UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

☑
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

or

☐
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 001-01373

MODINE MANUFACTURING COMPANY

(Exact name of registrant as specified in its charter)

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)

Registrant’s telephone number, including area code (262) 636-1200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
 
 
 
Common Stock, $0.625 par value
MOD
New York Stock Exchange LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☑    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☑
Accelerated Filer ☐
 
 
Non-accelerated Filer ☐
Smaller reporting company ☐
 
 
 
Emerging growth company ☐

If an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐    No ☑

The number of shares outstanding of the registrant’s common stock, $0.625 par value, was 50,746,949 at July 26, 2019.




MODINE MANUFACTURING COMPANY
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
 
 
 
 
1
 
 
 
22
 
 
 
28
 
 
 
28
 
 
 
PART II. OTHER INFORMATION
 
 
 
 
29
 
 
 
29
     
31
 
 
 
32

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended June 30, 2019 and 2018
(In millions, except per share amounts)
(Unaudited)

 
 
Three months ended
June 30,
 
 
 
2019
   
2018
 
Net sales
 
$
529.0
   
$
566.1
 
Cost of sales
   
445.6
     
471.8
 
Gross profit
   
83.4
     
94.3
 
Selling, general and administrative expenses
   
63.5
     
59.3
 
Restructuring expenses
   
1.8
     
0.2
 
Operating income
   
18.1
     
34.8
 
Interest expense
   
(5.9
)
   
(6.2
)
Other expense – net
   
(1.1
)
   
(1.1
)
Earnings before income taxes
   
11.1
     
27.5
 
Provision for income taxes
   
(2.9
)
   
(5.0
)
Net earnings
   
8.2
     
22.5
 
Net earnings attributable to noncontrolling interest
   
(0.2
)
   
(0.5
)
Net earnings attributable to Modine
 
$
8.0
   
$
22.0
 
 
               
Net earnings per share attributable to Modine shareholders:
               
Basic
 
$
0.16
   
$
0.43
 
Diluted
 
$
0.16
   
$
0.43
 
 
               
Weighted-average shares outstanding:
               
Basic
   
50.7
     
50.3
 
Diluted
   
51.1
     
51.2
 

The notes to condensed consolidated financial statements are an integral part of these statements.

1


MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three months ended June 30, 2019 and 2018
(In millions)
(Unaudited)

 
 
Three months ended
June 30,
 
 
 
2019
   
2018
 
Net earnings
 
$
8.2
   
$
22.5
 
Other comprehensive income (loss):
               
Foreign currency translation
   
1.8
     
(25.1
)
Defined benefit plans, net of income taxes of $0.3 and $0.3 million
   
1.1
     
1.0
 
Cash flow hedges, net of income taxes of $(0.3) and $0.1 million
   
(0.8
)
   
0.4
 
Total other comprehensive income (loss)
   
2.1
     
(23.7
)
 
               
Comprehensive income (loss)
   
10.3
     
(1.2
)
Comprehensive income attributable to noncontrolling interest
   
(0.1
)
   
(0.1
)
Comprehensive income (loss) attributable to Modine
 
$
10.2
   
$
(1.3
)

The notes to condensed consolidated financial statements are an integral part of these statements.

2

MODINE MANUFACTURING COMPANY
CONSOLIDATED BALANCE SHEETS
June 30, 2019 and March 31, 2019
(In millions, except per share amounts)
(Unaudited)

 
 
June 30, 2019
   
March 31, 2019
 
ASSETS
           
Cash and cash equivalents
 
$
29.1
   
$
41.7
 
Trade accounts receivable – net
   
336.9
     
338.6
 
Inventories
   
216.2
     
200.7
 
Other current assets
   
69.7
     
65.8
 
Total current assets
   
651.9
     
646.8
 
Property, plant and equipment – net
   
479.1
     
484.7
 
Intangible assets – net
   
114.4
     
116.2
 
Goodwill
   
168.5
     
168.5
 
Deferred income taxes
   
98.2
     
97.1
 
Other noncurrent assets
   
89.2
     
24.7
 
Total assets
 
$
1,601.3
   
$
1,538.0
 
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Short-term debt
 
$
121.5
   
$
66.0
 
Long-term debt – current portion
   
33.5
     
48.6
 
Accounts payable
   
272.9
     
280.9
 
Accrued compensation and employee benefits
   
77.5
     
81.7
 
Other current liabilities
   
52.8
     
39.9
 
Total current liabilities
   
558.2
     
517.1
 
Long-term debt
   
302.2
     
335.1
 
Deferred income taxes
   
8.6
     
8.2
 
Pensions
   
100.2
     
101.7
 
Other noncurrent liabilities
   
85.8
     
34.8
 
Total liabilities
   
1,055.0
     
996.9
 
Commitments and contingencies (see Note 17)
               
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 53.3 million and 52.8 million shares
   
33.2
     
33.0
 
Additional paid-in capital
   
240.2
     
238.6
 
Retained earnings
   
480.1
     
472.1
 
Accumulated other comprehensive loss
   
(176.2
)
   
(178.4
)
Treasury stock, at cost, 2.5 million and 2.1 million shares
   
(37.0
)
   
(31.4
)
Total Modine shareholders’ equity
   
540.3
     
533.9
 
Noncontrolling interest
   
6.0
     
7.2
 
Total equity
   
546.3
     
541.1
 
Total liabilities and equity
 
$
1,601.3
   
$
1,538.0
 

The notes to condensed consolidated financial statements are an integral part of these statements.

3

MODINE MANUFACTURING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended June 30, 2019 and 2018
(In millions)
(Unaudited)

 
 
Three months ended June 30,
 
   
2019
   
2018
 
Cash flows from operating activities:
           
Net earnings
 
$
8.2
   
$
22.5
 
Adjustments to reconcile net earnings to net cash provided by (used for) operating activities:
               
Depreciation and amortization
   
18.9
     
19.4
 
Stock-based compensation expense
   
1.7
     
2.0
 
Deferred income taxes
   
(0.5
)
   
1.0
 
Other – net
   
0.9
     
0.6
 
Changes in operating assets and liabilities:
               
Trade accounts receivable
   
1.6
     
(18.6
)
Inventories
   
(15.0
)
   
(21.7
)
Accounts payable
   
(3.8
)
   
15.4
 
Other assets and liabilities
   
(11.5
)
   
(24.7
)
Net cash provided by (used for) operating activities
   
0.5
     
(4.1
)
 
               
Cash flows from investing activities:
               
Expenditures for property, plant and equipment
   
(20.3
)
   
(22.6
)
Other – net
   
1.8
     
2.9
 
Net cash used for investing activities
   
(18.5
)
   
(19.7
)
 
               
Cash flows from financing activities:
               
Borrowings of debt
   
342.1
     
105.9
 
Repayments of debt
   
(329.1
)
   
(72.7
)
Dividend paid to noncontrolling interest
   
(1.3
)
   
(1.8
)
Purchases of treasury stock under share repurchase program
   
(2.4
)
   
-
 
Financing fees paid
   
(1.1
)
   
-
 
Other – net
   
(2.7
)
   
(3.8
)
Net cash provided by financing activities
   
5.5
     
27.6
 
 
               
Effect of exchange rate changes on cash
   
(0.1
)
   
(1.8
)
Net (decrease) increase in cash, cash equivalents and restricted cash
   
(12.6
)
   
2.0
 
 
               
Cash, cash equivalents and restricted cash – beginning of period
   
42.2
     
40.3
 
Cash, cash equivalents and restricted cash – end of period
 
$
29.6
   
$
42.3
 

The notes to condensed consolidated financial statements are an integral part of these statements.

4

MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the three months ended June 30, 2019 and 2018
(In millions)
(Unaudited)

 
Common stock
   
Additional
paid-in
   
Retained
   
Accumulated
other
comprehensive
   
Treasury
stock, at
   
Non-
controlling
       
   
Shares
   
Amount
   
capital
   
earnings
   
loss
   
cost
   
interest
   
Total
 
Balance, March 31, 2018
   
52.3
   
$
32.7
   
$
229.9
   
$
394.9
   
$
(140.3
)
 
$
(27.1
)
 
$
8.4
   
$
498.5
 
Adoption of new accounting guidance (Note 1)
   
-
     
-
     
-
     
(7.6
)
   
-
     
-
     
-
     
(7.6
)
Net earnings attributable to Modine
   
-
     
-
     
-
     
22.0
     
-
     
-
     
-
     
22.0
 
Other comprehensive loss
   
-
     
-
     
-
     
-
     
(23.3
)
   
-
     
(0.4
)
   
(23.7
)
Stock options and awards 
   
0.4
     
0.2
     
(0.2
)
   
-
     
-
     
-
     
-
     
-
 
Purchase of treasury stock
   
-
     
-
     
-
     
-
     
-
     
(3.7
)
   
-
     
(3.7
)
Stock-based compensation expense
   
-
     
-
     
2.0
     
-
     
-
     
-
     
-
     
2.0
 
Dividend paid to noncontrolling interest
   
-
     
-
     
-
     
-
     
-
     
-
     
(1.8
)
   
(1.8
)
Net earnings attributable to noncontrolling interest
   
-
     
-
     
-
     
-
     
-
     
-
     
0.5
     
0.5
 
Balance, June 30, 2018
   
52.7
   
$
32.9
   
$
231.7
   
$
409.3
   
$
(163.6
)
 
$
(30.8
)
 
$
6.7
   
$
486.2
 
                                                                 
Balance, March 31, 2019
   
52.8
   
$
33.0
   
$
238.6
   
$
472.1
   
$
(178.4
)
 
$
(31.4
)
 
$
7.2
   
$
541.1
 
Net earnings attributable to Modine
   
-
     
-
     
-
     
8.0
     
-
     
-
     
-
     
8.0
 
Other comprehensive income (loss)
   
-
     
-
     
-
     
-
     
2.2
     
-
     
(0.1
)
   
2.1
 
Stock options and awards 
   
0.5
     
0.2
     
(0.1
)
   
-
     
-
     
-
     
-
     
0.1
 
Purchase of treasury stock
   
-
     
-
     
-
     
-
     
-
     
(5.6
)
   
-
     
(5.6
)
Stock-based compensation expense
   
-
     
-
     
1.7
     
-
     
-
     
-
     
-
     
1.7
 
Dividend paid to noncontrolling interest
   
-
     
-
     
-
     
-
     
-
     
-
     
(1.3
)
   
(1.3
)
Net earnings attributable to noncontrolling interest
   
-
     
-
     
-
     
-
     
-
     
-
     
0.2
     
0.2
 
Balance, June 30, 2019
   
53.3
   
$
33.2
   
$
240.2
   
$
480.1
   
$
(176.2
)
 
$
(37.0
)
 
$
6.0
   
$
546.3
 

The notes to condensed consolidated financial statements are an integral part of these statements.


5
MODINE MANUFACTURING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
(unaudited)

Note 1: General

The accompanying condensed consolidated financial statements were prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States applied on a basis consistent with those principles used in the preparation of the annual consolidated financial statements of Modine Manufacturing Company (“Modine” or the “Company”) for the fiscal year ended March 31, 2019, except in regard to the new accounting guidance adopted, as described below. The financial statements include all normal recurring adjustments that are, in the opinion of management, necessary for a fair statement of results for the interim periods. Results for the first three months of fiscal 2020 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the consolidated financial statements and related notes in Modine's Annual Report on Form 10-K for the year ended March 31, 2019.

New Accounting Guidance Adopted in Fiscal 2020

Leases
In February 2016, the FASB issued new comprehensive lease accounting guidance that supersedes existing lease accounting guidance and requires balance sheet recognition for most leases. The Company adopted this guidance effective April 1, 2019 using a modified-retrospective transition method, under which it elected not to adjust comparative periods. The Company elected the package of practical expedients permitted under the new guidance, and, as a result, the Company did not reassess the classification of existing leases or initial direct costs thereof, or whether existing contracts contain leases. In addition, the Company elected accounting policies to not record short-term leases on the balance sheet and to not separate lease and non-lease components. The Company did not elect the hindsight practical expedient.

The Company assessed its global lease portfolio and implemented a new lease accounting software solution and new processes and controls to account for leases in accordance with the new guidance. The Company’s most significant leases represent leases of real estate, such as manufacturing facilities, warehouses, and office buildings. The Company also leases certain manufacturing and IT equipment and vehicles. Upon adoption of this new guidance on April 1, 2019, the Company recognized right-of-use assets for operating leases totaling $61.3 million and corresponding current and noncurrent operating lease liabilities of $12.4 million and $48.9 million, respectively. In addition, the Company assessed two existing build-to-suit arrangements, for which it had recorded property, plant and equipment and long-term debt on its consolidated balance sheet as of March 31, 2019. The Company determined these arrangements represent operating leases under the new accounting guidance. As a result, the Company derecognized the previously-recorded balances and recorded $5.2 million of operating lease right-of-use assets and corresponding lease liabilities. As a result of adopting the new guidance, there was not a significant impact on the Company’s accounting for its previously-recorded capital leases, which are now classified as finance leases under the new guidance.  In addition, there was no impact to retained earnings. Also, the adoption did not have a material impact on the Company’s consolidated statement of operations or consolidated statement of cash flows. See Note 15 for additional information regarding the Company’s leases.

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
In February 2018, the FASB issued new guidance related to the accounting for certain stranded income tax effects in accumulated other comprehensive income (loss) resulting from tax reform legislation that was enacted in the U.S. in December 2017.  This guidance provided companies the option to reclassify stranded income tax effects to retained earnings.  The Company adopted this guidance as of April 1, 2019 and chose not to reclassify stranded income tax effects; therefore, the adoption of this guidance did not impact the Company’s consolidated financial statements.

6
New Accounting Guidance Adopted in Fiscal 2019

Revenue Recognition
In May 2014, the FASB issued new guidance that outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of the new guidance is that companies are to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted this new guidance as of April 1, 2018, and, as a result, recorded an increase of $0.7 million to retained earnings.

Income Taxes: Intra-Entity Transfers of Assets Other than Inventory
In October 2016, the FASB issued new guidance related to income tax accounting for intercompany asset transfers. This new guidance requires companies to recognize the income tax effects of intercompany asset transfers other than inventory at the transaction date. The income tax effects of these transfers were previously deferred. The Company adopted this new guidance as of April 1, 2018, and, as a result, recorded a decrease to retained earnings of $8.3 million.

Note 2: Revenue Recognition

Disaggregation of Revenue
The table below presents revenue for each of the Company’s business segments, Vehicular Thermal Solutions (“VTS”), Commercial and Industrial Solutions (“CIS”) and Building HVAC Systems (“BHVAC”).  Each segment’s revenue is disaggregated by primary end market, by geographic location and based upon the timing of revenue recognition.

 
 
Three months ended June 30, 2019
 
 
 
VTS
   
CIS
   
BHVAC
   
Segment
Total
 
Primary end market:
                       
Automotive
 
$
129.2
   
$
-
   
$
-
   
$
129.2
 
Commercial vehicle
   
98.7
     
-
     
-
     
98.7
 
Off-highway
   
73.9
     
-
     
-
     
73.9
 
Commercial HVAC&R
   
-
     
130.9
     
38.0
     
168.9
 
Data center cooling
   
-
     
24.2
     
10.6
     
34.8
 
Industrial cooling
   
-
     
11.4
     
-
     
11.4
 
Other
   
24.7
     
2.3
     
0.4
     
27.4
 
Net sales
 
$
326.5
   
$
168.8
   
$
49.0
   
$
544.3
 
 
                               
Geographic location:
                               
Americas
 
$
153.3
   
$
97.1
   
$
29.1
   
$
279.5
 
Europe
   
126.1
     
58.6
     
19.9
     
204.6
 
Asia
   
47.1
     
13.1
     
-
     
60.2
 
Net sales
 
$
326.5
   
$
168.8
   
$
49.0
   
$
544.3
 
 
                               
Timing of revenue recognition:
                               
Products transferred at a point in time
 
$
319.1
   
$
143.9
   
$
49.0
   
$
512.0
 
Products transferred over time
   
7.4
     
24.9
     
-
     
32.3
 
Net sales
 
$
326.5
   
$
168.8
   
$
49.0
   
$
544.3
 

7

 
 
Three months ended June 30, 2018
 
 
 
VTS
   
CIS
   
BHVAC
   
Segment
Total
 
Primary end market:
                       
Automotive
 
$
145.1
   
$
-
   
$
-
   
$
145.1
 
Commercial vehicle
   
99.7
     
-
     
-
     
99.7
 
Off-highway
   
83.8
     
-
     
-
     
83.8
 
Commercial HVAC&R
   
-
     
135.3
     
32.0
     
167.3
 
Data center cooling
   
-
     
34.1
     
12.2
     
46.3
 
Industrial cooling
   
-
     
11.5
     
-
     
11.5
 
Other
   
24.2
     
3.0
     
0.8
     
28.0
 
Net sales
 
$
352.8
   
$
183.9
   
$
45.0
   
$
581.7
 
 
                               
Geographic location:
                               
Americas
 
$
150.9
   
$
104.8
   
$
25.3
   
$
281.0
 
Europe
   
148.4
     
65.2
     
19.7
     
233.3
 
Asia
   
53.5
     
13.9
     
-
     
67.4
 
Net sales
 
$
352.8
   
$
183.9
   
$
45.0
   
$
581.7
 
 
                               
Timing of revenue recognition:
                               
Products transferred at a point in time
 
$
342.8
   
$
153.6
   
$
45.0
   
$
541.4
 
Products transferred over time
   
10.0
     
30.3
     
-
     
40.3
 
Net sales
 
$
352.8
   
$
183.9
   
$
45.0
   
$
581.7
 

Contract Balances
Contract assets and contract liabilities from contracts with customers were as follows:

 
 
June 30, 2019
   
March 31, 2019
 
Contract assets
 
$
24.2
   
$
22.6
 
Contract liabilities
   
4.9
     
4.0
 

Contract assets, included within other current assets in the consolidated balance sheets, primarily consist of capitalized costs related to customer-owned tooling contracts, wherein the customer has guaranteed reimbursement, and assets recorded for revenue recognized over time, which represent the Company’s rights to consideration for work completed but not yet billed. The $1.6 million increase in contract assets during the first three months of fiscal 2020 primarily resulted from an increase in contract assets for revenue recognized over time and customer-owned tooling contracts, under which more costs were capitalized than reimbursed.

