-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F0mG7uVduG4bEC+6BjfkQw3KDwnaTQs4+yrPbDjcqRHJe8StAvTDSGeHI3CPZip7 8TcbR2ne2RVvqZGwaFxsvg== /in/edgar/work/20000623/0000067347-00-000010/0000067347-00-000010.txt : 20000920 0000067347-00-000010.hdr.sgml : 20000920 ACCESSION NUMBER: 0000067347-00-000010 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000623 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MODINE MANUFACTURING CO CENTRAL INDEX KEY: 0000067347 STANDARD INDUSTRIAL CLASSIFICATION: [3714 ] IRS NUMBER: 390482000 STATE OF INCORPORATION: WI FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-01373 FILM NUMBER: 659553 BUSINESS ADDRESS: STREET 1: 1500 DEKOVEN AVE CITY: RACINE STATE: WI ZIP: 53403 BUSINESS PHONE: 4146361200 10-K 1 0001.txt SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2000 Commission file number 1-1373 -------------- ------ MODINE MANUFACTURING COMPANY - -------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) WISCONSIN 39-0482000 - -------------------------------- --------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) 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(g) of the Act: Common Stock, $0.625 par value - -------------------------------------------------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Approximately 58% of the outstanding shares are held by non-affiliates. The aggregate market value of these shares was approximately $459,219,002 based on the market price of $27.0625 per share on June 20, 2000. The remaining outstanding shares are owned or controlled by or for directors, officers, employees, retired employees, and their families. The number of shares outstanding of the registrant's Common Stock, $0.625 par value, was 29,256,606 at June 20, 2000. An Exhibit index appears at pages 15-21 herein. Page 1 of 158 DOCUMENTS INCORPORATED BY REFERENCE - ----------------------------------- Portions of the following documents are incorporated by reference into the parts of this Form 10-K designated to the right of the document listed. Incorporated Document Location in Form 10-K - --------------------- --------------------- Annual Report to Shareholders for the fiscal year ended March 31, 2000 Part I of Form 10-K (Item 1) Part II of Form 10-K (Items 7, 8) Part IV of Form 10-K (Item 14) 2000 Definitive Proxy Statement dated June 9, 2000 Part III of Form 10-K (Items 10, 11, 12, 13) TABLE OF CONTENTS ----------------- MODINE MANUFACTURING COMPANY - FORM 10-K FOR THE YEAR ENDED MARCH 31, 2000 10-K Pages ---------- Cover Table of Contents Part I - ------ Item 1 - Business ------------------- General, Developments and Strategy, Geographical Areas, Exports, Foreign and Domestic Operations, Events Subsequent to the End of the Quarter, Competitive Position, Customer Dependence, Backlog of Orders, Raw Materials, Patents, Research and Development, Environmental, Health and Safety Matters, Employees, Seasonal Nature of Business, Working Capital Items, Year 2000, Euro Conversion 5 Item 2 - Properties 10 --------------------- Item 3 - Legal Proceedings 11 ---------------------------- Item 4 - Submission of Matters To A Vote of --------------------------------------------- Security Holders 12 ---------------- Part II - ------- Item 5 - Market for Registrant's Common Equity ------------------------------------------------ and Related Stockholder Matters 12 ------------------------------- Item 6 - Selected Financial Data 13 ---------------------------------- Item 7 - Management's Discussion and Analysis ----------------------------------------------- of Financial Condition and Results ---------------------------------- of Operations 13 ------------- Item 8 - Financial Statements & Supplementary Data 13 ---------------------------------------------------- 10-K Pages ---------- Item 9 - Changes in and Disagreements with Accountants -------------------------------------------------------- on Accounting and Financial Disclosure 13 --------------------------------------- Part III - -------- Items 10 and 11 - Directors and Executive Officers ---------------------------------------------------- of the Registrant; Executive Compensation 14 ----------------------------------------- Item 12 - Security Ownership of Certain Beneficial --------------------------------------------------- Owners and Management 15 --------------------- Item 13 - Certain Relationships and Related Transactions 15 --------------------------------------------------------- Part IV - ------- Item 14 - Exhibits, Financial Statement Schedules, and ------------------------------------------------------- Reports on Form 8-K 15 ------------------- 1) Financial Statements 2) Financial Statement Schedules 3) Consent of Independent Accountants 4) Exhibit Index Signatures 22 - ---------- PART I ------ 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 heat-transfer and heat storage technology serving vehicular, industrial, commercial, and building HVAC (heating, ventilating, air conditioning) markets. Modine develops, manufactures, and markets heat exchangers 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 markets. The primary markets consist of: - Automobile, truck and bus manufacturers; - Farm implement manufacturers - Heating and cooling equipment manufacturers; - Construction contractors; - Wholesalers of plumbing and heating equipment; - Radiator repair shops; and - Wholesalers of auto repair parts. 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 vehicular replacement market and the building HVAC market, from business units in North America; and European Operations, which provides heat-transfer products, primarily to European original-equipment manufacturers of on- highway and off-highway vehicles, industrial equipment manufacturers, and the vehicular replacement market from business units in Europe. The Company has assigned specific business units to a segment based principally on these defined markets and their geographical location. The Company's three reportable segments offer a broad line of products that can be categorized as follows: Percentage of total company revenue by product ---------------------------------------------- Years ended March 31 2000 1999 1998 ---- ---- ---- Radiators & Radiator 31% 32% 33% Cores Vehicular Air 12% 12% 14% Conditioning Oil Coolers 16% 16% 17% Charge Air Coolers 9% 8% 9% Building HVAC 7% 7% 7% Modules/Packages 22% 22% 17% Miscellaneous 3% 3% 3% Developments and Strategy - ------------------------- We remain committed to the vision of "creating value through technology." We will continue using our intellectual skills to strengthen our position in key traditional markets. At the same time, we will leverage those strengths into new, dynamic, rapidly growing markets that need heat- transfer solutions to solve complex problems. The creation process encompasses growth as a key focus for Modine. We have identified many ways to continue building our basic businesses through increasing marketshare, providing more content per application, and making strategic acquisitions. An ongoing process is in place to evaluate the markets that we currently serve and to allocate our resources to those with the best growth opportunities. We are also focusing on the most-promising new markets and new products. Like growth, profitability also is a key focus for Modine. We are concentrating heavily on managing our selling, general, and administrative expenses through numerous cost-saving initiatives, a reevaluation of our processes, and control of staff costs. In addition, we are evaluating the profitability of current product lines and plants, with the objective of improving our overall returns. A last, key focus involves asset utilization. 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 United States Denmark England France Germany Hungary Italy Netherlands Poland Spain Switzerland Our non-U.S. subsidiaries and affiliates manufacture and sell a number of vehicular and industrial 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 19. Business Segments" on pages 31-33 of our 2000 Annual Report. Exports - ------- In addition, the Company exports to foreign countries and receives royalties from foreign licensees. Export sales as a percentage of total sales were 11.1%, 11.5% and 12.6% for fiscal years ended in 2000, 1999 and 1998, respectively. Estimated after-tax earnings on export sales as a percentage of total net earnings were 11.1%, 11.5% and 12.6% for fiscal years ended in 2000, 1999 and 1998, respectively. Royalties from foreign licensees as a percentage of total earnings were 4.8%, 5.5% and 2.5% for the last three fiscal years, respectively. Modine believes its international presence has positioned the Company to profitably share 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 2000 Annual Report to Shareholders and is incorporated herein by reference at Note 19 on pages 31-33 therein. Events Subsequent to the End of the Quarter - ------------------------------------------- On June 9, 2000, the Company mailed its Annual Report to Shareholders and released its sales forecast for the upcoming year. See Current --- Reports on Form 8-K at page 21 herein for further details. 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 divisions of some of its major 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 better compete 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 have asked the Company, as they have asked all primary suppliers, to participate directly and more substantially in research and development, design, and validation responsibilities that should result in stronger relationships and more partnership opportunities. Customer Dependence - ------------------- Ten customers accounted for approximately 45.9% of the Company's sales in the fiscal year ended March 31, 2000. These customers, listed alphabetically, were: BMW, Caterpillar, DaimlerChrysler, Fiat, Ford, John Deere, International Truck (formerly Navistar International), NAPA, Paccar and Volkswagen. 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 supply agreements to minimize investment risks and provide a proven source of competitively priced products. 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 (including additional capacity planned to become operational this year) is capable of handling the sales volumes expected in fiscal 2001. 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 2001. 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. See also Item 3 - Legal Proceedings. 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, or services, or the improvement of existing products, processes, and services. Expenditures in fiscal 2000 amounted to $20,528,000; in fiscal 1999 amounted to $18,252,000; and in fiscal 1998 amounted to approximately $16,816,000. There were no significant 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 has a long standing corporate environmental policy which demonstrates the Company's commitment to the environment and compliance with all environmental laws and regulations worldwide. Modine continues to appraise environmental issues and regulatory compliance with a proactive approach. The benefits realized from the Company's environmental programs include conserved resources, more efficient manufacturing processes, minimized liability exposure and reduced operational costs. Modine evaluates the performance of the Company's environmental programs through continuous monitoring, auditing and accounting systems. The Company constantly examines its operations and processes to minimize their impact on the environment. In calendar 1996, the Company revised its corporate waste minimization program, which originated in 1991, to encompass all by-products of the manufacturing process in North America. Despite the increases in North American sales volumes from calendar 1996 to 1999, the company achieved a 26% reduction in by-product generation over that same period. 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 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 will now require investigative and/or remedial work to ensure sufficient protection to the environment. Five of the Company's manufacturing facilities currently have been identified as requiring soil and/or groundwater remediation. Because of the joint and several liability of former landowners, contractual obligations, and certain state programs that provide for partial reimbursement of certain remediation costs, 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, the Environmental Protection Agency ("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 Modine is relatively low ("de minimis"), there may be insufficient documentation linking Modine to the site, and the other PRPs have the financial resources to meet their obligations. Environmental regulations, as well as the company's policy to continuously improve upon its environmental management programs, will require significant capital equipment expenditures over the coming years. For the fiscal year ending March 31, 2000 capital expenditures related to environmental projects were $1.1 million. These environmental expenditures include 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 $2.5 million in fiscal 2001. Environmental expenses charged to current operations, including remediation costs, totaled about $3.5 million for the fiscal year ending March 31, 2000. These expenses include solid waste disposal and operating and maintenance costs incurred in conducting environmental compliance activities; and for other matters. Operating expenses of some facilities may increase during fiscal year 2001 because of such charges but the competitive position of the Company is not expected to change materially. Although environmental costs are substantial, the Company has no reason to believe such costs vary significantly from similar costs incurred by other companies engaged in similar businesses. Employees - --------- The number of persons employed by the Company at March 31, 2000, was approximately 8,300. Seasonal Nature of Business - --------------------------- Distributed Products may still experience a degree of seasonality since the demand for aftermarket and HVAC products are affected by weather patterns, constructions starts, and other factors. On an overall Company basis, there is no significant degree of seasonality as indicated by the percentages below. Sales to original equipment manufacturers are dependent upon the demand for new vehicles and equipment. The following quarterly net sales detail illustrates the degree of fluctuation for the past five years: Fiscal Year Fiscal Ended First Second Third Fourth Year March 31 Quarter Quarter Quarter Quarter Total - ----------- ------- ------- ------- ------- ----- ($ In Thousands) 2000 $283,847 $286,691 $283,520 $285,211 $1,139,269 1999 273,104 272,961 284,355 281,027 1,111,447 1998 256,923 260,806 267,699 254,990 1,040,418 1997 248,514 254,224 252,972 243,336 999,046 1996 239,216 254,292 252,817 244,168 990,493 Five-year 260,321 265,795 268,273 261,746 1,056,135 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. Therefore, large inventories of such products are not necessary, nor is the amount of products returned significant. In the HVAC and aftermarket areas, due to the distribution systems and seasonal sales programs, varying levels of finished goods inventory are necessary. This inventory is spread throughout the 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. Year 2000 - --------- Information required hereunder regarding Year 2000 is incorporated by reference from the Company's 2000 Annual Report to Shareholders, pages 16 and 17, attached as Exhibit 13. Euro Conversion - --------------- Information required hereunder regarding Euro Conversion is incorporated by reference from the Company's 2000 Annual Report to Shareholders, at page 17, attached as Exhibit 13. ITEM 2. PROPERTIES. - ------ ---------- The Company's general offices, along with laboratory, experimental and tooling facilities, are maintained in Racine, Wisconsin. Additional technical support functions are located in Harrodsburg, Kentucky and Bernhausen, 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 facilities, on an operating segment basis, are as follows: Type of Original Distributed European Corporate & Facility Equipment Products Operations Other Total -------- --------- ----------- ---------- ----------- ----- Manufacturing 16 7 12 -- 35 Distribution -- 4 1 -- 5 Sales & Service Centers/Offices 2 13 20 1 36 Joint Ventures 3 3 6 Total 18 24 36 4 82 The Company's facilities, on a geographic basis, are as follows: Type of North South Asia/ Central Facility America Europe America Pacific America Total -------- ------- ------ ------- ------- ------- ----- Manufacturing 22 13 -- -- -- 35 Distribution 4 1 -- -- -- 5 Sales & Service Centers/Offices 14 20 -- 1 1 36 Joint Ventures 1 3 1 1 -- 6 Total 41 37 1 2 1 82 Total square footage of the 82 facilities is approximately 8,263,635 square feet. 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, and their productive capacity is, from time to time, adjusted and expanded as necessitated by product market considerations and customer growth. ITEM 3. LEGAL PROCEEDINGS. - ------ ----------------- In the normal course of business, the Company and its subsidiaries are named as defendants in various lawsuits and enforcement proceedings by private parties, the Occupational Safety and Health Administration, the Environmental Protection Agency, other governmental agencies, and others in which claims, such as personal injury, property damage, or antitrust and trade regulation issues, are asserted against the Company. While the outcome of these proceedings is uncertain, in the opinion of the Company's management and counsel, any liabilities that may result from such proceedings are not reasonably likely to have a material effect on the Company's liquidity, financial condition or results of operations. Many of the pending damage claims are covered by insurance and, in addition, the Company from time to time establishes reserves for uninsured liabilities. The Mitsubishi and Showa Litigation ----------------------------------- In November 1991, the Company filed a lawsuit against Mitsubishi Motor Sales of America, Inc., and Showa Aluminum Corporation, alleging infringement of the Company's patent on parallel-flow air-conditioning condensers. The suit seeks an injunction to prohibit continued infringement, an accounting for damages, a trebling of such damages for willful infringement, and reimbursement of attorneys' fees. In December 1991, the Company submitted a complaint to the U.S. International Trade Commission (ITC) requesting that the ITC ban the import and sale of parallel-flow air-conditioning condensers and systems or vehicles that contain them, which are the subject of the November 1991 lawsuit. In August, 1997, the ITC issued an Order excluding from U.S. import Showa condensers that infringe Modine Manufacturing Company's parallel-flow patent. The ITC's Order covers condensers, their parts, and certain products including them, such as air-conditioning kits and systems. It directs the U.S. Customs Service to exclude from importation into the United States such products manufactured by Showa Aluminum Corporation of Japan and Showa Aluminum Corporation of America. The decision is based on a Modine U.S. patent covering condensers with tube hydraulic diameters less than 0.04822 inches. The Showa companies must certify to Customs officials that any condenser items imported by them do not infringe Modine's parallel-flow patent. The Showa companies must also file annual reports with the ITC regarding their sales of Showa parallel- flow condensers in the United States. In July, 1994, Showa filed a lawsuit against the Company alleging infringement by the Company of certain Showa patents pertaining to condensers. In June 1995, the Company filed a motion for partial summary judgment against such lawsuit. In December of 1994, the Company filed another lawsuit against Mitsubishi and Showa pertaining to a newly issued patent on parallel-flow air-conditioning condensers. Both 1994 suits have been stayed pending the outcome of re-examination in the U.S. Patent Office of the patents involved. In October of 1999, the U.S. Patent Office Board of Appeals rejected the Company's 1994 PF patent which rejection is being appealed to the Court of Appeals for the Federal Circuit. In October of 1997, Modine was issued a Japanese patent covering parallel-flow air-conditioning condensers having tube hydraulic diameters less than 0.070 inches. In August of 1998, the Company filed a patent infringement suit in Japan against Showa with respect to this patent seeking an injunction and damages. Several patents have been issued to Modine by the European Patent Office, one having been rejected at the opposition level, which is being appealed and another having been approved at the opposition level. All legal and court costs associated with these cases have been expensed as they were incurred. Other previously reported legal proceedings have been settled or the issues resolved so as to not merit further reporting. Under the rules of the Securities and Exchange Commission, certain environmental proceedings are not deemed to be ordinary or routine proceedings incidental to the Company's business and are required to be reported in the Company's annual and/or quarterly reports. The Company is not currently a party to any such proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. - ------ --------------------------------------------------- Omitted as not applicable. PART II ------- ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED - ------ ------------------------------------------------- STOCKHOLDER MATTERS. ------------------- The Company's Common Stock is quoted on the National Association of Securities Dealers' Automated Quotation system ("NASDAQ") as a National Market issue. The Company's trading symbol is "MODI." The table below shows the range of high and low bid information for the Company's Common Stock for fiscal years 1999-00 and 1998-99. As of April 1, 2000, shareholders of record numbered approximately 5,914; it is estimated that beneficial owners numbered about 14,500. 