ITEM 1. BUSINESS. - ------ --------
General - -------
Throughout this Report, the terms "Modine," the "Company" and/or the "Registrant" refer to Modine Manufacturing Company and consolidated subsidiaries.
Modine was incorporated under the laws of the State of Wisconsin on June 23, 1916.
Modine is an independent, worldwide leader in thermal management technology serving vehicular, industrial, commercial, electronic and building HVAC (heating, ventilating, air conditioning) markets. Modine develops, manufactures, and markets thermal management products, components and systems for use in various OEM (original equipment manufacturer) applications and for sale to the automotive aftermarket (as replacement parts) and to a wide array of building and other commercial markets. The primary markets consist of:
- Automobile, truck and bus manufacturers; - Agricultural and construction equipment manufacturers; - Heating and cooling equipment manufacturers; - Construction contractors; - Wholesalers of plumbing and heating equipment; - Radiator repair shops; - Wholesalers and installers of auto repair parts; - Computer and server manufacturers; - Telecommunications equipment manufacturers; and - Industrial electronic equipment manufacturers.
We distribute our products through:
- Company salespersons; - Independent manufacturers' representatives; - Independent warehouse distributors; - Mass merchandisers and - National accounts.
Our operations are organized on the basis of market categories or geographical responsibility, as follows:
Original Equipment, which provides heat-transfer products, generally from business units in North America, to original equipment manufacturers of on-highway and off-highway vehicles, as well as to industrial and commercial equipment manufacturers, located primarily in North America.
Distributed Products, which provides heat-transfer products primarily for the North American and European vehicular replacement market and the building HVAC market, from business units located in North America and Europe, and electronics cooling products primarily for the computer and
telecommunications equipment markets in North America, Europe, and Asia from business units in these three areas.
European Operations, which provides heat-transfer products, primarily to European original equipment manufacturers of on- highway and off-highway vehicles and European industrial equipment manufacturers.
The Company has assigned specific business units to a segment based principally on these defined markets and their geographical locations.
The Company's three reportable segments offer a broad line of products that can be categorized generally as follows:
Percentage of total company revenue by product ----------------------------------------------
Years ended March 31 2002 2001 2000 ---- ---- ----
Modules/Packages 27% 22% 23% Radiators & Radiator Cores 27% 29% 29% Oil Coolers 15% 16% 15% Charge-Air Coolers 9% 9% 9% Vehicular Air Conditioning 7% 8% 10% Building HVAC 7% 7% 7% Electronics 4% 5% 3% Miscellaneous 3% 4% 4% EGR Coolers 1% 0% 0%
Developments and Strategy - -------------------------
We remain committed to the vision of creating value by focusing on customer partnerships and providing innovative solutions for our customer's thermal problems. We will continue to use our skills and resources to strengthen our position in key traditional markets. At the same time, we will leverage those strengths into new markets that need heat-transfer solutions to solve complex problems.
From a growth perspective, we are pursuing strategies to grow our best-performing core businesses while increasing our participation in new, non-traditional markets that offer attractive growth potential. In our traditional markets, we will increase our market penetration through longstanding customer relationships, superior technology, improved service, and increased content per vehicle. We are increasing market penetration and content per vehicle by continuing to move from components to systems and by utilizing just- in-sequence assembly plants to provide more value to our customers.
We are also focusing on the most promising new markets and new products. With the acquisition of Thermacore International, Inc., in April 2001, Modine gained entry into the electronics-cooling market. Thermacore competes as a leading supplier in this market, by designing, manufacturing and distributing thermal-management solutions for microprocessors and electronics applications in the computer, telecommunications, networking, and power-semiconductor
markets. We will continue our search for acquisitions that meet our criteria: significant growth potential, high returns and a reasonable valuation. In addition, we are actively pursuing our next phase of growth, by introducing exhaust gas recirculation (EGR) coolers, investigating multiple uses of CO2 as a refrigerant and capitalizing on the growth in vehicular and stationary fuel cells through our Fuel Cell Products Group.
Like growth, profitability and asset utilization also are critical focuses for Modine. We are concentrating heavily on managing our selling, general, and administrative expenses through numerous cost-saving initiatives, a continuing evaluation of our processes, and control of staff costs. In addition, we continue to evaluate the profitability of current product lines and plants, with the objective of improving our overall returns. Evidence of this is our announcement in October 2001 to take a restructuring charge for the closure and consolidation of several facilities.
Finally, we have made substantial investments in new, highly efficient plants and equipment along with state-of-the-art technical centers. All of these are critical to our strategy of generating growth through technological leadership.
Geographical Areas - ------------------
We maintain administrative organizations in two regions - North America and Europe - to facilitate financial and statutory reporting and tax compliance on a worldwide basis and to support the three business units.
Our operations are located in the following countries:
North America Europe South America Central America Asia/Pacific - ------------- ------ ------------- --------------- ------------
Canada Austria Brazil El Salvador Japan Mexico Belgium Korea United States United Kingdom Taiwan France Germany Hungary Italy Netherlands Poland Spain Switzerland
Our non-U.S. subsidiaries and affiliates manufacture and sell a number of vehicular, industrial and electronic products similar to those produced in the U.S. In addition to normal business risks, operations outside the U.S. are subject to others such as changing political, economic and social environments, changing governmental laws and regulations, currency revaluations and market fluctuations.
You can find more information in "Note 21. Segment and Geographic Information" on pages 35-36 of our 2002 Annual Report to Shareholders.