Contract liabilities, included within other current liabilities in the consolidated balance sheets, consist of payments received in advance of satisfying performance obligations under customer contracts, including contracts for customer-owned tooling. The $0.9 million increase in contract liabilities during the first three months of fiscal 2020 was primarily related to customer contracts for which payment had been received in advance of the Company’s satisfaction of performance obligations.

8
Note 3: Fair Value Measurements

Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Fair value measurements are classified under the following hierarchy:

•
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.

When available, the Company uses quoted market prices to determine fair value and classifies such measurements as Level 1.  In some cases, where market prices are not available, the Company uses observable market-based inputs to calculate fair value, in which case the measurements are classified as Level 2.  If quoted or observable market prices are not available, the Company determines fair value based upon valuation models that use, where possible, market-based data such as interest rates, yield curves or currency rates.  These measurements are classified as Level 3.

The carrying values of cash, cash equivalents, restricted cash, short-term investments, trade accounts receivable, accounts payable, and short-term debt approximate fair value due to the short-term nature of these instruments. The Company holds trading securities in deferred compensation trusts to fund obligations under certain non-qualified deferred compensation plans. The securities’ fair values, which are recorded as other noncurrent assets, are determined based upon quoted prices from active markets and classified within Level 1 of the valuation hierarchy. The Company’s deferred compensation obligations, which are recorded as other noncurrent liabilities, are recorded at the fair values of the investments held by the trust.  The fair values of the Company’s trading securities and deferred compensation obligations each totaled $6.2 million and $6.0 million as of June 30, 2019 and March 31, 2019, respectively.  The fair value of the Company’s long-term debt is disclosed in Note 16.

Note 4: Pensions

Pension cost included the following components:

 
 
Three months ended
June 30,
 
 
 
2019
   
2018
 
Service cost
 
$
0.1
   
$
0.1
 
Interest cost
   
2.3
     
2.4
 
Expected return on plan assets
   
(3.0
)
   
(3.0
)
Amortization of unrecognized net loss
   
1.5
     
1.4
 
Net periodic benefit cost
 
$
0.9
   
$
0.9
 

During the three months ended June 30, 2019 and 2018, the Company contributed $0.9 million and $1.9 million, respectively, to its U.S. pension plans.

9
Note 5: Stock-Based Compensation

The Company’s stock-based incentive programs consist of the following: (1) a long-term incentive compensation program for officers and other executives that consists of stock awards, stock options, and performance-based stock awards granted for retention and performance, (2) a discretionary equity program for other management and key employees, and (3) stock awards for non-employee directors.

The Company calculates compensation expense based upon the fair value of the instruments at the time of grant and subsequently recognizes expense ratably over the respective vesting periods of the stock-based awards.  The Company recognized stock-based compensation expense of $1.7 million and $2.0 million for the three months ended June 30, 2019 and 2018, respectively. The performance component of awards granted under the Company’s long-term incentive plan during the first quarter of fiscal 2020 is based upon both a target three-year average cash flow return on invested capital and a target three-year average revenue growth at the end of the three-year performance period.

The fair value of stock-based compensation awards granted during the three months ended June 30, 2019 and 2018 were as follows:


 
Three months ended June 30,
 
   
2019
   
2018
 
   
Shares
   
Fair Value
Per Award
   
Shares
   
Fair Value
Per Award
 
Stock options
   
0.3
   
$
5.56
     
0.2
   
$
7.81
 
Restricted stock awards
   
0.3
   
$
13.26
     
0.2
   
$
17.90
 
Performance stock awards
   
0.3
   
$
13.26
     
0.2
   
$
17.90
 

The Company used the following assumptions in determining fair value for stock options:


 
Three months ended June 30,
 
   
2019
   
2018
 
Expected life of awards in years
   
6.3
     
6.3
 
Risk-free interest rate
   
2.2
%
   
2.8
%
Expected volatility of the Company’s stock
   
39.2
%
   
39.7
%
Expected dividend yield on the Company’s stock
   
0.0
%
   
0.0
%

As of  June 30, 2019, unrecognized compensation expense related to non-vested stock-based compensation awards, which will be amortized over the remaining service periods, was as follows:

 
 
Unrecognized
Compensation
Expense
   
Weighted-Average
Remaining Service
Period in Years
 
Stock options
 
$
3.6
     
3.1
 
Restricted stock awards
   
8.4
     
3.0
 
Performance stock awards
   
4.8
     
2.2
 
Total
 
$
16.8
     
2.8
 

10
Note 6: Restructuring Activities

The Company’s restructuring actions during the first quarter of fiscal 2020 and 2019 consisted primarily of targeted headcount reductions in Europe and the Americas within the VTS segment and plant consolidation activities.  The headcount reductions support the Company’s objective to reduce operational and selling, general and administrative (“SG&A”) cost structures at certain locations.  In addition, the Company is in process of transferring product lines associated with the merger of its North American coils business into the CIS segment in order to accelerate operational improvements and organizational efficiencies.

Restructuring and repositioning expenses were as follows:

 
 
Three months ended June 30,
 
 
 
2019
   
2018
 
Employee severance and related benefits
 
$
1.5
   
$
0.1
 
Other restructuring and repositioning expenses
   
0.3
     
0.1
 
Total
 
$
1.8
   
$
0.2
 

Other restructuring and repositioning expenses primarily consist of equipment transfers and plant consolidation costs.

The Company accrues severance in accordance with its written plans, procedures, and relevant statutory requirements. Changes in accrued severance were as follows:

 
 
Three months ended June 30,
 
 
 
2019
   
2018
 
Beginning balance
 
$
10.0
   
$
11.0
 
Additions
   
1.5
     
0.1
 
Payments
   
(3.7
)
   
(5.8
)
Effect of exchange rate changes
   
-
     
(0.5
)
Ending balance
 
$
7.8
   
$
4.8
 

11
Note 7: Other Income and Expense

Other income and expense consisted of the following:

 
 
Three months ended
June 30,
 
 
 
2019
   
2018
 
Equity in earnings of non-consolidated affiliate
 
$
0.1
   
$
0.2
 
Interest income
   
0.1
     
0.2
 
Foreign currency transactions (a)
   
(0.6
)
   
(0.8
)
Net periodic benefit cost (b)
   
(0.7
)
   
(0.7
)
Total other expense - net
 
$
(1.1
)
 
$
(1.1
)
(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 certain foreign currency exchange contracts.
(b)
Represents net periodic benefit cost, exclusive of service cost, for the Company's pension and postretirement plans.

Note 8: Income Taxes

The Company’s effective tax rate for the three months ended June 30, 2019 and 2018 was 26.1 percent and 18.2 percent, respectively.  The effective tax rate for the first quarter of fiscal 2020 is higher than the first quarter of the prior year, primarily due to the absence of a $2.0 million reversal of a valuation allowance on deferred tax assets in a foreign jurisdiction recorded during the first quarter of fiscal 2019 and changes in the mix and amount of foreign and domestic earnings.

As of June 30, 2019, valuation allowances against deferred tax assets in certain foreign jurisdictions totaled $38.1 million and valuation allowances against certain U.S. deferred tax assets totaled $6.8 million, as it is more likely than not these assets will not be realized based upon historical financial results.  The Company will continue to provide a valuation allowance against its net deferred tax assets in each of the applicable jurisdictions until the need for a valuation allowance is eliminated.  The need for a valuation allowance is eliminated when the Company determines it is more likely than not the deferred tax assets will be realized.

Accounting policies for interim reporting require the Company to adjust its effective tax rate each quarter to be consistent with its estimated annual effective tax rate.  Under this methodology, the Company applies its estimated annual income tax rate to its year-to-date ordinary earnings to derive its income tax provision each quarter.  The Company records the tax impacts of certain significant, unusual or infrequently occurring items in the period in which they occur.  The Company excluded the impact of its operations in certain foreign locations from the overall effective tax rate methodology and recorded them discretely based upon year-to-date results because the Company anticipates net operating losses for the full fiscal year in these jurisdictions.

The Company estimates that reductions to unrecognized tax benefits for the remainder of fiscal 2020 will total $2.8 million, primarily due to lapses in statutes of limitations, which, if recognized, would have a $2.2 million favorable impact on its effective tax rate.

12
Note 9: Earnings Per Share

The components of basic and diluted earnings per share were as follows:

 
 
Three months ended
June 30,
 
 
 
2019
   
2018
 
Net earnings attributable to Modine
 
$
8.0
   
$
22.0
 
Less: Undistributed earnings attributable to unvested shares
   
-
     
(0.1
)
Net earnings available to Modine shareholders
 
$
8.0
   
$
21.9
 
 
               
Weighted-average shares outstanding - basic
   
50.7
     
50.3
 
Effect of dilutive securities
   
0.4
     
0.9
 
Weighted-average shares outstanding - diluted
   
51.1
     
51.2
 
 
               
Earnings per share:
               
Net earnings per share - basic
 
$
0.16
   
$
0.43
 
Net earnings per share - diluted
 
$
0.16
   
$
0.43
 

For the three months ended June 30, 2019 and 2018, the calculation of diluted earnings per share excluded 0.8 million and 0.4 million stock options, respectively, because they were anti-dilutive.

Note 10: Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash consisted of the following:

 
 
June 30, 2019
   
March 31, 2019
 
Cash and cash equivalents
 
$
29.1
   
$
41.7
 
Restricted cash
   
0.5
     
0.5
 
 Total cash, cash equivalents and restricted cash
 
$
29.6
   
$
42.2
 

Restricted cash, which is reported within other noncurrent assets in the consolidated balance sheets, consists primarily of deposits for contractual guarantees or commitments required for rents, import and export duties, and commercial agreements.

Note 11: Inventories

Inventories consisted of the following:

 
 
June 30, 2019
   
March 31, 2019
 
Raw materials
 
$
134.1
   
$
122.8
 
Work in process
   
35.6
     
32.2
 
Finished goods
   
46.5
     
45.7
 
Total inventories
 
$
216.2
   
$
200.7
 

13
Note 12: Property, Plant and Equipment

Property, plant and equipment, including depreciable lives, consisted of the following:

 
 
June 30, 2019
   
March 31, 2019
 
Land
 
$
20.9
   
$
20.7
 
Buildings and improvements (10-40 years)
   
281.0
     
285.9
 
Machinery and equipment (3-15 years)
   
858.7
     
848.7
 
Office equipment (3-10 years)
   
93.6
     
92.0
 
Construction in progress
   
62.6
     
57.4
 
 
   
1,316.8
     
1,304.7
 
Less: accumulated depreciation
   
(837.7
)
   
(820.0
)
Net property, plant and equipment
 
$
479.1
   
$
484.7
 

Note 13: Goodwill and Intangible Assets

Changes in the carrying amount of goodwill were as follows:

 
 
VTS
   
CIS
   
BHVAC
   
Total
 
Goodwill, March 31, 2019
 
$
0.5
   
$
153.9
   
$
14.1
   
$
168.5
 
Effect of exchange rate changes
   
-
     
0.3
     
(0.3
)
   
-
 
Goodwill, June 30, 2019
 
$
0.5
   
$
154.2
   
$
13.8
   
$
168.5
 

Intangible assets consisted of the following:

 
 
June 30, 2019
   
March 31, 2019
 
 
 
Gross
Carrying
Value
   
Accumulated
Amortization
   
Net
Intangible
Assets
   
Gross
Carrying
Value
   
Accumulated
Amortization
   
Net
Intangible
Assets
 
Customer relationships
 
$
61.7
   
$
(10.1
)
 
$
51.6
   
$
61.5
   
$
(9.1
)
 
$
52.4
 
Trade names
   
58.9
     
(14.1
)
   
44.8
     
58.9
     
(13.5
)
   
45.4
 
Acquired technology
   
24.0
     
(6.0
)
   
18.0
     
23.9
     
(5.5
)
   
18.4
 
Total intangible assets
 
$
144.6
   
$
(30.2
)
 
$
114.4
   
$
144.3
   
$
(28.1
)
 
$
116.2
 

The Company recorded amortization expense of $2.2 million and $2.3 million for the three months ended June 30, 2019 and 2018, respectively. The Company estimates that it will record $6.7 million of amortization expense during the remainder of fiscal 2020 and approximately $8.0 million of annual amortization expense in fiscal 2021 through 2025.

14
Note 14: Product Warranties

Changes in accrued warranty costs were as follows:

 
 
Three months ended June 30,
 
 
 
2019
   
2018
 
Beginning balance
 
$
9.2
   
$
9.3
 
Warranties recorded at time of sale
   
1.4
     
1.4
 
Adjustments to pre-existing warranties
   
(0.6
)
   
(0.4
)
Settlements
   
(0.9
)
   
(1.3
)
Effect of exchange rate changes
   
-
     
(0.3
)
Ending balance
 
$
9.1
   
$
8.7
 


Note 15: Leases

Effective April 1, 2019, the Company adopted new lease accounting guidance and, as a result, recorded $61.3 million of right-of-use (“ROU”) assets and corresponding lease liabilities for operating leases on its consolidated balance sheet. The condensed consolidated financial statements for the three months ended June 30, 2019 reflect the adoption of this new guidance; however, the comparable prior-year period has not been adjusted. See Note 1 for additional information regarding the Company’s adoption of the new guidance.

Significant Accounting Policy
The Company determines if an arrangement is a lease at contract inception. The lease term begins upon lease commencement, which is when the Company takes possession of the asset, and may include options to extend or terminate the lease when it is reasonably certain that such options will be exercised.  The Company uses the lease term within its determination of the appropriate lease classification, either as an operating lease or as a finance lease, and to calculate straight-line lease expense for its operating leases.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company recognizes ROU assets and lease liabilities at the commencement date, based upon the present value of lease payments over the lease term.  As its lease agreements typically do not provide an implicit rate, the Company primarily uses an incremental borrowing rate based upon the information available at lease commencement. In determining the incremental borrowing rate, the Company considers its current borrowing rate, the term of the lease, and the economic environments where the lease activity is concentrated. The Company believes this method effectively estimates a borrowing rate that it could obtain for a debt instrument with similar terms as the lease agreement.

Based upon its accounting policy, the Company does not separate lease and non-lease components for any asset class. In addition, the Company does not record short-term leases (i.e. leases with an initial term of 12 months or less) on its consolidated balance sheets and recognizes payments for these leases as lease expense.

Certain leases require the Company to pay taxes, insurance, maintenance, and other operating expenses associated with the leased asset. Such amounts are not included in the measurement of the lease liability to the extent they are variable in nature. These variable lease costs are recognized as variable lease expense when incurred. The depreciable life of the ROU assets and related leasehold improvements are limited by the expected lease term, unless the lease contains a provision to transfer title to the Company or a purchase option that the Company expects to execute.

15
The Company’s most significant leases represent leases of real estate, such as manufacturing facilities, warehouses, and office buildings. In addition, the Company leases certain manufacturing and IT equipment and vehicles.  The Company’s most significant leases have remaining lease terms of 1 to 11 years. Certain leases contain renewal options for varying periods, which are at the Company’s discretion. If reasonably certain of exercise, the Company includes the renewal periods within the calculation of ROU assets and lease liabilities.  The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Lease assets and liabilities
The following table provides a summary of leases recorded on the consolidated balance sheet.