1999-00 1998-99 --------------------------- --------------------------- Quarter High Low Dividends High Low Dividends First $34.00 $26.50 $.23 $37.500 $32.313 $.21 Second 34.13 24.25 .23 36.500 27.750 .21 Third 29.63 23.00 .23 38.625 26.625 .21 Fourth 26.69 21.00 .23 38.000 25.250 .21 ---- ---- TOTAL $.92 $.84 - ------------------------------------------------------------------------ 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, $192,158,000 was available for these purposes at March 31, 2000. (However, dividend payments may not exceed $50,000,000 in any fiscal year.) 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. SELECTED FINANCIAL DATA. - ------ ----------------------- Fiscal Year ended March 31 ------------------------------------------------------ 2000 1999 1998 1997 1996 Sales (in thousands) $1,139,269 $1,111,447 $1,040,418 $999,046 $990,493 Net earnings (in thousands) 65,403 73,943 72,471 63,763 61,399 Total assets (in thousands) 931,107 915,739 759,024 694,955 671,836 Long-term debt (in thousands) 211,112 143,838 89,587 85,197 87,809 Dividends per share .92 .84 .76 .68 .60 Net earnings per share - Basic 2.22 2.50 2.44 2.14 2.07 - Assuming dilution 2.20 2.46 2.39 2.10 2.03 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 2000 Annual Report to Shareholders, pages 12-20 and 22, attached as Exhibit 13. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. - ------ ------------------------------------------- The Consolidated Statements of Earnings, and the related Consolidated Balance Sheets, Cash Flows, Shareholders' Investment, Notes to Consolidated Financial Statements, and the report of Pricewaterhouse- Coopers LLP dated April 26, 2000 appearing on pages 19, 21, 23, 24, and 25-33, respectively, of the Company's 2000 Annual Report to Shareholders are incorporated herein by reference. With the exception of the aforementioned information, no other data appearing in the 2000 Annual Report to Shareholders is deemed to be filed as part of this Annual Report on Form 10-K. Individual financial statements of the Registrant are omitted because the Registrant is primarily an operating company, and the subsidiaries included in the consolidated financial statements are wholly-owned. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING - ------ ----------------------------------------------------------- AND FINANCIAL DISCLOSURE. ------------------------ There were no disagreements on accounting or financial disclosures between the Company and its auditors. PART III -------- ITEMS 10 and 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; - --------------- -------------------------------------------------- EXECUTIVE COMPENSATION. ---------------------- The information about directors and executive officers and executive compensation on pages 3 - 5 and pages 10, 11, 15, and 16, of the Company's definitive Proxy Statement dated June 9, 2000 under the headings "Election of Directors," "Nominees to be Elected," "Directors Continuing in Service," and "Executive Compensation" attached to this report is incorporated herein by reference, but excluding the Officer Nomination and Compensation Committee Report on Executive Compensation and the Performance Graph on pages 11-14. Executive Officers of Registrant Officer Name Age Position Since - ---- --- -------- ----- R. T. Savage* 61 Chairman 1981 D. R. Johnson* 58 President and Chief Executive Officer 1988 D. B. Rayburn* 52 Executive Vice President, Operations 1991 W. E. Pavlick 66 Senior Vice President, General Counsel 1979 and Secretary E. T. Thomas 46 Group Vice President 1998 C. R. Katzfey** 53 Group Vice President 2000 K. A. Feldmann** 46 Group Vice President 2000 A. C. DeVuono 51 Vice President, Technical Services 1996 R. L. Hetrick 58 Vice President, Human Resources 1989 R. W. Possehl 55 Vice President, Administration 1985 A. D. Reid 58 Vice President, Finance and Chief Financial Officer 1985 R. S. Bullmore 50 Corporate Controller 1983 G. A. Fahl 45 Environmental, Health & Safety Officer 1998 C. C. Harper 46 Chief Information Officer 1998 D. B. Spiewak 46 Treasurer 1998 D. R. Zakos 46 Associate General Counsel and Assistant Secretary 1985 L. D. Howard*** 56 Group Vice President, Europe 1991 * Prior to March 31 and April 1, 1998: R. T. Savage was Chairman, President and Chief Executive Officer (now retired); D. R. Johnson was President and Chief Operating Officer; and D. B. Rayburn was Group Vice President, Highway Products. ** K. A. Feldmann and C. R. Katzfey became officers on April 1, 2000. Prior to April 1, 2000, K. A. Feldmann was Heavy Duty Business Unit Managing Director and C. R. Katzfey was Truck Division General Manager. *** L. D. Howard retired April 1, 2000. 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 A. C. DeVuono, E. T. Thomas, C. C. Harper, and D. B. Spiewak. Mr. DeVuono joined Modine on March 4, 1996, as Director, Technical Services. He was promoted to Vice President, Technical Services in October, 1996. Before joining Modine, he was a staff scientist at the Lawrence Berkeley National Laboratory of the University of California. Prior to that, he spent 10 years with Battelle Memorial Institute in Columbus, Ohio, as a principal research scientist, and also has previous affiliations with the teaching faculties of the Ohio State University and the University of Illinois. 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. Harper was promoted to Chief Information Officer on October 21, 1998. Mr. Harper joined Modine in January, 1997 as Director of Information Systems. Previous to Modine, Mr. Harper had been employed by Tenneco Incorporated for 14 years in a number of technical and managerial positions. 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. 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. Officers are elected annually at the first meeting of the Board of Directors after the Annual Meeting of Shareholders. Information relating to the employment agreements, termination and change-in-control arrangements is incorporated by reference from the Company's 1999-2000 definitive Proxy Statement dated June 9, 2000 attached to this Report at page 17 and 18 therein. The Company's stock option and stock award plans contain certain provisions relating to change-in-control or other specified transactions that may, if authorized by the Officer Nomination and Compensation Committee of the board, accelerate or otherwise release shares granted or awarded under those plans. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. - ------- -------------------------------------------------------------- The information relating to stock ownership on pages 5 - 7 of the Company's definitive Proxy Statement dated June 9, 2000 under the headings "Principal Shareholders and Share Ownership of Directors and Executive Officers, "Principal Shareholders," and "Securities Owned by Management" attached to this report is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. - ------- ---------------------------------------------- The information required by this item is incorporated by reference from the Company's definitive Proxy Statement dated June 9, 2000 on page 18 under the heading "Transactions" attached to this Report. PART IV ------- 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, 2000,1999, and 1998. 19 Consolidated Balance Sheets at March 31, 2000 and 1999. 21 Consolidated Statements of Cash Flows for the years ended March 31, 2000, 1999, and 1998. 23 Consolidated Statements of Shareholders' Investment for the years ended March 31, 2000, 1999, and 1998. 24 Notes to Consolidated Financial Statements 25 - 33 Report of Independent Accountants 33 * Incorporated by reference from the indicated pages of the 1999-00 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, 2000 24 Schedule II - Valuation and Qualifying Accounts for the years ended March 31, 2000, 1999, and 1998. 25 (3) Consent of Independent Accountants 133 (4) Exhibit Index 15 (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 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 between the Registrant and First Chicago Trust Company of New York (Rights Agent) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1997). *4(b)(i) Rights Agreement Amendment No. 1 dated as of January 18, 1995 between the Registrant and First Chicago Trust Company of New York (Rights Agent). 37 *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). 40 Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- 4(b)(iii) Rights Agreement Amendment No. 3 dated as of October 15, 1996, between the Registrant and First Chicago Trust Company of New York (Rights Agent) (filed by reference to the exhibit contained within the Registrant's Quarterly Report on Form 10-Q dated December 26, 1996). 4(b)(iv) Rights Agreement Amendment No. 4 dated as of November 10, 1997 between the Registrant and Norwest Bank Minnesota, N.A. (Rights Agent) (filed by reference to the exhibit contained within the Registrant's Quarterly Report on Form 10-Q dated December 26, 1997). Note: The amount of long-term debt authorized ---- under any instrument defining the rights of holders of long-term debt of the Registrant, other than as noted above, does not exceed ten 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 April 1,1992) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1997). 10(b) Employment Agreement between the Registrant and D. R. Johnson (filed by reference to the Registrant's Quarterly Report on Form 10-Q dated November 1, 1996). 10(c) 1985 Incentive Stock Plan (as amended) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1997). 10(d) 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(e) 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). Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- *10(f) Executive Supplemental Retirement Plan (as 43 amended). 10(g) 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(h) 1994 Incentive Compensation Plan (as amended) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1997). 10(i) 1994 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, 1997). *10(j) 1995 Stock Award Plan [a part of the 1994 Incentive Compensation Plan]. 48 *10(k) 1995 Stock Option Agreements (incentive and non-qualified) [a part of the 1994 Incentive Compensation Plan]. 54 *10(l) 1995 Stock Option Agreement [a part of the 1994 Stock Option Plan for Non-Employee Directors]. 66 10(m) 1996 Stock Award Plan [a part of the 1994 Incentive Compensation Plan] (filed by reference to the exhibit contained within the Registrant's Annual Report on Form 10-K for the fiscal year 1996). 10(n) 1996 Stock Option Agreements (incentive and non-qualified) [a part of the 1994 Incentive Compensation Plan] (filed by reference to the exhibit contained within the Registrant's Annual Report on Form 10-K for the fiscal year 1996). 10(o) 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 this Annual Report on Form 10-K as Exhibit 10(l). Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- 10(p) 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 the Registrant's Annual Report on Form 10-K for the fiscal year 1996. 10(q) 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 the Registrant's Annual Report on Form 10-K for the fiscal year 1996. 10(r) 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 this Annual Report on Form 10-K as Exhibit 10(l). 10(s) 1998 Stock Award Plan [a part of the 1994 Incentive Compensation Plan]. Note: The 1998 Stock Award Plan is not ---- materially different from the 1996 Stock Award Plan filed with the Registrant's Annual Report on Form 10-K for fiscal year 1996. 10(t) 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 the Registrant's Annual Report on Form 10-K for the fiscal year 1996. Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- 10(u) 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 this Annual Report on Form 10-K as Exhibit 10(l). 10(v) 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 the Registrant's Annual Report on Form 10-K for the fiscal year 1996. 10(w) 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 this Annual Report on Form 10-K as Exhibit 10(l). *10(x) 2000 Stock Award Plan [a part of the 1994 Incentive Compensation Plan]. 72 *10(y) 2000 Stock Option Agreements (incentive and non-qualified) [a part of the 1994 Incentive Compensation Plan]. 78 Note: The 2000 Stock Option Agreements ---- are not materially different from the 1996 Stock Option Agreements filed with the Registrant's Annual Report on Form 10-K for the fiscal year 1996. 11 Not applicable. 12 Not applicable. *13 2000 Annual Report to Shareholders. Except for the portions of the Report expressly incorporated by reference, Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- the Report is furnished solely for the information of the Commission and is not deemed "filed" as a part hereof. 91 16 Not applicable. 18 Not applicable. *21 List of subsidiaries of the Registrant. 131 22 Not applicable. *23 Consent of independent accountants. 133 24 Not applicable. *27 Financial Data Schedules -- Fiscal 2000 (electronic transmission only) 28 Not applicable. *99(a) Definitive Proxy Statement of the Registrant dated June 9, 2000. 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. 134 *99(b) Appendix (filed pursuant to Item 304 of Regulation S-T). 156 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: - --------------------------- A Current Report on Form 8-K, dated June 9, 2000, was filed by the Company. This report, filed in connection with the Company's mailing of its Annual Report to Shareholders and its sales forecast for the upcoming year contained therein, includes as exhibits (1) the news release containing the sales forecast and (2) a statement of the important factors and assumptions regarding forward-looking statements. 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 21, 2000 By: D. R. JOHNSON --------------------------------- D. R. Johnson, President 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. R. T. SAVAGE June 21, 2000 - ---------------------------------------- ------------- R. T. Savage, Chairman and Director Date D. R. JOHNSON June 21, 2000 - ---------------------------------------- ------------- D. R. Johnson, President and Date Chief Executive Officer and Director A. D. REID June 21, 2000 - ---------------------------------------- ------------- A. D. Reid, Vice President, Finance Date and Chief Financial Officer W. E. PAVLICK June 21, 2000 - ---------------------------------------- ------------- W. E. Pavlick, Senior Vice President, Date General Counsel and Secretary R. J. DOYLE June 21, 2000 - ---------------------------------------- ------------- R. J. Doyle, Director Date F. P. INCROPERA June 21, 2000 - ---------------------------------------- ------------- F. P. Incropera, Director Date F. W. JONES June 21, 2000 - ---------------------------------------- ------------- F. W. Jones, Director Date D. J. KUESTER June 21, 2000 - ---------------------------------------- ------------- D. J. Kuester, Director Date G. L. NEALE June 21, 2000 - ---------------------------------------- ------------- G. L. Neale, Director Date M. C. WILLIAMS June 21, 2000 - ---------------------------------------- ------------- M. C. Williams, Director Date M. T. YONKER June 21, 2000 - ---------------------------------------- ------------- M. T. Yonker, Director Date REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors Modine Manufacturing Company Our audits of the consolidated financial statements referred to in our report dated April 26, 2000 appearing in the Annual Report to Shareholders of Modine Manufacturing Company and its Subsidiaries (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 Chicago, Illinois April 26, 2000 MODINE MANUFACTURING COMPANY AND SUBSIDIARIES (A Wisconsin Corporation) SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS for the years ended March 31, 2000, 1999 and 1998 ($ 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 - ----------- ---------- ---------- ----------- ---------- ------- 2000: Intangible Assets- Accumulated Amortization $23,852 $8,390 $(1,093)(B) $ 80(C) $31,069 ------- ------ ----------- --------- ------- Allowance for Doubtful Accounts $ 3,749 $1,173 $ (8)(B) $ 478(A) $ 4,436 ------- ------ ----------- --------- ------- Valuation Allowance for Deferred Tax Assets $ 5,154 $4,298(D) $ 856 ------- --------- ------- 1999: Intangible Assets- Accumulated Amortization $17,150 $5,856 $ 846(B) $ 0(C) $23,852 ------- ------ ----------- --------- ------- Allowance for Doubtful Accounts $ 4,585 $ (427) $ 5(B) $ 414(A) $ 3,749 ------- ------- ----------- --------- ------- Valuation Allowance for Deferred Tax Assets $ 3,947 $1,304(D) $ 97(D) $ 5,154 ------- --------- --------- ------- 1998: Intangible Assets- Accumulated Amortization $12,885 $4,761 $ (496)(B) $ 0(C) $17,150 ------- ------ ------------ --------- ------- Allowance for Doubtful Accounts $ 4,140 $1,029 $ (70)(B) $ 514(A) $ 4,585 ------- ------ ------------ --------- ------- Valuation Allowance for Deferred Tax Assets $ 4,127 $ 644(D) $ 824(D) $ 3,947 ------- --------- --------- ------- 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. EX-3 2 0002.txt EXHIBIT 3(b) RESTATED BY-LAWS OF MODINE MANUFACTURING COMPANY (as adopted July 17, 1969) (as amended September 17, 1970) (as amended September 16, 1971) (as amended May 4, 1972) (as amended March 20, 1974) (as amended September 18, 1974) (as amended May 19, 1976) (as amended July 21, 1976) (as amended May 18, 1977) (as amended July 20, 1977) (as amended October 18, 1978) (as amended May 16, 1979) (as amended July 18, 1979) (as amended October 17, 1979) (as amended October 15, 1980) (as amended May 1, 1981) (as amended May 5, 1982 to be effective July 21, 1982) (as amended August 17, 1982) (as amended February 18, 1987) (as amended March 18, 1987) (as amended July 15, 1987) (as amended February 15, 1989) (as amended May 19, 1993) (as amended October 20, 1993) (as amended November 17, 1993) (as amended March 16, 1994 to be effective July 20, 1994) (as amended May 17, 1995 to be effective July 19, 1995) (as amended October 16, 1996 to be effective October 16, 1996) (as amended December 17, 1997) (as amended March 18, 1998 to be effective July 15, 1998) (as amended January 20, 1999) (as amended March 17, 1999 to be effective July 21, 1999) (as amended September 15, 1999) (as amended March 15, 2000 to be effective July 19, 2000) ARTICLE I. STOCKHOLDERS ------------------------ 1.01. Annual Meeting. The annual meeting of -------------- stockholders of the Company shall be held each year at such time and place, either within or without the State of Wisconsin, as shall be determined by the Board of Directors at a meeting prior to the date otherwise provided herein for such stockholders' meeting; in the absence or failure of the Board to designate a time and place, then at the principal office of the Company in Racine, Wisconsin, on the third Wednesday in July, at 9:30 o'clock A.M., for the purpose of election of directors and for the transaction of such other business as may properly come before the meeting. 1.02. Special Meetings. Special meetings of the ---------------- stockholders may be called by the Chairman of the Board or the President and shall be called by the President, or Secretary at the request in writing of a majority of the Board of Directors, or at the request of stockholders owning Ten Percent (10%) or more in amount of the entire capital stock of the Company issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at all special meetings shall be confined to the purposes stated in the notice of meeting. 1.03. Notice of Meetings. The Company shall notify ------------------ each shareholder who is entitled to vote at the meeting, and any other shareholder entitled to notice under ch. 180, of the date, time, and place of each annual or special shareholders' meeting. In the case of special meetings, the notice shall also state the meeting's purpose. Unless otherwise required by ch. 180, the meeting notice shall be given at least five (5) days before the meeting date. Notice may be given orally or communicated in person, by telephone, telegraph, teletype, facsimile, other form of wire or wireless communication, private carrier, or in any other manner provided by ch. 180. Written notice, if mailed, is effective when mailed; and such notice may be addressed to the shareholder's address shown in the Company's current record of shareholders. Written notice provided in any other manner is effective when received. Oral notice is effective when communicated. 1.04. Quorum. A quorum at any meeting of the ------ stockholders shall consist of a majority of the voting stock of the Company represented in person or by proxy. Unless otherwise provided in the Articles of Incorporation, by these by-laws, or by the Wisconsin Business Corporation Law, a majority of such quorum shall decide any questions that may come before the meeting. Though less than a quorum of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. 1.05. Order of Business. The order and conduct of ----------------- business and matters of procedure at any meeting of stockholders shall be determined by the Chairman. 1.06. List of Stockholders. The officer or agent -------------------- having charge of the stock transfer books for shares of the Company shall, before each meeting of stockholders, make a complete list of the stockholders entitled to vote at such meeting or any adjournment thereof, with the address of and the number of shares held by each, which list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any stockholder during the whole time of the meeting for the purposes of the meeting. The original stock transfer books shall be prima facie evidence as to the stockholders entitled to examine such list or transfer books or to vote at any meeting of stockholders. 