Basic
|
49.5
|
46.9
|
||||||
Diluted
|
50.1
|
47.2
|
Three months ended June 30,
|
||||||||
2017
|
2016
|
|||||||
Net earnings
|
$
|
17.4
|
$
|
8.9
|
||||
Other comprehensive income (loss):
|
||||||||
Foreign currency translation
|
16.5
|
(4.9
|
)
|
|||||
Defined benefit plans, net of income taxes of $0.5 and $0.4 million
|
0.8
|
0.9
|
||||||
Total other comprehensive income (loss)
|
17.3
|
(4.0
|
)
|
|||||
Comprehensive income
|
34.7
|
4.9
|
||||||
Comprehensive income attributable to noncontrolling interest
|
(0.4
|
)
|
(0.2
|
)
|
||||
Comprehensive income attributable to Modine
|
$
|
34.3
|
$
|
4.7
|
June 30, 2017
|
March 31, 2017
|
|||||||
ASSETS
|
||||||||
Cash and cash equivalents
|
$
|
41.5
|
$
|
34.2
|
||||
Trade accounts receivable – net
|
317.8
|
295.2
|
||||||
Inventories
|
180.2
|
168.5
|
||||||
Other current assets
|
61.4
|
55.4
|
||||||
Total current assets
|
600.9
|
553.3
|
||||||
Property, plant and equipment – net
|
473.0
|
459.0
|
||||||
Intangible assets – net
|
135.0
|
134.1
|
||||||
Goodwill
|
169.4
|
165.1
|
||||||
Deferred income taxes
|
111.7
|
108.4
|
||||||
Other noncurrent assets
|
30.2
|
29.6
|
||||||
Total assets
|
$
|
1,520.2
|
$
|
1,449.5
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Short-term debt
|
$
|
90.6
|
$
|
73.4
|
||||
Long-term debt – current portion
|
34.0
|
31.8
|
||||||
Accounts payable
|
246.8
|
230.3
|
||||||
Accrued compensation and employee benefits
|
76.0
|
74.8
|
||||||
Other current liabilities
|
41.3
|
45.1
|
||||||
Total current liabilities
|
488.7
|
455.4
|
||||||
Long-term debt
|
406.0
|
405.7
|
||||||
Deferred income taxes
|
9.5
|
9.7
|
||||||
Pensions
|
119.5
|
119.4
|
||||||
Other noncurrent liabilities
|
39.9
|
38.1
|
||||||
Total liabilities
|
1,063.6
|
1,028.3
|
||||||
Commitments and contingencies (see Note 15)
|
||||||||
Shareholders' equity:
|
||||||||
Preferred stock, $0.025 par value, authorized 16.0 million shares, issued - none
|
-
|
-
|
||||||
Common stock, $0.625 par value, authorized 80.0 million shares, issued 51.9 million and 51.8 million shares
|
32.4
|
32.4
|
||||||
Additional paid-in capital
|
219.4
|
216.4
|
||||||
Retained earnings
|
389.7
|
372.4
|
||||||
Accumulated other comprehensive loss
|
(164.5
|
)
|
(181.8
|
)
|
||||
Treasury stock, at cost, 1.8 million and 1.7 million shares
|
(27.1
|
)
|
(25.4
|
)
|
||||
Total Modine shareholders' equity
|
449.9
|
414.0
|
||||||
Noncontrolling interest
|
6.7
|
7.2
|
||||||
Total equity
|
456.6
|
421.2
|
||||||
Total liabilities and equity
|
$
|
1,520.2
|
$
|
1,449.5
|
|
Three months ended June 30,
|
|||||||
2017
|
2016
|
|||||||
Cash flows from operating activities:
|
||||||||
Net earnings
|
$
|
17.4
|
$
|
8.9
|
||||
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
18.5
|
12.5
|
||||||
Deferred income taxes
|
(4.1
|
)
|
(1.4
|
)
|
||||
Other – net
|
4.5
|
2.2
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Trade accounts receivable
|
(14.0
|
)
|
(9.0
|
)
|
||||
Inventories
|
(7.3
|
)
|
(5.5
|
)
|
||||
Accounts payable
|
15.2
|
(1.7
|
)
|
|||||
Other assets and liabilities
|
(11.5
|
)
|
(4.4
|
)
|
||||
Net cash provided by operating activities
|
18.7
|
1.6
|
||||||
Cash flows from investing activities:
|
||||||||
Expenditures for property, plant and equipment
|
(21.6
|
)
|
(14.5
|
)
|
||||
Other – net
|
(0.8
|
)
|
1.1
|
|||||
Net cash used for investing activities
|
(22.4
|
)
|
(13.4
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Borrowings of debt
|
48.1
|
14.2
|
||||||
Repayments of debt
|
(36.7
|
)
|
(4.9
|
)
|
||||
Dividend paid to noncontrolling interest
|
(0.9
|
)
|
-
|
|||||
Other – net
|
(0.9
|
)
|
(1.1
|
)
|
||||