Exports - -------
In addition, the Company exports to foreign countries and receives royalties from foreign licensees. Export sales as a percentage of total sales were 11%, 12% and 12% for fiscal years ended in 2002, 2001 and 2000 respectively. Estimated after-tax earnings on export sales as a percentage of total net earnings were 11%, 12% and 12% for fiscal years ended in 2002, 2001 and 2000, respectively. Royalties from foreign licensees as a percentage of total after-tax earnings were 13%, 25% and 5% for the last three fiscal years, respectively. Included in the royalty percentages reported for fiscal 2002, 2001 and 2000 are lump-sum payments received as partial settlement for past infringement of Modine's PF technology. As a percentage of total after-tax earnings these lump-sum payments were 0%, 21% and 1% for the last three fiscal years. Based upon an unfavorable decision by the Japanese patent office Board of Appeals in March 2002, Modine will no longer receive royalty payments in Japan related to its PF patents. Since July of 2000, Modine has been receiving royalty payments from certain Japanese competitors related to its PF patents, which expire in 2006. In fiscal 2002, these royalties accounted for approximately $1.8 million, or 8%, of after-tax earnings.
Modine believes its international presence has positioned the Company to share profitably in the anticipated long-term growth of the global vehicular and industrial markets. Modine is committed to increasing its involvement and investment in international markets in the years ahead.
Foreign and Domestic Operations - -------------------------------
Financial information relating to the Company's foreign and domestic operations is included in the Company's 2002 Annual Report to Shareholders and is incorporated herein by reference at Note 21 on pages 35-36 therein.
Competitive Position - --------------------
The Company competes with several manufacturers of heat transfer products, some of which are divisions of larger companies and some of which are independent companies. The Company also competes for business with parts manufacturing affiliates of some of its customers. The markets for the Company's products are increasingly competitive and have changed significantly in the past few years as the Company's traditional OEM customers in the United States, faced with dramatically increased international competition, have expanded their worldwide sourcing of parts to compete more effectively with lower-cost imports. These market changes have caused the Company to experience competition from suppliers in other parts of the world which enjoy economic advantages such as lower labor costs, lower health care costs, and other factors. In addition, our customers continue to ask the Company, as well as their other primary suppliers, to participate directly and more substantially in research and development, design, and validation responsibilities. That has resulted and should continue to result in stronger customer relationships and more partnership opportunities for the Company.
Customer Dependence - -------------------
Ten customers accounted for approximately 51% of the Company's sales in the fiscal year ended March 31, 2002. These customers, listed alphabetically, were: BMW, Caterpillar, DaimlerChrysler, Fiat, John Deere, International Truck (formerly Navistar International), MAN Truck, NAPA, Paccar and Volkswagen. One of these customers, BMW, accounted for approximately 10.5% of total Company sales in fiscal 2002. These sales were made predominantly in the European Operations segment. Goods are supplied to these customers on the basis of individual purchase orders received from them. When it is in the customer's and the Company's best interests, the Company utilizes long-term sales agreements with customers to minimize investment risks and also to provide the customer with a proven source of competitively priced products. These contracts can be up to two to three years in duration and may include built -in pricing adjustments. There are no other relationships between the Company and its customers.
Backlog of Orders - -----------------
While the Company has a large backlog of orders, the backlog is not deemed significant or material; backlog historically has had little relation to shipments. Modine's products are produced from readily available materials such as aluminum, copper, brass, and steel and have a relatively short manufacturing cycle. The Company's operating units maintain their own inventories and production schedules. Current production capacity, reduced by planned plant closures in North America and Europe as part of a restructuring announced in the third quarter of fiscal 2002, is capable of handling the sales volumes expected in fiscal 2003.
Raw Materials - -------------
Aluminum, copper, brass, steel, and solder, all essential to the business, are purchased regularly from several domestic and foreign producers. In general, the Company does not rely on any one supplier for these materials, which are for the most part available from numerous sources in quantities required by the Company. The Company normally does not experience material shortages within its operations and believes that producers' supplies of these materials will be adequate through the end of fiscal year 2003.
Patents - -------
The Company, and certain of its wholly-owned subsidiaries, own outright or are licensed to produce products under a number of patents and licenses. These patents and licenses, which have been obtained over a period of years, will expire at various times. Because the Company is involved with many product lines, the Company believes that its business as a whole is not materially dependent upon any particular patent or license, or any particular group of patents or licenses. Modine considers
each of its patents, trademarks and licenses to be of value and aggressively defends its rights throughout the world against infringement.
Research and Development - ------------------------
The Company remains committed to its vision of creating value through technology. Company-sponsored research activities relate to the development of new products, processes and services, or the improvement of existing products, processes, and services. Research expenditures in fiscal 2002 amounted to $29,877,000; in fiscal 2001 amounted to $28,059,000; and in fiscal 2000 amounted to $23,011,000. There were no material expenditures on research activities that were customer-sponsored. Over the course of the last few years, the Company has become involved in a number of industry- or university- sponsored research organizations. These consortia conduct research and provide data on technical topics deemed to be of interest to the Company for practical applications in the markets the Company serves. The research and data developed is generally shared among the member companies. In addition, to achieve efficiencies and lower developmental costs, Modine's research and engineering groups work closely with Modine's customers on special projects and systems designs.
Environmental, Health and Safety Matters - ----------------------------------------
Modine is strengthening its commitment to the environment by implementing an Environmental Management System (EMS) at all its original equipment locations throughout the world. The system is based on the internationally recognized ISO 14000 standard for environmental management systems. Modine's EMS provides a common framework and the tools needed to conserve resources, improve manufacturing process efficiency, minimize liability exposure and reduce operational costs. Modine evaluates the performance of the Company's environmental programs through continuous monitoring, auditing and accounting systems.