1.07. Inspectors of Election. Two inspectors of ---------------------- election shall be appointed by the Board of Directors at or before each stockholders' meeting at which an election of directors shall take place; if no such appointment shall have been made, or if the inspectors appointed by the Board shall refuse to act, or fail to attend, then the appointment shall be made by the Chairman at the meeting. The inspectors shall receive and take in charge all proxies and ballots, and shall decide all questions touching upon the qualification of voters, and validity of proxies and the acceptance and rejection of votes. In case of a tie vote by the inspectors on any questions, the Chairman shall decide. 1.08. Voting of Shares. Each outstanding share shall ---------------- be entitled to one vote upon each matter submitted to a vote at a meeting of stockholders, except to the extent that the voting rights of the shares of any class or classes are enlarged, limited or denied by the Wisconsin Business Corporation Law, the Articles of Incorporation, or the resolution of the Board of Directors creating such series of any class. 1.09. Proxies. At all meetings of stockholders, a ------- stockholder entitled to vote may vote in person or by proxy appointed in writing by the stockholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the Company before or at the time of meeting. Unless otherwise provided in the proxy, a proxy may be revoked at any time before it is voted either by written notice filed with the Secretary or the acting secretary of the meeting or by oral notice given by the stockholder to the presiding officer during the meeting. The presence of a stockholder who has filed his proxy shall not of itself constitute a revocation. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy. The Board of Directors shall have the power and authority to make rules establishing presumptions as to the validity and sufficiency of proxies. ARTICLE II. DIRECTORS ---------------------- 2.01. Number, Classification and Terms of Directors. --------------------------------------------- The number of directors shall be nine. Directors need not be stockholders. The Board of Directors shall be divided into three classes: each class consisting of three directors. The term of office of a director shall be three years. The classes of directors shall be staggered so that each expires in succeeding years. At each annual meeting of stockholders, the number of directors equal to the number of the class whose terms expire at the time of such meeting shall be elected to hold office until the third succeeding annual meeting and until their successors shall have been elected. 2.02. Annual Directors' Meetings. Annual meeting of -------------------------- the Board of Directors shall be held immediately following the annual meeting of stockholders. No notice of the annual meeting of the Board of Directors shall be required. 2.03. Special Directors' Meetings. Special meetings --------------------------- of the Board of Directors may be called by the Chairman of the Board, the President, or Secretary on twenty-four (24) hours' notice to each director. 2.04. Notice of Meetings; Waiver of Notice. Notice of ------------------------------------ each board of directors' meeting, except meetings pursuant to Section 2.02 of these by-laws, shall be delivered to each director at his or her business address or at such other address as the director shall have designated in writing and filed with the Secretary. Notice may be given orally or communicated in person, by telephone, telegraph, teletype, facsimile, other form of wire or wireless communication, private carrier, or in any other manner provided by ch. 180. Written notice shall be deemed given at the earlier of the time it is received or at the time it is deposited with postage prepaid in the United States mail or delivered to the private carrier. Oral notice is effective when communicated. A director may waive notice required under this section or by-law at any time, whether before or after the time of the meeting. The waiver must be in writing, signed by the director, and retained in the corporate record book. The director's attendance at or participation in a meeting shall constitute a waiver of notice of the meeting, unless the director at the beginning of the meeting or promptly upon his or her arrival objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. Neither the business to be transacted at nor the purpose of any regular or special board of directors meeting need be specified in the notice or waiver of notice of the meeting. 2.05. Regular Meetings. Regular meetings of the ---------------- directors may be held without notice at such place and times as shall be determined from time to time by resolution of the Board of Directors. 2.06. Quorum. A quorum at any meeting of the Board of ------ Directors shall consist of a majority of the entire membership of the Board. Unless otherwise provided in the Articles of Incorporation, these by-laws, or by law, a majority of such quorum shall decide all questions that may come before the meeting. 2.07. General Powers of Directors. The Board of --------------------------- Directors shall manage the business and affairs of the Company and subject to the restrictions imposed by law, by the Articles of Incorporation, or by these by-laws, may exercise all the powers, including specific powers, of the Company. 2.08. Compensation of Directors. The Board of ------------------------- Directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the Company as directors, officers or otherwise, or to delegate such authority to an appropriate committee. The Board of Directors also shall have authority to provide for or to delegate authority to an appropriate committee to provide for reasonable pensions, disability or death benefits, employee stock options, and other benefits or payments, to directors, officers and employees and to their estates, families, dependents or beneficiaries on account of prior services rendered by such directors, officers and employees to the Company. 2.09. Resignation and Removal for Cause. Any director, --------------------------------- member of a committee or other officer may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the Chairman or Secretary. The acceptance of a resignation shall not be necessary to make it effective. A director may be removed from office during the term of such office but only upon a showing of good cause, such removal to be by affirmative vote of a majority of the outstanding shares entitled to vote for the election of such director and which removal may only be taken at a special meeting of stockholders called for that purpose. A special meeting of the stockholders as herein referred to may only be held after a hearing on the matter of cause claimed to exist has been held by the full Board of Directors of the Company at which hearing the director or directors proposed for removal shall be given an adequate opportunity for preparation and attendance in person (together with representation by counsel); provided, however, that such hearing shall be held only after written notice has been given to said director or directors proposed for removal specifying the matters of cause claimed to exist. The conclusions of said hearing shall be reported by the Board of Directors in writing accompanying the notice of the special stockholders' meeting sent to each stockholder eligible to vote at said special meeting. 2.10. Increase or Decrease of Number of Directors. ------------------------------------------- Increase or decrease of the number of directors and classification of such directors, may only be made by amendment of these by-laws at a regular or special meeting called for that purpose, and a vacancy created by an increase in the number of directors may be filled at such meeting. 2.11. Filling of Vacancies. If the office of any -------------------- director, member of a committee or other officer becomes vacant for any reason, including vacancies on the Board of Directors due to removal for cause, the remaining directors in office, by a majority vote, may appoint any qualified person to fill such vacancy, who shall hold office for the unexpired term and until his successor shall be duly chosen. 2.12. Informal Action by Directors. Any action ---------------------------- required or permitted by the Articles of Incorporation, these by- laws or other provision of law, which might be taken at a meeting of the Board of Directors or of a lawfully constituted committee thereof, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all the directors, or by all of the members of such committee, as the case may be. 2.13. Retirement. Each Director shall be retired at ---------- the close of the term in which he attains the age of seventy (70) years except that this provision shall not apply to any Director who has been exempted from this provision by a resolution passed by a two-thirds vote of the Board of Directors. Upon such retirement a Director may take the status of a Director Emeritus. A Director Emeritus shall receive the notice of meetings of Directors, shall be invited to and welcome at all meetings of the Board and of the stockholders, and shall receive such compensation and such reimbursement for reasonable expenses, if any, for attendance at meetings as the Board of Directors shall determine, provided, however, that such compensation shall not exceed that received by a Director. A Director Emeritus shall attend the meetings of the Board in a consultive capacity but shall not be entitled to vote or have any duties or powers of a Director of the Company. 2.14. Committees. The Board of Directors may by ---------- resolution or resolutions, adopted by a majority of the total number of directors, designate one or more committees, each such committee to consist of three or more directors elected by the Board of Directors which, to the extent provided in said resolution or resolutions, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the corporation. Such committees shall have such names as may be determined from time to time by resolution adopted by the Board of Directors. A majority of the members of any such committee may determine its action unless the Board of Directors shall otherwise provide. The Board of Directors shall have power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee. The Board of Directors may elect one or more of its members as alternate members of any committee who may take the place of any absent member or members at any meeting of such committee. ARTICLE III. OFFICERS ---------------------- 3.01. Number. The principal officers of the Company ------ shall be a Chairman of the Board of Directors, a President, such number of Vice Presidents as the Board of Directors shall elect, a Secretary, and a Treasurer, each of whom shall be elected by the Board of Directors. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. Any two or more offices may be held by the same person, except the offices of President and Secretary and the offices of President and Vice President. 3.02. Election and Term of Office. The officers of the --------------------------- Company to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Each officer shall hold office at the pleasure of the Board of Directors or until his successor shall have been duly elected or until his prior death, resignation or removal. 3.03. Removal. Any officer or agent may be removed by ------- the Board of Directors whenever in its judgment the best interests of the Company will be served thereby, but such removal shall be without prejudice to the rights provided by written contract, if any, of the person so removed. Election or appointment shall not of itself create contract rights. 3.04. Vacancies. A vacancy in any principal office --------- because of death, resignation, removal, disqualification or otherwise, shall be filled by the Board of Directors for the unexpired portion of the term. 3.05. Chairman of the Board. The Chairman of the --------------------- Board of Directors shall preside at all meetings of stockholders and directors. In his absence, the Vice Chairman of the Board, if there be one, otherwise the President, shall preside. 3.06. President. The President shall be the Chief --------- Executive Officer of the Company, and subject to the control of the Board of Directors, shall in general supervise and control all of the business and affairs of the Company. He shall have authority, subject to such rules as may be prescribed by the Board of Directors, to appoint such agents and employees of the Company as he shall deem necessary, to prescribe their powers, duties and compensation, and to delegate authority to them. Such agents and employees shall hold office at the discretion of the President. He shall have authority to sign, execute and acknowledge, on behalf of the Company, all deeds, mortgages, bonds, stock certificates, contracts, leases, reports and all other documents or instruments necessary or proper to be executed in the course of the Company's regular business, or which shall be authorized by resolution of the Board of Directors; and except as otherwise provided by law or the Board of Directors, he may authorize any Vice President or other officer or agent of the Company to sign, execute and acknowledge such documents or instruments in his place and stead. In general he shall perform all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time. 3.07. The Vice President. In the absence of the ------------------ President or in the event of his death, inability or refusal to act, or in the event for any reason it shall be impracticable for the President to act personally, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Board of Directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Any Vice President may sign, with the Secretary or Assistant Secretary, certificates for shares of the Company; and shall perform such other duties and have such authority as from time to time may be delegated or assigned to him by the Chairman, President or by the Board of Directors. The execution of any instrument of the Company by any Vice President shall be conclusive evidence, as to third parties, of his authority to act in the stead of the President. 3.08. The Secretary. The Secretary shall: (a) keep ------------- the minutes of the meetings of the stockholders and of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these by-laws or as required by law; (c) be custodian of the corporate records and of the seal of the Company and see that the seal of the Company is affixed to all documents the execution of which on behalf of the Company under its seal is duly authorized; (d) sign with the Chairman, President or a Vice President, certificates for shares of the Company, the issuance of which shall have been authorized by resolution of the Board of Directors; and (e) in general perform all duties incident to the office of Secretary as provided by the Wisconsin Business Corporation Law and have such other duties and exercise such authority as from time to time may be delegated or assigned to him by the Chairman, President or by the Board of Directors. 3.09. The Treasurer. The Treasurer shall: (a) have ------------- charge and custody of and be responsible for all funds and securities of the Company; (b) receive and give receipts for moneys due and payable to the Company from any source whatsoever, and deposit all such moneys in the name of the Company in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Section 6.07; and (c) in general perform all of the duties incident to the office of Treasurer and have such other duties and exercise such other authority as from time to time may be delegated or assigned to him by the Chairman, President or by the Board of Directors. 3.10. Assistant Secretaries and Assistant Treasurers. ---------------------------------------------- There shall be such number of Assistant Secretaries and Assistant Treasurers as the Board of Directors may from time to time authorize and designate. The Assistant Secretaries and Assistant Treasurers, in general, shall perform such duties and have such authority as shall from time to time be delegated or assigned to them by the Secretary or the Treasurer, respectively, or by the Chairman, President or the Board of Directors. 3.11. Other Assistants and Acting Officers. The Board ------------------------------------ of Directors shall have the power to appoint any person to act as assistant to any officer, or as agent for the Company in his stead, or to perform the duties of such officer whenever for any reason it is impracticable for such officer to act personally, and such assistant or acting officer or other agent so appointed by the Board of Directors shall have the power to perform all the duties of the office to which he is so appointed to be assistant, or as to which he is so appointed to act, except as such power may be otherwise defined or restricted by the Board of Directors. 3.12. Salaries. The salaries of the principal officers -------- shall be fixed from time to time by the Board of Directors or by a duly authorized committee thereof, and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Company. ARTICLE IV. INDEMNIFICATION BY THE COMPANY ------------------------------------------- Any person made a party to or threatened with any civil, criminal, administrative or investigative action, suit or proceeding (other than an action by or in the right of the Company) by reason of the fact that he, his testator or intestate, is or was a Director, officer or employee of the Company or is or was serving at the request of the Company as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified by the Company against the reasonable expenses, including attorneys' fees, judgments, fines, and amounts paid in settlement, actually and necessarily incurred by him in connection with such action, suit or proceeding, or in connection with any appeal therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Such right of indemnification shall not be deemed exclusive of any other right to which such Director, officer, employee or agent may otherwise be entitled. ARTICLE V. CAPITAL STOCK ------------------------- 5.01 Certificates of Stock. Certificates of stock, --------------------- numbered and with the seal of the Company affixed, signed by the President, or a Vice President, and the Secretary or an Assistant Secretary, shall be issued to each stockholder certifying the number of shares owned by him in the Company. When such certificates are countersigned by a transfer agent, or registered by a registrar, the signatures of such officers may be facsimiles. A facsimile or printed seal of the Company may be affixed upon certificates of stock of the Company. In case any officer who has signed, or whose facsimile signature has been placed upon a certificate has ceased to be an officer of the Company before such certificate has been issued, such certificate may, nevertheless, be adopted and issued and delivered by the Company as though the officer who signed such certificate or whose facsimile signature shall have been used thereon, had not ceased to be such officer with the same effect as if he were such office at the date of its issue. 5.02. Lost Certificates. A new certificate of stock may ----------------- be issued in the place of any certificate theretofore issued by the Company, alleged to have been lost or destroyed, and the directors may, in their discretion, require the owner of the lost or destroyed certificate, or his legal representative, to give the Company a bond, in such sum as they may direct, not exceeding double the value of the stock, to indemnify the Company against any claim that may be made against it on account of the alleged loss of any such certificate or the issuance of any such new certificate. 5.03. Transfer of Shares. Transfer of stock shall be ------------------ made only on the transfer books of the Company, kept at the office of the Company or respective transfer agents designated to transfer the stock, and before a new certificate is issued, the old certificate shall be surrendered and cancelled. 5.04. Closing of Transfer Books. The Board of Directors ------------------------- of the Company may provide that the stock transfer books be closed for a period not to exceed, in any case, fifty (50) days for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purposes. If the stock transfer books shall be closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten (10) days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders, such date in any case to be not more than seventy (70) days and, in case of a meeting of stockholders not less than ten (10) days prior to the date on which the particular action, requiring such determination of stockholders is to be taken. When a determination of stockholder, entitled to vote at any meeting of stockholders has been made as provided herein, such determination shall be applied to any adjournment thereof except when the determination has been made through the closing of the stock transfer books and the stated period of closing has expired. 5.05. Dividends. The Board of Directors of the Company --------- may, from time to time, declare and the Company may pay dividends on its outstanding shares in cash, property, or its own shares, as provided by law. ARTICLE VI. MISCELLANEOUS -------------------------- 6.01. Corporate Seal. The corporate seal shall be a round -------------- metallic disc, with the words "MODINE MANUFACTURING COMPANY, Wisconsin" around the circumference, and the words "CORPORATE SEAL" in the center. If a facsimile or printed seal is used on stock certificates, it shall be similar in content and design to the above. 6.02. Fiscal Year. The fiscal year of the Company shall ----------- begin on the first day of April in each year, and end on the thirty-first day of March in the following year. 6.03. Contracts. The Board of Directors may authorize any --------- officer or officers, agent or agents, to enter into any contract or exercise or deliver any instrument in the name of and on behalf of the Company, and such authorization may be general or confined to specific instances. In the absence of other designation, all deeds, mortgages, contracts, promissory notes, and instruments of assignment or pledge made by the Company shall be executed in the name of the Company by the Chairman, President or one of the Vice Presidents and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer; the Secretary or an Assistant Secretary, when necessary or required, shall affix the corporate seal thereto; and when so executed no other party to such instrument or any third party shall be required to make any inquiry into the authority of the signing officer or officers. 