   
 Balance Sheet Location
June 30, 2019
Lease Assets
     
Operating lease ROU assets
Other noncurrent assets
$
64.9
Finance lease ROU assets (a)
Property, plant and equipment - net
 
8.8
       
Lease Liabilities
     
Operating lease liabilities
Other current liabilities
$
12.9
Operating lease liabilities
Other noncurrent liabilities
 
50.7
Finance lease liabilities
Long-term debt - current portion
 
0.3
Finance lease liabilities
Long-term debt
 
3.6

GRAPHIC
(a)
Finance lease ROU assets are recorded net of accumulated amortization of $1.4 million as of June 30, 2019.

Components of Lease Expense
The Company records operating lease expense as either cost of sales or SG&A expenses within its consolidated statements of operations, depending upon the nature and use of the ROU assets.  The Company records finance lease expense as depreciation expense within cost of sales or SG&A expenses, depending upon the nature and use of the ROU assets, and as interest expense in its consolidated statements of operations.

The components of lease expense were as follows:


 
Three months ended
June 30, 2019
 
Operating lease expense (a)
 
$
5.2
 
Finance lease expense:
       
Depreciation of ROU assets
   
0.1
 
Interest on lease liabilities
   
-
 
Total lease expense
 
$
5.3
 

GRAPHIC
(a)
For the three months ended June 30, 2019, operating lease expense included $0.9 million of short-term lease expense. Variable lease expense was not significant.

16
Supplemental Cash Flow Information


 
Three months ended
June 30, 2019
 
Cash paid for amounts included in the measurement of lease liabilities:
     
Operating cash flows for operating leases
 
$
3.7
 
Financing cash flows for finance leases
   
0.1
 
         
ROU assets obtained in exchange for lease liabilities
       
Operating leases
 
$
0.3
 
Finance leases
   
-
 

Lease Term and Discount Rates


June 30, 2019
Weighted-average remaining lease term:
 
Operating leases
8.9 years
Finance leases
9.7 years
   
Weighted-average discount rate:
 
Operating leases
3.4%
Finance leases
2.0%

Maturity of Lease Liabilities under New Lease Accounting Guidance
Future minimum rental payments for leases with initial non-cancellable lease terms in excess of one year were as follows at June 30, 2019:

Fiscal Year
 
Operating Leases
   
Finance Leases
 
Remainder of fiscal 2020
 
$
11.4
   
$
0.4
 
2021
   
13.4
     
0.5
 
2022
   
9.9
     
0.5
 
2023
   
8.0
     
0.5
 
2024
   
5.5
     
0.5
 
2025 and beyond
   
24.8
     
2.5
 
Total lease payments
   
73.0
     
4.9
 
Less: Interest
   
(9.4
)
   
(1.0
)
Present value of lease liabilities
 
$
63.6
   
$
3.9
 

The table above excludes approximately $7.0 million of future lease payments associated with a 15-year operating lease of a manufacturing facility within the CIS segment that commenced in July 2019.

17
Maturity of Lease Liabilities under Previous Lease Accounting Guidance
Future minimum rental payments for operating leases with initial non-cancellable lease terms in excess of one year were as follows at March 31, 2019:

Fiscal Year
     
2020
 
$
14.2
 
2021
   
12.4
 
2022
   
9.1
 
2023
   
7.1
 
2024
   
4.7
 
2025 and beyond
   
22.9
 
Total
 
$
70.4
 

The Company recorded $19.3 million and $18.5 million of rental expense related to operating leases in fiscal 2019 and 2018, respectively.

Note 16: Indebtedness

In June 2019, the Company executed an amended and restated credit agreement with a syndicate of banks that provides for a multi-currency $250.0 million revolving credit facility expiring in June 2024, which modified the Company’s then-existing revolver that would have expired in November 2021.   As a result of the credit agreement modification, the Company deferred debt issuance costs of $1.1 million, which will be amortized over the term of the debt.  In addition, this credit agreement provides for both U.S. dollar- and euro-denominated term loan facilities.  At June 30, 2019, the Company’s term loan borrowings totaled $200.5 million, with repayments beginning in the second quarter of fiscal 2020 and continuing through fiscal 2025.  These term loans replaced the previously-existing term loans with repayments scheduled through fiscal 2022.  Borrowings under both the revolving credit and term loan facilities bear interest at a variable rate, based upon the applicable reference rate and including a margin percentage dependent upon the Company’s leverage ratio, as described below. At June 30, 2019, the weighted-average interest rates for revolving credit facility borrowings and the term loans were 3.8 percent and 3.4 percent, respectively.

Long-term debt consisted of the following:


 
Fiscal year
of maturity
   
June 30, 2019
   
March 31, 2019
 
Term loans
 
2025
   
$
200.5
   
$
238.4
 
6.8% Senior Notes
 
2021
     
81.0
     
85.0
 
5.8% Senior Notes
 
2027
     
50.0
     
50.0
 
Other (a)
   
-
     
8.1
     
14.3
 
             
339.6
     
387.7
 
Less: current portion
           
(33.5
)
   
(48.6
)
Less: unamortized debt issuance costs
           
(3.9
)
   
(4.0
)
Total long-term debt
         
$
302.2
   
$
335.1
 
(a)
Other long-term debt primarily includes borrowings by foreign subsidiaries and finance lease obligations.

18
Long-term debt matures as follows:

Fiscal Year
     
Remainder of 2020
 
$
24.0
 
2021
   
84.7
 
2022
   
21.7
 
2023
   
21.7
 
2024
   
21.7
 
2025 & beyond
   
165.8
 
Total
 
$
339.6
 

As of June 30, 2019 and March 31, 2019, the Company reported its revolving credit facility borrowings of $101.6 million and $47.1 million, respectively, as short-term debt on the consolidated balance sheets.  At June 30, 2019, domestic letters of credit totaled $5.3 million, resulting in available borrowings under the Company’s revolving credit facility of $143.1 million.  The Company also maintains credit agreements for its foreign subsidiaries, with outstanding short-term borrowings at June 30, 2019 and March 31, 2019 of $19.9 million and $18.9 million, respectively.

Provisions in the Company’s credit agreement, Senior Note agreements, and various foreign credit agreements require the Company to maintain compliance with various covenants and include certain cross-default clauses.  Under its primary debt agreements in the U.S., the Company has provided liens on substantially all domestic assets.  In addition, as specified in the credit agreement, the term loans may require prepayments in the event of certain asset sales.  The Company is also subject to a leverage ratio covenant, which requires the Company to limit its consolidated indebtedness, less a portion of its cash balance, both as defined by the credit agreements, to no more than three and one-quarter times consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”).  The Company is also subject to an interest expense coverage ratio covenant, which requires the Company to maintain Adjusted EBITDA of at least three times consolidated interest expense.  The Company was in compliance with its debt covenants as of June 30, 2019.

The Company estimates the fair value of long-term debt using discounted future cash flows at rates offered to the Company for similar debt instruments of comparable maturities. As of June 30, 2019 and March 31, 2019, the carrying value of the Company’s long-term debt approximated fair value, with the exception of the Senior Notes, which had an aggregate fair value of approximately $134.0 million and $137.2 million, respectively.  The fair value of the Company’s long-term debt is categorized as Level 2 within the fair value hierarchy. Refer to Note 3 for the definition of a Level 2 fair value measurement.

Note 17: Contingencies and Litigation

Environmental
The Company has recorded environmental investigation and remediation accruals related to soil and groundwater contamination at manufacturing facilities in the United States, one of which the Company currently owns and operates, and at its former manufacturing facility in the Netherlands, along with accruals for lesser environmental matters at certain other facilities in the United States and Brazil.  These accruals generally relate to facilities where past operations followed practices and procedures that were considered acceptable under then-existing regulations, or where the Company is a successor to the obligations of prior owners, and current laws and regulations require investigative and/or remedial work to ensure sufficient environmental compliance.  The accruals for these environmental matters totaled $18.9 million as of June 30, 2019 and March 31, 2019.  As additional information becomes available, the Company will re-assess the liabilities related to these matters and revise the estimated accruals, if necessary.  Based upon currently available information, the Company believes the ultimate outcome of these matters, individually and in the aggregate, will not have a material adverse effect on its financial position.  However, these matters are subject to inherent uncertainties, and unfavorable outcomes could occur, including significant monetary damages.

19
Other Litigation
In the normal course of business, the Company and its subsidiaries are named as defendants in various lawsuits and enforcement proceedings by private parties, governmental agencies and/or others in which claims are asserted against Modine.  In the opinion of management, the liabilities, if any, which may ultimately result from such lawsuits or proceedings are not expected to have a material adverse effect on the Company’s financial position.

Note 18: Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss were as follows:

 
 
Three months ended June 30, 2019
 
 
 
Foreign
Currency
Translation
   
Defined
Benefit Plans
   
Cash Flow
Hedges
   
Total
 
Beginning balance
 
$
(42.6
)
 
$
(136.3
)
 
$
0.5
   
$
(178.4
)
 
                               
Other comprehensive income (loss) before reclassifications
   
1.9
     
-
     
(1.0
)
   
0.9
 
Reclassifications:
                               
Amortization of unrecognized net loss (a)
   
-
     
1.4
     
-
     
1.4
 
Realized gains - net (b)
   
-
     
-
     
(0.1
)
   
(0.1
)
Income taxes
   
-
     
(0.3
)
   
0.3
     
-
 
Total other comprehensive income (loss)
   
1.9
     
1.1
     
(0.8
)
   
2.2
 
 
                               
Ending balance
 
$
(40.7
)
 
$
(135.2
)
 
$
(0.3
)
 
$
(176.2
)

 
 
Three months ended June 30, 2018
 
 
 
Foreign
Currency
Translation
   
Defined
Benefit Plans
   
Cash Flow
Hedges
   
Total
 
Beginning balance
 
$
(5.5
)
 
$
(134.9
)
 
$
0.1
   
$
(140.3
)
 
                               
Other comprehensive income before reclassifications
   
(24.7
)
   
-
     
0.5
     
(24.2
)
Reclassifications for amortization of unrecognized net loss (a)
   
-
     
1.3
     
-
     
1.3
 
Income taxes
   
-
     
(0.3
)
   
(0.1
)
   
(0.4
)
Total other comprehensive income
   
(24.7
)
   
1.0
     
0.4
     
(23.3
)
 
                               
Ending balance
 
$
(30.2
)
 
$
(133.9
)
 
$
0.5
   
$
(163.6
)
(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.
(b)
Amount represent net gains and losses associated with cash flow hedges that were  reclassified to net earnings.

20
Note 19: Segment Information

The following is a summary of net sales, gross profit, operating income, and total assets by segment:

 
 
Three months ended June 30,
 
 
 
2019
   
2018
 
 
 
External Sales
   
Inter-segment
Sales
   
Total
   
External Sales
   
Inter-segment
Sales
   
Total
 
Net sales:
                                   
VTS
 
$
312.6
   
$
13.9
   
$
326.5
   
$
338.3
   
$
14.5
   
$
352.8
 
CIS
   
167.9
     
0.9
     
168.8
     
183.5
     
0.4
     
183.9
 
BHVAC
   
48.5
     
0.5
     
49.0
     
44.3
     
0.7
     
45.0
 
Segment total
   
529.0
     
15.3
     
544.3
     
566.1
     
15.6
     
581.7
 
Corporate and eliminations
   
-
     
(15.3
)
   
(15.3
)
   
-
     
(15.6
)
   
(15.6
)
Net sales
 
$
529.0
   
$
-
   
$
529.0
   
$
566.1
   
$
-
   
$
566.1
 

 
 
Three months ended June 30,
 
 
 
2019
   
2018
 
 
 
$'s
   
% of sales
   
$'s
   
% of sales
 
Gross profit:
                       
VTS
 
$
45.0
     
13.8
%
 
$
54.0
     
15.3
%
CIS
   
24.3
     
14.4
%
   
28.6
     
15.6
%
BHVAC
   
13.7
     
27.9
%
   
11.6
     
25.9
%
Segment total
   
83.0
     
15.2
%
   
94.2
     
16.2
%
Corporate and eliminations
   
0.4
     
-
     
0.1
     
-
 
Gross profit
 
$
83.4
     
15.8
%
 
$
94.3
     
16.7
%

 
 
Three months ended June 30,
 
 
 
2019
   
2018
 
Operating income:
           
VTS
 
$
17.3
   
$
25.5
 
CIS
   
9.0
     
13.2
 
BHVAC
   
5.3
     
3.2
 
Segment total
   
31.6
     
41.9
 
Corporate and eliminations
   
(13.5
)
   
(7.1
)
Operating income
 
$
18.1
   
$
34.8
 

 
 
June 30, 2019
   
March 31, 2019
 
Total assets: (a)
           
VTS
 
$
767.9
   
$
749.9
 
CIS
   
628.2
     
604.2
 
BHVAC
   
107.0
     
89.4
 
Corporate and eliminations
   
98.2
     
94.5
 
Total assets
 
$
1,601.3
   
$
1,538.0
 

(a)
The Company adopted new lease accounting guidance and, as a result, recorded $61.3 million of operating lease assets on its consolidated balance sheet on April 1, 2019.  See Note 1 for additional information.
21
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.

When we use the terms “Modine,” “we,” “us,” the “Company,” or “our” in this report, we are referring to Modine Manufacturing Company. Our fiscal year ends on March 31 and, accordingly, all references to quarters refer to our fiscal quarters.  The quarter ended June 30, 2019 was the first quarter of fiscal 2020.

First Quarter Highlights

Net sales in the first quarter of fiscal 2020 decreased $37.1 million, or 7 percent, from the first quarter of fiscal 2019, primarily due to lower sales in our Vehicular Thermal Solutions (“VTS”) and Commercial and Industrial Solutions (“CIS”) operating segments, partially offset by higher sales in our Building HVAC Systems (“BHVAC”) segment.  Gross profit decreased $10.9 million and gross margin declined 90 basis points to 15.8 percent, primarily due to lower sales volume.  Selling, general and administrative (“SG&A”) expenses increased $4.2 million, primarily due to $8.4 million of costs associated with our review of strategic alternatives for the VTS segment’s automotive business.  Operating income during the first quarter of fiscal 2020 decreased $16.7 million to $18.1 million, primarily due to lower gross profit and higher SG&A expenses, and our net earnings decreased $14.3 million.

We previously announced that we are evaluating strategic alternatives for the automotive business within our VTS segment.  Our primary objectives include optimizing the VTS segment’s profitability and reprioritizing capital investments across all of our businesses.  We are currently engaged in a formal sales process with potential buyers; however, we will continue to evaluate all strategic alternatives for the automotive business in order to maximize shareholder value.

CONSOLIDATED RESULTS OF OPERATIONS

The following table presents our consolidated financial results on a comparative basis for the three months ended June 30, 2019 and 2018:

 
Three months ended June 30,
 
 
 
2019
 
 
2018
 
(in millions)
 
$’s
 
 
% of sales
 
 
$’s
 
 
% of sales
 
Net sales
 
$
529.0
 
 
 
100.0
%
 
$
566.1
 
 
 
100.0
%
Cost of sales
 
 
445.6
 
 
 
84.2
%
 
 
471.8
 
 
 
83.3
%
Gross profit
 
 
83.4
 
 
 
15.8
%
 
 
94.3
 
 
 
16.7
%
Selling, general and administrative expenses
 
 
63.5
 
 
 
12.0
%
 
 
59.3
 
 
 
10.5
%
Restructuring expenses
 
 
1.8
 
 
 
0.3
%
 
 
0.2
 
 
 
-
 
Operating income
 
 
18.1
 
 
 
3.4
%
 
 
34.8
 
 
 
6.1
%
Interest expense
 
 
(5.9
)
 
 
-1.1
%
 
 
(6.2
)
 
 
-1.1
%
Other expense – net
 
 
(1.1
)
 
 
-0.2
%
 
 
(1.1
)
 
 
-0.2
%
Earnings before income taxes
 
 
11.1
 
 
 
2.1
%
 
 
27.5
 
 
 
4.9
%
Provision for income taxes
 
 
(2.9
)
 
 
-0.6
%
 
 
(5.0
)
 
 
-0.9
%
Net earnings
 
$
8.2
 
 
 
1.5
%
 
$
22.5
 
 
 
4.0
%

First quarter net sales of $529.0 million were $37.1 million, or 7 percent, lower than the first quarter of the prior year, primarily due to lower sales in our VTS and CIS segments and a $17.8 million unfavorable impact of foreign currency exchange rate changes, partially offset by higher sales in our BHVAC segment.