Net cash provided by financing activities
|
9.6
|
8.2
|
||||||
Effect of exchange rate changes on cash
|
1.4
|
(1.2
|
)
|
|||||
Net increase (decrease) in cash and cash equivalents
|
7.3
|
(4.8
|
)
|
|||||
Cash and cash equivalents – beginning of period
|
34.2
|
68.9
|
||||||
Cash and cash equivalents – end of period
|
$
|
41.5
|
$
|
64.1
|
Cash and cash equivalents
|
$
|
27.4
|
||
Trade accounts receivable
|
86.3
|
|||
Inventories
|
55.7
|
|||
Property, plant and equipment
|
120.4
|
|||
Intangible assets
|
130.2
|
|||
Goodwill
|
151.9
|
|||
Other assets
|
38.4
|
|||
Accounts payable
|
(73.7
|
)
|
||
Accrued compensation and employee benefits
|
(24.3
|
)
|
||
Deferred income taxes
|
(38.8
|
)
|
||
Pensions
|
(14.3
|
)
|
||
Other liabilities
|
(43.6
|
)
|
||
Purchase price
|
$
|
415.6
|
Three months ended
June 30, 2016 |
||||
Net sales
|
$
|
487.7
|
||
Net earnings attributable to Modine
|
16.0
|
|||
Net earnings per share attributable to Modine shareholders:
|
||||
Basic
|
$
|
0.32
|
||
Diluted
|
0.32
|
· |
Level 1 – Quoted prices for identical instruments in active markets.
|
· |
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.
|
· |
Level 3 – Model-derived valuations in which one or more significant inputs are not observable.
|
Three months ended June 30,
|
||||||||
2017
|
2016
|
|||||||
Service cost
|
$
|
0.1
|
$
|
0.1
|
||||
Interest cost
|
2.5
|
2.4
|
||||||
Expected return on plan assets
|
(3.0
|
)
|
(3.0
|
)
|
||||
Amortization of unrecognized net loss
|
1.4
|
1.4
|
||||||
Net periodic benefit cost
|
$
|
1.0
|
$
|
0.9
|
Three months ended June 30,
|
||||||||||||||||
2017
|
2016
|
|||||||||||||||
Shares
|
Fair Value
Per Award
|
Shares
|
Fair Value
Per Award
|
|||||||||||||
Stock options
|
0.2
|
$
|
7.30
|
0.3
|
$
|
4.60
|
||||||||||
Restricted stock awards
|
0.2
|
$
|
15.90
|
0.3
|
$
|
10.00
|
||||||||||
Performance stock awards
|
0.2
|
$
|
15.90
|
0.3
|
$
|
10.00
|
Three months ended June 30,
|
||||||||
2017
|
2016
|
|||||||
Expected life of awards in years
|
6.4
|
6.4
|
||||||
Risk-free interest rate
|
1.9
|
%
|
1.4
|
%
|
||||
Expected volatility of the Company's stock
|
44.3
|
%
|
45.5
|
%
|
||||
Expected dividend yield on the Company's stock
|
0.0
|
%
|
0.0
|
%
|
Unrecognized
Compensation Expense |
Weighted-Average
Remaining Service
Period in Years
|
|||||||
Stock options
|
$
|
3.4
|
3.1
|
|||||
Restricted stock awards
|
7.9
|
3.0
|
||||||
Performance stock awards
|
7.3
|
2.3
|
||||||
Total
|
$
|
18.6
|
2.7
|
Three months ended June 30,
|
||||||||
2017
|
2016
|
|||||||
Employee severance and related benefits
|
$
|
0.5
|
$
|
1.3
|
||||
Other restructuring and repositioning expenses
|
1.2
|
1.0
|
||||||
Total
|
$
|
1.7
|
$
|
2.3
|
Three months ended June 30,
|
||||||||
2017
|
2016
|
|||||||
Beginning balance
|
$
|
6.5
|
$
|
14.7
|
||||
Additions
|
0.5
|
1.3
|
||||||
Payments
|
(3.3
|
)
|
(3.1
|
)
|
||||
Effect of exchange rate changes
|
0.3
|
(0.2
|
)
|
|||||
Ending balance
|
$
|
4.0
|
$
|
12.7
|
Three months ended June 30,
|
||||||||
2017
|
2016
|
|||||||
Equity in earnings of non-consolidated affiliate
|
$
|
-
|
$
|
0.1
|
||||
Interest income
|
0.1
|
0.1
|
||||||
Foreign currency transactions (a)
|
(0.2
|
)
|
(0.4
|
)
|
||||
Net periodic benefit cost (b)
|
(0.8
|
)
|
(0.7
|
)
|
||||
Total other expense - net
|
$
|
(0.9
|
)
|
$
|
(0.9
|
)
|
(a) |
Foreign currency transactions primarily consist of foreign currency transaction gains and losses on the re-measurement or settlement of foreign currency-denominated assets and liabilities, including intercompany loans and transactions denominated in a foreign currency, along with gains and losses on foreign currency exchange contracts.