6.04. Loans. No indebtedness for borrowed money shall be ----- contracted on behalf of the Company and no evidence of such indebtedness shall be issued in its name unless authorized by or under the authority of a resolution of the Board of Directors. Such authorization may be general or confined to specific instances. 6.05. Drafts, Checks, etc. All checks, drafts or ------------------- other orders for the payment of money issued in the name of the Company shall be signed by such employee or employees, agent or agents, of the Company as are appointed by the Chairman or President, and in such manner, including facsimile and printed signatures, as may be designated by the Chairman or President. In connection with the furnishing of authorizing resolution and signature card forms needed by commercial banks, the corporate Secretary, or any Assistant Secretary, is authorized to execute and certify to such forms as he may deem appropriate as adopted under the authority of this by-law and as binding upon the Company in accordance therewith, thereby empowering employees or agents appointed by the President to sign checks, drafts, or other orders for the payment of money in the name of the Company. 6.06. Deposits. All funds of the Company not -------- otherwise employed shall be deposited from time to time to the credit of the Company in such banks, trust companies or other depositaries as may be selected by or under the authority of the Chairman or President. In connection with the furnishing of authorizing resolution and signature card forms, needed by such banks, trust companies or other depositaries, the corporate Secretary, or any Assistant Secretary, is authorized to execute and certify to such forms as he may deem appropriate as adopted under the authority of his by-law and as binding upon the Company in accordance therewith, thereby designating such banks, trust companies or other depositaries as may be selected by the Chairman or President, for the deposit of Company funds. 6.07. Voting of Securities Owned by this Company. ------------------------------------------ Subject always to the specific directions of the Board of Directors, (a) any shares or other securities issued by any other corporation and owned or controlled by this Company may be voted at any meeting of security holders of such other corporation by the Chairman of this Company if he be present, or in his absence by the President or any Vice President of this Company who may be present, and (b) whenever, in the judgment of the Chairman, or in his absence, of the President or any Vice President, it is desirable for this Company to execute a proxy or written consent in respect to any shares for other securities issued by any other corporation and owned by this Company, such proxy or consent shall be executed in the name of this Company by the Chairman, President or one of the Vice Presidents of this Company, without necessity of any authorization by the Board of Directors, affixation of corporate seal or countersignature or attestation by another officer. Any person or persons designated in the manner above stated as the proxy or proxies of this Company shall have full right, power and authority to vote the shares or other securities issued by such other corporation and owned by this Company the same as such shares or other securities might be voted by this Company. ARTICLE VII. AMENDMENTS ------------------------ These by-laws may be amended, repealed or altered in whole or in part by the affirmative vote of not less than two- third (2/3) of the shares of the Company entitled to vote thereon, or by the affirmative vote of not less than two-thirds (2/3) of the full Board of Directors of the Company, at any regular meeting of the stockholders or of the Board of Directors, or any special meeting of the stockholders or Bard of Directors, provided that such action has been specified in the notice of any such meeting. EX-4 3 0003.txt EXHIBIT 4(b)(i) MODINE MANUFACTURING COMPANY AND THE FIRST NATIONAL BANK OF CHICAGO Rights Agent Amendment Number 1 ------------------ to Rights Agreement Dated as of October 15, 1986 RIGHTS AGREEMENT ---------------- Amendment Number 1 ------------------ This Amendment, when executed, shall constitute a valid and binding amendment to that certain Rights Agreement dated as of October 15, 1986 by and between Modine Manufacturing Company, a Wisconsin corporation (the "Company"), and The First National Bank of Chicago, a national banking association (the "Rights Agent"). Recitals A. The Rights Agreement provides that the Company and the Rights Agent may supplement or amend the Rights Agreement from time to time. B. The Rights Agent has consolidated all of its shareholder services, including the services contemplated by the Rights Agreement, in one business unit known as "First Chicago Trust Company of New York." C. The Company and the Rights Agent desire to amend the Rights Agreement in accordance with the terms of this Amendment. Agreement 1. In consideration of the Recitals and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Rights Agent agree, pursuant to the provisions set forth in the Rights Agreement, to amend the Rights Agreement as follows: 2. The Rights Agreement is amended by substituting, where applicable, "First Chicago Trust Company of New York" in place of "The First National Bank of Chicago" as the Rights Agent. 3. This Amendment shall be effective as of January 18, 1995. 4. The Company and the Rights Agent agree that all other terms, provisions, covenants, or restrictions of the Rights Agreement, to the extent not inconsistent with this Amendment, shall remain unchanged and in full force and effect. 5. Capitalized terms which are not defined in this Amendment have the meanings given such terms in the Rights Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and their respective corporate seals to be hereunto affixed and attested, as of the effective date hereof. (SEAL) MODINE MANUFACTURING COMPANY Attest: By W. E. PAVLICK By R. T. SAVAGE ---------------------- -------------------------- Title: Secretary Title: President and Chief Executive Officer (SEAL) FIRST CHICAGO TRUST COMPANY OF NEW YORK Attest: By s/M. Phalen By s/L. Woods ---------------------- --------------------------- Title: Vice President Title: Vice President -2- EX-4 4 0004.txt EXHIBIT 4(b)(ii) MODINE MANUFACTURING COMPANY AND FIRST CHICAGO TRUST COMPANY OF NEW YORK Rights Agent Amendment Number 2 to Rights Agreement Dated as of October 15, 1986 RIGHTS AGREEMENT ---------------- Amendment Number 2 ------------------ This Amendment, when executed, shall constitute a valid and binding amendment to that certain Rights Agreement dated as of October 15, 1986 by and between Modine Manufacturing Company, a Wisconsin corporation (the "Company"), and First Chicago Trust Company of New York (the "Rights Agent"). Recitals A. The Rights Agreement provides that the Company and the Rights Agent may supplement or amend the Rights Agreement for the purpose of, among other things, extending the Final Expiration Date of the Rights. B The Company and the Rights Agent desire to amend the Rights Agreement in accordance with the terms of this Amendment. Agreement 1. In consideration of the Recitals and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Rights Agent agree, pursuant to the provision set forth in Section 26 of the Rights Agreement, to amend the Rights Agreement as follows: 2. Section 7(a)(i)of the Rights Agreement is amended by substituting the following: (i) the close of business on October 27, 2006 (the "Final Expiration Date"), . . . , 3. This Amendment shall be effective as of January 18, 1995. 4. The Company and the Rights Agent agree that all other terms, provisions, covenants, or restrictions of the Rights Agreement, to the extent not inconsistent with this Amendment, shall remain unchanged and in full force and effect. 5. Capitalized terms which are not defined in this Amendment have the meanings given such terms in the Rights Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and their respective corporate seals to be hereunto affixed and attested, as of the effective date hereof. (SEAL) MODINE MANUFACTURING COMPANY Attest: By W. E. PAVLICK By R. T. SAVAGE ---------------------- --------------------------- Title: Secretary Title: President and Chief Executive Officer (SEAL) FIRST CHICAGO TRUST COMPANY OF NEW YORK Attest: By s/M. Phalen By s/L. Woods ----------------------- ---------------------------- Title: Vice President Title: Vice President -2- EX-10 5 0005.txt EXHIBIT 10(f) MODINE MANUFACTURING COMPANY EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN PURPOSE ------- Modine Manufacturing Company (hereinafter called the "Company") has adopted the MODINE PENSION AND DISABILITY PLAN FOR SALARIED EMPLOYEES (hereinafter called the "Pension Plan"), and executed a Trust Agreement to provide retirement benefits for its employees. The Pension Plan and Trust is intended to meet requirements of Sections 401(a) and 501(a) of the Internal Revenue Code of 1954, as amended. The Pension Plan contains provisions placing limitations on the maximum benefit which may be paid to a Participant in the Pension Plan in accordance with Sections 401(a)(17) and 415 of the Internal Revenue Code. By resolution of November 14, 1979, the Board of Directors of the Company determined that the maximum benefit limitations in the Internal Revenue Code adversely affected the pension benefits of eligible employees. It therefore authorized the payment of supplemental retirement benefits of such employees impacted by these maximum benefit limitations. As a formal expression on the intent of said resolution of the Board of Directors, the Company hereby establishes an unfunded "Executive Supplemental Retirement Plan" within the meaning of Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA for a select group of highly compensated employees, to be effective for any eligible employee who terminates employment on or after November 14, 1979, (hereinafter called the "Plan"). ARTICLE I DEFINITIONS AND CONSTRUCTION ---------------------------- Section 1.1 Definitions: Except as specified below or elsewhere - ----------- ----------- in this Plan, the definitions of words and phrases appearing in this Plan shall have the meanings as set forth in the Pension Plan. Where the following words and phrases appear in this Plan, they shall have the respective meanings herein set forth, unless the context clearly indicates to the contrary: (a) Code: The Internal Revenue Code as now in effect or ---- hereafter amended. (b) Committee: The Plan Administrator consisting of at --------- least three officers of the Company who are appointed by the Officer Nomination and Compensation Committee of the Company, but who are not members of the Officer Nomination and Compensation Committee. (c) Effective Date: November 14, 1979, the date on which -------------- the provisions of this Plan became effective. Section 1.2 Except when otherwise indicated by the context, - ----------- words in a masculine gender shall include the feminine and neuter gender; the plural shall include the singular and the singular shall include the plural. Section 1.3 Employment Rights: Establishment of the Plan shall - ----------- ----------------- not be construed to give any employee the right to be retained by the Company or to any benefits not specifically provided by the Plan. Section 1.4 Severability: In the event any provision of the Plan - ----------- ------------ shall be held invalid or illegal for any reason, any illegality or invalidity shall not affect the remaining part of the Plan, but the Plan shall be construed and enforced as if the illegal or invalid provisions had never been inserted, and the Company shall have the privilege and opportunity to correct and remedy such questions of illegality or invalidity by amendment as provided in the Plan. Section 1.5 Applicable Law: This Plan is fully exempt from - ----------- -------------- Titles II, III and IV of ERISA. The Plan shall be governed and construed in accordance with Title I of ERISA and the laws of the State of Wisconsin. ARTICLE II PARTICIPATION AND ELIGIBILITY ----------------------------- Section 2.1 Participation: A Participant in the Pension Plan - ----------- ------------- shall become a Participant in this Plan when any benefits payable under the Pension Plan are reduced on account of the limitations in Code Section 415 or Code Section 401(a)(17). Section 2.2 Other Retirement Benefits: Section 2.1 shall not - ----------- ------------------------- preclude any Employee who has entered into an agreement with the Company in which is provided other supplemental retirement benefits from participating in this Plan and receiving such other supplemental retirement benefits; provided, however, that such Employee shall not receive the same benefit twice. ARTICLE III AMOUNT AND FORM OF BENEFIT PAYMENTS ----------------------------------- Section 3.1 Amount of Benefits: Benefits payable under the Plan - ----------- ------------------ shall be equal to: (a) The amount of benefits payable under the Pension Plan if the limitations in Code Section 415 and 401(a)(17) were not applied, less (b) The amount of benefits payable under the Pension Plan. Section 3.2 Form of Benefit Payments: A Participant may elect - ----------- ------------------------ the same manner of payment and optional benefits as are provided in ARTICLE V of the Pension Plan, with the following exceptions: (a) There is no joint and survivor pension payable to the spouse of any married Participant who dies before retiring from or otherwise leaving employment with the Company. (b) The monthly benefit to a Participant under the Plan shall be a monthly benefit only for the life of the Participant unless the Participant, prior to his retirement (as defined in the Pension Plan) elects one of the other optional Forms of Benefit as provided by the Pension Plan. An election of one optional form of benefit under the Pension Plan does not affect the right of the Participant to elect a different form of optional benefit under this Plan. (c) Election of an optional form of benefit and designation of a surviving beneficiary shall be done in accordance with the rules set forth in the Pension Plan, except that any such election by a married Participant shall not require the written consent of his spouse. (d) A Participant who is eligible to elect a lump-sum payment under the Pension Plan, may elect to have a lump-sum payment under this plan. (e) Benefits under this Plan shall commence or be paid at a time to be determined by the Committee, but not earlier than the Date of Determination under the Pension Plan and not later than twelve months after the Participant has terminated his employment with the Company. (f) If the commencement of benefit payments or a lump-sum payment under this Plan occurs later than the commencement of benefit payments or a lump-sum payment under the Pension Plan, the amount of benefits under this Plan shall be calculated in accordance with Section 3.1 based upon the pension benefit as of the date of commencement of benefit payments or the lump- sum payment under this Plan (but not later than age 65). Section 3.3 Forfeiture of Benefits: Neither a Participant nor - ----------- ---------------------- his beneficiary shall have any right to a benefit under this Plan if the Committee or the Company determines that the Participant engaged in a willful, deliberate, or gross act of commission or omission which is injurious to the finances or reputation of the Company. ARTICLE IV GENERAL PROVISIONS ------------------ Section 4.1 Plan Financing: All benefits paid under this Plan - ----------- -------------- shall be paid from the general assets of the Company. Such amounts shall be reflected on the accounting records of the Company but shall not be construed to create or require the creation of a trust, custodial, or escrow account. No Employee or Participant shall have any right, title or interest whatever in or to any investment reserves, accounts, or funds that the Company may purchase, establish, or accumulate to aid in providing benefits under this Plan. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create a trust or fiduciary relationship of any kind between the Company and the Employee or any other person. Neither an Employee or any beneficiary of an Employee shall acquire any interest greater than that of an unsecured creditor. Section 4.2 Administration: This Plan shall be administered by - ----------- -------------- the Committee. The Committee shall have, to the extent appropriate, the same powers, rights, duties, and obligations with respect to this Plan as it would have if it were charged with the duties of the Board of Administration under the Pension Plan. Section 4.3 Amendment and Termination: The Company reserves the - ----------- ------------------------- right to amend this Plan from time to time and reserves the right to terminate the Plan at any time, but any such amendment or termination shall not have the effect of reducing or eliminating any monthly benefit payable or accrued but not yet payable under the terms of this Plan as of the date of the amendment or termination. Section 4.4 Action by the Company: Any action required of or - ----------- --------------------- permitted by the Company under this Plan shall be by resolution of the Officers Nomination and Compensation Committee of the Company, the Board of Directors of the Company or any person or persons authorized by resolution of the Officers Nomination and Compensation Committee, or the Board of Directors including, but not limited to, the Committee. Section 4.5 Tax Liability: The Company may withhold from any - ----------- ------------- payments of benefits hereunder any taxes required to be withheld in such sum as the Company may reasonably estimate to be necessary to cover any taxes for which the Company may be liable and which may be assessed with regard to such payment. Section 4.6 Coordination with Pension Plan: Provisions of the - ----------- ------------------------------ Pension Plan, not specifically excluded or revised by this Plan, may be applied by the Committee or the Company in determining the rights and obligations, and any limitations thereon, under this Plan. IN WITNESS WHEREOF, MODINE MANUFACTURING COMPANY has caused this instrument to be executed by its duly authorized officers, this 16th day of July, 1987. MODINE MANUFACTURING COMPANY By: FRANK W. JONES ------------------------------ Title: Executive V.P. ---------------------------- ATTEST: W. E. PAVLICK - ---------------------- Secretary MODINE MANUFACTURING COMPANY EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN FIRST AMENDMENT WHEREAS, the Company established the Modine Manufacturing Company Executive Supplemental Retirement Plan effective November 14, 1979, and WHEREAS, it is the desire of the Company to amend such Plan as hereinafter set forth. NOW, THEREFORE, the Company does hereby adopt the First Amendment to the Modine Manufacturing Company Executive Supplemental Retirement Plan to be effective as of October 1, 1994. Section 3.2(d), is amended to read as follows in its entirety: (d) A Participant, upon his retirement, may elect a one- time lump-sum payment of his benefit under this Plan, whether or not he is eligible to elect a lump-sum payment under the Pension Plan. Except as expressly amended herein, the Modine Manufacturing Company Executive Supplemental Retirement Plan shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this First Amendment of the Modine Manufacturing Company Executive Supplemental Retirement Plan, this 19th day of October, 1994. MODINE MANUFACTURING COMPANY By: R. T. SAVAGE ---------------------------- ATTEST: W. E. PAVLICK - -------------------- EX-10 6 0006.txt EXHIBIT 10(j) STOCK AWARD PLAN 1. PURPOSES OF PLAN. The purposes of the Stock Award Plan of Modine Manufacturing Company ("Modine") are as follows: A. To further the growth, success and interest of the Company and its stockholders by enabling key managerial employees of the Company, who have responsibility for the administration of the affairs of the Company, to acquire shares of Modine Common Stock under the terms and conditions and in the manner contemplated by this Plan, thereby increasing their personal involvement in the fortunes of the Company; and B. To enable the Company to obtain and retain the services of desirable key managerial employees by providing such employees with an opportunity to become owners of Modine Common Stock under the terms and conditions and in the manner contemplated by this Plan. The term "Company" as used herein shall mean Modine and its majority owned subsidiaries, including subsidiaries which may be created or acquired during the period of this Plan. 2. ADMINISTRATION OF PLAN. This Plan shall be administered by the Officer Nomination and Compensation Committee consisting of two or more directors of the Board of Directors of Modine, none of whom shall be employees of the Company. The Committee shall interpret the Plan and to the extent and in the manner contemplated herein it shall exercise the discretion granted to it as to the determination of who shall participate in the Plan, and how many shares shall be awarded to each participant. The Committee shall issue from time to time such rules and interpretations as in its judgment are necessary or appropriate in order to effectively administer the Plan. 3. ELIGIBLE EMPLOYEES. Employees including officers of the Company who the Committee determines have and exercise management