In calendar year 2001, the Company's North American facilities reduced waste for a fifth consecutive year with a 21% year-over- year decrease (normalized for sales dollars). Overall, these facilities have achieved an impressive 51% reduction in waste/sales dollars since 1996. The reduced use of solvents, conversion to more environmentally-friendly chemicals, shift to returnable packaging, and the generation of less scrap contributed to this long-term, sustained waste reduction.
Modine's advances in reducing its impact on the environment are also evidenced by a marked reduction in its use of toxic chemicals. Each year, the United States Environmental Protection Agency ("USEPA") requires companies to report on their environmental releases of toxic chemicals, including air emissions, water discharges, and landfilled wastes. From 1995 to 2000, Modine's US locations achieved a 56% (532,000 pounds) reduction in environmental releases. This rate of reduction is better than the industry trend, and substantially better than the national trend, which decreased only 8% from 1995 to 1999.
Modine accrues for environmental remediation activities relating to past operations - including those under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), often referred to as "Superfund," and under the Resource Conservation and Recovery Act (RCRA) - when it is probable that a liability has been incurred and reasonable estimates can be made. In addition, an investigation and/or remediation obligation may arise when a facility is closed or sold. These expenditures most often relate to facilities and sites where past operations followed practices and procedures that were considered acceptable under then-existing regulations, but which now require investigative and/or remedial work to ensure sufficient protection to the environment.
Three of the Company's manufacturing facilities currently have been identified as requiring soil and/or groundwater remediation. Because of the liability of former landowners and contractual obligations, it is unlikely these remediation efforts will have a material effect on the Company's consolidated financial condition.
Although there are no currently known liabilities that might have a material effect on the Company's consolidated net assets, operating results or liquidity, the EPA has designated Modine as a potentially responsible party ("PRP") for remediation of six waste disposal sites. These sites are not company-owned and allegedly contain wastes attributable to Modine from past operations. For the six sites currently known, the Company's potential liability will be significantly less than the total site remediation because the percentage of material attributable to the Company is relatively low.
Environmental regulations, as well as the Company's policy to improve continuously upon its environmental management programs, will require capital equipment expenditures over the coming years. For the fiscal year ending March 31, 2002, capital expenditures related to environmental projects were $0.2 million. These expenditures included capital outlays to retrofit existing facilities, as well as those associated with new facilities and other compliance costs. Modine currently expects expenditures for environmentally-related capital projects to be about $0.5 million in fiscal year 2003.
Environmental expenses charged to current operations, including remediation costs, totaled about $3.8 million for the fiscal year ending March 31, 2002. These expenses related to solid waste disposal, operating and maintenance costs incurred in conducting routine compliance activities, and other matters. Operating expenses of some facilities, including environmentally-related plant closure costs, may increase during fiscal year 2003, but the competitive position of the Company is not expected to change materially. The Company has no reason to believe that environmental costs will vary significantly from similar costs incurred by other companies engaged in similar businesses.
The Health and Safety performance of the Company continues to move in a positive direction. Recordable and Lost Workday (LWDII) incident rates improved from the previous year by 23% and 30%, respectively. Over the past five years, Modine has experienced a 58% reduction in its recordable incident rate and a 53% reduction
in its LWDII rate. In addition, two of Modine's facilities, located in Lawrenceburg, TN and Buena Vista, VA, both reached milestones this year when they achieved five years without a lost time injury.
The Company's Richland, SC facility was the second Modine location to become a "STAR" plant. The Modine "STAR" is awarded to those facilities that achieve 100% compliance with the Company's 22 Health and Safety elements and attain recordable and LWDII rates below the General Industry Average for the preceding twelve month period. The Modine "STAR" program is modeled after the Occupational Safety and Health Administration's (OSHA) Voluntary Protection Program (VPP).
The Company also continues to make significant efforts to prevent Muscular Skeletal Disorders (MSD's). The Body Mechanic Job Observation Program is used by nearly all of our U.S. Original Equipment plants. This program involves the use of occupational therapists, who observe employees performing their jobs and provide coaching on proper body mechanics, stretching, and off- the-job safety. In addition, these specialists are actively involved in the improvement of ergonomics in both existing and planned production processes.
Employees - ---------
The number of persons employed by the Company as of March 31, 2002 was approximately 7,700.
Seasonal Nature of Business - ---------------------------
Distributed Products may experience a degree of seasonality since the demand for aftermarket and HVAC products are affected by weather patterns, construction, and other factors. On an overall company basis, though, there is no significant degree of seasonality as indicated by the percentages below. Sales to original equipment and electronics manufacturers are dependent upon the demand for new vehicles and equipment. The following quarterly net- sales detail illustrates the degree of fluctuation for the past five years:
Fiscal Year Fiscal Ended First Second Third Fourth Year March 31 Quarter Quarter Quarter Quarter Total - --------- -------- ------- ------- ------- ------ ($ In Thousands) 2002 $280,631 $269,114 $270,433 $254,582 $1,074,760 2001 300,441 284,056 265,393 271,509 1,121,399 2000 291,388 296.161 291,298 296,109 1,174,956 1999 279,376 278,341 291,002 287,874 1,136,593 1998 262,213 266,951 274,714 262,237 1,066,115
Five-year 282,810 278,925 278,568 274,462 1,114,765 Average
Percent 25% 25% 25% 25% 100% of Year
Working Capital Items - ---------------------
The Company's products for the original equipment market are manufactured on an as-ordered basis, which makes large inventories of such products unnecessary. In addition, the Company does not experience a significant amount of returned products. In the HVAC and aftermarket areas, due to the extensive distribution systems and seasonal sales programs, varying levels of finished goods inventory are maintained. This inventory is managed efficiently and spread throughout the Company's distribution systems. In these areas, in general, the industry and the Company make use of extended terms of payment for customers on a limited and/or seasonal basis.