|
(b) |
Represents net periodic benefit cost, exclusive of service cost, for the Company’s pension and postretirement plans.
|
Three months ended June 30,
|
||||||||
2017
|
2016
|
|||||||
Net earnings attributable to Modine
|
$
|
17.0
|
$
|
8.6
|
||||
Less: Undistributed earnings attributable to unvested shares
|
(0.2
|
)
|
(0.1
|
)
|
||||
Net earnings available to Modine shareholders
|
$
|
16.8
|
$
|
8.5
|
||||
Weighted-average shares outstanding - basic
|
49.5
|
46.9
|
||||||
Effect of dilutive securities
|
0.6
|
0.3
|
||||||
Weighted-average shares outstanding - diluted
|
50.1
|
47.2
|
||||||
Earnings per share:
|
||||||||
Net earnings per share - basic
|
$
|
0.34
|
$
|
0.18
|
||||
Net earnings per share - diluted
|
$
|
0.34
|
$
|
0.18
|
June 30, 2017
|
March 31, 2017
|
|||||||
Raw materials and work in process
|
$
|
134.8
|
$
|
127.7
|
||||
Finished goods
|
45.4
|
40.8
|
||||||
Total inventories
|
$
|
180.2
|
$
|
168.5
|
June 30, 2017
|
March 31, 2017
|
|||||||
Gross property, plant and equipment
|
$
|
1,225.1
|
$
|
1,177.6
|
||||
Accumulated depreciation
|
(752.1
|
)
|
(718.6
|
)
|
||||
Net property, plant and equipment
|
$
|
473.0
|
$
|
459.0
|
Asia
|
Building HVAC
|
CIS
|
Total
|
|||||||||||||
Goodwill, March 31, 2017
|
$
|
0.5
|
$
|
13.7
|
$
|
150.9
|
$
|
165.1
|
||||||||
Acquisition (a)
|
-
|
-
|
1.3
|
1.3
|
||||||||||||
Effect of exchange rate changes
|
-
|
0.4
|
2.6
|
3.0
|
||||||||||||
Goodwill, June 30, 2017
|
$
|
0.5
|
$
|
14.1
|
$
|
154.8
|
$
|
169.4
|
(a)
|
During the first quarter of fiscal 2018, the Company recorded a $1.3 million increase to goodwill as a result of measurement period adjustments made in connection with purchase accounting for the acquisition of Luvata HTS. See Note 2 for additional information.
|
June 30, 2017
|
March 31, 2017
|
|||||||||||||||||||||||
Gross
Carrying
Value
|
Accumulated
Amortization
|
Net
Intangible
Assets
|
Gross
Carrying
Value
|
Accumulated
Amortization
|
Net
Intangible
Assets
|
|||||||||||||||||||
Customer relationships
|
$
|
62.3
|
$
|
(2.8
|
)
|
$
|
59.5
|
$
|
60.5
|
$
|
(1.7
|
)
|
$
|
58.8
|
||||||||||
Trade names
|
59.4
|
(8.1
|
)
|
51.3
|
58.4
|
(7.2
|
)
|
51.2
|
||||||||||||||||
Acquired technology
|
27.8
|
(3.6
|
)
|
24.2
|
27.0
|
(2.9
|
)
|
24.1
|
||||||||||||||||
Total intangible assets
|
$
|
149.5
|
$
|
(14.5
|
)
|
$
|
135.0
|
$
|
145.9
|
$
|
(11.8
|
)
|
$
|
134.1
|
Fiscal Year
|
Estimated
Amortization
Expense
|
|||
Remainder of 2018
|
$
|
7.2
|
||
2019
|
9.5
|
|||
2020
|
9.4
|
|||
2021
|
8.8
|
|||
2022
|
7.6
|
|||
2023 & Beyond
|
92.5
|
Three months ended June 30,
|
||||||||
2017
|
2016
|
|||||||
Beginning balance
|
$
|
10.0
|
$
|
8.3
|
||||
Warranties recorded at time of sale
|
1.3
|
1.4
|
||||||
Adjustments to pre-existing warranties
|
(0.5
|
)
|
0.1
|
|||||
Settlements
|
(1.0
|
)
|
(1.3
|
)
|
||||
Effect of exchange rate changes
|
0.3
|
(0.1
|
)
|
|||||
Ending balance
|
$
|
10.1
|
$
|
8.4
|
Fiscal year
of maturity |
June 30, 2017
|
March 31, 2017
|
|||||||
Term loans
|
2022
|
$
|
272.4
|
$
|
268.9
|
||||
6.8% Senior Notes
|
2021
|
113.0
|
117.0
|
||||||
5.8% Senior Notes
|
2027
|
50.0
|
50.0
|
||||||
Other (a)
|
2032
|
10.9
|
8.3
|
||||||
446.3
|
444.2
|
||||||||
Less: current portion
|
(34.0
|
)
|
(31.8
|
)
|
|||||
Less: unamortized debt issuance costs
|
(6.3
|
)
|
(6.7
|
)
|
|||||
Total long-term debt
|
$
|
406.0
|
$
|
405.7
|
(a) |
Other long-term debt includes capital lease obligations and other financing-type obligations.