functions and responsibilities shall be eligible for participation under the Plan. However, no member of the Board of Directors of the Company shall be eligible to participate under the Plan unless such member is also an employee of the Company, and no member of the Committee shall be eligible to participate under the Plan. 4. SHARES SUBJECT TO PLAN. The Board of Directors and the shareholders of the Company in July 1994 approved a broad Incentive Compensation Plan providing for an aggregate of 3,000,000 shares of the Common Stock, $0.625 par value of Modine for various plans adopted by the Board of Directors under such authority. The 1994 Incentive Compensation Plan permitted the use of either newly-issued shares, authorized but heretofore unissued shares, or shares reacquired by the Company, including shares purchased on the open market. If shares issued pursuant hereto shall have been forfeited and returned to Modine in connection with the restrictions imposed upon such shares pursuant to this Plan, such forfeited shares again shall become available for issuance under the Plan prior to termination of the Plan. 5. RESTRICTIONS. All shares awarded pursuant to this Plan shall be subject to the following restrictions: (a) The shares may not be sold or otherwise alienated or hypothecated as long as they are subject to forfeiture provided in this Section 5. (b) In the event of termination with the Company of a participant prior to the beginning of the third year after shares are awarded to him hereunder, if such termination is for any reason other than normal retirement, death, total disability or early retirement with the consent of Modine's Board of Directors or the Committee, the shares shall be forfeited and returned to the Company; and if such employment so terminates for any reason other than those described above more than two (2) years after but prior to the beginning of the seventh (7) year after the granting of such stock awards, the shares which are at the date of such termination of employment still subject to the restrictions imposed hereunder shall be forfeited and returned to the Company. (c) In the event a participant who has been awarded shares hereunder terminates employment with the Company because of normal retirement, death, total disability or early retirement with the consent of Modine's Board of Directors or of the Committee, the shares so awarded shall not be subject to forfeit and shall vest with the employee, or the employee's designated legal representative in the event of death. In the event a participant is subject to a qualified domestic relations order, the shares so awarded and to which the participant is otherwise entitled under the terms of this Plan shall vest with such person as designated by the qualified domestic relations order. (d) Except as otherwise provided above, the restrictions imposed upon shares awarded to each participant hereunder shall be removed as to one-fifth of the aggregate number of shares awarded to the participant at one time upon the expiration of each of the second, third, fourth, fifth and sixth years after the award of such shares hereunder. (e) In the event at any time the Company is dissolved or is a party to a merger or consolidation in which the Company is not the surviving corporation, the restrictions provided in this Section 5 shall automatically cease as of the effective date of such dissolution, merger or consolidation, as the case may be. (f) Notwithstanding any other terms or conditions contained in this Plan, the restrictions provided in this Section 5 shall automatically cease in the event of a voluntary or involuntary termination with the Company of a participant for any reason within a two- year period after the occurrence of a Pre-Condition described below in this subparagraph: "Pre-Condition" means that a person (as defined in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended), or a corporation or other entity controlled by the person, has (i) merged or consolidated with the Company, (ii) acquired substantially all of the assets of the Company, or (iii) acquired securities of the Company having at least 20% of the combined voting power of the Company's then outstanding securities, except in the case of a merger of another entity with the Company where the Company is the surviving corporation, the merger solely involved an acquisition by the Company of another business entity in which the Company issued its authorized but unissued or treasury stock to stockholders of the acquired entity, and over 80% of the combined voting power of the Company's stock after the merger is owned of record by stockholders of the Company prior to the merger. 6. OTHER RESTRICTIONS. The Committee may impose such other restrictions on any shares awarded pursuant to the Plan as it may deem advisable, including, without limitation, restrictions under the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, under the requirements of any stock exchange or any over-the-counter securities trading market upon which such share or shares of the same class are then listed and under any blue sky or securities laws applicable to such shares. 7. ESCROW OR LEGEND. In order to enforce the restrictions imposed upon shares issued hereunder, the Committee may require any participant to enter into an Escrow Agreement providing that the certificates representing shares issued pursuant to this Plan shall remain in the physical custody of an escrow holder until any or all of the restrictions imposed pursuant to this Plan have terminated and the Committee may cause a legend or legends to be placed on any certificates representing shares issued pursuant to this Plan, which legend or legends shall make appropriate reference to the restrictions imposed hereunder. 8. AMENDMENTS. This Plan may be amended at any time by the Board of Directors of Modine, provided that no such amendment shall increase the maximum number of shares that may be issued pursuant to the Plan except pursuant to Section 4 hereunder without the further approval of the stockholders of Modine. 9. TERMINATION. This Plan shall terminate and no further shares shall be awarded or issued hereunder on July 19, 2004 or such earlier date as may be determined by the Committee. The termination of this Plan, however, shall not affect any restrictions previously imposed on shares issued pursuant to this Plan. EX-10 7 0007.txt EXHIBIT 10(k) MODINE MANUFACTURING COMPANY ---------------------------- INCENTIVE STOCK OPTION AGREEMENT -------------------------------- THIS INCENTIVE STOCK OPTION granted this day of ---------- January , 19 , by Modine Manufacturing Company, a - -------- ------- Wisconsin corporation (the "Company"), to -------------------- (the "Employee") under and pursuant to the Company's 1994 Incentive Compensation Plan (the "Plan"). WITNESSETH: WHEREAS, the Committee of the Board of Directors, which is authorized to administer the Plan (the "Committee"), is of the opinion that the interests of the Company and its subsidiaries will be advanced by encouraging and enabling certain key employees of the Company and its subsidiaries to acquire or increase their proprietary interest in the Company, thus providing them with a more direct stake in its welfare and assuring a closer identification of their interests with those of the Company; and WHEREAS, the Committee believes that the acquisition of such an interest in the Company will stimulate the efforts of such employees and strengthen their desire to remain with the Company or one of its subsidiaries; NOW, THEREFORE, in consideration of the aforementioned, and the covenants and agreements herein set forth, the Company grants this option (which is intended to qualify as an incentive stock option within the meaning of Section 422A of the Internal Revenue Code) to the Employee on the terms hereinafter expressed: 1. Option Grant. The Company hereby grants to the Employee an ------------ option to purchase a total of shares of Common ---------- Stock of the Company at the option price of $ per ------- share, being at least equal to 100% of the fair market value of such shares on the date hereof. 2. Time of Exercise; Exercise Limitation. This option may be ------------------------------------- exercised (in the manner provided in paragraph 3 hereof) in whole or in part, from time to time after the date hereof, subject to the following limitations: (a) Except for exercises under paragraph 5 below, this option may not be exercised for one year from the date when the Employee's present employment is first commenced. (b) This option is intended to qualify as an incentive stock option so that the Employee may obtain preferential tax treatment and, consequently, certain limitations on disposition must be observed. In order to obtain preferential tax treatment, shares of capital stock transferred to the Employee pursuant to this Agreement may not be disposed of within twenty-four (24) months after the grant of such shares or twelve (12) months after exercise of such shares. (c) If Employee is an officer of the Company subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, this option may not be exercised by the Employee for six (6) months from the date of grant. (d) This 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 this option. (e) This option may not be exercised beyond the shorter of: (i) ten (10) years from the date hereof; (ii) after an Employee has been terminated for cause (such as dishonesty or negligence in performance of Employee's duties). In such event the employee shall forfeit all unexercised options; (iii) three (3) years (except as provided in paragraph 5) following termination of employment (if without cause) or retirement; provided, however, that this option must be exercised within ninety (90) days following termination of employment (if without cause) or retirement from the Company in order to obtain preferential tax treatment. In the event this option is not exercised in accordance with subparagraphs (i), (ii) or (iii) above, it shall be forfeited as an unexercised option. (f) To the extent required by the Internal Revenue Code, the aggregate fair market value (determined at the time the option is granted) of the Common Stock for which incentive stock options are exercisable for the first time by an option holder during any calendar year (under all the plans of the Company) shall not exceed $100,000. This limitation applies to Incentive Stock Options granted after 1986 only. Incentive Stock Options exercisable for the first time in a calendar year that exceed the $100,000 annual limit are denied preferential tax treatment. 3. Exercise of Option. This option may be exercised only by ------------------ appropriate notice in writing delivered to the Secretary of the Company at 1500 DeKoven Avenue, Racine, Wis. 53403, and accompanied by: (a) Check payable to the order of the Company, or Modine stock (the value of which shall be the fair market value of the stock on the day preceding the exercise date), or a combination of Modine stock and cash for the full purchase price of the shares purchased. 4. Nontransferability of Option. This option is not ---------------------------- transferable by the Employee otherwise than (a) by will or the laws of descent and distribution, or (b) pursuant to a qualified domestic relations order, and is exercisable, during the Employee's lifetime, only by the Employee or his legal representative. 5. Death or Disability of Employee. If the Employee dies ------------------------------- during the option period, this option may be exercised in whole or in part and from time to time, in the manner described in paragraph 3 hereof, by the Employee's estate or the person to whom the option passes by will or the laws of descent and distribution, but only within a period of (a) one year next succeeding the Employee's death, or (b) ten years from the date hereof, whichever period is shorter. If the Employee becomes disabled during the option period, his option may be exercised in whole or in part and from time to time, in the manner described in paragraph 3 hereof, within one year of retirement or other termination of employment due to a determination of permanent and total disability; except that any options exercised after one year of retirement due to disability, but prior to expiration of three years following such retirement, will be denied preferential tax treatment. 6. Delivery of Certificates. The Company shall issue and ------------------------ deliver certificates for stock purchased pursuant to an exercise of this option subject to the following limitations: (a) The Employee shall have no interest in any such shares until payment for said shares is made in accordance with paragraph 3 hereinabove. (b) The Company shall not be required to issue or deliver any certificate for its Common Stock purchased upon the exercise of this option prior to the admission of such shares to listing on any stock exchange or any over-the-counter quotation system on which shares may at that time be listed. In the event of the exercise of this option while the option class of stock is not so listed or admitted, the Company shall make prompt application for such listing or admission. If any time during the option period the Company shall be advised by its counsel that the shares deliverable upon an exercise of the option are required to be registered under the Federal Securities Act of 1933 or any state securities law or that delivery of such shares must be accompanied or preceded by a prospectus, the Company will use its best efforts to effect such registration or provide such prospectus, but delivery of shares by the Company may be deferred until such registration is effected or such prospectus is available. 7. Adjustment Provisions. In the event that there is any --------------------- change in the number of issued shares of Common Stock of the Company without new consideration to the Company therefor, by reason of stock dividends, stock split-ups or like recapitalizations, the number of shares which may thereafter be purchased under this option shall be adjusted in the same proportion as said change in issued shares. In such event, the per share purchase price specified in paragraph 1 above shall be adjusted so that the total consideration payable to the Company for the adjusted number of shares remaining subject to this option shall not be changed by reason of the adjustment in number of shares. If during the term of this option the Common Stock of the Company shall be combined or be changed into the same or another kind of stock of the Company or into securities of another corporation, whether through recapitalization, reorganization, sale, merger, consolidation, or by other means, the Company shall cause adequate provision to be made whereby the Employee thereafter will be entitled to receive, upon the due exercise of any then unexercised portion of this option, the securities which the Employee would have been entitled to receive for Common Stock acquired through exercise of such portion of the option (regardless of whether or to what extent the option would then have been exercisable) immediately prior to the effective date of such recapitalization, reorganization, sale, merger, consolidation, or similar transaction. If appropriate, due adjustment shall be made in the per share or per unit price of the securities purchased on exercise of this option following said recapitalization, reorganization, sale, merger, consolidation, or similar transaction. 8. Effect on Other Benefits. Neither this option, shares of ------------------------ stock issued upon its exercise, any excess of market value over option price, nor any other rights, benefits, values or interests resulting from the granting of this option shall be considered as compensation for purposes of any pension, profit sharing, retirement plan, insurance plan, investment or stock purchase plan, or any other employee benefit plan of the Company or any of its subsidiaries. 9. Fair Market Value. For purposes hereof, "fair market ----------------- value" shall equal the closing market price on the largest stock exchange or over-the-counter quotation system on which Modine Common Stock is traded on the date a determination is required to be made under the Plan or this Agreement, or if no stock is traded on that day then it shall equal the closing market price on the last preceding day on which such stock was traded on said exchange or system. 10. Employee Not Deemed to be a Shareholder. The Employee --------------------------------------- shall not be deemed to be a shareholder of the Company for any purposes with respect to any option granted hereunder except to the extent that such option shall have been exercised and a stock certificate issued therefor. 11. No Right to Continued Employment. Nothing in this -------------------------------- Agreement or the Plan shall confer upon Employee any right to continue in the employment of the Company or in any way affect the right of the Company to terminate Employee's employment at any time. 12. Cancellation and Rescission of Stock Option. The Committee ------------------------------------------- may cancel this option at any time if Employee is not in compliance with all other applicable provisions of this option, the Plan, and with the following conditions: (a) Employee shall not render services for any organization or engage directly or indirectly in any business which, in the judgment of the Committee, is or becomes competitive with the Company, or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company; (b) Employee shall comply fully with applicable laws and government regulations and maintain high ethical standards. Employee shall also comply with the Company's corporate policies, including, but not limited to, Policy No. G-2, Guideline for Business Conduct, and Policy No. G-3, Antitrust Compliance, and the Company's Agreement for Protection of Trade Secrets and Sales Data and for Assignment of Inventions; or If Employee's employment has terminated, the judgment of the Committee shall be based on Employee's position and responsibilities while employed by the Company, Employee's post-employment responsibilities and position with the other organization or business, the extent of past, current and potential competition or conflict between the Company and the other organization or business, the effect on the Company's customers, suppliers and competitors of Employee's assuming the post-employment position, and such other considerations as are deemed relevant given the applicable facts and circumstances. If Employee retires, he shall be free, however, to purchase as an investment or otherwise, stock or other securities of such organization or business so long as they are listed upon a recognized securities exchange or traded over-the-counter, and such investment does not represent a substantial investment to Employee or a greater than 10 percent equity interest in the organization or business. Failure to comply with the provisions of paragraphs (a) or (b) of this Paragraph 13 prior to, or during the twenty-four (24) months after, any exercise pursuant to this option shall cause such exercise to be rescinded. The Company shall notify Employee in writing of any such rescission within twenty-four (24) months after such exercise. Within ten days after receiving such a notice from the Company, Employee shall pay to the Company the amount of any gain realized or payment received pertaining to the rescinded exercise of this option. Such payment shall be made either in cash or by returning to the Company the number of shares of Common Stock that Employee received in connection with the rescinded exercise. 13. Grant Subject to 1994 Incentive Compensation Plan. This ------------------------------------------------- award is subject to all the terms and conditions set forth in the 1994 Incentive Compensation Plan as amended which is hereby incorporated by reference and to all determinations of the Committee of the Board of Directors which is authorized to administer the Plan. As a condition of granting the option herein granted, the Employee agrees, for himself and his personal representatives, that any requirement or interpretation, dispute, or disagreement which may arise under or as a result of or pursuant to this Agreement or the Plan shall be determined by the Committee in its sole discretion, and that any interpretation or determination by the Committee shall be final, binding and conclusive. 14. Governing Law. This Agreement shall be construed, ------------- administered and governed in all respects in accordance with the laws of the State of Wisconsin. IN WITNESS WHEREOF, the Company has caused this option to be executed on the date first above written. ATTEST: MODINE MANUFACTURING COMPANY By: - --------------------------- ----------------------------------- W. E. Pavlick, Secretary D. R. Johnson President & Chief Executive Officer Accepted and Agreed To: --------------------------------------- Employee MODINE MANUFACTURING COMPANY ---------------------------- NON-QUALIFIED STOCK OPTION AGREEMENT ------------------------------------ THIS NON-QUALIFIED STOCK OPTION granted this day of ------ January, 19 by Modine Manufacturing Company, a Wisconsin - ------- ---- corporation (the "Company"), to , (the ------------------------- "Employee") under and pursuant to the Company's 1994 Incentive Compensation Plan (the "Plan"). WITNESSETH: WHEREAS, The Committee of the Board of Directors, which is authorized to administer the Plan (the "Committee"), is of the opinion that the interests of the Company and its subsidiaries will be advanced by encouraging and enabling certain key employees of the Company and its subsidiaries to acquire or increase their proprietary interest in the Company, thus providing them with a more direct stake in its welfare and assuring a closer identification of their interests with those of the Company; and WHEREAS, the Committee believes that the acquisition of such an interest in the Company will stimulate the efforts of such employees and strengthen their desire to remain with the Company or one of its subsidiaries; NOW, THEREFORE, in consideration of the aforementioned, and the covenants and agreements herein set forth, the Company grants its option to the Employee on the terms hereinafter expressed: 1. Option Grant. The Company hereby grants to the Employee ------------ an option to purchase a total of shares of ----------- Common Stock of the Company at the option price of $ ------ per share, being at least equal to 100% of the fair market value of such shares on the date hereof. 