ITEM 2.
ITEM 2. PROPERTIES. - -------------------
The Company's world headquarters, including general offices, and laboratory, experimental and tooling facilities, are maintained in Racine, Wisconsin. Additional technical support functions are located in Harrodsburg, Kentucky and Bonlanden, Germany. Almost all of the Company's manufacturing and larger distribution centers are owned outright. A few manufacturing facilities and numerous regional sales and service centers, distribution centers, and offices are occupied under various lease arrangements.
The Company's principal plants and other facilities during the fiscal year ended 2002, on an operating-segment basis, are as follows:
Type of Original Distributed European Corporate & Facility Equipment Products Operations Other Total -------- --------- ----------- ---------- ----------- -----
Manufacturing 16 13 9 -- 38 Distribution -- 5 -- -- 5 Sales & Service Centers/Offices 2 22 8 1 33 Joint Ventures 2 3 5
Total 18 40 19 4 81
Those same plants and facilities, on a geographic basis, are as follows:
Type of North South Asia/ Central Facility America Europe America Pacific America Total -------- ------- ------ ------- ------- ------- -----
Manufacturing 23 13 -- 2 -- 38 Distribution 4 1 -- -- -- 5 Sales & Service Centers/Offices 13 18 -- 1 1 33 Joint Ventures -- 2 2 1 -- 5
Total 40 34 2 4 1 81
The Company currently uses its facilities for the purposes as noted above.
The Company's facilities, in general, are well maintained and conform to the sales, distribution, or manufacturing operations for which they are being used. Their productive capacity is, from time to time, reduced or expanded as necessary to meet changing market conditions and Company needs. In the third quarter of fiscal 2002, the Company announced a restructuring which will reduce productive capacity in United States and Europe in fiscal 2003. Three manufacturing facilities will be closed in the United States and one manufacturing facility will be closed in Germany.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS. - --------------------------
Certain information required hereunder is incorporated by reference from the Company's Annual Report to Shareholders, Page 37, Note 22.
Under the rules of the Securities and Exchange Commission, certain environmental proceedings are not deemed to be ordinary or routine proceedings incidental to the Company's business and are required to be reported in the Company's annual and/or quarterly reports. The Company is not currently a party to any such proceedings.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. - ------ ---------------------------------------------------
Omitted as not applicable.
PART II -------
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED - ------ ------------------------------------------------- STOCKHOLDER MATTERS. -------------------
The Company's Common Stock is quoted on the National Association of Securities Dealers' Automated Quotation system ("NASDAQ") as a National Market issue. The Company's trading symbol is "MODI." The table below shows the range of high and low bid information for the Company's Common Stock for fiscal years 2001-02 and 2000- 01. As of March 31, 2002, shareholders of record numbered approximately 5,300; it is estimated that beneficial owners numbered about 17,000.
2001-02 2000-01 --------------------------------------------------------- Quarter High Low Dividends High Low Dividends First $29.00 $24.06 $ .250 $28.31 $19.94 $ .25 Second 32.00 19.50 .250 29.94 25.00 .25 Third 25.75 19.13 .250 29.38 19.63 .25 Fourth 29.08 22.10 .125 28.13 19.00 .25 ------ ----- TOTAL $ .875 $1.00 - --------------------------------------------------------------------
Certain of the Company's financing agreements require it to maintain specific financial ratios and place certain limitations on the use of retained earnings for the payment of cash dividends and the acquisition of treasury stock. Under the most restrictive covenant dividend payments may not exceed $50,000,000 in any fiscal year. Cash dividend payments made in fiscal 2002 totaled $28,981,000. Other loan agreements give certain existing unsecured lenders security equal to any future secured borrowing.
In October 1986, the Company adopted a shareholder rights plan and issued one right for each share of common stock. The rights are not currently exercisable but will become exercisable 10 days after a shareholder has acquired 20 percent or more, or commenced a tender or exchange offer for 30 percent or more, of the Company's common stock. Each right will initially entitle the holder to purchase a unit of 1/100 Preferred Series A Participating Stock. During fiscal 1996-1997, the Company amended the Plan increasing the price from $21.25 to $95.00 per unit. In the event of certain mergers, sales of assets, or self-dealing transactions involving a 20 percent or more shareholder, each right not owned by such 20 percent or more shareholder will be modified so that it will then be exercisable for common stock having a market value of twice the exercise price of the right. The rights are redeemable in whole by the Company, at a price of $0.0125 per right, at any time before 20 percent or more of the Company's common stock has been acquired. On January 18, 1995, the Board of Directors of the Company authorized an amendment to the Rights Agreement by extending the final expiration date of the Rights from October 27, 1996 to October 27, 2006. Accordingly, the Rights expire on October 27, 2006, unless previously redeemed.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA. - ------ -----------------------
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION - ------ ----------------------------------------------------------- AND RESULTS OF OPERATIONS. -------------------------
Certain information required hereunder is incorporated by reference from the Company's 2002 Annual Report to Shareholders, pages 14-22.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. - ------ -------------------------------------------
The Consolidated Statements of Earnings, and the related Consolidated Balance Sheets, Statements of Cash Flows, Shareholders' Equity, Notes to Consolidated Financial Statements, and the report of PricewaterhouseCoopers LLP dated April 30, 2002 appearing on pages 23-38 of the Company's 2002 Annual Report to Shareholders are incorporated herein by reference. With the exception of the aforementioned information, no other data appearing in the 2002 Annual Report to Shareholders is deemed to be filed as part of this Annual Report on Form 10-K. Individual financial statements of the Registrant are omitted because the Registrant is primarily an operating company, and the subsidiaries included in the consolidated financial statements are wholly-owned.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON - ------ ------------------------------------------------ ACCOUNTING AND FINANCIAL DISCLOSURE. -----------------------------------
There were no disagreements on accounting or financial disclosures between the Company and its auditors.