|
Three months ended June 30, 2017
|
||||||||||||
Foreign
Currency
Translation
|
Defined
Benefit
Plans
|
Total
|
||||||||||
Beginning balance
|
$
|
(46.8
|
)
|
$
|
(135.0
|
)
|
$
|
(181.8
|
)
|
|||
Other comprehensive income before reclassifications
|
16.5
|
-
|
16.5
|
|||||||||
Reclassifications for amortization of unrecognized net loss (a)
|
-
|
1.3
|
1.3
|
|||||||||
Income taxes
|
-
|
(0.5
|
)
|
(0.5
|
)
|
|||||||
Total other comprehensive income
|
16.5
|
0.8
|
17.3
|
|||||||||
Ending balance
|
$
|
(30.3
|
)
|
$
|
(134.2
|
)
|
$
|
(164.5
|
)
|
Three months ended June 30, 2016
|
||||||||||||
Foreign
Currency
Translation
|
Defined
Benefit
Plans
|
Total
|
||||||||||
Beginning balance
|
$
|
(36.0
|
)
|
$
|
(138.2
|
)
|
$
|
(174.2
|
)
|
|||
Other comprehensive loss before reclassifications
|
(4.8
|
)
|
-
|
(4.8
|
)
|
|||||||
Reclassifications for amortization of unrecognized net loss (a)
|
-
|
1.3
|
1.3
|
|||||||||
Income taxes
|
-
|
(0.4
|
)
|
(0.4
|
)
|
|||||||
Total other comprehensive income (loss)
|
(4.8
|
)
|
0.9
|
(3.9
|
)
|
|||||||
Ending balance
|
$
|
(40.8
|
)
|
$
|
(137.3
|
)
|
$
|
(178.1
|
)
|
(a) |
Amounts are included in the calculation of net periodic benefit cost for the Company’s defined benefit plans, which include pension and other postretirement plans. See Note 4 for additional information about the Company’s pension plans.
|
Three months ended June 30,
|
|||||||||
Net sales:
|
2017
|
2016
|
|||||||
Americas
|
$
|
148.3
|
$
|
140.0
|
|||||
Europe
|
136.3
|
146.0
|
|||||||
Asia
|
35.4
|
24.9
|
|||||||
Commercial and Industrial Solutions
|
157.5
|
-
|
|||||||
Building HVAC
|
43.0
|
39.9
|
|||||||
Segment total
|
520.5
|
350.8
|
|||||||
Corporate and eliminations
|
(5.0
|
)
|
(3.6
|
)
|
|||||
Net sales
|
$
|
515.5
|
$
|
347.2
|
Three months ended June 30,
|
||||||||||||||||
2017
|
2016
|
|||||||||||||||
Gross profit:
|
$'s
|
% of
sales
|
$'s
|
% of
sales
|
||||||||||||
Americas
|
$
|
26.5
|
17.9
|
%
|
$
|
25.2
|
18.0
|
%
|
||||||||
Europe
|
19.3
|
14.2
|
%
|
25.3
|
17.3
|
%
|
||||||||||
Asia
|
6.3
|
17.7
|
%
|
4.4
|
17.6
|
%
|
||||||||||
Commercial and Industrial Solutions
|
25.3
|
16.0
|
%
|
-
|
-
|
|||||||||||
Building HVAC
|
11.1
|
25.9
|
%
|
10.0
|
25.1
|
%
|
||||||||||
Segment total
|
88.5
|
17.0
|
%
|
64.9
|
18.5
|
%
|
||||||||||
Corporate and eliminations
|
-
|
-
|
(2.6
|
)
|
-
|
|||||||||||
Gross profit
|
$
|
88.5
|
17.2
|
%
|
$
|
62.3
|
17.9
|
%
|
Three months ended June 30,
|
|||||||||
Operating income:
|
2017
|
2016
|
|||||||
Americas
|
$
|
12.1
|
$
|
9.6
|
|||||
Europe
|
7.9
|
15.3
|
|||||||
Asia
|
3.3
|
1.5
|
|||||||
Commercial and Industrial Solutions
|
10.8
|
-
|
|||||||
Building HVAC
|
3.1
|
0.9
|
|||||||
Segment total
|
37.2
|
27.3
|
|||||||
Corporate and eliminations
|
(9.6
|
)
|
(11.5
|
)
|
|||||
Operating income
|
$
|
27.6
|
$
|
15.8
|
June 30, 2017
|
March 31, 2017
|
|||||||
Total assets:
|
||||||||
Americas
|
$
|
283.2
|
$
|
282.9
|
||||
Europe
|
294.6
|
269.4
|
||||||
Asia
|
114.5
|
111.3
|
||||||
Commercial and Industrial Solutions
|
610.7
|
576.0
|
||||||
Building HVAC
|
95.5
|
85.2
|
||||||
Corporate and eliminations
|
121.7
|
124.7
|
||||||
Total assets
|
$
|
1,520.2
|
$
|
1,449.5
|
Three months ended June 30,
|
||||||||||||||||
2017
|
2016
|
|||||||||||||||
(in millions)
|
$'s
|
% of sales
|
$'s
|
% of sales
|
||||||||||||
Net sales
|
$
|
515.5
|
100.0
|
%
|
$
|
347.2
|
100.0
|
%
|
||||||||
Cost of sales
|
427.0
|
82.8
|
%
|
284.9
|
82.1
|
%
|
||||||||||