First quarter gross profit decreased $10.9 million and gross margin declined 90 basis points to 15.8 percent, primarily due to lower sales volume, higher labor costs, and higher tariff-related expenses, partially offset by favorable raw material costs.  In addition, gross profit was unfavorably impacted by $2.6 million from foreign currency exchange rate changes.

22
First quarter SG&A expenses increased $4.2 million. The increase in SG&A expenses was primarily due to $8.4 million of costs recorded at Corporate associated with our review of strategic alternatives for the VTS segment’s automotive business, which primarily related to third-party professional services and included costs to prepare for a potential sale of the automotive business.  This increase was partially offset by lower compensation-related expenses and a $1.6 million favorable impact of foreign currency exchange rate changes.

Restructuring expenses of $1.8 million in the first quarter of fiscal 2020 increased $1.6 million compared with the prior year, primarily due to higher severance expenses in the VTS segment.

Operating income of $18.1 million in the first quarter of fiscal 2020 decreased $16.7 million compared with the first quarter of fiscal 2019, primarily due to the automotive business strategic process costs and lower earnings in the VTS and CIS segments, partially offset by higher earnings in the BHVAC segment.

The provision for income taxes was $2.9 million and $5.0 million in the first quarter of fiscal 2020 and 2019, respectively.  The $2.1 million decrease was primarily due to lower operating earnings in the current year, partially offset by the absence of a $2.0 million income tax benefit recorded in the prior year resulting from the reversal of a tax valuation allowance in a foreign jurisdiction.

SEGMENT RESULTS OF OPERATIONS

The following is a discussion of our segment results of operations for the three months ended June 30, 2019 and 2018:

Vehicular Thermal Solutions

 
Three months ended June 30,
 
 
 
2019
 
 
2018
 
(in millions)
 
$’s
 
 
% of sales
 
 
$’s
 
 
% of sales
 
Net sales
 
$
326.5
 
 
 
100.0
%
 
$
352.8
 
 
 
100.0
%
Cost of sales
 
 
281.5
 
 
 
86.2
%
 
 
298.8
 
 
 
84.7
%
Gross profit
 
 
45.0
 
 
 
13.8
%
 
 
54.0
 
 
 
15.3
%
Selling, general and administrative expenses
 
 
26.1
 
 
 
8.0
%
 
 
28.4
 
 
 
8.1
%
Restructuring expenses
 
 
1.6
 
 
 
0.5
%
 
 
0.1
 
 
 
-
 
Operating income
 
$
17.3
 
 
 
5.3
%
 
$
25.5
 
 
 
7.2
%

VTS net sales decreased $26.3 million, or 7 percent, from the first quarter of fiscal 2019 to the first quarter of fiscal 2020, primarily due to lower sales volume to customers in Europe and to off-highway customers in Asia, partially offset by higher sales volume to commercial vehicle customers in North America.  Foreign currency exchange rate changes had an unfavorable $12.1 million impact on first quarter sales.  Gross profit decreased $9.0 million and gross margin declined 150 basis points to 13.8 percent, primarily due to lower sales volume, higher labor costs, and higher tariff-related expenses, partially offset by favorable raw material costs.  In addition, foreign currency exchange rate changes had an unfavorable $1.8 million impact on gross profit.  SG&A expenses decreased $2.3 million, or 10 basis points as a percentage of sales, primarily due to lower compensation-related expenses, lower environmental charges related to a previously-owned manufacturing facility in the U.S., and a $1.0 million favorable impact of foreign currency exchange rate changes.  Restructuring expenses increased $1.5 million, primarily due to higher severance expenses resulting from targeted headcount reductions in Europe and in the Americas during the current year.  Operating income decreased $8.2 million to $17.3 million during the first quarter, primarily due to lower gross profit.

23
Commercial and Industrial Solutions

 
Three months ended June 30,
 
 
 
2019
 
 
2018
 
(in millions)
 
$’s
 
 
% of sales
 
 
$’s
 
 
% of sales
 
Net sales
 
$
168.8
 
 
 
100.0
%
 
$
183.9
 
 
 
100.0
%
Cost of sales
 
 
144.5
 
 
 
85.6
%
 
 
155.3
 
 
 
84.4
%
Gross profit
 
 
24.3
 
 
 
14.4
%
 
 
28.6
 
 
 
15.6
%
Selling, general and administrative expenses
 
 
15.1
 
 
 
9.0
%
 
 
15.3
 
 
 
8.3
%
Restructuring expenses
 
 
0.2
 
 
 
0.1
%
 
 
0.1
 
 
 
0.1
%
Operating income
 
$
9.0
 
 
 
5.3
%
 
$
13.2
 
 
 
7.2
%

CIS net sales decreased $15.1 million, or 8 percent, from the first quarter of fiscal 2019 to the first quarter of fiscal 2020, primarily due to lower sales volume to data center and commercial HVAC&R customers and a $4.6 million unfavorable impact of foreign currency exchange rate changes.  Gross profit decreased $4.3 million and gross margin declined 120 basis points to 14.4 percent, primarily due to lower sales volume and unfavorable sales mix.  In addition, foreign currency exchange rate changes had an unfavorable $0.6 million impact on gross profit.  SG&A expenses decreased $0.2 million compared with the prior year, yet increased 70 basis points as a percentage of sales.  Operating income decreased $4.2 million to $9.0 million during the first quarter, primarily due to lower gross profit.

Building HVAC Systems

 
Three months ended June 30,
 
 
 
2019
 
 
2018
 
(in millions)
 
$’s
 
 
% of sales
 
 
$’s
 
 
% of sales
 
Net sales
 
$
49.0
 
 
 
100.0
%
 
$
45.0
 
 
 
100.0
%
Cost of sales
 
 
35.3
 
 
 
72.1
%
 
 
33.4
 
 
 
74.1
%
Gross profit
 
 
13.7
 
 
 
27.9
%
 
 
11.6
 
 
 
25.9
%
Selling, general and administrative expenses
 
 
8.4
 
 
 
17.2
%
 
 
8.4
 
 
 
18.8
%
Operating income
 
$
5.3
 
 
 
10.7
%
 
$
3.2
 
 
 
7.1
%

BHVAC net sales increased $4.0 million, or 9 percent, from the first quarter of fiscal 2019 to the first quarter of fiscal 2020, primarily due to higher ventilation and heating product sales in North America, partially offset by a $1.1 million unfavorable impact of foreign currency exchange rate changes.  Gross profit increased $2.1 million and gross margin improved 200 basis points to 27.9 percent, primarily due to higher sales volume and favorable sales mix.  SG&A expenses remained consistent with the prior year and decreased 160 basis points as a percentage of sales.  Operating income of $5.3 million increased $2.1 million, primarily due to higher gross profit.

Liquidity and Capital Resources

Our primary sources of liquidity are cash flow from operating activities, our cash and cash equivalents as of June 30, 2019 of $29.1 million, and an available borrowing capacity of $143.1 million under our revolving credit facility.  Given our extensive international operations, approximately $27.0 million of our cash and cash equivalents are held by our non-U.S. subsidiaries. Amounts held by non-U.S. subsidiaries are available for general corporate use; however, these funds may be subject to foreign withholding taxes if repatriated.  We have not encountered, and do not expect to encounter, any difficulty meeting the liquidity requirements of our global operations.

24
Net cash provided by operating activities for the three months ended June 30, 2019 was $0.5 million, which represents a $4.6 million increase compared with $4.1 million of net cash used for operating activities during the same period in the prior year.  This increase in operating cash flow was primarily due to favorable net changes in working capital, partially offset by the unfavorable impact of lower earnings and payments associated with our strategic review of alternatives for the VTS segment’s automotive business.  The favorable changes in working capital during the first three months of fiscal 2020, compared with the same period in the prior year, included lower employee benefit and incentive compensation payments.  Capital expenditures of $20.3 million during the first three months of fiscal 2020 decreased $2.3 million compared with the same period in the prior year.

Debt

In June 2019, we executed an amended and restated credit agreement with a syndicate of banks that provides for a multi-currency $250.0 million revolving credit facility expiring in June 2024, which replaced our then-existing revolver that would have expired in November 2021.  In addition, this credit agreement provides for both U.S. dollar- and euro-denominated term loan facilities.

Our debt agreements require us to maintain compliance with various covenants.  As specified in the credit agreement, the term loans may require prepayments in the event of certain asset sales.  In addition, under our primary debt agreements in the U.S., we are subject to a leverage ratio covenant, which requires us to limit our consolidated indebtedness, less a portion of our cash balance, both as defined by the credit agreements, to no more than three and one-quarter times consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”).  We are also subject to an interest expense coverage ratio covenant, which requires us to maintain Adjusted EBITDA of at least three times consolidated interest expense.  As of June 30, 2019, our leverage ratio and interest coverage ratio were 2.2 and 8.7, respectively.  We were in compliance with our debt covenants as of June 30, 2019 and expect to remain in compliance during the balance of fiscal 2020 and beyond.

Share Repurchase Program

During fiscal 2019, our Board of Directors approved a $50.0 million share repurchase program, which expires in October 2020.  During the first quarter of fiscal 2020, we repurchased $2.4 million of common stock under this program and as of June 30, 2019, we had approximately $47.0 million of the repurchase authorization remaining.  Our decision whether and to what extent to repurchase additional shares under this program will depend on a number of factors, including business conditions, other cash priorities, and stock price.

Forward-Looking Statements

This report, including, but not limited to, the discussion under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains statements, including information about future financial performance, accompanied by phrases such as “believes,” “estimates,” “expects,” “plans,” “anticipates,” “intends,” and other similar “forward-looking” statements, as defined in the Private Securities Litigation Reform Act of 1995. Modine’s actual results, performance or achievements may differ materially from those expressed or implied in these statements, because of certain risks and uncertainties, including, but not limited to, those described under “Risk Factors” in Item 1A. in Part I. of the Company’s Annual Report on Form 10-K for the year ended March 31, 2019. Other risks and uncertainties include, but are not limited to, the following:

Market Risks:

•
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 (and potential trade war impacts resulting from tariffs or retaliatory actions), inflation, changes in interest rates, recession and recovery therefrom, restrictions and uncertainty associated with cross-border trade, and the general uncertainties about the impact of regulatory and/or policy changes, including those related to tax and trade, that have been or may be implemented in the United States or by its trade partners, as well as continuing uncertainty regarding the timing and the short- and long-term implications of “Brexit”;

25
•
The impact of potential price increases associated with raw materials, including aluminum, copper, steel and stainless steel (nickel), and other purchased component inventory including, but not limited to, increases in the underlying material cost based upon the London Metal Exchange and related premiums or fabrication costs.  These prices may be impacted by a variety of factors, including changes in trade laws and tariffs and the behavior of our suppliers.  This risk includes our ability to successfully manage our exposure and our ability to adjust product pricing in response to price increases, whether through our quotation process or through contract provisions for prospective price adjustments, as well as the inherent lag in timing of such contract provisions; 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.

Operational Risks:

•
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;

•
Unanticipated problems with suppliers meeting our time, quantity, quality and price demands, and the overall health of our suppliers, including their ability and willingness to supply our volume demands if their production capacity becomes constrained;

•
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 operating inefficiencies, including unanticipated program launch and product transfer challenges and warranty claims;

•
Unanticipated delays or modifications initiated by major customers with respect to program launches, product applications or requirements;

•
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;

•
Our ability to effectively and efficiently complete restructuring activities and realize the anticipated benefits of those activities;

•
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;

•
Our ability to recruit and maintain talent, including personnel in managerial, leadership and administrative functions, in light of tightening global labor markets;

26
•
Our ability to protect our proprietary information and intellectual property from theft or attack by internal or external sources;

•
The impact of any substantial disruption or material breach of our information technology systems, and any related delays, problems or costs;

•
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.

Strategic Risks:

•
Our ability to successfully take advantage of our increased presence in the “industrial” markets, with our CIS and BHVAC businesses, while maintaining appropriate focus on the market opportunities presented by our VTS business;

•
The success of our evaluation of strategic alternatives for our automotive business within our VTS segment in optimizing the segment’s future profitability;

•
Our ability to identify and execute additional growth and diversification opportunities in order to position us for long-term success; and

•
The potential expense, disruption or other impacts that could result from unanticipated actions by activist shareholders.

Financial Risks:

•
Our ability to fund our global liquidity requirements efficiently for Modine’s current operations 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 the Euro Interbank Offered Rate (“EURIBOR”) in relation to our variable-rate debt obligations, and of the continued uncertainty around the utilization of LIBOR or alternative reference rates;

•
Our ability to maintain our leverage ratio (net debt divided by Adjusted EBITDA, as defined in our credit agreements) in our target range of 1.5 to 2.5 in an efficient manner;

•
The potential unfavorable impact of foreign currency exchange rate fluctuations on our financial results; and

•
Our ability to effectively realize the benefits of deferred tax assets in various jurisdictions in which we operate.

Forward-looking statements are as of the date of this report; we do not assume any obligation to update any forward-looking statements.

27
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.

The Company’s quantitative and qualitative disclosures about market risk are incorporated by reference from Part II, Item 7A. of the Company’s Annual Report on Form 10-K for the year ended March 31, 2019. The Company’s market risks have not materially changed since the fiscal 2019 Form 10-K was filed.

Item 4.
Controls and Procedures.

Evaluation Regarding Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report on Form 10-Q, management of the Company, at the direction of the General Counsel and under the supervision, and with the participation, of the Company’s President and Chief Executive Officer and Vice President, Finance and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures, at a reasonable assurance level, as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the President and Chief Executive Officer and Vice President, Finance and Chief Financial Officer have concluded that the design and operation of the Company’s disclosure controls and procedures were effective, at a reasonable assurance level, as of June 30, 2019.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting during the first quarter of fiscal 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

28
PART II. OTHER INFORMATION

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.

ISSUER PURCHASES OF EQUITY SECURITIES

The following describes the Company’s purchases of common stock during the first quarter of fiscal 2020:

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 (a)
April 1 – April 30, 2019
———
———
———
$49,431,509
         
May 1 – May 31, 2019
228,308 (b)
$12.93
29,250
$49,046,555
         
June 1 – June 30, 2019
194,321 (b)
$13.54
150,000
$46,985,524
         
Total
422,629 (b)
$13.21
179,250
 

(a)
Effective October 30, 2018, the Board of Directors approved a two-year, $50.0 million share repurchase program, which allows the Company to repurchase Modine common stock through solicited and unsolicited transactions in the open market or in privately-negotiated or other transactions, at such times and prices and upon such other terms as the authorized officers of the Company deem appropriate.

(b)
Consists of both shares acquired pursuant to the repurchase program described in (a) above and 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.

Item 5.
Other Information.

On July 26, 2019, the Company entered into an Employment Retention Agreement (the “Agreement”) with former Vice President, Chief Technology Officer, Scott D. Wollenberg.  Under the Agreement, Mr. Wollenberg agreed to transition from his position as Vice President, Chief Technology Officer to be the lead of the Company’s Project Management Office.  In his new role, Mr. Wollenberg is responsible for overseeing all aspects of the execution of the Company’s marketing and potential sale of its automotive business unit.

Upon successful completion of Mr. Wollenberg’s obligations set forth in the Agreement, Mr. Wollenberg will be entitled to the following benefits (the “Completion Benefits”):

•
Severance pay in an amount equal to one year of Mr. Wollenberg’s annual salary of $367,000;
•
A healthcare insurance subsidy;
•
A prorated payment of his annual management incentive payment; and
•
Accelerated or prorated vesting of certain previously granted unvested restricted stock, restricted stock units and performance shares under the Company’s long-term incentive plan (the “LTIP”), in accordance with the terms of the Agreement.

In the event that we consummate a sale of the automotive business, Mr. Wollenberg’s employment and the Agreement would terminate, subject to the early termination rights described below, unless the parties mutually agree otherwise.

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In the event that the Company terminates Mr. Wollenberg’s employment “For Cause,” as defined in the Agreement, Mr. Wollenberg will forfeit his right to all of the Completion Benefits.  In the event that the Company terminates Mr. Wollenberg’s employment “Without Cause,” as defined in the Agreement, by providing Mr. Wollenberg at least 180 days’ notice in advance of his last day of employment, Mr. Wollenberg will be entitled to receive the full amount of his salary for the entire 180-day notice period, and will be entitled to receive all of the Completion Benefits.

In the event that Mr. Wollenberg terminates his employment with the Company at any time prior to the completion of his responsibilities as the lead of the Project Management Office by providing at least 60 days’ advanced notice, Mr. Wollenberg would forfeit all Completion Benefits.

The foregoing description of the Agreement does not purport to be complete, and is qualified in its entirety by reference to the full text of the Agreement attached to this Form 10-Q as Exhibit 10.5, which is incorporated by reference herein.