PART III --------
ITEMS 10 and 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE - --------------- --------------------------------------- REGISTRANT; EXECUTIVE COMPENSATION. ----------------------------------
The information about directors and executive officers and executive compensation on pages 3-5 and pages 11, 12, 16, 17 and 18, of the Company's definitive Proxy Statement dated June 7, 2002 under the headings "Election of Directors," "Nominees to be Elected," "Directors Continuing in Service," "Executive Compensation," and Equity Compensation" is incorporated herein by reference, but excluding the Officer Nomination and Compensation Committee Report on Executive Compensation on page 12 of the Proxy Statement.
Executive Officers of Registrant
Officer Name Age Position Since - ---- --- -------- -------
D. R. Johnson* 60 Chairman and Chief Executive Officer 1988 D. B. Rayburn* 54 President and Chief Operating Officer 1991 D. R. Zakos** 48 Vice President, General Counsel and 1985 Secretary E. T. Thomas 48 Senior Vice President and Chief Financial 1998 Officer C. R. Katzfey 55 Group Vice President 2000 K. A. Feldmann 48 Group Vice President 2000 J. R. Rulseh*** 46 Group Vice President 2001 A. C. DeVuono 53 Vice President and Chief Technology 1996 Officer R. L. Hetrick 60 Vice President, Human Resources 1989 R. W. Possehl 57 Vice President, Administration 1985 R. S. Bullmore 52 Corporate Controller 1983 G. A. Fahl 47 Environmental, Health & Safety Officer 1998 C. C. Harper 48 Chief Information Officer 1998 D. B. Spiewak 48 Treasurer 1998 M. C. Kelsey**** 37 Senior Counsel and Assistant Secretary 2002
* D. R. Johnson was named Chairman and Chief Executive Officer, and D. B. Rayburn was named President and Chief Operating Officer on April 1, 2002. ** D. R. Zakos was promoted to Vice President, General Counsel and Secretary on April 1, 2001. *** J. R. Rulseh became an Officer/Group Vice President on April 1, 2001. Prior to April 1, 2001, Mr. Rulseh was General Manager of Modine's Heavy Duty and Industrial Division, and more recently, was Managing Director of Modine Europe Automotive Division. **** M. C. Kelsey became an officer on April 1, 2002. Prior to that, she was Senior Counsel.
Officer positions are designated in Modine's By-Laws and the persons holding these positions are elected annually by the Board at its first meeting after the annual meeting of shareholders in July of each year.
There are no family relationships among the executive officers and directors. All of the above officers have been employed by Modine in various capacities during the last five years, except E. T. Thomas, D. B. Spiewak and M. C. Kelsey.
Mr. Thomas joined Modine on August 3, 1998 as Group Vice President, Highway Products. Mr. Thomas previously worked at Eaton Corporation for nine years where he had been General Manager of the Fluid Power Division. Before that, he was General Manager of Eaton's Torque Control Products Division. He also served Eaton as a Plant Manager and Manager of Strategic Planning and Acquisition Analysis. Prior to joining Eaton, Mr. Thomas spent eleven years at General Motors as a member of the Corporate Financial Staff.
Mr. Spiewak joined Modine as Treasurer on September 21, 1998. Mr. Spiewak came to Modine from Alliant Foodservice, Inc., formerly a part of Kraft Foods. Prior to Alliant, Mr. Spiewak
spent eight years with Illinois Tool Works, Inc. as Manager, Treasury Systems.
Ms. Kelsey joined Modine as Senior Counsel on April 2, 2001. Ms. Kelsey came to Modine from Quarles & Brady, LLP, a large national law firm, where she was a partner. Ms. Kelsey was with Quarles & Brady for 12 years.
There are no arrangements or understandings between any of the above officers and any other person pursuant to which he was elected an officer of Modine.
Information relating to the employment agreements, termination and change-in-control arrangements is incorporated by reference from the Company's 2001-2002 definitive Proxy Statement dated June 7, 2002 at pages 19-20.
The Company's stock option and stock award plans contain certain provisions relating to change-in-control or other specified transactions that may, if authorized by the Officer Nomination and Compensation Committee of the board, accelerate or otherwise release shares granted or awarded under those plans.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND - ------- --------------------------------------------------- MANAGEMENT. ----------
The Company incorporates by reference the information relating to stock ownership on pages 5-7 of the Company's definitive Proxy Statement dated June 7, 2002 under the headings "Principal Shareholders and Share Ownership of Directors and Executive Officers, "Principal Shareholders," and "Securities Owned by Management."
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. - ------- ----------------------------------------------
The Company incorporates by reference the information contained in the Company's definitive Proxy Statement dated June 7, 2002 on page 20 under the heading "Transactions."