Gross profit
|
88.5
|
17.2
|
%
|
62.3
|
17.9
|
%
|
||||||||||
Selling, general and administrative expenses
|
59.2
|
11.5
|
%
|
44.2
|
12.7
|
%
|
||||||||||
Restructuring expenses
|
1.7
|
0.3
|
%
|
2.3
|
0.7
|
%
|
||||||||||
Operating income
|
27.6
|
5.4
|
%
|
15.8
|
4.5
|
%
|
||||||||||
Interest expense
|
(6.6
|
)
|
-1.3
|
%
|
(3.0
|
)
|
-0.9
|
%
|
||||||||
Other expense – net
|
(0.9
|
)
|
-0.2
|
%
|
(0.9
|
)
|
-0.2
|
%
|
||||||||
Earnings before income taxes
|
20.1
|
3.9
|
%
|
11.9
|
3.4
|
%
|
||||||||||
Provision for income taxes
|
(2.7
|
)
|
-0.5
|
%
|
(3.0
|
)
|
-0.8
|
%
|
||||||||
Net earnings
|
$
|
17.4
|
3.4
|
%
|
$
|
8.9
|
2.6
|
%
|
Three months ended June 30,
|
||||||||||||||||
2017
|
2016
|
|||||||||||||||
(in millions)
|
$'s
|
% of
sales
|
$'s
|
% of
sales
|
||||||||||||
Net sales
|
$
|
148.3
|
100.0
|
%
|
$
|
140.0
|
100.0
|
%
|
||||||||
Cost of sales
|
121.8
|
82.1
|
%
|
114.8
|
82.0
|
%
|
||||||||||
Gross profit
|
26.5
|
17.9
|
%
|
25.2
|
18.0
|
%
|
||||||||||
Selling, general and administrative expenses
|
13.0
|
8.8
|
%
|
13.4
|
9.5
|
%
|
||||||||||
Restructuring expenses
|
1.4
|
0.9
|
%
|
2.2
|
1.6
|
%
|
||||||||||
Operating income
|
$
|
12.1
|
8.2
|
%
|
$
|
9.6
|
6.9
|
%
|
Three months ended June 30,
|
||||||||||||||||
2017
|
2016
|
|||||||||||||||
(in millions)
|
$'s
|
% of
sales
|
$'s
|
% of
sales
|
||||||||||||
Net sales
|
$
|
136.3
|
100.0
|
%
|
$
|
146.0
|
100.0
|
%
|
||||||||
Cost of sales
|
117.0
|
85.8
|
%
|
120.7
|
82.7
|
%
|
||||||||||
Gross profit
|
19.3
|
14.2
|
%
|
25.3
|
17.3
|
%
|
||||||||||
Selling, general and administrative expenses
|
11.1
|
8.2
|
%
|
10.3
|
7.0
|
%
|
||||||||||
Restructuring expenses (income)
|
0.3
|
0.2
|
%
|
(0.3
|
)
|
-0.2
|
%
|
|||||||||
Operating income
|
$
|
7.9
|
5.8
|
%
|
$
|
15.3
|
10.5
|
%
|
Three months ended June 30,
|
||||||||||||||||
2017
|
2016
|
|||||||||||||||
(in millions)
|
$'s
|
% of
sales
|
$'s
|
% of
sales
|
||||||||||||
Net sales
|
$
|
35.4
|
100.0
|
%
|
$
|
24.9
|
100.0
|
%
|
||||||||
Cost of sales
|
29.1
|
82.3
|
%
|
20.5
|
82.4
|
%
|
||||||||||
Gross profit
|
6.3
|
17.7
|
%
|
4.4
|
17.6
|
%
|
||||||||||
Selling, general and administrative expenses
|
3.0
|
8.3
|
%
|
2.9
|
11.8
|
%
|
||||||||||
Operating income
|
$
|
3.3
|
9.4
|
%
|
$
|
1.5
|
5.8
|
%
|
Three months ended June 30,
|
||||||||||||||||
2017
|
2016
|
|||||||||||||||
(in millions)
|
$'s
|
% of
sales
|
$'s
|
% of
sales
|
||||||||||||
Net sales
|
$
|
43.0
|
100.0
|
%
|
$
|
39.9
|
100.0
|
%
|
||||||||
Cost of sales
|
31.9
|
74.1
|
%
|
29.9
|
74.9
|
%
|
||||||||||
Gross profit
|
11.1
|
25.9
|
%
|
10.0
|
25.1
|
%
|
||||||||||
Selling, general and administrative expenses
|
8.0
|
18.7
|
%
|
8.7
|
21.8
|
%
|
||||||||||
Restructuring expenses
|
-
|
-
|
0.4
|
1.0
|
%
|
|||||||||||
Operating income
|
$
|
3.1
|
7.2
|
%
|
$
|
0.9
|
2.3
|
%
|
· |
Economic, social and political conditions, changes, challenges and unrest, particularly in the geographic, product and financial markets where we and our customers operate and compete, including, in particular, foreign currency exchange rate fluctuations, tariffs, inflation, changes in interest rates, recession and recovery therefrom, restrictions and uncertainty associated with cross-border trade, and, in particular, the continuing recovery and/or instability of certain markets in which we operate in China and North America, the still-weak forecasts for the Brazilian economy, and the general uncertainties about the impact of potential regulatory and/or policy changes, including those related to tax and trade, that may be implemented in the United States, as well as continuing uncertainty regarding the longer-term implications of “Brexit”;