2. Time of Exercise. This option may be exercised (in the ---------------- manner provided in paragraph 3 hereof) in whole or in part, from time to time after the date hereof, subject to the following limitations: (a) Except for exercise under paragraph 5 below, this option may not be exercised for one year from the date when the Employee's present employment with Modine first commenced. (b) If Employee is an officer of the Company subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, this option may not be exercised by the Employee for six (6) months from the date of grant. (c) Options may be exercised before the option period terminates without regard to the order of grant. (d) This 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 this option. (e) This option may not be exercised beyond the shorter of: (i) ten (10) years from the date hereof; (ii) after an Employee has been terminated for cause (such as dishonesty or negligence in performance of Employee's duties). In such event the employee shall forfeit all unexercised options; (iii) three (3) years (except as provided in paragraph 5) following termination of employment (if without cause) or retirement. In the event this option is not exercised in accordance with subparagraphs (i), (ii) or (iii) above, it shall be forfeited as an unexercised option. 3. Exercise of Option. This option may be exercised only by ------------------ appropriate notice in writing delivered to the Secretary of the Company at 1500 DeKoven Avenue, Racine, Wis. 53403 and accompanied by: (a) Check payable to the order of the Company, or Modine Stock (the value of which shall be the fair market value of the stock on the day preceding the exercise date), or a combination of Modine stock and cash for the full purchase price of the shares purchased. 4. Nontransferability of Option. This option is not ---------------------------- transferable by the Employee otherwise than (a) by will or the laws of descent and distribution, or (b) pursuant to a qualified domestic relations order, and is exercisable, during the Employee's lifetime, only by the Employee or his legal representative. 5. Death of Employee. If the Employee dies during the option ----------------- period, this option may be exercised in whole or in part and from time to time, in the manner described in paragraph 3 hereof, by the Employee's estate or the person to whom the option passes by will or the laws of descent and distribution, but only within a period of (a) one year next succeeding the Employee's death, or (b) ten years from the date hereof, whichever period is shorter. 6. Delivery of Certificates. The Company shall issue and ------------------------ deliver certificates for stock purchased pursuant to an exercise of this option subject to the following limitations: (a) The Employee shall have no interest in any such Shares until certificates for said Shares are issued. (b) The Company shall not be required to issue or deliver any certificates for its Common Stock purchased upon the exercise of this option prior to the admission of such shares to listing on any stock exchange or any over-the-counter quotation system on which shares may at that time be listed. In the event of the exercise of this option while the option class of stock is not so listed or admitted, the Company shall make prompt application for such listing or admission. If any time during the option period the Company shall be advised by its counsel that the shares deliverable upon an exercise of the option are required to be registered under the Federal Securities Act of 1933 or any state securities law or that delivery of such shares must be accompanied or preceded by a prospectus, the Company will use its best efforts to effect such registration or provide such prospectus, but delivery of shares by the Company may be deferred until such registration is effected or such prospectus is available. 7. Adjustment Provisions. In the event that there is any --------------------- change in the number of issued shares of Common Stock of the Company without new consideration to the Company therefor, by reason of stock dividends, stock split-ups or like recapitalizations, the number of shares which may thereafter be purchased under this option shall be adjusted in the same proportion as said change in issued shares. In such event, the per share purchase price specified in paragraph 1 above shall be adjusted so that the total consideration payable to the Company for the adjusted number of shares remaining subject to this option shall not be changed by reason of the adjustment in number of shares. If during the term of this option the Common Stock of the Company shall be combined or be changed into the same or another kind of stock of the Company or into securities of another corporation, whether through recapitalization, reorganization, sale, merger, consolidation, or by other means, the Company shall cause adequate provision to be made whereby the Employee thereafter will be entitled to receive, upon the due exercise of any then unexercised portion of this option, the securities which the Employee would have been entitled to receive for Common Stock acquired through exercise of such portion of the option (regardless of whether or to what extent the option would then have been exercisable) immediately prior to the effective date of such recapitalization, reorganization, sale, merger, consolidation, or similar transaction. If appropriate, due adjustment shall be made in the per share or per unit price to the securities purchased on exercise of this option following said recapitalization, sale, merger, consolidation, or similar transaction. 8. Effect on Other Benefits. Neither this option, shares of ------------------------ stock issued upon its exercise, any excess of market value over option price, nor any other rights, benefits, values or interests resulting from the granting of this option shall be considered as compensation for purposes of any pension, profit sharing, retirement plan, insurance plan, investment or stock purchase plan, or any other employee benefit plan of the Company or any of its subsidiaries. 9. Fair Market Value. For purposes hereof, "fair market ----------------- value" shall equal the closing market price on the largest stock exchange or over-the-counter quotation system on which Modine Common Stock is traded on the date a determination is required to be made under the Plan or this Agreement, or if no stock is traded on that day then it shall equal the closing market price on the last preceding day on which such stock was traded on said exchange or system. 10. Employee Not Deemed to be a Shareholder. The Employee --------------------------------------- shall not be deemed to be a shareholder of the Company for any purposes with respect to any option granted hereunder except to the extent that such option shall have been exercised and a stock certificate issued therefor. 11. No Right to Continued Employment. Nothing in this -------------------------------- Agreement or the Plan shall confer upon Employee any right to continue in the employment of the Company or in any way effect the right of the Company to terminate Employee's employment at any time. 12. Cancellation and Rescission of Stock Option. The ------------------------------------------- Committee may cancel this option at any time if Employee is not in compliance with all other applicable provisions of this option, the Plan, and with the following conditions: (a) Employee shall not render services for any organization or engage directly or indirectly in any business which, in the judgment of the Committee, is or becomes competitive with the Company, or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company; (b) Employee shall comply fully with applicable laws and government regulations and maintain high ethical standards. Employee shall also comply with the Company's corporate policies, including, but not limited to, Policy No. G-2, Guideline for Business Conduct, and Policy No. G-3, Antitrust Compliance, and the Company's Agreement for Assignment of Inventions. If Employee's employment has terminated, the judgment of the Committee shall be based on Employee's position and responsibilities while employed by the Company, Employee's post-employment responsibilities and position with the other organization or business, the extent of past, current and potential competition or conflict between the Company and the other organization or business, the effect on the Company's customers, suppliers and competitors of Employee's assuming the post-employment position, and such other considerations as are deemed relevant given the applicable facts and circumstances. If Employee retires, he shall be free, however, to purchase as an investment or otherwise, stock or other securities of such organization or business so long as they are listed upon a recognized securities exchange or traded over-the-counter, and such investment does not represent a substantial investment to Employee or a greater than 10 percent equity interest in the organization or business. Failure to comply with the provisions of paragraphs (a) or (b) of this Paragraph 13 prior to, or during the twenty-four (24) months after, any exercise pursuant to this option shall cause such exercise to be rescinded. The Company shall notify Employee in writing of any such rescission within twenty-four (24) months after such exercise. Within ten days after receiving such a notice from the Company, Employee shall pay to the Company the amount of any gain realized or payment received pertaining to the rescinded exercise of this option. Such payment shall be made either in cash or by returning to the Company the number of shares of Common Stock that Employee received in connection with the rescinded exercise. 13. Grant Subject to 1994 Incentive Compensation Plan. This ------------------------------------------------- award is subject to all the terms and conditions set forth in the 1994 Incentive Compensation Plan which is hereby incorporated by reference and to all determinations of the Committee of the Board of Directors which is authorized to administer the Plan. As a condition of granting the option herein granted, the Employee agrees, for himself and his personal representatives, that any requirement or interpretation, dispute, or disagreement which may arise under or as a result of or pursuant to this Agreement or the Plan shall be determined by the Committee in its sole discretion, and that any interpretation or determination by the Committee shall be final, binding and conclusive. 14. Governing Law. This Agreement shall be construed, ------------- administered and governed in all respects in accordance with the laws of the State of Wisconsin. IN WITNESS WHEREOF, the Company has caused this option to be executed on the date first above written. ATTEST: MODINE MANUFACTURING COMPANY By: - ------------------------- --------------------------------- W. E. Pavlick, Secretary D. R. Johnson, President and Chief Executive Officer Accepted and Agreed To: ------------------------------------- Employee EX-10 8 0008.txt EXHIBIT 10(l) MODINE MANUFACTURING COMPANY ---------------------------- DIRECTOR'S STOCK OPTION AGREEMENT --------------------------------- THIS DIRECTOR'S STOCK OPTION granted this day of ----- , , by Modine Manufacturing Company, a Wisconsin - --------------- ------ corporation (the "Company"), to (the ------------------------- "Director") under and pursuant to the Company's 1994 Stock Option Plan For Non-Employee Directors (the "Directors' Plan"). WITNESSETH: WHEREAS, the Board of Directors is of the opinion that the interests of the Company will be advanced by encouraging and enabling the non-employee directors of the Company to acquire or increase their proprietary interest in the Company; and WHEREAS, the Board of Directors believes that the acquisition of such an interest will assist the Company in its efforts to attract and retain well qualified individuals to serve as its directors; NOW, THEREFORE, in consideration of the aforementioned, and the covenants and agreements herein set forth, the Company grants this option to the Director on the terms hereinafter expressed: 1. Option Grant. The Company hereby grants to the Director an ------------ option to purchase a total of 15,000 shares of Common ---------- Stock of the Company at the option price of $ -------------- per share, being at least equal to 100% of the fair market value of such shares on the date hereof. 2. Time of Exercise. This option may be exercised (in the ---------------- manner provided in paragraph 3 hereof) in whole or in part, from time to time after the date hereof; provided, however, that this option may not be exercised beyond the shorter of: (a) ten (10) years from the date hereof; (b) after the Director has been removed for cause, in which event the Director shall forfeit all unexercised options; (c) except as provided in paragraphs 2(d) or 5, after expiration of 90 days following the Director's resignation from the Board of Directors or failure to be re-elected to the Board of Directors by the shareholders; or (d) after expiration of 3 years following the Director's retirement pursuant to the Company's Director Emeritus Retirement Plan; after such period the Director shall forfeit all unexercised options. Pursuant to Section 16 of the Securities Exchange Act of 1934, stock subject to the exercise of this option may not be sold by the Director for six (6) months from the date of grant. 3. Exercise of Option. This option may be exercised only by ------------------ appropriate notice in writing delivered to the Secretary of the Company at 1500 DeKoven Avenue, Racine, Wis. 53403, and accompanied by: (a) Check payable to the order of the Company, or Modine stock (the value of which shall be the fair market value of the stock on the day preceding the exercise date), or a combination of Modine stock and cash for the full purchase price of the shares purchased; and (b) Written representation by the Director that at the time of such exercise it is the Director's intention to acquire the shares for investment and not for resale. Such written representation shall not be required of the purchaser under paragraph 5 below. 4. Nontransferability of Option. This option is not ---------------------------- transferable by the Director otherwise than (a) by will or the laws of descent and distribution, or (b) pursuant to a qualified domestic relations order. This option is exercisable during the Director's lifetime only by the Director. 5. Death of Director. If the Director dies during the option ----------------- period, this option may be exercised in whole or in part in the manner described in paragraph 3 hereof, by the Director's estate or the person to whom the option passes by will or the laws of descent and distribution, but only within a period of one year next succeeding the Director's death. 6. Delivery of Certificates. The Company shall issue and ------------------------ deliver certificates for stock purchased pursuant to an exercise of this option subject to the following limitations: (a) The Director shall have no interest in any such Shares until certificates for said Shares are issued. (b) The Company shall not be required to issue or deliver any certificate for its Common Stock purchased upon the exercise of this option prior to the admission of such shares to listing on any stock exchange or any over-the-counter quotation system on which shares may at that time be listed. In the event of the exercise of this option while the option class of stock is not so listed or admitted, the Company shall make prompt application for such listing or admission. If any time during the option period the Company shall be advised by its counsel that the shares deliverable upon an exercise of the option are required to be registered under the Federal Securities Act of 1933 or any state securities law or that delivery of such shares must be accompanied or preceded by a prospectus, the Company will use its best efforts to effect such registration or provide such prospectus, but delivery of shares by the Company may be deferred until such registration is effected or such prospectus is available. 7. Adjustment Provisions. In the event that there is any --------------------- change in the number of issued shares of Common Stock of the Company without new consideration to the Company therefor, by reason of stock dividends, stock split-ups or like recapitalizations, the number of shares which may thereafter be purchased under this option shall be adjusted in the same proportion as said change in issued shares. In such event, the per share purchase price specified in paragraph 1 above shall be adjusted so that the total consideration payable to the Company for the adjusted number of shares remaining subject to this option shall not be changed by reason of the adjustment in number of shares. If during the term of this option the Common Stock of the Company shall be combined or be changed into the same or another kind of stock of the Company or into securities of another corporation, whether through recapitalization, reorganization, sale, merger, consolidation, etc., the Company shall cause adequate provision to be made whereby the Director thereafter will be entitled to receive, upon the due exercise of any then unexercised portion of this option, the securities which the Director would have been entitled to receive for Common Stock acquired through exercise of such portion of the option (regardless of whether or to what extent the option would then have been exercisable) immediately prior to the effective date of such recapitalization, reorganization, sale, merger, consolidation, etc. If appropriate, due adjustment shall be made in the per share or per unit price of the securities purchased on exercise of this option following said recapitalization, reorganization, sale, merger, consolidation, etc. 8. Fair Market Value. For purposes hereof, "fair market value" ----------------- shall equal the closing market price on the largest stock exchange or the over the counter quotation system on which Modine Common Stock is traded on the date a determination is required to be made under the Directors' Plan or this Agreement, or if no stock is traded on that day then it shall equal the closing market price on the last preceding day on which such stock was traded on said exchange or system. 9. Tenure. Nothing in this Agreement or the Directors' Plan ------ shall confer upon the Director any right to continue to serve as a Director of the Company or in any way effect the right of the Company to take any action against a Director pursuant to law and/or the Company's Articles of Incorporation or By-Laws. 10. Grant Subject to 1994 Stock Option Plan for Non-Employee --------------------------------------------------------- Directors. This grant is subject to all the terms and --------- conditions set forth in the 1994 Stock Option Plan for Non-Employee Directors which is hereby incorporated by reference including the requirement of shareholder approval and to all determinations of the Committee which is authorized to administer the Directors' Plan. As a condition of granting the option herein granted, the Director agrees, for himself and his personal representatives, that any requirement or interpretation, dispute, or disagreement which may arise under or as a result of or pursuant to this Agreement or the Directors' Plan shall be determined by the Committee in its sole discretion, and that any interpretation or determination by the Committee shall be final, binding and conclusive. 