PART IV -------
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. - ------- ----------------------------------------------------------------
(a) The following documents are filed as part of this Report:
Page in Annual Report* ------------- (1) Financial Statements:
Consolidated Statements of Earnings for the years ended March 31, 2002, 2001, and 2000. 23
Consolidated Balance Sheets at March 31, 2002 and 2001. 24
Consolidated Statements of Cash Flows for the years ended March 31, 2002, 2001, and 2000. 25
Consolidated Statements of Shareholders' Equity for the years ended March 31, 2002, 2001, and 2000. 26
Notes to Consolidated Financial Statements. 27 - 37
Report of Independent Accountants. 38
* Incorporated by reference from the indicated pages of the 2001-02 Annual Report to Shareholders.
Page in Form 10-K --------- (2) Financial Statement Schedules:
Report of Independent Accountants on Financial Statement Schedule for the three years ended March 31, 2002. 23
Schedule II - Valuation and Qualifying Accounts for the years ended March 31, 2002, 2001, and 2000. 24
(3) Consent of Independent Accountants. 28
(4) Exhibit Index. 16
(b) All other schedules have been omitted as they are not applicable, not required, or because the required information is included in the financial statements.
The following exhibits are attached for information only unless specifically incorporated by reference in this Report:
Reference Number per Item 601 of Regulation S-K Page - ---------------- ----
2 Not applicable.
3(a) Restated Articles of Incorporation (as amended) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1999).
*3(b) Restated By-Laws (as amended). 26
4(a) Specimen Uniform Denomination Stock Certificate of the Registrant (filed by reference to the
Reference Number per Item 601 of Regulation S-K Page - ---------------- ----
Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1998).
*4(b) Rights Agreement dated as of October 16, 1986 38 between the Registrant and First Chicago Trust Company of New York (Rights Agent).
4(b)(i) Rights Agreement Amendment No. 1 dated as of January 18, 1995 between the Registrant and First Chicago Trust Company of New York (Rights Agent) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2000).
4(b)(ii) Rights Agreement Amendment No. 2 dated as of January 18, 1995 between the Registrant and First Chicago Trust Company of New York (Rights Agent) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2000).
4(b)(iii) Rights Agreement Amendment No. 3 dated as of October 15, 1996, between the Registrant and First Chicago Trust Company of New York (Rights Agent) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2001).
*4(b)(iv) Rights Agreement Amendment No. 4 dated as of 101 November 10, 1997 between the Registrant and Norwest Bank Minnesota, N.A., [now known as Wells Fargo Bank Minnesota, N.A.] (Rights Agent).
*4(c) Bank One Credit Agreement dated April 17, 2002. 104
Note: The amount of long-term debt authorized ---- under any instrument defining the rights of holders of long-term debt of the Registrant, other than as noted above, does not exceed ten percent of the total assets of the Registrant and its subsidiaries on a consolidated basis. Therefore, no such instruments are required to be filed as exhibits to this Form. The Registrant agrees to furnish copies of such instruments to the Commission upon request.
9 Not applicable.
*10(a) Director Emeritus Retirement Plan (effective 186 April 1, 1992 and frozen as of July 1, 2000).
Reference Number per Item 601 of Regulation S-K Page - ---------------- ----
10(b) Employment Agreement between the Registrant and D. R. Johnson (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2001).
10(c) Employment Agreement between the Registrant and D. B. Rayburn (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2001).
10(d) Employment Agreement between the Registrant and E. T. Thomas.
NOTE: This Employment Agreement is not materially different from the Employment Agreement between the Registrant and D. B. Rayburn filed with Annual Report on Form 10-K as Exhibit 10(c) for the fiscal year ended March 31, 2001.
10(e) Employment Agreement between the Registrant and A. C. DeVuono.
NOTE: This Employment Agreement is not materially different from the Employment Agreement between the Registrant and D. B. Rayburn filed with Annual Report on Form 10-K as Exhibit 10(c) for the fiscal year ended March 31, 2001.
*10(f) Change-in-Control Agreement between the 212 Registrant and D. R. Johnson.
10(g) Change-in-Control Agreement between the Registrant and D. B. Rayburn.
NOTE: This Change-in-Control Agreement is not materially different from the Change-in- Control Agreement between the Registrant and D. R. Johnson filed with this Annual Report on Form 10-K as Exhibit 10(f).
10(h) Change-in-Control Agreement between the Registrant and E. T. Thomas.
NOTE: This Change-in-Control Agreement is not materially different from the Change-in- Control Agreement between the Registrant and D. R. Johnson filed with this Annual Report on Form 10-K as Exhibit 10(f).
10(i) Change-in-Control Agreement between the Registrant and A. C. DeVuono.
Reference Number per Item 601 of Regulation S-K Page - ---------------- ----
NOTE: This Change-in-Control Agreement is not materially different from the Change-in- Control Agreement between the Registrant and D. R. Johnson filed with this Annual Report on Form 10-K as Exhibit 10(f).
*10(j) 1985 Incentive Stock Plan (as amended). 227
10(k) 1985 Stock Option Plan for Non-Employee Directors (as amended)(filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1999).
10(l) Pension and Disability Plan For Salaried Employees of Modine Manufacturing Company (as amended) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1999).
10(m) Executive Supplemental Retirement Plan (as amended) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2000).
10(n) Modine Manufacturing Company Executive Supplemental Stock Plan (as amended) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1999).
*10(o) 1994 Incentive Compensation Plan (as amended) 232
*10(p) 1994 Stock Option Plan for Non-Employee 244 Directors (as amended).
10(q) 1995 Stock Option Agreements (incentive and non-qualified) [a part of the 1994 Incentive Compensation Plan] (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2000).
10(r) 1995 Stock Option Agreement [a part of the 1994 Stock Option Plan for Non-Employee Directors] (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2000).