|
· |
The impact of potential increases in commodity prices, including our ability to successfully manage our exposure and/or pass increasing prices of aluminum, copper, steel and stainless steel (nickel) on to customers, as well as the inherent lag in timing of such pass-through arrangements; and
|
· |
The impact of current and future environmental laws and regulations on our business and the businesses of our customers, including our ability to take advantage of opportunities to supply alternative new technologies to meet environmental and/or energy standards and objectives.
|
· |
Our ability to integrate the former Luvata HTS operations into Modine, realize cost and revenue synergies in accordance with our expectations, and effectively manage any unanticipated risks that arise, while also maintaining stability within the acquired business and appropriate focus on the rest of Modine’s business;
|
· |
The overall health and continually increasing price-down focus of our vehicular customers in light of economic and market-specific factors, and the potential impact on us from any deterioration in the stability or performance of any of our major customers;
|
· |
Our ability to maintain current customer programs and compete effectively for new business, including our ability to offset or otherwise address increasing pricing pressures from competitors and price reduction and overall service pressures from customers, particularly in the face of macro-economic instability;
|
· |
Unanticipated product or manufacturing difficulties or inefficiencies, including unanticipated program launch and product transfer challenges and warranty claims;
|
· |
Unanticipated delays or modifications initiated by major customers with respect to product launches, product applications or requirements;
|
· |
Unanticipated problems with suppliers meeting our time, quantity, quality and price demands, and the overall health of our suppliers, particularly in light of some continuing economic challenges in areas of the world in which we and our suppliers operate;
|
· |
Our ability to consistently structure our operations in order to develop and maintain a competitive cost base with appropriately skilled and stable labor, while also positioning ourselves geographically, so that we can continue to support our customers with the technical expertise and market-leading products they demand and expect from Modine;
|
· |
Costs and other effects of the investigation and remediation of environmental contamination; particularly when related to the actions or inactions of others and/or facilities over which we have no control;
|
· |
Increasingly complex and restrictive laws and regulations, including those associated with being a U.S. public company and others present in various jurisdictions in which we operate, and the costs associated with compliance therewith;
|
· |
Work stoppages or interference at our facilities or those of our major customers and/or suppliers;
|
· |
The constant and increasing pressures associated with healthcare and associated insurance costs; and
|
· |
Costs and other effects of unanticipated litigation, claims, or other obligations, including those associated with our recent acquisition of Luvata HTS.