30
Item 6.
Exhibits.

(a)  Exhibits:

Exhibit No.
Description
 
Incorporated Herein By
Reference To
 
Filed
Herewith
 
 
 
 
 
 
4.1
Fourth Amended and Restated Credit Agreement dated as of June 28, 2019.
 
Exhibit 4.1 to Registrant’s Current Report on Form 8-K dated June 28, 2019
 
 
 
 
 
 
 
 
Form of Fiscal 2020 Modine Performance Stock Award Agreement
 
 
 
X
 
 
 
 
 
 
Form of Fiscal 2020 Modine Incentive Stock Options Award Agreement
 
 
 
X
 
 
 
 
 
 
Form of Fiscal 2020 Modine Restricted Stock Unit Award Agreement
 
 
 
X
 
 
 
 
 
 
Form of Fiscal 2020 Modine Non-Qualified Stock Option Award Agreement
 
 
 
X
 
 
 
 
 
 
Employment Retention Agreement for Scott Wollenberg, dated as of July 26, 2019
 
 
 
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

31
SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MODINE MANUFACTURING COMPANY
(Registrant)

By: /s/ Michael B. Lucareli
Michael B. Lucareli, Vice President, Finance and
Chief Financial Officer*

Date: August 1, 2019

* Executing as both the principal financial officer and a duly authorized officer of the Company

32
Exhibit 10.1

MODINE MANUFACTURING COMPANY
2017 INCENTIVE COMPENSATION PLAN
PERFORMANCE STOCK AWARD
AWARD AGREEMENT

We are pleased to inform you that you have been granted an opportunity to earn a Performance Stock Award of Modine Manufacturing Company (the “Company”), subject to the terms and conditions of the Modine Manufacturing Company 2017 Incentive Compensation Plan (the “Plan”) and of this Award Agreement.  Unless otherwise defined herein, all terms used in this Award Agreement shall have the same meanings as set forth in the Plan.
 
 
Full name of Grantee:
 
     
 
Date of Award:
May 29, 2019
     
 
Target number of Common Stock:
 
     
 
Performance Period:
April 1, 2019 to March 31, 2022

1.  Performance Stock Award.  Pursuant to the Plan, you are hereby granted a Performance Stock Award, subject to the terms and conditions of this Award Agreement and the Plan.  The number of shares of Common Stock to be issued hereunder if the Target Performance Goals are achieved is set forth above.

2.  Terms of Performance Stock Award and Performance Goals.  You have been granted an opportunity to earn shares of Common Stock under this Performance Stock Award.  The actual number of shares of Common Stock earned by you will be determined as described below, based upon the actual results for the Performance Period set forth above compared to the Performance Goals set forth below, provided that you remain an employee of the Company or a Subsidiary for the entire Performance Period (subject to the provisions below regarding death, Disability or retirement) and the achievement of the Performance Goals is greater than the Threshold amount specified below (the “Conditions”).  If either of these Conditions is not satisfied, then except as otherwise provided in this Award Agreement and the Plan, no Common Stock shall be earned.  The Performance Goals for this Performance Stock Award are: Cash Flow Return on Invested Capital (“CFROIC”) and Average Annual Revenue Growth (“Revenue Growth”), with each having a 50% weight.  The Threshold Performance Goals are the minimum Performance Goals necessary for the Performance Period that must be achieved by the Company in order for you to qualify for any Common Stock and the Maximum Performance Goals are the minimum Performance Goals for the Performance Period in order for you to qualify for the maximum number of shares of Common Stock earned under this Performance Stock Award.

 
Performance Goal: CFROIC
Performance Stock Award Earned Based on
Achievement of Performance Goal
 
Threshold:  7.0%
5% of Target number of Common Stock
 
Target:   10.5%
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

“CFROIC” or “Cash Flow Return on Invested Capital” means Cash Flow Conversion divided by Average Capital Employed.  Cash Flow Conversion equals Adjusted Free Cash Flow, which equals current fiscal year “net cash provided by operating activities”, less “expenditures for property, plant and equipment” (both as reported externally in the Company’s consolidated statement of cash flows), plus or minus Permitted Adjustments (defined below) plus Cash Interest, which is cash interest expense paid on outstanding debt.  Average Capital Employed for each fiscal year equals total debt plus shareholders’ equity averaged over five points (i.e., the last day of each fiscal quarter and prior fiscal year-end); and where shareholder’s equity excludes shareholder equity attributable to minority shareholders.  Permitted Adjustments include:

Restructuring Charges

•
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)

Acquisition and Divestiture Charges

•
Fees and expenses for transaction advisors

•
Integration expenses

•
Other incremental costs and charges that are non-recurring and directly related to the transaction

Other

•
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

2
Adoption of New Accounting Standards

•
The impact of the adoption of new U.S. GAAP accounting standards and significant changes in the Company’s accounting methods.

Divestitures

•
The impact of significant divestitures, such that annual metrics will be calculated on a “continuing operations” basis for the periods following divestiture.

Notwithstanding the foregoing, the Committee may disregard all or part of any Permitted Adjustment as separately applicable to each performance metric if doing so would decrease the amount payable under this Performance Stock Award.

“Revenue Growth” means the simple three-year arithmetic average of the Company’s annual change in revenue over the Performance Period, as reported on the Company’s audited financial statements.

If actual CFROIC or Revenue Growth for the Performance Period is between Threshold and Target and/or between Target and Maximum, the number of shares of Common Stock earned shall be determined on a linear basis.  In the event that the Company’s actual CFROIC or Revenue Growth does not meet the Threshold for the Performance Period, no Common Stock shall be earned relative to such metric under this Performance Stock Award.  In the event that the Company’s actual CFROIC or Revenue Growth exceeds the Maximum for the Performance Period, only the Maximum percentage of the Target number of shares of Common Stock set forth above shall be earned relative to such metric.

3.  Delivery of Shares of Common Stock.   Performance Stock earned shall be paid in shares of Common Stock delivered to you after the end of the Performance Period as soon as administratively practicable after the Committee has approved and certified the number of shares of Performance Stock that have been earned hereunder or, in the event of vesting covered under Paragraph 4 below, within thirty (30) days of the date of your termination of employment.
 
4.  Change in Control.    Notwithstanding anything in this Agreement to the contrary, upon a Change in Control, all outstanding Performance Stock shall be deemed to have satisfied the Target Performance Goals and shall vest pro-rata based upon the period worked during the Performance Period as of the date of an involuntary termination of your employment with the Company or a Subsidiary by the Company without Cause or by you for Good Reason within one (1) year following a Change in Control.  “Good Reason” means a material diminution in your base salary; material diminution in your annual target bonus opportunity; material diminution in your authority, duties or responsibilities; material diminution in authority, duties or responsibilities of the supervisor to whom you report; material diminution in the budget over which you retain authority; or material change in the geographic location at which you must perform services.
 
5.  Death, Disability or Retirement.  Notwithstanding anything in this Agreement to the contrary, upon your termination of employment due to death or Disability (as defined herein), or upon your retirement (with Committee approval), a prorated portion (based on the period working during the Performance Period) of the Performance Stock granted to you hereunder shall vest based on the Company’s actual achievement of the Performance Goals at the end of the Performance Period as certified by the Committee and shares will be delivered to you after the Committee has approved and certified the number of shares of Performance Stock that have been earned hereunder.  For purposes of this Award Agreement, “Disability” shall mean “permanent and total disability” as defined in Section 22 (e)(3) of the Code.

3
6.  Forfeiture.  Other than as described above in Paragraph 4 regarding a Change in Control or Paragraph 5 regarding Death, Disability or retirement, upon your termination of employment with the Company or a Subsidiary for any reason during the Performance Period, you will forfeit all Performance Stock covered by this Agreement.

7.  Shareholder Status.  While this Performance Stock Award is outstanding and until Common Stock is issued hereunder, you shall not have any rights as a shareholder of the Company, including the right to vote and the right to receive dividends on any Common Stock potentially earned under this Performance Stock Award.
 
8.  Transfer.  The Performance Stock Award shall be nontransferable.  Notwithstanding the foregoing, you shall have the right to transfer the Performance Stock Award or Common Stock otherwise issued hereunder upon your death, either by the terms of your will or under the laws of descent and distribution.

9.  No Unlawful Issue of Common Stock.  If, in the opinion of its counsel, the issue of any Common Stock hereunder pursuant to this Performance Stock Award shall not be lawful for any reason, including the inability of the Company to obtain, from any regulatory body having jurisdiction, authority deemed by such counsel to be necessary to such issuance, the Company shall not be obligated to issue any such Common Stock pursuant to this Performance Stock Award.

10.  No Obligation of Employment.  This Performance Stock Award shall not impose any obligation on the Company to continue your employment with the Company or any Subsidiary.

11.  Controlling Provisions; Plan Controls.  In the event of a conflict between the terms of this Award Agreement and any employment agreement or change in control agreement between you and the Company, this Award Agreement shall control.   This Performance Stock Award is qualified in its entirety by reference to the terms and conditions of the Plan under which it is granted, a copy of which you may request from the Company.  The Plan empowers the Committee to make interpretations, rules and regulations thereunder and, in general, provides that the determinations of such Committee with respect to the Plan shall be binding upon you.  The Plan is incorporated herein by reference.

12.  Forfeiture Under Recoupment Policy.  The Company shall have the power and the right to require you to forfeit and return the shares of Common Stock issued hereunder or any proceeds therefrom consistent with any recoupment policy maintained by the Company under applicable law, as such policy is amended from time to time.

13.  Use of Words.  The use of words of the masculine gender in this Award Agreement is intended to include, wherever appropriate, the feminine or neuter gender and vice versa.

14.  Successors.  This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company.

15.  Taxes.  The Company may require payment of or withhold any tax which it believes is required as a result of this Performance Stock Award, and the Company may defer making delivery with respect to shares issuable hereunder until arrangements satisfactory to the Company have been made with respect to such tax withholding obligations.

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16. Committee Discretion.  Notwithstanding anything in this Agreement, the Committee retains the discretion to make negative adjustments to the final determination of the achievement of any Performance Goals.

17. Personal Information.  Solium Capital LLC and Equiniti Trust Company assist the Company in the operation of the Plan and the administration of the Performance Stock Award granted pursuant to this Award Agreement.  If you choose to participate in the Plan, you acknowledge and consent to the Company sharing your name, email, and information regarding the grant of the Performance Stock Award under this Award Agreement with both Solium Capital LLC and Equiniti Trust Company.

By your electronic agreement and the signature of the Company’s representative below, you and the Company agree that this Performance Stock Award awarded to you under this Award Agreement is subject to the terms and conditions of the Plan, a copy of which is available to you upon request.  As provided in the Plan, you hereby agree to accept as binding any decision of the Committee with respect to the interpretation of the Plan and this Award Agreement, or any other matters associated therewith.

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed as of May 29, 2019.

 
MODINE MANUFACTURING COMPANY



 
By:
   
Thomas A. Burke
   
President and Chief Executive Officer


5
Exhibit 10.2

MODINE MANUFACTURING COMPANY
2017 INCENTIVE COMPENSATION PLAN
INCENTIVE STOCK OPTION
AWARD AGREEMENT

We are pleased to inform you that you have been granted an Option to purchase shares of Common Stock of Modine Manufacturing Company (the “Company”), subject to the terms and conditions of the Modine Manufacturing Company 2017 Incentive Compensation Plan (the “Plan”) and of this Award Agreement.  Unless otherwise defined herein, all terms used in this Award Agreement shall have the same meanings as set forth in the Plan.
 
 
Full name of Grantee:
 
     
 
Date of Award:
May 29, 2019
     
 
Exercise price per share:
 
     
 
Total number of shares:
 
     
 
Total exercise price:
 

1.  Option.  Pursuant to the Plan, you are hereby granted the option to purchase shares of Common Stock on the terms and conditions set forth in this Award Agreement.  The Option is intended to qualify as an Incentive Stock Option within the meaning of Section 422 of the Code to the extent it meets the requirements thereof, including the $100,000 per year limitation in Code Section 422(d).  Any portion of the Option that does not qualify as an Incentive Stock Option shall be a Nonqualified Stock Option.  This Option is intended to qualify as an Incentive Stock Option so that you may obtain preferential tax treatment and, consequently, certain limitations on disposition must be observed.  In order to obtain preferential tax treatment, shares of Common Stock obtained upon exercise of the Option may not be disposed of within twenty-four (24) months after the Date of Award or within twelve (12) months after exercise of the Option.

2.  Vesting Schedule.  The Option granted pursuant to this Award will vest according to the following schedule, provided, however, that, except as otherwise provided in Section 12.02 of the Plan or in this Award Agreement, you must be employed by the Company or a Subsidiary on each vesting date for that portion of the Option to vest.  If you separate from service due to Disability (as defined below), death, or your retirement (with Committee approval) prior to any Vesting Date, any unvested portion of the Option shall become fully and immediately exercisable.  For purposes of this Award Agreement, “Disability” shall mean “permanent and total disability” as defined in Section 22 (e)(3) of the Code.

 
Number of Shares of Common Stock
Vesting Date
 
25% of the total number of shares
May 29, 2020
 
25% of the total number of shares
May 29, 2021
 
25% of the total number of shares
May 29, 2022
 
25% of the total number of shares
May 29, 2023

3.  Time of Exercise; Exercise Limitation.  Vested Options may be exercised (in the manner provided in paragraph 4 hereof) in whole or in part, from time to time after the Vesting Date, subject to the following limitations:


(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


(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.

4.  Method of Exercising Option.  Subject to the limitations stated elsewhere in this Award Agreement or in the Plan, this Option will be exercisable as to all or a portion of the Common Stock in accordance with the vesting schedule above in Paragraph 2.  In no event will the Option be exercisable if it would result in a violation of federal or state securities laws or would occur later than ten (10) years from the date of grant.  The Option may be exercised in whole or in part by delivery to the Company or its designee of (a) written notice identifying the Option and stating the number of shares with respect to which it is being exercised, and (b) payment in full of the exercise price of the shares then being acquired; provided, however, that you may pay the exercise price either in cash, by transferring to the Company shares of stock of the Company at their Fair Market Value as of the date of exercise of the Option (“Delivered Stock”), a combination of cash and Delivered Stock, or such other forms or means that the Company determines are consistent with the Plan’s purpose and applicable law.  Notwithstanding the foregoing, the Company may arrange for or cooperate in permitting broker-assisted cashless exercise procedures.  No person shall acquire any rights or privileges of a shareholder of the Company with respect to any shares of Common Stock until such shares have been duly issued.  The Company shall have the right to delay the issue or delivery of any shares to be delivered hereunder until (a) the completion of such registration or qualification of such shares under federal, state or foreign law, ruling or regulation as the Company shall deem to be necessary or advisable, and (b) receipt from you of such documents and information as the Company may deem necessary or appropriate in connection with such registration or qualification or the issuance of shares hereunder.
 
5.  Expiration Date.  Upon a termination of your employment for any reason (except termination of employment for Cause), this Option shall expire one (1) year from the date of termination of your employment.  Upon your termination of employment for Cause, this Option shall immediately expire. Notwithstanding anything herein contained to the contrary, this Option shall not be exercisable subsequent to ten (10) years after the date of grant.  Your Option will become nonqualified (i.e., lose preferential tax treatment) if it is not exercised within three (3) months after a termination of employment or within one (1) year after a termination of employment due to Disability. 
 
6.  Transfer of Option.  The Option shall be nontransferable and shall, except in the case of death or Disability, be exercisable only by you during your lifetime.  Notwithstanding the foregoing, you shall have the right to transfer the Option upon your death, either by the terms of your will or under the laws of descent and distribution.  In the case of your Disability, the Option shall be exercisable by your personal representative.  Upon your death, the Option shall be exercisable by your personal representative, administrator, or other representative of your estate, or the person or persons to whom this Option shall pass by will or under the laws of descent and distribution.
 
7.  Transfer of Stock.  If you dispose of any of the Common Stock acquired upon exercise of the Option within twenty-four (24) months after the date the Option was granted or within twelve (12) months after exercise of the Option, then, you shall promptly notify the Company of the number of shares so disposed of, the dates of disposition, and the consideration, if any, received for such shares.  In order to comply with federal income tax law, the Company may take such action as it deems appropriate to ensure notice to the Company of any disposition of the Common Stock with the time periods described.
 
2
8.  No Unlawful Issue of Shares.  If, in the opinion of its counsel, the issue or sale of any shares of its stock hereunder pursuant to the Option shall not be lawful for any reason, including the inability of the Company to obtain, from any regulatory body having jurisdiction, authority deemed by such counsel to be necessary to such issuance or sale, the Company shall not be obligated to issue or sell any such shares pursuant to the exercise of the Option.
 