10(s) 1996 Stock Award Plan [a part of the 1994 Incentive Compensation Plan] (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2001).
Reference Number per Item 601 of Regulation S-K Page - ---------------- ----
10(t) 1996 Stock Option Agreements (incentive and non-qualified) [a part of the 1994 Incentive Compensation Plan] (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2001).
10(u) 1996 Stock Option Agreement [a part of the 1994 Stock Option Plan for Non-Employee Directors].
Note: The 1996 Stock Option Agreement is ---- not materially different from the 1995 Non-Employee Directors Stock Option Agreement filed with Registrant's Annual Report on Form 10-K as Exhibit 10(l) for the fiscal year ended March 31, 2000.
10(v) 1997 Stock Award Plan [a part of the 1994 Incentive Compensation Plan].
Note: The 1997 Stock Award Plan is not ---- materially different from the 1996 Stock Award Plan filed with Annual Report on Form 10-K as Exhibit 10(p) for the year ended March 31, 2001.
10(w) 1997 Stock Option Agreements (incentive and non-qualified) [a part of the 1994 Incentive Compensation Plan].
Note: The 1997 Stock Option Agreements ---- are not materially different from the 1996 Stock Option Agreements filed with Annual Report on Form 10-K as Exhibit 10(q) for the fiscal year ended March 31, 2001.
10(x) 1997 Stock Option Agreement [a part of the 1994 Stock Option Plan for Non-Employee Directors].
Note: The 1997 Stock Option Agreement is ---- not materially different from the 1995 Non- Employee Directors Stock Option Agreement filed with the Registrant's Annual Report on Form 10-K as Exhibit 10(l) for fiscal year ended March 31, 2000.
10(y) 1998 Stock Award Plan [a part of the 1994 Incentive Compensation Plan].
Reference Number per Item 601 of Regulation S-K Page - ---------------- ----
Note: The 1998 Stock Award Plan is not ---- materially different from the 1996 Stock Award Plan filed with Registrant's Annual Report on Form 10-K as Exhibit 10(p) for the fiscal year ended March 31, 2001.
10(z) 1998 Stock Option Agreements (incentive and non-qualified) [a part of the 1994 Incentive Compensation Plan].
Note: The 1998 Stock Option Agreements are ---- not materially different from the 1996 Stock Option Agreements filed with Annual Report on Form 10-K as Exhibit 10(q) for the fiscal year ended March 31, 2001.
10(aa) 1998 Stock Option Agreement [a part of the 1994 Stock Option Plan for Non-Employee Directors].
Note: The 1998 Stock Option Agreement is not ---- materially different from the 1995 Non-Employee Directors Stock Option Agreement filed with the Registrant's Annual Report on Form 10-K as Exhibit 10(l) for the fiscal year ended March 31, 2000.
10(ab) 1999 Stock Option Agreements (incentive and non-qualified) [a part of the 1994 Incentive Compensation Plan].
Note: The 1999 Stock Option Agreements are ---- not materially different from the 1996 Stock Option Agreements filed with Annual Report on Form 10-K as Exhibit 10(q) for the fiscal year ended March 31, 2001.
10(ac) 1999 Stock Option Agreement [a part of the 1994 Stock Option Plan for Non-Employee Directors].
Note: The 1999 Stock Option Agreement is ---- not materially different from the 1995 Non- Employee Directors Stock Option Agreement filed with the Registrant's Annual Report on Form 10-K as Exhibit 10(l) for the fiscal year ended March 31, 2000.
10(ad) 2000 Stock Award Plan [a part of the 1994 Incentive Compensation Plan] (filed by
Reference Number per Item 601 of Regulation S-K Page - ---------------- ----
reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2000).
10(ae) 2000 Stock Option Agreements (incentive and non-qualified) [a part of the 1994 Incentive Compensation Plan] (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2000).
Note: The 2000 Stock Option Agreements are ---- not materially different from the 1996 Stock Option Agreements filed with Annual Report on Form 10-K as Exhibit 10(q) for the fiscal year ended March 31, 2001.
10(af) 2000 Stock Option Plan for Non-Employee Directors (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2001).
10(ag) 2000 Stock Option Agreement [a part of the 2000 Stock Option Plan for Non-Employee Directors] (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2001).
10(ah) Modine Manufacturing Company Stock Option Plan for Thermacore Employees under the DTX Corporation 1995 Stock Option Plan (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2001).
10(ai) Modine Manufacturing Company Stock-Based Compensation Plan for Thermacore Employees under the DTX Corporation 1997 Plan (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2001).
10(aj) Modine Manufacturing Company Stock Option Agreements pertaining to 10(ae) and 10(af) of Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2001.
10(ak) 2001 Stock Option Agreements (incentive and non-qualified) [a part of the 1994 Incentive Compensation Plan]
Note: The 2001 Stock Option Agreements are ---- not materially different from the 1996 Stock
Reference Number per Item 601 of Regulation S-K Page - ---------------- ----
Option Agreements filed with Annual Report on Form 10-K as Exhibit 10(q) for the fiscal year ended March 31, 2001.
10(al) 2001 Stock Award Plan [a part of the 1994 Incentive Compensation Plan]
Note: The 2001 Stock Award Plan is not ---- materially different from the 2000 Stock Award Plan filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2000.
10(am) 2001 Stock Option Agreement [a part of the 2000 Stock Option Plan for Non- Employee Directors].
Note: The 2001 Stock Option Agreement is ---- not materially different from the 2000 Non-Employee Directors Stock Option Agreement filed with Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2001).