|
· |
Our ability to successfully take advantage of our increased presence in the “industrial” markets, with our Building HVAC and Commercial and Industrial Solutions businesses, without shifting attention away from our vehicular business, where we enjoy and desire to preserve a leading position; and
|
· |
Our ability to identify and execute additional growth and diversification opportunities in order to position us for long-term success.
|
· |
Our ability to fund our global liquidity requirements efficiently for Modine’s current operations, particularly those in our Asia business segment, and meet our long-term commitments in the event of an unexpected disruption in or tightening of the credit markets or extended recessionary conditions in the global economy;
|
· |
The impact of potential increases in interest rates, particularly in LIBOR and EURIBOR in relation to our variable-rate debt obligations;
|
· |
Our ability to bring our leverage ratio (net debt divided by Adjusted EBITDA, as defined in our credit agreements) back into our target range of 1.5 to 2.5 in an efficient manner following our acquisition of Luvata HTS;
|
· |
Costs arising from the integration of Luvata HTS and the timing and impact of potential purchase accounting adjustments;
|
· |
The impact of foreign currency exchange rate fluctuations, particularly the value of the euro, Brazilian real, and British pound, relative to the U.S. dollar; and
|
· |
Our ability to effectively realize the benefits of tax assets in various jurisdictions in which we operate.
|
PART II. |
OTHER INFORMATION
|
Period
|
Total Number of
Shares Purchased
|
Average
Price Paid
Per Share
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
|
Maximum
Number (or
Approximate Dollar
Value) of Shares
that May Yet Be
Purchased Under the
Plans or Programs
|
|||||||
April 1 – April 30, 2017
|
_______
|
_______
|
_______
|
_______
|
|||||||
May 1 – May 31, 2017
|
26,505 (a)
|
$
|
15.20
|
_______
|
_______
|
||||||
June 1 – June 30, 2017
|
81,179 (a)
|
$
|
15.85
|
_______
|
_______
|
||||||
Total
|
107,684 (a)
|
$
|
15.69
|
_______
|
_______
|
(a) |
Consists of shares delivered back to the Company by employees and/or directors to satisfy tax withholding obligations that arise upon the vesting of stock awards. The Company, pursuant to its equity compensation plans, gives participants the opportunity to turn back to the Company the number of shares from the award sufficient to satisfy tax withholding obligations that arise upon the termination of restrictions. These shares are held as treasury shares.
|
(a)
|
Exhibits
:
|
Exhibit No.
|
Description
|
Incorporated Herein By
Reference To
|
Filed
Herewith
|
Form of Fiscal 2018 Modine Performance Stock Award Agreement
|
X
|
||
Form of Fiscal 2018 Modine Incentive Stock Options Award Agreement
|
X
|
||
Form of Fiscal 2018 Modine Restricted Stock Unit Award Agreement
|
X
|
||
Form of Fiscal 2018 Modine Non-Qualified Stock Option Award Agreement
|
X
|
||
Rule 13a-14(a)/15d-14(a) Certification of Thomas A. Burke, President and Chief Executive Officer.
|
X
|
||
Rule 13a-14(a)/15d-14(a) Certification of Michael B. Lucareli, Vice President, Finance and Chief Financial Officer.
|
X
|
||
Section 1350 Certification of Thomas A. Burke, President and Chief Executive Officer.
|
X
|
||
Section 1350 Certification of Michael B. Lucareli, Vice President, Finance and Chief Financial Officer.
|
X
|
||
101.INS
|
Instance Document
|
X
|
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
X
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
X
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
X
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
X
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
X
|
*
|
Denotes management contract or executive compensation plan or arrangement required to be filed as an exhibit pursuant to Item 11, Part 6 of Form 10-Q.