11. Governing Law. This Agreement shall be construed, ------------- administered and governed in all respects in accordance with the laws of the State of Wisconsin. IN WITNESS WHEREOF, the Company has caused this option to be executed on the date first above written. ATTEST: MODINE MANUFACTURING COMPANY By: - --------------------------------- ---------------------------- W. E. Pavlick, Secretary D. R. Johnson, President and Chief Executive Officer Accepted and Agreed To: ------------------------------- Director EX-10 9 0009.txt EXHIBIT 10(x) 2000 STOCK AWARD PLAN 1. PURPOSES OF PLAN. The purposes of the Stock Award Plan of Modine Manufacturing Company ("Modine") are as follows: A. To further the growth, success and interest of the Company and its stockholders by enabling key managerial employees of the Company, who have responsibility for the administration of the affairs of the Company, to acquire shares of Modine Common Stock under the terms and conditions and in the manner contemplated by this Plan, thereby increasing their personal involvement in the fortunes of the Company; and B. To enable the Company to obtain and retain the services of desirable key managerial employees by providing such employees with an opportunity to become owners of Modine Common Stock under the terms and conditions and in the manner contemplated by this Plan. The term "Company" as used herein shall mean Modine and its majority owned subsidiaries, including subsidiaries which may be created or acquired during the period of this Plan. 2. ADMINISTRATION OF PLAN. This Plan shall be administered by the Officer Nomination and Compensation Committee consisting of two or more directors of the Board of Directors of Modine, none of whom shall be employees of the Company. The Committee shall interpret the Plan and to the extent and in the manner contemplated herein it shall exercise the discretion granted to it as to the determination of who shall participate in the Plan, and how many shares shall be awarded to each participant. The Committee shall issue from time to time such rules and interpretations as in its judgment are necessary or appropriate in order to effectively administer the Plan. 3. ELIGIBLE EMPLOYEES. Employees including officers of the Company who the Committee determines have and exercise management functions and responsibilities shall be eligible for participation under the Plan. However, no member of the Board of Directors of the Company shall be eligible to participate under the Plan unless such member is also an employee of the Company, and no member of the Committee shall be eligible to participate under the Plan. 4. SHARES SUBJECT TO PLAN. The Board of Directors and the shareholders of the Company in July 1994 approved a broad Incentive Compensation Plan providing for an aggregate of 3,000,000 shares of the Common Stock, $0.625 par value of Modine for various plans adopted by the Board of Directors under such authority. The 1994 Incentive Compensation Plan permitted the use of either newly-issued shares, authorized but heretofore unissued shares, or shares reacquired by the Company, including shares purchased on the open market. If shares issued pursuant hereto shall have been forfeited and returned to Modine in connection with the restrictions imposed upon such shares pursuant to this Plan, such forfeited shares again shall become available for issuance under the Plan prior to termination of the Plan. 5. RESTRICTIONS. All shares awarded pursuant to this Plan shall be subject to the following restrictions: (a) The shares may not be sold or otherwise alienated or hypothecated as long as they are subject to forfeiture provided in this Section 5. (b) In the event of termination with the Company of a participant prior to the beginning of the second year after shares are awarded to him hereunder, if such termination is for any reason other than normal retirement, death, total disability or early retirement with the consent of Modine's Board of Directors or the Committee, the shares shall be forfeited and returned to the Company; and if such employment so terminates for any reason other than those described above more than one (1) year after but prior to the beginning of the sixth (6) year after the granting of such stock awards, the shares which are at the date of such termination of employment still subject to the restrictions imposed hereunder shall be forfeited and returned to the Company. (c) In the event a participant who has been awarded shares hereunder terminates employment with the Company because of normal retirement, death, total disability or early retirement with the consent of Modine's Board of Directors or of the Committee, the shares so awarded shall not be subject to forfeit and shall vest with the employee, or the employee's designated legal representative in the event of death. In the event a participant is subject to a qualified domestic relations order, the shares so awarded and to which the participant is otherwise entitled under the terms of this Plan shall vest with such person as designated by the qualified domestic relations order. (d) Except as otherwise provided above, the restrictions imposed upon shares awarded to each participant hereunder shall be removed as to one-fifth of the aggregate number of shares awarded to the participant at one time upon the expiration of each of the first, second, third, fourth, and fifth years after the award of such shares hereunder. (e) In the event at any time the Company is dissolved or is a party to a merger or consolidation in which the Company is not the surviving corporation, the restrictions provided in this Section 5 shall automatically cease as of the effective date of such dissolution, merger or consolidation, as the case may be. (f) Notwithstanding any other terms or conditions contained in this Plan, the restrictions provided in this Section 5 shall automatically cease in the event of a voluntary or involuntary termination with the Company of a participant for any reason within a two- year period after the occurrence of a Pre-Condition described below in this subparagraph: "Pre-Condition" means that a person (as defined in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended), or a corporation or other entity controlled by the person, has (i) merged or consolidated with the Company, (ii) acquired substantially all of the assets of the Company, or (iii) acquired securities of the Company having at least 20% of the combined voting power of the Company's then outstanding securities, except in the case of a merger of another entity with the Company where the Company is the surviving corporation, the merger solely involved an acquisition by the Company of another business entity in which the Company issued its authorized but unissued or treasury stock to stockholders of the acquired entity, and over 80% of the combined voting power of the Company's stock after the merger is owned of record by stockholders of the Company prior to the merger. 6. OTHER RESTRICTIONS. The Committee may impose such other restrictions on any shares awarded pursuant to the Plan as it may deem advisable, including, without limitation, restrictions under the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, under the requirements of any stock exchange or any over-the-counter securities trading market upon which such share or shares of the same class are then listed and under any blue sky or securities laws applicable to such shares. 7. ESCROW OR LEGEND. In order to enforce the restrictions imposed upon shares issued hereunder, the Committee may require any participant to enter into an Escrow Agreement providing that the certificates representing shares issued pursuant to this Plan shall remain in the physical custody of an escrow holder until any or all of the restrictions imposed pursuant to this Plan have terminated and the Committee may cause a legend or legends to be placed on any certificates representing shares issued pursuant to this Plan, which legend or legends shall make appropriate reference to the restrictions imposed hereunder. 8. AMENDMENTS. This Plan may be amended at any time by the Board of Directors of Modine, provided that no such amendment shall increase the maximum number of shares that may be issued pursuant to the Plan except pursuant to Section 4 hereunder without the further approval of the stockholders of Modine. 9. TERMINATION. This Plan shall terminate and no further shares shall be awarded or issued hereunder on July 19, 2004 or such earlier date as may be determined by the Committee. The termination of this Plan, however, shall not affect any restrictions previously imposed on shares issued pursuant to this Plan. EX-10 10 0010.txt EXHIBIT 10(y) MODINE MANUFACTURING COMPANY ---------------------------- INCENTIVE STOCK OPTION AGREEMENT -------------------------------- THIS INCENTIVE STOCK OPTION granted this day of -------- January , 2000, by Modine Manufacturing Company, a Wisconsin - --------- corporation (the "Company"), to ----------------------------- (the "Employee") under and pursuant to the Company's 1994 Incentive Compensation Plan (the "Plan"). WITNESSETH: WHEREAS, the Committee of the Board of Directors, which is authorized to administer the Plan (the "Committee"), is of the opinion that the interests of the Company and its subsidiaries will be advanced by encouraging and enabling certain key employees of the Company and its subsidiaries to acquire or increase their proprietary interest in the Company, thus providing them with a more direct stake in its welfare and assuring a closer identification of their interests with those of the Company; and WHEREAS, the Committee believes that the acquisition of such an interest in the Company will stimulate the efforts of such employees and strengthen their desire to remain with the Company or one of its subsidiaries; NOW, THEREFORE, in consideration of the aforementioned, and the covenants and agreements herein set forth, the Company grants this option (which is intended to qualify as an incentive stock option within the meaning of Section 422A of the Internal Revenue Code) to the Employee on the terms hereinafter expressed: 1. Option Grant. The Company hereby grants to the Employee an ------------ option to purchase a total of shares of Common ----------- Stock of the Company at the option price of $ per ---------- share, being at least equal to 100% of the fair market value of such shares on the date hereof. 2. Time of Exercise; Exercise Limitation. This option may be ------------------------------------- exercised (in the manner provided in paragraph 3 hereof) in whole or in part, from time to time after the date hereof, subject to the following limitations: (a) Except for exercises under paragraph 5 below, this option may not be exercised for one year from the date when the Employee's present employment is first commenced. (b) This option is intended to qualify as an incentive stock option so that the Employee may obtain preferential tax treatment and, consequently, certain limitations on disposition must be observed. In order to obtain preferential tax treatment, shares of capital stock transferred to the Employee pursuant to this Agreement may not be disposed of within twenty-four (24) months after the grant of such shares or twelve (12) months after exercise of such shares. (c) If Employee is an officer of the Company subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, this option may not be exercised by the Employee for six (6) months from the date of grant. (d) This 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 this option. (e) This option may not be exercised beyond the shorter of: (i) ten (10) years from the date hereof; (ii) after an Employee has been terminated for cause (such as dishonesty or negligence in performance of Employee's duties). In such event the employee shall forfeit all unexercised options; (iii) three (3) years (except as provided in paragraph 5) following termination of employment (if without cause) or retirement; provided, however, that this option must be exercised within ninety (90) days following termination of employment (if without cause) or retirement from the Company in order to obtain preferential tax treatment. In the event this option is not exercised in accordance with subparagraphs (i), (ii) or (iii) above, it shall be forfeited as an unexercised option. (f) To the extent required by the Internal Revenue Code, the aggregate fair market value (determined at the time the option is granted) of the Common Stock for which incentive stock options are exercisable for the first time by an option holder during any calendar year (under all the plans of the Company) shall not exceed $100,000. This limitation applies to Incentive Stock Options granted after 1986 only. Incentive Stock Options exercisable for the first time in a calendar year that exceed the $100,000 annual limit are denied preferential tax treatment. 3. Exercise of Option. This option may be exercised only by ------------------ appropriate notice in writing delivered to the Secretary of the Company at 1500 DeKoven Avenue, Racine, Wis. 53403, and accompanied by: (a) Check payable to the order of the Company, or Modine stock (the value of which shall be the fair market value of the stock on the day preceding the exercise date), or a combination of Modine stock and cash, or attestation, i.e., by affidavit identifying for delivery specific already-owned shares of Modine Stock having a value equal to the aggregate exercise price, but not actually delivering such shares to Modine, for the full purchase price of the shares purchased. 4. Nontransferability of Option. This option is not ---------------------------- transferable by the Employee otherwise than (a) by will or the laws of descent and distribution, or (b) pursuant to a qualified domestic relations order, and is exercisable, during the Employee's lifetime, only by the Employee or his legal representative. 5. Death or Disability of Employee. If the Employee dies ------------------------------- during the option period, this option may be exercised in whole or in part and from time to time, in the manner described in paragraph 3 hereof, by the Employee's estate or the person to whom the option passes by will or the laws of descent and distribution, but only within a period of (a) one year next succeeding the Employee's death, or (b) ten years from the date hereof, whichever period is shorter. If the Employee becomes disabled during the option period, his option may be exercised in whole or in part and from time to time, in the manner described in paragraph 3 hereof, within one year of retirement or other termination of employment due to a determination of permanent and total disability; except that any options exercised after one year of retirement due to disability, but prior to expiration of three years following such retirement, will be denied preferential tax treatment. 6. Delivery of Certificates. The Company shall issue and ------------------------ deliver certificates for stock purchased pursuant to an exercise of this option subject to the following limitations: (a) The Employee shall have no interest in any such shares until payment for said shares is made in accordance with paragraph 3 hereinabove. (b) The Company shall not be required to issue or deliver any certificate for its Common Stock purchased upon the exercise of this option prior to the admission of such shares to listing on any stock exchange or any over-the-counter quotation system on which shares may at that time be listed. In the event of the exercise of this option while the option class of stock is not so listed or admitted, the Company shall make prompt application for such listing or admission. If any time during the option period the Company shall be advised by its counsel that the shares deliverable upon an exercise of the option are required to be registered under the Federal Securities Act of 1933 or any state securities law or that delivery of such shares must be accompanied or preceded by a prospectus, the Company will use its best efforts to effect such registration or provide such prospectus, but delivery of shares by the Company may be deferred until such registration is effected or such prospectus is available. 7. Adjustment Provisions. In the event that there is any --------------------- change in the number of issued shares of Common Stock of the Company without new consideration to the Company therefor, by reason of stock dividends, stock split-ups or like recapitalizations, the number of shares which may thereafter be purchased under this option shall be adjusted in the same proportion as said change in issued shares. In such event, the per share purchase price specified in paragraph 1 above shall be adjusted so that the total consideration payable to the Company for the adjusted number of shares remaining subject to this option shall not be changed by reason of the adjustment in number of shares. If during the term of this option the Common Stock of the Company shall be combined or be changed into the same or another kind of stock of the Company or into securities of another corporation, whether through recapitalization, reorganization, sale, merger, consolidation, or by other means, the Company shall cause adequate provision to be made whereby the Employee thereafter will be entitled to receive, upon the due exercise of any then unexercised portion of this option, the securities which the Employee would have been entitled to receive for Common Stock acquired through exercise of such portion of the option (regardless of whether or to what extent the option would then have been exercisable) immediately prior to the effective date of such recapitalization, reorganization, sale, merger, consolidation, or similar transaction. If appropriate, due adjustment shall be made in the per share or per unit price of the securities purchased on exercise of this option following said recapitalization, reorganization, sale, merger, consolidation, or similar transaction. 8. Effect on Other Benefits. Neither this option, shares of ------------------------ stock issued upon its exercise, any excess of market value over option price, nor any other rights, benefits, values or interests resulting from the granting of this option shall be considered as compensation for purposes of any pension, profit sharing, retirement plan, insurance plan, investment or stock purchase plan, or any other employee benefit plan of the Company or any of its subsidiaries. 9. Fair Market Value. For purposes hereof, "fair market value" ----------------- shall equal the closing market price on the largest stock exchange or over-the-counter quotation system on which Modine Common Stock is traded on the date a determination is required to be made under the Plan or this Agreement, or if no stock is traded on that day then it shall equal the closing market price on the last preceding day on which such stock was traded on said exchange or system. 10. Employee Not Deemed to be a Shareholder. The Employee shall --------------------------------------- not be deemed to be a shareholder of the Company for any purposes with respect to any option granted hereunder except to the extent that such option shall have been exercised and a stock certificate issued therefor. 11. No Right to Continued Employment. Nothing in this Agreement -------------------------------- or the Plan shall confer upon Employee any right to continue in the employment of the Company or in any way affect the right of the Company to terminate Employee's employment at any time. 12. Cancellation and Rescission of Stock Option. The Committee ------------------------------------------- may (in its sole discretion) cancel this option at any time if Employee is not in compliance with all other applicable provisions of this option, the Plan, and with the following conditions: (a) Conflict of Interest. Employee shall not render services for any organization or engage directly or indirectly in any business which, in the judgment of the Committee, is or becomes competitive with the Company, or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company (including but not limited to serving as an employee, consultant, advisor or in any other capacity to such organization or business, or participating in a hostile takeover attempt of the Company by such organization or business); (b) Certain Prohibited Activities. Employee shall comply fully with applicable laws and government regulations (both civil and criminal) and maintain high ethical standards. Employee shall also comply with the Company's corporate policies, including, but not limited to, Policy No. G-2, Guideline for Business Conduct, and Policy No. G-3, Antitrust Compliance, and the Company's Agreement for Protection of Trade Secrets and Sales Data and for Assignment of Inventions; or (c) Leaving the Company within One Year of Exercise. Employee shall not exercise any portion of this option and then leave the employment of the Company within one year after exercise for any reason except death, disability, normal retirement, or early retirement with the consent of the Board of Directors. The judgment of the Committee shall be based on Employee's position and responsibilities while employed by the Company, Employee's post-employment responsibilities and position with the other organization or business, the extent of past, current and potential competition or conflict between the Company and the other organization or business, the effect on the Company's customers, suppliers and competitors of Employee's assuming the post-employment position, and such other considerations as are deemed relevant given the applicable facts and circumstances. If Employee retires, he shall be free, however, to purchase as an investment or otherwise, stock or other securities of such organization or business so long as they are listed upon a recognized securities exchange or traded over-the-counter, and such investment does not represent a substantial investment to Employee or a greater than 10 percent equity interest in the organization or business. Failure to comply with the provisions of paragraphs (a) or (b) of this Paragraph 13 prior to, or during the twenty-four (24) months after, any exercise pursuant to this option, or failure to comply with the provisions of paragraph (c) of this Paragraph 13 during the twelve (12) months after exercise pursuant to this option, shall cause such exercise to be subject to rescission. The Company shall notify Employee in writing of any such rescission within twenty-four (24) months after such exercise under paragraphs (a) or (b) or within twelve (12) months after such exercise under paragraph (c). In the event of notice of rescission, Employee shall pay to the Company the amount of any gain realized or payment received pertaining to the rescinded exercise of this option. By accepting this Agreement, Employee consents to a deduction from any amounts the Company owes Employee from time to time (including amounts owed to Employee as salary or other compensation, fringe benefits, or vacation pay, as well as any other amounts owed to Employee by the Company), to the extent of the amounts Employee owes the Company under paragraphs (a), (b), or (c) above. Whether or not the Company elects to make any set-off in whole or in part, if the Company does not recover by means of set-off the full amount Employee owes, calculated as set forth above, Employee agrees to pay immediately the unpaid balance to the Company. Such payment shall be made either in cash or by returning to the Company the number of shares of Common Stock that Employee received in connection with the rescinded exercise. 