10(an) 2002 Stock Option Agreements (incentive and non-qualified) [a part of the 1994 Incentive Compensation Plan]
Note: The 2002 Stock Option Agreements are ---- not materially different from the 1996 Stock Option Agreements filed with Annual Report on Form 10-K as Exhibit 10(q) for the fiscal year ended March 31, 2001.
10(ao) 2002 Stock Award Plan [a part of the 1994 Incentive Compensation Plan]
Note: The 2002 Stock Award Plan is not ---- materially different from the 2000 Stock Award Plan filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2000.
11 Not applicable.
12 Not applicable.
*13 2001 Annual Report to Shareholders. Except 252 for the portions of the Report expressly incorporated by reference, the Report is
Reference Number per Item 601 of Regulation S-K Page - ---------------- ----
furnished solely for the information of the Commission and is not deemed "filed" as a part hereof.
16 Not applicable.
18 Not applicable.
*21 List of subsidiaries of the Registrant. 296
22 Not applicable.
*23 Consent of independent accountants. 298
24 Not applicable.
28 Not applicable.
*99(a) Definitive Proxy Statement of the Registrant 299 dated June 7, 2002. Except for the portions of the Proxy Statement expressly incorporated by reference, the Proxy Statement is furnished solely for the information of the Commission and is not deemed "filed" as a part hereof.
*99(b) Appendix (filed pursuant to Item 304 of 337 Regulation S-T). Note: All Exhibits ---- filed herewith are current to the end of the reporting period of the Form 10-K (unless otherwise noted).
* Filed herewith.
Current Reports on Form 8-K: - ---------------------------
No current Reports on Form 8-K were filed.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Modine Manufacturing Company
Date: June 19, 2002 By: D. R. JOHNSON ------------------------------- D. R. Johnson, Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated.
D. R. JOHNSON June 19, 2002 - -------------------------------------------- ------------- D. R. Johnson, Chairman and Date Chief Executive Officer and Director
D. B. RAYBURN June 19, 2002 - -------------------------------------------- ------------- D. B. Rayburn, President and Chief Operating Date Officer
E. T. THOMAS June 19, 2002 - -------------------------------------------- ------------- E. T. Thomas, Senior Vice President, Finance Date and Chief Financial Officer
D. R. ZAKOS June 19, 2002 - -------------------------------------------- ------------- D. R. Zakos, Vice President, Date General Counsel and Secretary
R. J. DOYLE June 19, 2002 - -------------------------------------------- ------------- R. J. Doyle, Director Date
F. P. INCROPERA June 19, 2002 - -------------------------------------------- ------------- F. P. Incropera, Director Date
F. W. JONES June 19, 2002 - -------------------------------------------- ------------- F. W. Jones, Director Date
D. J. KUESTER June 19, 2002 - -------------------------------------------- ------------- D. J. Kuester, Director Date
V. L. MARTIN June 19, 2002 - -------------------------------------------- ------------- V. L. Martin, Director Date
G. L. NEALE June 19, 2002 - -------------------------------------------- ------------- G. L. Neale, Director Date
M. C. WILLIAMS June 19, 2002 - -------------------------------------------- ------------- M. C. Williams, Director Date
M. T. YONKER June 19, 2002 - -------------------------------------------- ------------- M. T. Yonker, Director Date
Report of Independent Accountants on Financial Statement Schedules
To the Shareholders and Board of Directors Modine Manufacturing Company:
Our audits of the consolidated financial statements referred to in our report dated April 30, 2002 appearing in the 2002 Annual Report to Shareholders of Modine Manufacturing Company (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chicago, Illinois April 30, 2002
MODINE MANUFACTURING COMPANY AND SUBSIDIARIES (A Wisconsin Corporation)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS for the years ended March 31, 2002, 2001 and 2000 ($ In Thousands)
Col. A Col. B Col. C Col. D Col. E - ------ ------ ------ ------ ------ Additions (1) (2) Balance at Balance Beginning Charged to Charged to at of Costs and Other End of Description Period Expenses Accounts Deductions Period - ----------- ---------- ---------- ---------- ---------- -------- 2002: Intangible Assets- Accumulated Amortization $35,302 $9,065 $(330)(B) $6,700(C) $37,337 ------ ----- -------- -------- ------ Allowance for Doubtful Accounts $2,459 $2,086 $(39)(B) $1,289(A) $3,217 ----- ----- ------- -------- ----- Valuation Allowance for Deferred Tax Assets $592 $0 $(35)(B) $0 $557 --- - ------- - --- 2001: Intangible Assets- Accumulated Amortization $31,232 $6,875 $(390)(B) $2,415(C) $35,302 ------ ----- -------- -------- ------ Allowance for Doubtful Accounts $4,474 $(1,311) $(54)(B) $650(A) $2,459 ----- ------- ------- ------ ----- Valuation Allowance for Deferred Tax Assets $856 $(237)(E) $(27)(B) $0 $592 ---- -------- ------- - --- 2000: Intangible Assets- Accumulated Amortization $23,917 $8,488 $(1,093)(B) $80(C) $31,232 ------ ----- ---------- ----- ------ Allowance for Doubtful Accounts $3,845 $1,233 $(8)(B) $596(A) $4,474 ----- ----- ------ ------ ----- Valuation Allowance for Deferred Tax Assets $5,154 $0 $0 $4,298(D) $856 ----- - - -------- --- Notes: (A) Bad debts charged off during the year. (B) Translation and other adjustments. (C) Retirement of fully amortized intangibles (D) Includes foreign operating losses and tax credit carryforwards. (E) Includes the effect of new tax rate recently enacted in Germany.