9.  No Obligation of Employment.  The Option shall not impose any obligation on the Company to continue your employment with the Company or a Subsidiary.
 
10.  Controlling Provisions; Plan Controls.  In the event of a conflict between the terms of this Award Agreement and any employment agreement or change in control agreement between you and the Company, this Award Agreement shall control.  This Option is qualified in its entirety by reference to the terms and conditions of the Plan under which it is granted, a copy of which you may request from the Company.  The Plan empowers the Committee to make interpretations, rules and regulations thereunder and, in general, provides that the determinations of such Committee with respect to the Plan shall be binding upon you.  The Plan is hereby incorporated herein by reference.
 
11.  Change in Control.  The vesting of the Option in the event of a Change in Control is governed by Section 12.02 of the Plan.  Involuntary termination of your employment by the Company would be termination of your employment by the Company without Cause and termination by you of your employment for Good Reason.   “Good Reason” means a material diminution in your base salary; material diminution in your annual target bonus opportunity; material diminution in your authority, duties or responsibilities; material diminution in authority, duties or responsibilities of the supervisor to whom you report; material diminution in the budget over which you retain authority; or material change in the geographic location at which you must perform services.
 
12.  Forfeiture Under Recoupment Policy.  The Company shall have the power and the right to require you to forfeit this Option, return the shares of Common Stock issued pursuant to an exercise of this Option or any proceeds therefrom consistent with any recoupment policy maintained by the Company under applicable law, as such policy is amended from time to time.
 
13.  Use of Words.  The use of words of the masculine gender in this Award Agreement is intended to include, wherever appropriate, the feminine or neuter gender and vice versa.

14.  Successors.  This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company.

15.   Taxes.  The Company may require payment of or withhold any tax that it believes is required as a result of the grant or exercise of the Option, and the Company may defer making delivery with respect to shares issuable hereunder until arrangements satisfactory to the Company have been made with respect to such tax withholding obligations.

16.  Personal Information.  Solium Capital LLC and Equiniti Trust Company assist the Company in the operation of the Plan and the administration of the Option granted pursuant to this Award Agreement.  If you choose to participate in the Plan, you acknowledge and consent to the Company sharing your name, email, and information regarding the grant of the Option under this Award Agreement with both Solium Capital LLC and Equiniti Trust Company.

3
By your electronic agreement and the signature of the Company’s representative below, you and the Company agree that the Option which has been awarded to you under this Award Agreement is subject to the terms and conditions of the Plan, a copy of which is available to you upon request.  As provided in the Plan, you hereby agree to accept as binding any decision of the Committee with respect to the interpretation of the Plan and this Award Agreement, or any other matters associated therewith.

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed as of May 29, 2019.

 
MODINE MANUFACTURING COMPANY



 
By:
   
Thomas A. Burke
   
President and Chief Executive Officer


4
Exhibit 10.3

MODINE MANUFACTURING COMPANY
2017 INCENTIVE COMPENSATION PLAN
RESTRICTED STOCK UNIT AWARD
AWARD AGREEMENT

We are pleased to inform you that you have been granted a Restricted Stock Unit Award subject to the terms and conditions of the Modine Manufacturing Company 2017 Incentive Compensation Plan (the “Plan”) and of this Award Agreement.  Unless otherwise defined herein, all terms used in this Award Agreement shall have the same meanings as set forth in the Plan.
 
 
Full name of Grantee:
 
     
 
Date of Award:
May 29, 2019
     
 
Total number of Restricted Stock Units:
 

1.  Restricted Stock Unit Award.  Pursuant to the Plan, you are hereby granted a Restricted Stock Unit Award (“Award”), subject to the terms and conditions of this Award Agreement and the Plan.  Accordingly, you are hereby granted the aggregate number of Restricted Stock Units (“RSUs”) set forth above, subject to the restrictions and conditions set forth in this Award Agreement.

2.  Restricted Period.  Upon the expiration of the Restricted Period (as described in the chart below) applicable to the number of RSUs specified in the chart below, you shall receive one share of Common Stock for each RSU for which the Restricted Period has expired.  For purposes of this Award Agreement, the Restricted Period shall mean the period beginning on the date of this Award set forth above and ending as set forth below:
 
 
Number of RSUs that Vest
Restricted Period Expiration
 
25% of the total number of RSUs
May 29, 2020
 
25% of the total number of RSUs
May 29, 2021
 
25% of the total number of RSUs
May 29, 2022
 
25% of the total number of RSUs
May 29, 2023

Except as otherwise provided in Section 8.02(f) or Section 12.02 of the Plan, in the event of your termination of employment with the Company or a Subsidiary for any reason (other than due to Disability (as defined below), death, or (with Committee approval) your retirement) prior to the expiration of the Restricted Period for any RSUs, you shall forfeit to the Company all RSUs for which the Restricted Period has not expired and the right to receive any Common Stock with respect to such RSUs.  If you separate from service with the Company or a Subsidiary due to Disability, death, or (with Committee approval) your retirement prior to the end of the Restricted Period for any RSUs, your Restricted Stock Unit Award shall vest in full.  For purposes of this Award Agreement, “Disability” shall mean “permanent and total disability” as defined in Section 22 (e)(3) of the Code.

3.  Shareholder Status.  You shall not have any voting or other ownership rights in the Company arising from the grant of RSUs under this Agreement, unless and until such RSUs are settled pursuant to Section 4, below.  Further, you shall not be entitled to dividend equivalents during the period you hold RSUs.
 
4.  Settlement and Delivery.  As soon as administratively practicable after the expiration of the Restricted Period, the Company shall ascribe to you (or, in the event of your death, your beneficiary) a share of Common Stock for each RSU that vests as a result of the expiration of the Restricted Period in a book entry on the records kept by the Company’s transfer agent or such other method of delivering shares of Common Stock subject to this Award, as determined by the Committee.
 
5.  Transfer.  This Restricted Stock Unit Award shall not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by you other than in the event of your death.  Except for the designation of your beneficiary in the event of your death, the purported assignment, alienation, pledge, attachment, transfer or encumbrance of the Award or this Award Agreement shall be void and unenforceable against the Company.  This provision shall not prevent you from transferring the shares of Common Stock issued hereunder after the expiration of the Restricted Period.

6.  No Obligation of Employment.  This Restricted Stock Unit Award shall not impose any obligation on the Company to continue your employment with the Company or any Subsidiary.

7.  Controlling Provisions; Plan Controls. In the event of a conflict between the terms of this Award Agreement and any employment agreement or change in control agreement between you and the Company, this Award Agreement shall control.   This Award Agreement is qualified in its entirety by reference to the terms and conditions of the Plan under which it is granted, a copy of which you may request from the Company.  The Plan empowers the Committee to make interpretations, rules and regulations thereunder and, in general, provides that the determinations of such Committee with respect to the Plan shall be binding upon you.  The Plan is incorporated herein by reference.

8.  Change in Control.  The vesting of the Award in the event of a Change in Control is governed by Section 12.02 of the Plan.  Involuntary termination of your employment by the Company would be termination of your employment by the Company without Cause or termination by you of your employment for Good Reason.  “Good Reason” means a material diminution in your base salary; material diminution in your annual target bonus opportunity; material diminution in your authority, duties or responsibilities; material diminution in authority, duties or responsibilities of the supervisor to whom you report; material diminution in the budget over which you retain authority; or material change in the geographic location at which you must perform services.

9.  Forfeiture Under Recoupment Policy.  The Company shall have the power and the right to require you to forfeit and return the shares of Common Stock issued as a result of the vesting of any Award or any proceeds therefrom consistent with any recoupment policy maintained by the Company under applicable law, as such policy is amended from time to time.

10.  Use of Words.  The use of words of the masculine gender in this Award Agreement is intended to include, wherever appropriate, the feminine or neuter gender and vice versa.

11.  Successors.  This Award Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company.

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12.  Taxes.  The Company may require payment of or withhold any tax which it believes is required as a result of the Award and/or the issuance of Common Stock resulting from the vesting of the RSUs that are the subject of this Award, and the Company may defer making delivery with respect to shares issuable hereunder until arrangements satisfactory to the Company have been made with respect to such tax withholding obligations.

13.  Personal Information.  Solium Capital LLC and Equiniti Trust Company assist the Company in the operation of the Plan and the administration of the Restricted Stock Unit Award granted pursuant to this Award Agreement.  If you choose to participate in the Plan, you acknowledge and consent to the Company sharing your name, email, and information regarding the grant of the Restricted Stock Unit Award under this Award Agreement with both Solium Capital LLC and Equiniti Trust Company.

By your electronic agreement and the signature of the Company’s representative below, you and the Company agree that the Restricted Stock Unit Award awarded to you under this Award Agreement are subject to the terms and conditions of the Plan, a copy of which is available to you upon request.  As provided in the Plan, you hereby agree to accept as binding any decision of the Committee with respect to the interpretation of the Plan and this Award Agreement, or any other matters associated therewith.

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed as of May 29, 2019.

 
MODINE MANUFACTURING COMPANY



 
By:
   
Thomas A. Burke
   
President and Chief Executive Officer


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Exhibit 10.4

MODINE MANUFACTURING COMPANY
2017 INCENTIVE COMPENSATION PLAN
NON-QUALIFIED STOCK OPTION
AWARD AGREEMENT

We are pleased to inform you that you have been granted an Option to purchase shares of Common Stock of Modine Manufacturing Company (the “Company”), subject to the terms and conditions of the Modine Manufacturing Company 2017 Incentive Compensation Plan (the “Plan”) and of this Award Agreement.  Unless otherwise defined herein, all terms used in this Award Agreement shall have the same meanings as set forth in the Plan.
 
 
Full name of Grantee:
 
     
 
Date of Award:
May 29, 2019
     
 
Exercise price per share:
 
     
 
Total number of shares:
 
     
 
Total exercise price:
 

1. Option.  Pursuant to the Plan, you are hereby granted the option to purchase shares of Common Stock on the terms and conditions set forth in this Award Agreement.  The Option granted hereunder shall be a Non-Qualified Stock Option.

2.  Vesting Schedule.  The Option granted pursuant to this Award will vest according to the following schedule, provided, however, that, except as otherwise provided in Section 12.02 of the Plan or in this Award Agreement, you must be employed by the Company or a Subsidiary on each vesting date for that portion of the Option to vest.  If you separate from service due to Disability (as defined below), death, or your retirement (with Committee approval) prior to any Vesting Date, any unvested portion of the Option shall become fully and immediately exercisable.  For purposes of this Award Agreement, “Disability” shall mean “permanent and total disability” as defined in Section 22 (e)(3) of the Code.

 
Number of Shares of Common Stock
Vesting Date
 
25% of the total number of shares
May 29, 2020
 
25% of the total number of shares
May 29, 2021
 
25% of the total number of shares
May 29, 2022
 
25% of the total number of shares
May 29, 2023

3.  Time of Exercise; Exercise Limitation.  Vested Options may be exercised (in the manner provided in paragraph 4 hereof) in whole or in part, from time to time after the Vesting Date, subject to the following limitations:


(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


(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.

4.  Method of Exercising Option.  Subject to the limitations stated elsewhere in this Award Agreement or in the Plan, this Option will be exercisable as to all or a portion of the Common Stock in accordance with the vesting schedule above in Paragraph 2.  In no event will the Option be exercisable if it would result in a violation of federal or state securities laws or would occur later than ten (10) years from the date of grant.  The Option may be exercised in whole or in part by delivery to the Company or its designee of (a) written notice identifying the Option and stating the number of shares with respect to which it is being exercised, and (b) payment in full of the exercise price of the shares then being acquired; provided, however, that you may pay the exercise price either in cash, by transferring to the Company shares of stock of the Company at their Fair Market Value as of the date of exercise of the Option (“Delivered Stock”), a combination of cash and Delivered Stock, or such other forms or means that the Company determines are consistent with the Plan’s purpose and applicable law.  Notwithstanding the foregoing, the Company may arrange for or cooperate in permitting broker-assisted cashless exercise procedures.  No person shall acquire any rights or privileges of a shareholder of the Company with respect to any shares of Common Stock until such shares have been duly issued.  The Company shall have the right to delay the issue or delivery of any shares to be delivered hereunder until (a) the completion of such registration or qualification of such shares under federal, state or foreign law, ruling or regulation as the Company shall deem to be necessary or advisable, and (b) receipt from you of such documents and information as the Company may deem necessary or appropriate in connection with such registration or qualification or the issuance of shares hereunder.
 
5.  Expiration Date.  Upon a termination of your employment for any reason (except termination of employment for Cause), this Option shall expire one (1) year from the date of termination of your employment.  Upon your termination of employment for Cause, this Option shall immediately expire. Notwithstanding anything herein contained to the contrary, this Option shall not be exercisable subsequent to ten (10) years after the date of grant.
 
6.  Transfer of Option.  The Option shall be nontransferable and shall, except in the case of death or Disability, be exercisable only by you during your lifetime.  Notwithstanding the foregoing, you shall have the right to transfer the Option upon your death, either by the terms of your will or under the laws of descent and distribution.  In the case of your Disability, the Option shall be exercisable by your personal representative.  Upon your death, the Option shall be exercisable by your personal representative, administrator, or other representative of your estate, or the person or persons to whom this Option shall pass by will or under the laws of descent and distribution.
 
7.  No Unlawful Issue of Shares.  If, in the opinion of its counsel, the issue or sale of any shares of its stock hereunder pursuant to the Option shall not be lawful for any reason, including the inability of the Company to obtain, from any regulatory body having jurisdiction, authority deemed by such counsel to be necessary to such issuance or sale, the Company shall not be obligated to issue or sell any such shares pursuant to the exercise of the Option.
 
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8.  No Obligation of Employment.  The Option shall not impose any obligation on the Company to continue your employment with the Company or a Subsidiary.
 
9.  Controlling Provisions; Plan Controls.  In the event of a conflict between the terms of this Award Agreement and any employment agreement or change in control agreement between you and the Company, this Award Agreement shall control.  This Option is qualified in its entirety by reference to the terms and conditions of the Plan under which it is granted, a copy of which you may request from the Company.  The Plan empowers the Committee to make interpretations, rules and regulations thereunder and, in general, provides that the determinations of such Committee with respect to the Plan shall be binding upon you.  The Plan is hereby incorporated herein by reference.
 
10.  Change in Control.  The vesting of the Option in the event of a Change in Control is governed by Section 12.02 of the Plan.  Involuntary termination of your employment by the Company would be termination of your employment by the Company without Cause and termination by you of your employment for Good Reason.   “Good Reason” means a material diminution in your base salary; material diminution in your annual target bonus opportunity; material diminution in your authority, duties or responsibilities; material diminution in authority, duties or responsibilities of the supervisor to whom you report; material diminution in the budget over which you retain authority; or material change in the geographic location at which you must perform services.
 
11.  Forfeiture Under Recoupment Policy.  The Company shall have the power and the right to require you to forfeit this Option, return the shares of Common Stock issued pursuant to an exercise of this Option or any proceeds therefrom consistent with any recoupment policy maintained by the Company under applicable law, as such policy is amended from time to time.
 
12.  Use of Words.  The use of words of the masculine gender in this Award Agreement is intended to include, wherever appropriate, the feminine or neuter gender and vice versa.

13.  Successors.  This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company.

14.   Taxes.  The Company may require payment of or withhold any tax that it believes is required as a result of the grant or exercise of the Option, and the Company may defer making delivery with respect to shares issuable hereunder until arrangements satisfactory to the Company have been made with respect to such tax withholding obligations.

15.  Personal Information.  Solium Capital LLC and Equiniti Trust Company assist the Company in the operation of the Plan and the administration of the Option granted pursuant to this Award Agreement.  If you choose to participate in the Plan, you acknowledge and consent to the Company sharing your name, email, and information regarding the grant of the Option under this Award Agreement with both Solium Capital LLC and Equiniti Trust Company.

By your electronic agreement and the signature of the Company’s representative below, you and the Company agree that the Option which has been awarded to you under this Award Agreement is subject to the terms and conditions of the Plan, a copy of which is available to you upon request.  As provided in the Plan, you hereby agree to accept as binding any decision of the Committee with respect to the interpretation of the Plan and this Award Agreement, or any other matters associated therewith.

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IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed as of May 29, 2019.

 
MODINE MANUFACTURING COMPANY
 

 
By:
   
Thomas A. Burke
   
President and Chief Executive Officer


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Exhibit 10.5

EMPLOYMENT RETENTION AGREEMENT
FOR SCOTT WOLLENBERG

THIS AGREEMENT, made as of this 26th day of July, 2019, between SCOTT WOLLENBERG ("Mr. Wollenberg") and MODINE MANUFACTURING COMPANY, a Wisconsin corporation, and its divisions, subsidiaries, successors and assigns ("Modine").