|
MODINE MANUFACTURING COMPANY
|
(Registrant)
|
By:
/s/ Michael B. Lucareli
|
Michael B. Lucareli, Vice President, Finance and
|
Chief Financial Officer*
|
Date: August 2, 2017
|
Full name of Grantee:
|
|
Date of Award:
|
June 1, 2017
|
Target number of Common Stock:
|
|
Performance Period:
|
April 1, 2017 to March 31, 2020
|
Performance Goal: ROACE
|
Performance Stock Award Earned Based on Achievement of Performance Goal
|
Threshold: 5.0%
|
5% of Target number of Common Stock
|
Target: 9.0%
|
50% of Target number of Common Stock
|
Maximum: ≥14.0%
|
100% of Target number of Common Stock
|
Performance Goal: Revenue Growth
|
Performance Stock Award Earned Based on Achievement of Performance Goal
|
Threshold: 3.0%
|
5% of Target number of Common Stock
|
Target: 8.0%
|
50% of Target number of Common Stock
|
Maximum: ≥13.0%
|
100% of Target number of Common Stock
|
· |
Fees and expenses for restructuring consultants or financial advisors
|
· |
Employee severance, outplacement and related benefits
|
· |
Employee insurance and benefits continuation
|
· |
Contractual salary continuation for terminated employees
|
· |
Equipment transfers and facility preparation
|
· |
Environmental services (e.g. plant clean-up prior to sale)
|
· |
Fees and expenses for transaction advisors
|
· |
Integration expenses
|
· |
Other incremental costs and charges that are non-recurring and directly related to the transaction
|
· |
Fees and expenses for strategy advisory services associated with a specific transaction or unique project
|
· |
Unusual, non-recurring or extraordinary cash and non-cash charges or income
|
· |
The impact of the adoption of new U.S. GAAP accounting standards and significant changes in the Company’s accounting methods.
|
MODINE MANUFACTURING COMPANY
|
||
By:
|
/s/ Thomas A. Burke
|
|
Thomas A. Burke
|
||
President and Chief Executive Officer
|
Full name of Grantee:
|
|
Date of Award:
|
June 1, 2017
|
Exercise price per share:
|
|
Total number of shares:
|
|
Total exercise price:
|
Number of Shares of Common Stock
|
Vesting Date
|
25% of the total number of shares
|
June 1, 2018
|
25% of the total number of shares
|
June 1, 2019
|
25% of the total number of shares
|
June 1, 2020
|
25% of the total number of shares
|
June 1, 2021
|
(a) |
If you are an executive officer of the Company subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, the Option may not be exercised by you within six (6) months after the Grant Date; and
|
(b) |
The Option may only be exercised, at any one time, exclusively in multiples of twenty‑five (25) shares with a one hundred (100) share exercise minimum, except for the purchase of all shares then remaining subject to these options.
|
MODINE MANUFACTURING COMPANY
|
||
By:
|
/s/ Thomas A. Burke
|
|
Thomas A. Burke
|
||
President and Chief Executive Officer
|
Full name of Grantee:
|
|
Date of Award:
|
June 1, 2017
|
Total number of Restricted Stock Units:
|
Number of RSUs that Vest
|
Restricted Period Expiration
|
25% of the total number of RSUs
|
June 1, 2018
|
25% of the total number of RSUs
|
June 1, 2019
|
25% of the total number of RSUs
|
June 1, 2020
|
25% of the total number of RSUs
|
June 1, 2021
|
MODINE MANUFACTURING COMPANY
|
||
By:
|
/s/ Thomas A. Burke
|
|
Thomas A. Burke
|
||
President and Chief Executive Officer
|
Full name of Grantee:
|
|
Date of Award:
|
June 1, 2017
|
Exercise price per share:
|
|
Total number of shares:
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Total exercise price:
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(a) |
Because you are an executive officer of the Company subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, the Option may not be exercised by you within six (6) months after the Grant Date; and
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(b) |
The Option may only be exercised, at any one time, exclusively in multiples of twenty‑five (25) shares with a one hundred (100) share exercise minimum, except for the purchase of all shares then remaining subject to these options.
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MODINE MANUFACTURING COMPANY
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By:
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/s/ Thomas A. Burke
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Thomas A. Burke
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President and Chief Executive Officer
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1. |
I have reviewed this quarterly report on Form 10-Q of Modine Manufacturing Company for the quarter ended June 30, 2017;
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2. |
Based on my knowledge, this 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 report;
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3. |
Based on my knowledge, the financial statements, and other financial information included in this 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 report;
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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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
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b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date:
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August 2, 2017
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/s/ Thomas A. Burke
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Thomas A. Burke
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President and Chief Executive Officer
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1. |
I have reviewed this quarterly report on Form 10-Q of Modine Manufacturing Company for the quarter ended June 30, 2017;
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2. |
Based on my knowledge, this 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 report;
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3. |
Based on my knowledge, the financial statements, and other financial information included in this 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 report;
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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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
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b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date:
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August 2, 2017
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/s/ Michael B. Lucareli
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Michael B. Lucareli
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Vice President, Finance and Chief Financial Officer
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1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
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August 2, 2017
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/s/ Thomas A. Burke
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Thomas A. Burke
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President and Chief Executive Officer
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1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
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August 2, 2017
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/s/ Michael B. Lucareli
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Michael B. Lucareli
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Vice President, Finance and Chief Financial Officer
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