RECITALS

WHEREAS, Mr. Wollenberg has been an employee of Modine since April 13, 1992;

WHEREAS, Modine has informed Mr. Wollenberg that due to corporate restructuring, Mr. Wollenberg’s position is being eliminated;

WHEREAS, Modine has requested that Mr. Wollenberg step down as Vice President, Chief Technology Officer, and continue his employment with Modine to complete an ongoing project;

WHEREAS, Mr. Wollenberg has agreed to continue his employment with Modine based upon Modine entering into this Employment Retention Agreement, with the benefits and compensation and severance benefits described herein (“Agreement”).

NOW, THEREFORE, the Parties agree as follows:


1.
Recitals.  The Recitals form an integral part of this Agreement and are incorporated herein as if fully set forth.


2.
Job Responsibilities.


A.
Project Specific Responsibilities:  Mr. Wollenberg’s specific assignment for the Term of this Agreement will be lead of the Project Dakota Program Management Office (the “Project”).  It is anticipated that this Project will continue through the 2019 calendar year. Completion of the Project occurs upon the earlier of (i) one hundred eighty (180) days after the closing of the sale of the business or assets of the Project or (ii) one hundred eighty (180) days after notification by Modine to terminate Mr. Wollenberg’s employment in accordance with Paragraph 7(B). (“Project Completion”).

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B.
General Responsibilities:  Mr. Wollenberg, in addition to his Duties set forth above, shall perform such ancillary duties which are within Mr. Wollenberg’s training and experience.


3.
Term.  This Agreement shall commence immediately and will terminate upon Project Completion or as otherwise provided for in Paragraph 7 below.


4.
Salary.  Mr. Wollenberg’s salary shall be Three Hundred Sixty-Seven Thousand ($367,000) Dollars per calendar year paid pursuant to Modine’s current pay periods for office personnel subject to all federal, state and local taxes.  Mr. Wollenberg’s salary may not be reduced during the term of this Agreement.


5.
Benefits.  Mr. Wollenberg will continue to participate in all employee benefit programs which are offered to other executive level employees of Modine, as may be amended from time to time.  This includes, but is not limited to: group health insurance, paid time off, performance bonus programs and equity grants.


6.
Best Efforts, Exclusive Service.  Mr. Wollenberg shall devote his best efforts and all his attention, skill and efforts on a full-time basis to the business and affairs of Modine and the Project and shall not without prior, unanimous approval of Modine's Officers, which approval shall not unreasonably be withheld, directly or indirectly, engage in or provide advice or assistance to any other business enterprise, whether or not competitive with Modine.

 
7.
Termination of Employment.


A.
Termination “for cause”.  Modine may terminate Mr. Wollenberg at any time and without notice if such termination is “for cause” as that term is defined below.  “For cause’ termination shall mean: (i) material breach by Mr. Wollenberg of any provision of this Agreement; (ii) commission of any material act of dishonesty or fraud with respect to Modine; or (iii) conviction of a felony which in the reasonable judgment of Modine Board of Directors is likely to have a material adverse effect upon the business or reputation of Modine or which substantially relates to Mr. Wollenberg’s duties.  In the event Mr. Wollenberg is terminated pursuant to this Paragraph 7(A), Mr. Wollenberg is entitled to no severance compensation as outlined in Paragraph 7(F).

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B.
Termination By Modine Without Cause.  In the event Modine elects to terminate Mr. Wollenberg’s employment for reasons other than those set forth in Paragraph 7(A) (“without cause”), Modine must give Mr. Wollenberg no less than one hundred eighty (180) days’ advance notice of his termination date (“Notice Period”).  If Modine no longer needs the services of Mr. Wollenberg prior to the passage of the Notice Period, it may so inform Mr. Wollenberg, at which time he would be relieved of any continuing obligations to Modine, however, for purposes of this Agreement, Mr. Wollenberg’s date of employment separation with Modine would be the date Modine informs Mr. Wollenberg he is relieved of his continuing obligations. Mr. Wollenberg would receive all salary he would have received during the remaining period of the Notice Period.  This payment will be in addition to the severance set forth in Paragraph 7(F). This amount will be paid to Mr. Wollenberg in a lump sum within sixty (60) days after Mr. Wollenberg separates employment with from the Modine. Payment of this amount is contingent on the satisfaction of Paragraph 7(F)(7) (Release of Claims) of this Agreement.


C.
End of Project.  Mr. Wollenberg’s continued employment with Modine is based upon Modine’s need to complete the Project.  Mr. Wollenberg agrees to remain with Modine until the Project is complete.  Both parties acknowledge that the Project will continue through the 2019 calendar year.  The Project Completion will be treated as a without cause termination by Modine for purposes of Paragraph 7(F). Further, Modine may, at Project Completion, offer Mr. Wollenberg another position within Modine.  Mr. Wollenberg may, but is not required, to accept such a position.  The offering of the new position within Modine does not alter Modine’s obligation to pay the separation benefits set forth in Paragraph 7(F).   In the event that Mr. Wollenberg does accept such a position, Modine shall be required to make the payment in accordance with Paragraph 7(F)(1), but shall not be required to provide the severance benefits described in Paragraphs 7(F)(2),  7(F)(3),  7(F)(4),  and 7(F)(5).  Notwithstanding the foregoing, the parties reserve the right to negotiate any severance benefits that may be provided in the event of a severance from employment from any position subsequently accepted by Mr. Wollenberg.


D.
Voluntary Termination.  Mr. Wollenberg may terminate his employment at Modine by giving Modine at least sixty (60) days' written notice in advance.  In the event Mr. Wollenberg voluntarily terminates his employment with Modine, Mr. Wollenberg is entitled to no severance compensation as outlined in Paragraph 7(F).

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E.
Return of Property upon Termination. Upon termination of employment, for any reason, Mr. Wollenberg agrees forthwith to deliver to Modine all equipment, notebooks and other data or records, whether written or in any other media, relating to Mr. Wollenberg's duties with Modine.


F.
Severance.  In the event Mr. Wollenberg’s employment is terminated pursuant to Paragraph 7(B) or when this Agreement terminates pursuant to Paragraph 7(C), Mr. Wollenberg will be entitled to receive as severance the following compensations and benefits:


1.
Severance Pay.  Modine will pay to Mr. Wollenberg an amount equal to fifty-two (52) weeks of pay at the rate set forth in Paragraph 4 above.  This severance will be paid to Mr. Wollenberg in a lump sum within five (5) business days after execution of the General Release of Claims Agreement by Mr. Wollenberg and the passage of the seven (7) day revocation period.


2.
Health Insurance.  Provided Mr. Wollenberg timely elects continuation coverage for Modine’s group health plan under the  Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), Modine will continue to subsidize the cost of its group health plan so that Mr. Wollenberg only pays the premiums amounts of active employees with the same coverage as of his separation of employment date, until the earliest of (a) the expiration of 12 months following his separation of employment with Modine, (b) the date that Mr. Wollenberg becomes eligible for the group health plan of another employer, or (c) the date Mr. Wollenberg loses the right to COBRA continuation coverage under Modine’s group health plan. Notwithstanding the foregoing, if at any time Modine determines, in its sole discretion, that its subsidy of the COBRA premiums on Mr. Wollenberg’s behalf reasonably could result in Modine or plan participants under the group health plan incurring additional costs, penalties or taxes under applicable law (including, without limitation, Section 2716 of the Public Health Service Act, and Section 105(h) of the Internal Revenue Code) then in lieu of subsidizing the COBRA premiums on Mr. Wollenberg’s behalf, Modine will instead pay Mr. Wollenberg on the last day of each remaining month for which Mr. Wollenberg is entitled to the COBRA subsidy, a fully taxable cash payment equal to the COBRA subsidy for that month, subject to applicable tax withholding.

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3.
FY20 MIP.  Upon ONC Committee approval of any FY20 MIP payout, Mr. Wollenberg will receive his MIP compensation in accordance with the terms of the MIP, pursuant to Mr. Wollenberg’s target bonus percentage of fifty percent (50%) of his base salary and payment conditioned on all MIP financial metrics being achieved.   For purposes of calculation of the MIP compensation, Modine shall forecast financial metrics for FY20 as of Mr. Wollenberg’s termination date. Such MIP compensation shall  be prorated for the number of complete months of service in FY20. This amount will be paid to Mr. Wollenberg in a lump sum within five (5) business days after execution of the General Release of Claims Agreement by Mr. Wollenberg and the passage of the seven (7) day revocation period.


4.
Equity Considerations.


a.
In partial consideration for Mr. Wollenberg accepting this position, Modine agrees that all unvested Restricted Stock and Restricted Stock Units granted in FY17, FY18 and FY19 shall vest upon Mr. Wollenberg’s separation of employment with Modine.


b.
In partial consideration of Mr. Wollenberg remaining with Modine to Project Completion, the ONC Committee has approved accelerated vesting of certain outstanding equity grants held by Mr. Wollenberg.  In addition, all LTIP Performance Shares earned in accordance with the FY18-20 performance cycle will be vested in full at the earned payout percentage, and all LTIP Performance Shares earned in accordance with the FY19-21 performance cycle will be vested at the earned payout percentage, but prorated for full months of active service provided by Mr. Wollenberg to Modine during this performance cycle.  Mr. Wollenberg will be granted equity in connection with the FY20-22 performance cycle; however, no accelerated vesting will occur with respect to this grant, and any unvested equity will be forfeited at the time of Mr. Wollenberg’s separation.

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5.
Outplacement Services.  Modine will provide Mr. Wollenberg with executive outplacement services to assist him in this career transition. Said outplacement service will continue until such time as Mr. Wollenberg takes a full time position in his field. Notwithstanding the foregoing, Modine shall pay the cost for twelve (12) months of such outplacement services and the cost of any services beyond twelve (12) months shall be the responsibility of Mr. Wollenberg.


6.
Payment Continuation.  Modine agrees that the obligation regarding these severance benefits is partial consideration for Mr. Wollenberg’s agreement to stay with Modine and complete the Project.  As such, Modine agrees that the severance benefits once earned by Mr. Wollenberg will continue to be paid even in the event of Mr. Wollenberg’s death.


7.
Release of Claims.  Modine shall not be obligated to provide any payments to Mr. Wollenberg under Paragraph 7(F) as a result of any termination of employment unless: (a) the Mr. Wollenberg first executes within twenty-one (21) calendar days, or in the event that such termination of employment is “in connection with an exit incentive or other employment termination program” (as such phrase is defined in the Age Discrimination in Employment Act of 1967, as amended), forty-five (45) calendar days, of Mr. Wollenberg’s (or such earlier date as may be required by Modine) a release of claims agreement substantially in the form attached hereto as Exhibit A, with such changes as Modine may determine to be required or reasonably advisable, including but not limited to changes to make the release enforceable and otherwise compliant with applicable law (the “Release”), (b) Mr. Wollenberg does not revoke the Release, and (c) the Release becomes effective and irrevocable in accordance with its terms.  Notwithstanding the foregoing, the Release will not affect Mr. Wollenberg’s ability to enforce the terms, conditions and benefits set forth in this Agreement.

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8.
Section 409A.


A.
Interpretation. Compensation and benefits under this Agreement are intended to be exempt from or to comply with Code Section 409A and the interpretive guidance thereunder, and any similar state laws (collectively, “Section 409A”), including but not limited to, the exceptions for short-term deferrals, separation pay arrangements, reimbursements and in-kind distributions, and shall be administered accordingly. This Agreement shall be construed and interpreted with such intent, and the requirement of Treasury Regulation Section 1.409A-3(i)(2) shall be observed, if applicable. Each payment under this Agreement or any benefit plan of Modine is intended to be treated as one of a series of separate payments for purposes of Section 409A and Treasury Regulation Section 1.409A-2(b)(2)(iii) (or any similar or successor provisions, including without limitation any similar state law provisions).


B.
Required Payment Delays for Non-Qualified Deferred Compensation. If any payments are treated as non-qualified deferred compensation subject to Section 409A, and if Mr. Wollenberg is deemed, at the time of separation from service to be a “specified employee” for purposes of Code Section 409A(a)(2)(B)(i), then to the extent delayed commencement of any portion of the payments or benefits to which Mr. Wollenberg is entitled is required, such portion shall not be paid to Mr. Wollenberg before the earlier of (A) the first business day of the seventh month measured from the date of Mr. Wollenberg’s “separation from service” with the Modine under Section 409A, or (B) the date of Mr. Wollenberg’s death. Upon the earlier of such dates, all deferred payments shall be paid to Mr. Wollenberg (or beneficiary or estate) as applicable, in a single lump sum, and any remaining payments due shall be paid as otherwise provided in this Agreement. To the extent any payments are treated as non-qualified deferred compensation subject to Section 409A of the Code, if the time period for consideration of a general release through the expiration of any applicable revocation period with respect to the general release begins in one taxable year and ends in the following taxable year, then payments shall not be paid or commence being paid until the beginning of the second taxable year.


C.
No Warranty or Guaranty of Tax Treatment. Modine does not represent or guarantee that any particular federal or state income, payroll or other tax treatment will result from the compensation or benefits payable under this Agreement.  Modine does not represent that this Agreement complies with Section 409A and in no event shall Modine, its affiliates nor their respective directors, officers, employees or advisers be liable for any additional tax, interest or penalty that may be imposed on Mr. Wollenberg (or any other individual claiming a benefit through Mr. Wollenberg) pursuant to Section 409A or damages for failing to comply with Section 409A.  Mr. Wollenberg is solely responsible for the proper tax reporting and timely payment of any tax or interest for which he or she is liable as a result of the compensation or benefits payable pursuant to this Agreement.

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9.
Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Wisconsin, and the parties agree and consent (subject to the Arbitration provision herein) to jurisdiction and venue in the courts of the State of Wisconsin to resolve any dispute arising under this Agreement.


10.
Binding Effect.  The rights accruing to Modine under this Agreement shall pass to its assigns or successors, and Mr. Wollenberg's obligations set forth herein shall extend to Mr. Wollenberg's administrators, executors, personnel representatives, heirs, and assigns.


11.
Severability.  Should any part, term or provision of this Agreement be construed by any court of competent jurisdiction to be illegal or in conflict with any law of the State of Wisconsin, such part, term or provision shall be construed to afford Modine the maximum protection and benefit permissible, and the validity of the remaining portions or provisions shall not be affected thereby.


12.
Modifications.  This Agreement may not be changed, modified, released, discharged, abandoned, or otherwise terminated, in whole or in part, except by an instrument in writing signed by an officer or other authorized executive of Modine and Mr. Wollenberg.


13.
Arbitration Clause.  The parties expressly intend that the mandatory arbitration provisions of this Agreement shall be liberally construed so as to require the arbitration of all claims and disputes of every kind and nature, whether arising out of contract, tort, statute, common law or any other theories of liability and/or recovery in law and/or equity.

Without in any way limiting the above expressed intent of the parties to this Agreement, all “Disputed Claims” shall be resolved by mandatory arbitration and shall include, but not be limited to:  any differences, claims, matters in dispute, or controversies of every kind or nature as to the existence, construction, validity, interpretation, meaning, performance, non-performance, enforcement, operation, breach, continuance, termination, misrepresentations (both in its formation or its execution), compliance with Federal, State or Local statutes, ordinances, or regulations and any other theories of liability and/or recovery in law and/or equity, arising from or related, either directly or indirectly, to this Agreement or the matters discussed herein.

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All Disputed Claims shall be submitted by the parties to arbitration in accordance with this Agreement and the Wisconsin Arbitration Act, Chapter 788 of the Wisconsin Statutes, if that Act is applicable, and if not, in accordance with the provisions of the United States Arbitration Act, 9 U.S.C. §1 et. seq., or any revisions or recreations of those Acts.  In the event of arbitration, each party shall select an arbitrator within thirty (30) days of submission of any Disputed Claims to arbitration.  If an arbitrator timely selected by a party is unable, for any reason, to serve until the making of a decision or an award, that party may name a successor arbitrator.  If either party fails to designate an arbitrator within the thirty (30) day period, that party's right to name an arbitrator (or any successor arbitrator) is forfeited, and any arbitrator timely named shall select a second arbitrator.  The first two arbitrators shall then [within thirty (30) days of the selection of the last of them] jointly select a third arbitrator, the three arbitrators of which shall constitute the “Arbitration Panel”.  If the two arbitrators to be selected by the parties are unable to agree upon the selection of a third arbitrator, the third arbitrator shall be supplied by the Circuit Court for Racine County, Wisconsin.   Each party shall reach an agreement with the arbitrator named by that party on the compensation to be paid to that arbitrator and shall disclose that agreement to the other party and the other arbitrator.

In the event a party forfeits its right to have an arbitrator, then the second arbitrator shall be paid by the forfeiting party upon the same terms as the non-forfeiting party compensates its appointed arbitrator.  The parties shall each pay one-half (1/2) of the fees and expenses of the third arbitrator as billed by that arbitrator to the parties.

Notwithstanding any other provision to the contrary, the parties agree and consent to the taking of depositions and the use of discovery in accordance with the Federal Rules of Civil Procedure and the Wisconsin Statutes.  Furthermore, an aggrieved party prior to the seating of the arbitration panel as provided for in this Agreement, may petition the Circuit Court for Racine County, Wisconsin, for such temporary equitable relief as the court may determine is appropriate under the circumstances to maintain the status quo until the appointment of the arbitration panel as provided for herein.

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14.
Entire Agreement.  This Agreement, with the Release, constitutes the entire agreement among the parties hereto with respect to employment, change in control, post-employment and compensation and benefit arrangements, and supersedes all prior agreements, promises, and representations with respect to such arrangements whether in writing or otherwise, including without limitation the agreements, offer letters or other arrangements, including the letter agreement between Modine and Mr. Wollenberg dated February 25, 2019.

In witness whereof, the parties have executed this Agreement as of the date and year first written above.

/s/ Scott Wollenberg
 
Scott Wollenberg
 

MODINE MANUFACTURING COMPANY

By:
/s/ Brian Agen
 
 
Brian Agen, Vice President,
 
Human Resources

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MODINE MANUFACTURING COMPANY

GENERAL RELEASE OF CLAIMS AGREEMENT (“AGREEMENT”)

THIS AGREEMENT, made by and between SCOTT WOLLENBERG ("Mr. Wollenberg") and  MODINE MANUFACTURING COMPANY, a Wisconsin corporation, and its divisions, subsidiaries, successors and assigns ("Modine").  The Parties hereby agree as follows:

1.
Mutual Release of Claims.

(A)          I, Scott. Wollenberg, individually and for my heirs, successors, administrators and assigns, hereby knowingly and voluntarily releases Modine, its officers, directors, stockholders, current or former employees, insurers, affiliates, agents, successors, assigns and legal representatives hereinafter collectively referred to as “released parties” from any and all claims and causes of action of every kind and nature, including, but not limited to, claims for attorney’s fees, whether based on federal, state or local laws, statutes, rules, regulations or common law, whether in law or equity, whether liquidated or unliquidated, whether known or unknown, which I have, had or may have against the released parties, arising out of and/or in connection with their previous employment relationships and/or in connection with my period of employment with Modine, including the termination of his employment from Modine.  This release shall be binding upon and inure to the benefit of each of the respective parties and their heirs, successors, assigns and the released parties.  The parties intend this release to be liberally construed so as to fully release the released parties from any and all obligations (except the obligations as specifically provided for in this Agreement or rising from the Employment Retention Agreement dated July 26, 2019 (“ERA”)), liabilities, claims and causes of action of every single kind and nature which I may have against the released parties.

(B)           My waiver and release of rights, claims and causes of action under this Agreement includes, but is not limited to, a waiver of any rights, claims and causes of action arising under Title VII of the Civil Rights Act of 1964 as amended, 42 U.S.C. §§2000e et seq.; the Civil Rights Act of 1966, 42 U.S.C. §1981; the Civil Rights Act of 1991, Pub. L. No. 102-166, 105 Stat. 1071; the Fair Labor Standards Act, 29 U.S.C. §§201 et seq.; the American With Disabilities Act, 42 U.S.C. §§12101 et seq.; the Age Discrimination in Employment Act, 29 U.S.C. §§ 621 et seq.; the National Labor Relations Act, 29 U.S.C. §§151, et seq.; the Rehabilitation Act of 1973, 29 U.S.C. §§701 et seq.; Employee Retirement Security Act, 29 U.S.C. §§1001 et seq.; Federal Executive Order 11246; the Wisconsin Fair Employment Act, Wis. Stats. §§ 111.31 et seq., including but not limited to any and all claims for age discrimination and wrongful termination, and all other applicable federal, state and local statutes, laws and ordinances.  I understand that I am waiving and releasing all his rights, claims and causes of action arising or occurring prior to, and including, the effective date of this Agreement, including the period of my employment with and termination from Modine.  I acknowledge and agree that the consideration I will receive under this Agreement and/or the ERA is fully sufficient and satisfactory for these releases and waivers.

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2.
Claims to Which Agreement Does Not Apply.

This Agreement does not apply to any claims that may arise after the date of this Release. This Agreement does not apply to any claims that may not be released under applicable law, including, but not limited to any charge or complaint filed with any administrative agencies such as the United  States Equal Employment Opportunity Commission (“EEOC”). Further, this Agreement does not apply to any claims which may rise as to the enforcement of the ERA between Modine and me.

3.
Claims Released Include Age Discrimination.

The claims released include, but are not limited to, discrimination on the basis of age under the Age Discrimination in Employment Act, as amended (29 U.S.C. Section 621 et. seq.) and any similar state and local law. Neither Modine’s signing of this Agreement, nor any actions taken toward compliance with its terms, constitutes Modine’s admission of any liability to me other than under this release, or of any wrongdoing under any federal, state or local laws.

4.
Agreement Covers Claims Against Related Parties.

For purposes of this Agreement the term “Modine” includes Modine Manufacturing Company and any of its present, former and future owners, parents, affiliates and subsidiaries, and its and their directors, officers, shareholders, employees, agents, servants, representatives, predecessors, successors, assigns, and retirement plan administrators and fiduciaries. Therefore, the claims released include claims I have against any such persons or entities, as of the date of my execution of this Agreement.

5.
The Terms “Claims” and “Release” are Construed Broadly.

As used in this Agreement, the term “claims” shall be construed broadly and shall be read to include, for example, the terms “rights”, “causes of action (whether arising in law or equity)”, “damages”, “demands”, “obligations”, “grievances” and “liabilities” of any kind or character. Similarly, the term “release” shall be construed broadly and shall be read to include, for example, the terms “discharge” and “waive.”

6.
Agreement Binding on Employee and Related Parties.

This Agreement shall be binding upon me and my agents, attorneys, personal representatives, executors, administrators, heirs, beneficiaries, successors and assigns.

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7.
Employee Rights and Protections.

Nothing in this Agreement, or any agreement or policy referenced in it, is intended or interpreted to prohibit me: (a) from participating, cooperating or providing information in an investigation by the EEOC or other government agency or entity regarding any claim released in this Agreement, any of the terms and conditions of this release or my employment with Modine, or as may be required or permitted by law; (b) from seeking a judicial or administrative determination regarding the validity of the waiver and release set forth in this Agreement or from filing a charge or complaint with the EEOC or other government agency or entity; or (c) from reporting possible violations of federal law or regulation to any government agency or entity or making any disclosures that are protected under the whistleblower provisions of federal law or regulation or otherwise cooperating with any government inquiry without advance approval by or notice to Modine. Further, nothing in this Agreement shall be construed to prevent me from communicating with any government agency regarding matters that are within the agency’s jurisdiction. Specifically, I may provide information to the Securities and Exchange Commission regarding any possible securities law violations, and recover an award from the Securities and Exchange Commission as a result of my reporting such possible violations. Modine’s acknowledgment of this exception does not otherwise limit the scope of the waiver and release in Paragraphs 1 – 6 of this Agreement; I do, however, waive any right to recover damages or obtain any monetary or any other personal relief of any kind based on (y) a charge filed with the EEOC or state or local EEO agency, or (z) any lawsuit arising from such a charge.

8.
Additional Consideration.

I have executed this Agreement in consideration of the severance benefits under the ERA.  I acknowledge that those benefits contained in the ERA represent consideration in addition to anything of value that I am otherwise entitled to receive from Modine. I further acknowledge that the severance benefits described in the ERA are sufficient to support this Agreement.

9.
Representations.

In connection with my decision to enter into this Agreement, I acknowledge that I have not relied on any verbal or written representations by Modine other than those explicitly set forth in this Agreement.

10.
Opportunity to Consider this Release; Consultation with Attorney.

I have read this release and fully understand its terms. I have been offered twenty-one (21) days to consider its terms. MODINE HEREBY RECOMMENDS AND I ACKNOWLEDGE THAT I HAVE BEEN ADVISED IN WRITING TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS AGREEMENT.

11.
Voluntary Agreement.

I have entered into this Agreement knowingly and voluntarily and understand that its terms are binding on me.

12.
Partial Invalidity of this Agreement.

If any part of this Agreement is held to be unenforceable, invalid or void, then the balance of this Agreement shall nonetheless remain in full force and effect to the extent permitted by law.

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13.
Return of Modine Property; Confidentiality.

I have returned or will return to Modine any and all Modine property, including all equipment, telephones, keycards, records, files, papers, handbooks, Confidential Information (as defined below), computers and computer equipment that I had in my possession in whatever form, including electronic media.

During the course of my employment with Modine, I have had access to, received and/or developed information that is confidential to Modine including, without limitation, information pertaining to financial matters, budgets, strategic plans, marketing, sales, customers, business plans, inventions, processes, formulas, designs, supplies, products and employees (the “Confidential Information”). Confidential Information shall not include any information that is in the public domain by means other than improper disclosure, but shall include non-public compilations, combinations or analysis of otherwise public information. The restrictions set forth in this paragraph are in addition to and not in lieu of any obligations I may have under the law with respect to Modine’s Confidential Information, including any obligations I may owe under Wis. Stat. § 134.90 or similar statutes governing trade secrets which may extend beyond the contractual period restrictions herein. I acknowledge and agree that all Confidential Information was or is hereby assigned to and remains the exclusive property of Modine. I agree that I will maintain the Confidential Information in strict confidence and not disclose it to any person or use it in any way to harm Modine for a period of two (2) years following the end of my employment unless specifically required by this Agreement, by law or by written permission of Modine.

I further agree that I have not and will not, except as specifically noted below, make known the negotiations leading to and contents or terms of this Agreement except to my spouse, legal counsel or tax advisor or except as required by law or as may be necessary in order to enforce this Agreement, and agree that if disclosure is made to my spouse, legal counsel or tax advisor, they shall also be bound by this confidentiality provision and I shall take all reasonable steps to ensure that they comply with it.

14.
Headings.

The headings and subheadings in this Agreement are inserted for convenience and reference only and are not to be used in construing this Agreement.

15.
Applicable Law.

Wisconsin law will apply in connection with any dispute or proceeding concerning this Agreement.

16.
Suit in Violation of this Agreement - Loss of Benefits and Payment of Costs.

If I bring an action against Modine in violation of this Agreement or if I bring an action asking that this Agreement be declared invalid or unenforceable, I agree that prior to the commencement of such an action I will tender back to Modine all payments that I have received as consideration for this Agreement. If my action is unsuccessful, I further agree that I will pay all costs, expenses and reasonable attorneys’ fees incurred by Modine in its successful defense against the action. However, the previous two sentences shall not be applicable to an action, if I bring it, challenging the validity of this Agreement under the Age Discrimination in Employment Act (which I may do without penalty under this Agreement). I acknowledge and understand that all remaining benefits to be provided to me as consideration for this Agreement will permanently cease as of the date such action is instituted.

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17.
Non-disparagement.

I agree that I will not make disparaging remarks about Modine or its products, practices, or conduct (including personnel practices), provided, however, that I may give nonmalicious and truthful testimony about such matters if properly subpoenaed to do so.

18.
Preservation of Rights under Benefit Plans and Indemnities.

This Agreement shall not adversely affect my rights to receive any benefit that I am otherwise entitled to receive under any of Modine’s qualified and nonqualified benefit plans, the ERA, or any rights I may have to indemnification under Modine’s officers and directors’ insurance coverage, Modine’s Articles of Incorporation or Bylaws or any expressly written indemnity agreement between Modine and me.

19.
7 Day Revocation Period.

I understand that I have a period of seven calendar days following the date I deliver a signed copy of this Agreement to Modine Manufacturing Company, Attn: Brian J. Agen, 1500 DeKoven Avenue, Racine, Wisconsin 53403 to revoke this Agreement by giving written notice to that person. This Agreement and my entitlement to severance benefits described in the ERA will be binding and effective upon the expiration of this seven day period if I do not revoke, but not before.

20.
Total Amount of Severance Payments.

I understand that my severance pay and all other benefits payable to me in connection with this Agreement have been designed to qualify as a “short-term deferral” or “separation pay plan” that is exempt from certain federal tax laws that govern the payment of non-qualified deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended. I further understand that, because of this, the total amount of severance payments that I receive that are not “short-term deferrals” as contemplated in Treasury Regulation 1.409A-1(b)(4), will not be greater than two times the lower of the following two amounts: (1) my annualized compensation for the year prior to the year of my termination (as determined by Modine under Treasury Regulation 1.409A-1(b)(9)(iii)) or (2) the dollar limitation set by the Internal Revenue Service under Internal Revenue Code section 401(a)(17) for the calendar year of my termination ($280,000 in 2019). In addition, I further understand that no severance payment or benefit due to me in this connection with this Agreement will, under any circumstances, be provided after the December 31 of the second calendar year after the year of my termination. I understand that any future employment and income tax consequences (including related penalties and interest) on payments or consideration received under this Agreement are my responsibility and will not provide a basis to set aside or in any way alter this Agreement.

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21.
Cooperation with Government Agencies.

Nothing in this Agreement, including but not limited to the provisions in Sections 1, 2, 3, 4, 5, 6, 13 and 17 above, (a) limits or affects my right to challenge the validity of this Agreement, including a challenge under the Age Discrimination in Employment Act of 1967, as amended; (b) interferes with my right and obligations to give truthful testimony under oath; or (c) precludes me from participating in an investigation, filing a charge, or otherwise communicating with the Equal Employment Opportunity or other state or federal agencies responsible for enforcing anti-discrimination laws. That notwithstanding, by signing below, I agree and acknowledge that I do, however, waive any right to recover damages or obtain individual relief that might otherwise result from the filing of any such charge.

22.
Entire Agreement.

Unless otherwise stated in this Agreement, I acknowledge that I have not relied on any verbal or written representations by any Modine representative other than those explicitly set forth in this Agreement. This Agreement and the ERA set forth the entire agreement between Modine and me and completely supersedes any prior agreements, oral statements or understandings concerning the termination of my employment and any benefits I might receive following that termination. This Agreement does not supersede my obligations and Modine’s rights under any confidentiality, intellectual property, or any other restrictive covenant I may have signed with Modine. I agree that I am not entitled to any other severance, benefits, vacation accrual, bonus, commission or other payments of any kinds from Modine, except those described in this Agreement or in the ERA.

EXECUTED THIS _____DAY OF ___________________, 20_____.

 
 
Employee's Signature
 

Employee’s Name:
 
(please print)
 
Scott Wollenberg
 

Received by:

 
 
Modine Manufacturing Company
1500 DeKoven Avenue
Racine WI 53403

Name:
 
Date:
 
 
 
 
 
 
 
Title:
 
 
 
 


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Exhibit 31.1

Certification

I, Thomas A. Burke, certify that:


1.
I have reviewed this quarterly report on Form 10-Q of Modine Manufacturing Company for the quarter ended June 30, 2019;


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;


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;


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;


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;


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


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


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):


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


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.

Date:  August 1, 2019
 
/s/ Thomas A. Burke
 
Thomas A. Burke
President and Chief Executive Officer


Exhibit 31.2

Certification

I, Michael B. Lucareli, certify that:


1.
I have reviewed this quarterly report on Form 10-Q of Modine Manufacturing Company for the quarter ended June 30, 2019;


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;


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;


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;


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;


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


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


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):


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


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.

Date:  August 1, 2019
  
/s/ Michael B. Lucareli
 
Michael B. Lucareli
Vice President, Finance and Chief Financial Officer


Exhibit 32.1

Certification
Pursuant to 18 United States Code § 1350

In connection with the quarterly report of Modine Manufacturing Company (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas A. Burke, President and Chief Executive Officer of the Company certify, pursuant to 18 U.S.C. § 1350, 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, as amended; and


2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  August 1, 2019
 
/s/ Thomas A. Burke
 
Thomas A. Burke
President and Chief Executive Officer

This certification accompanies the 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 32.2

Certification
Pursuant to 18 United States Code § 1350

In connection with the quarterly report of Modine Manufacturing Company (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael B. Lucareli, Vice President, Finance and Chief Financial Officer of the Company certify, pursuant to 18 U.S.C. § 1350, 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, as amended; and


2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  August 1, 2019
 
/s/ Michael B. Lucareli
 
Michael B. Lucareli
Vice President, Finance and Chief Financial Officer

This certification accompanies the 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.