13. Grant Subject to 1994 Incentive Compensation Plan. This ------------------------------------------------- award is subject to all the terms and conditions set forth in the 1994 Incentive Compensation Plan as amended which is hereby incorporated by reference and to all determinations of the Committee of the Board of Directors which is authorized to administer the Plan. As a condition of granting the option herein granted, the Employee agrees, for himself and his personal representatives, that any requirement or interpretation, dispute, or disagreement which may arise under or as a result of or pursuant to this Agreement or the Plan shall be determined by the Committee in its sole discretion, and that any interpretation or determination by the Committee shall be final, binding and conclusive. 14. Governing Law. This Agreement shall be construed, ------------- administered and governed in all respects in accordance with the laws of the State of Wisconsin. IN WITNESS WHEREOF, the Company has caused this option to be executed on the date first above written. ATTEST: MODINE MANUFACTURING COMPANY By: - -------------------------- ------------------------------------ W. E. Pavlick, Secretary D. R. Johnson President & Chief Executive Officer Accepted and Agreed To: --------------------------------------- Employee MODINE MANUFACTURING COMPANY ---------------------------- NON-QUALIFIED STOCK OPTION AGREEMENT ------------------------------------ THIS NON-QUALIFIED STOCK OPTION granted this day of ------ January, 2000 by Modine Manufacturing Company, a Wisconsin - ------- corporation (the "Company"), to , (the ------------------------- "Employee") under and pursuant to the Company's 1994 Incentive Compensation Plan (the "Plan"). WITNESSETH: WHEREAS, The Committee of the Board of Directors, which is authorized to administer the Plan (the "Committee"), is of the opinion that the interests of the Company and its subsidiaries will be advanced by encouraging and enabling certain key employees of the Company and its subsidiaries to acquire or increase their proprietary interest in the Company, thus providing them with a more direct stake in its welfare and assuring a closer identification of their interests with those of the Company; and WHEREAS, the Committee believes that the acquisition of such an interest in the Company will stimulate the efforts of such employees and strengthen their desire to remain with the Company or one of its subsidiaries; NOW, THEREFORE, in consideration of the aforementioned, and the covenants and agreements herein set forth, the Company grants its option to the Employee on the terms hereinafter expressed: 1. Option Grant. The Company hereby grants to the Employee an ------------ option to purchase a total of shares of Common ----------- Stock of the Company at the option price of $ per --------- share, being at least equal to 100% of the fair market value of such shares on the date hereof. 2. Time of Exercise. This option may be exercised (in the ---------------- manner provided in paragraph 3 hereof) in whole or in part, from time to time after the date hereof, subject to the following limitations: (a) Except for exercise under paragraph 5 below, this option may not be exercised for one year from the date when the Employee's present employment with Modine first commenced. (b) If Employee is an officer of the Company subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, this option may not be exercised by the Employee for six (6) months from the date of grant. (c) Options may be exercised before the option period terminates without regard to the order of grant. (d) This 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 this option. (e) This option may not be exercised beyond the shorter of: (i) ten (10) years from the date hereof; (ii) after an Employee has been terminated for cause (such as dishonesty or negligence in performance of Employee's duties). In such event the employee shall forfeit all unexercised options; (iii) three (3) years (except as provided in paragraph 5) following termination of employment (if without cause) or retirement. In the event this option is not exercised in accordance with subparagraphs (i), (ii) or (iii) above, it shall be forfeited as an unexercised option. 3. Exercise of Option. This option may be exercised only by ------------------ appropriate notice in writing delivered to the Secretary of the Company at 1500 DeKoven Avenue, Racine, Wis. 53403 and accompanied by: (a) Check payable to the order of the Company, or Modine Stock (the value of which shall be the fair market value of the stock on the day preceding the exercise date), or a combination of Modine stock and cash, or attestation, i.e., by affidavit identifying for delivery specific already-owned shares of Modine Stock having a value equal to the aggregate exercise price, but not actually delivering such shares to Modine, for the full purchase price of the shares purchased. 4. Nontransferability of Option. This option is not ---------------------------- transferable by the Employee otherwise than (a) by will or the laws of descent and distribution, or (b) pursuant to a qualified domestic relations order, and is exercisable, during the Employee's lifetime, only by the Employee or his legal representative. 5. Death of Employee. If the Employee dies during the option ----------------- period, this option may be exercised in whole or in part and from time to time, in the manner described in paragraph 3 hereof, by the Employee's estate or the person to whom the option passes by will or the laws of descent and distribution, but only within a period of (a) one year next succeeding the Employee's death, or (b) ten years from the date hereof, whichever period is shorter. 6. Delivery of Certificates. The Company shall issue and ------------------------ deliver certificates for stock purchased pursuant to an exercise of this option subject to the following limitations: (a) The Employee shall have no interest in any such Shares until certificates for said Shares are issued. (b) The Company shall not be required to issue or deliver any certificates for its Common Stock purchased upon the exercise of this option prior to the admission of such shares to listing on any stock exchange or any over-the-counter quotation system on which shares may at that time be listed. In the event of the exercise of this option while the option class of stock is not so listed or admitted, the Company shall make prompt application for such listing or admission. If any time during the option period the Company shall be advised by its counsel that the shares deliverable upon an exercise of the option are required to be registered under the Federal Securities Act of 1933 or any state securities law or that delivery of such shares must be accompanied or preceded by a prospectus, the Company will use its best efforts to effect such registration or provide such prospectus, but delivery of shares by the Company may be deferred until such registration is effected or such prospectus is available. 7. Adjustment Provisions. In the event that there is any --------------------- change in the number of issued shares of Common Stock of the Company without new consideration to the Company therefor, by reason of stock dividends, stock split-ups or like recapitalizations, the number of shares which may thereafter be purchased under this option shall be adjusted in the same proportion as said change in issued shares. In such event, the per share purchase price specified in paragraph 1 above shall be adjusted so that the total consideration payable to the Company for the adjusted number of shares remaining subject to this option shall not be changed by reason of the adjustment in number of shares. If during the term of this option the Common Stock of the Company shall be combined or be changed into the same or another kind of stock of the Company or into securities of another corporation, whether through recapitalization, reorganization, sale, merger, consolidation, or by other means, the Company shall cause adequate provision to be made whereby the Employee thereafter will be entitled to receive, upon the due exercise of any then unexercised portion of this option, the securities which the Employee would have been entitled to receive for Common Stock acquired through exercise of such portion of the option (regardless of whether or to what extent the option would then have been exercisable) immediately prior to the effective date of such recapitalization, reorganization, sale, merger, consolidation, or similar transaction. If appropriate, due adjustment shall be made in the per share or per unit price to the securities purchased on exercise of this option following said recapitalization, sale, merger, consolidation, or similar transaction. 8. Effect on Other Benefits. Neither this option, shares of ------------------------ stock issued upon its exercise, any excess of market value over option price, nor any other rights, benefits, values or interests resulting from the granting of this option shall be considered as compensation for purposes of any pension, profit sharing, retirement plan, insurance plan, investment or stock purchase plan, or any other employee benefit plan of the Company or any of its subsidiaries. 9. Fair Market Value. For purposes hereof, "fair market value" ----------------- shall equal the closing market price on the largest stock exchange or over-the-counter quotation system on which Modine Common Stock is traded on the date a determination is required to be made under the Plan or this Agreement, or if no stock is traded on that day then it shall equal the closing market price on the last preceding day on which such stock was traded on said exchange or system. 10. Employee Not Deemed to be a Shareholder. The Employee --------------------------------------- shall not be deemed to be a shareholder of the Company for any purposes with respect to any option granted hereunder except to the extent that such option shall have been exercised and a stock certificate issued therefor. 11. No Right to Continued Employment. Nothing in this Agreement -------------------------------- or the Plan shall confer upon Employee any right to continue in the employment of the Company or in any way effect the right of the Company to terminate Employee's employment at any time. 12. Cancellation and Rescission of Stock Option. The Committee ------------------------------------------- may (in its sole discretion) cancel this option at any time if Employee is not in compliance with all other applicable provisions of this option, the Plan, and with the following conditions: (a) Conflict of Interest. Employee shall not render services for any organization or engage directly or indirectly in any business which, in the judgment of the Committee, is or becomes competitive with the Company, or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company (including but not limited to serving as an employee, consultant, advisor or in any other capacity to such organization or business, or participating in a hostile takeover attempt of the Company by such organization or business); (b) Certain Prohibited Activities. Employee shall comply fully with applicable laws and government regulations (both civil and criminal) and maintain high ethical standards. Employee shall also comply with the Company's corporate policies, including, but not limited to, Policy No. G-2, Guideline for Business Conduct, and Policy No. G-3, Antitrust Compliance, and the Company's Agreement for Protection of Trade Secrets and Sales Data and for Assignment of Inventions; or (c) Leaving the Company within One Year of Exercise. Employee shall not exercise any portion of this option and then leave the employment of the Company within one year after exercise for any reason except death, disability, normal retirement, or early retirement with the consent of the Board of Directors. The judgment of the Committee shall be based on Employee's position and responsibilities while employed by the Company, Employee's post-employment responsibilities and position with the other organization or business, the extent of past, current and potential competition or conflict between the Company and the other organization or business, the effect on the Company's customers, suppliers and competitors of Employee's assuming the post-employment position, and such other considerations as are deemed relevant given the applicable facts and circumstances. If Employee retires, he shall be free, however, to purchase as an investment or otherwise, stock or other securities of such organization or business so long as they are listed upon a recognized securities exchange or traded over-the-counter, and such investment does not represent a substantial investment to Employee or a greater than 10 percent equity interest in the organization or business. Failure to comply with the provisions of paragraphs (a) or (b) of this Paragraph 13 prior to, or during the twenty-four (24) months after, any exercise pursuant to this option, or failure to comply with the provisions of paragraph (c) of this Paragraph 13 during the twelve (12) months after exercise pursuant to this option, shall cause such exercise to be subject to rescission. The Company shall notify Employee in writing of any such rescission within twenty-four (24) months after such exercise under paragraphs (a) or (b) or within twelve (12) months after such exercise under paragraph (c). In the event of notice of rescission, Employee shall pay to the Company the amount of any gain realized or payment received pertaining to the rescinded exercise of this option. By accepting this Agreement, Employee consents to a deduction from any amounts the Company owes Employee from time to time (including amounts owed to Employee as salary or other compensation, fringe benefits, or vacation pay, as well as any other amounts owed to Employee by the Company), to the extent of the amounts Employee owes the Company under paragraphs (a), (b), or (c) above. Whether or not the Company elects to make any set-off in whole or in part, if the Company does not recover by means of set-off the full amount Employee owes, calculated as set forth above, Employee agrees to pay immediately the unpaid balance to the Company. Such payment shall be made either in cash or by returning to the Company the number of shares of Common Stock that Employee received in connection with the rescinded exercise. 13. Grant Subject to 1994 Incentive Compensation Plan. This ------------------------------------------------- award is subject to all the terms and conditions set forth in the 1994 Incentive Compensation Plan which is hereby incorporated by reference and to all determinations of the Committee of the Board of Directors which is authorized to administer the Plan. As a condition of granting the option herein granted, the Employee agrees, for himself and his personal representatives, that any requirement or interpretation, dispute, or disagreement which may arise under or as a result of or pursuant to this Agreement or the Plan shall be determined by the Committee in its sole discretion, and that any interpretation or determination by the Committee shall be final, binding and conclusive. 14. Governing Law. This Agreement shall be construed, ------------- administered and governed in all respects in accordance with the laws of the State of Wisconsin. IN WITNESS WHEREOF, the Company has caused this option to be executed on the date first above written. ATTEST: MODINE MANUFACTURING COMPANY By: - -------------------------- ------------------------------------ W. E. Pavlick, Secretary D. R. Johnson, President and Chief Executive Officer Accepted and Agreed To: ---------------------------------------- Employee EX-13 11 0011.txt EXHIBIT 13 MANAGEMENT'S DISCUSSION & ANALYSIS OF OPERATIONS - ------------------------------------------------ Modine Manufacturing Company's fiscal-2000 sales rose 2.5 percent to $1.14 billion. The increases came mainly from the North American aftermarket and truck markets, and from the European automotive markets. Excluding the impact of changes in currency-exchange rates, worldwide consolidated sales were five-percent higher than the prior year. Earnings for the fiscal year were negatively affected by increased aftermarket distribution costs and price pressures, new- plant startup costs, and the strong U.S. dollar. In fiscal 2000, 45 percent of sales were outside the United States. Net sales from international operations were 34 percent of the total, and exports from the United States were 11 percent of total revenues. In the Distributed Products segment, worldwide sales were up 10 percent, primarily from a full year's operation of a North American aftermarket acquisition compared with six months in the prior year. The Distributed Products segment provides heat-transfer products primarily for the North American vehicular replacement market and the building-HVAC&R (heating, ventilating, air-conditioning, & refrigeration) market. The Original Equipment (North America) segment was down slightly. There was a small gain from the European Operations segment, which provides products from business units in Europe primarily to European original-equipment manufacturers (OEMs) of on- and off-highway vehicles, industrial-equipment manufacturers, and the vehicular replacement market. In both segments, sales to original-equipment manufacturers of heavy and medium trucks were up but sales to off-highway-equipment OEM customers declined substantially. See Note 19 to the consolidated financial statements for more details of segment and geographic information. Modine's fiscal 2000 revenues from its top ten customers, including their multiple brands and models, were 45.9 percent of total sales. All were less than 10 percent of total revenues. Overall, Modine continues to have a highly diversified customer base, which helps minimize the effect of various business cycles. FISCAL-YEAR SALES BY MARKET - --------------------------- OEM passenger-car and light-truck market: In fiscal 2000, ---------------------------------------- 25 percent of Modine's sales were to worldwide original-equipment manufacturers of passenger cars and light trucks. This market along with the aftermarket represent the customer markets with the largest sales for Modine. More than three-fourths of Modine's sales in this market are generated from European customers. The company continues to forge stronger relationships with large, European customers such as BMW and Volkswagen. Modine serves them there and in their operations in other parts of the world - from North America to South Africa, Malaysia, and Egypt. Also, Modine constructed a new plant in Pontevico, Italy, to add appropriate capacity for additional business from Fiat and others. The Toledo, Ohio, assembly plant, which was built to serve the new Daimler/Chrysler Jeep business, is complete and will be operational the summer of 2000. This facility will assemble automotive engine- cooling modules with components from several Modine facilities in the United States and Europe. The North American partnership with Daimler/Chrysler is helping to establish a stronger relationship between Modine's European operations and that customer. Modine began construction of a technical center in Europe, similar to the state-of-the-art facility in Racine that began full operations last fall. The centers will help to validate new technologies and bring additional and incremental business programs to this and other market segments. Modine's work in this market helped win a "Best of the Best" award for suppliers of engine power-train systems from Automotive Industries magazine in July 1999. OEM heavy- and medium-truck market: Sales to this market ---------------------------------- increased 11 percent from the previous year to make up 19 percent of Modine's total revenues for fiscal 2000. Once again, Modine's sales to heavy-truck OEMs in North America substantially surpassed the prior year's records, due both to marketshare gains and to increased demand for commercial vehicles. The outlook for fiscal 2001, in the North American heavy-truck market, appears to be softening. However, early indications show that the medium- truck and bus market will remain strong. In Germany, the company finalized relocation of an aluminum plant from the Bernhausen facility to Kirchentellinsfurt. This new plant makes radiators for trucks and has been fully operational since the fall of 1999. Globally, Modine continues to take on additional responsibility to offer its customers improved product designs, better delivery and warranty policies, and fully integrated systems for their vehicles instead of just components to fill their engine envelopes. Future changes by North American truck manufacturers will probably include adoption of aluminum radiators, much like in Europe. Modine will continue to work with these customers to validate the conversion for their heavy-truck cooling systems. In an effort to help its truck customers comply with ever- increasing North American and European governmental emissions standards, Modine has made substantial research and development investments to supply exhaust-gas-recirculation coolers. These coolers, as discussed earlier in this report, will help to reduce emissions for diesel engines. The technology demands for this component are especially stringent because of the corrosive nature of exhaust gas. Modine has begun some production of this entirely new product category in Europe and will do so in North America later in fiscal 2001. OEM industrial market: This market includes various engine --------------------- customers as well as those that manufacture generator sets, refrigeration equipment, compressors, lift trucks, and other applications. Modine's revenues for fiscal 2000 were approximately the same as the previous year, constituting about 12 percent of total sales. A large portion of the revenues in this market is from sales to manufacturers of engines, some of which are destined for use in the truck market. OEM off-highway market: The global agricultural- and ---------------------- construction-equipment markets continued to struggle in fiscal 2000. Within Modine, sales to this market dropped 25 percent from the year before, as demand continued to contract due to low grain prices and to lagging equipment-export markets worldwide. Sales to off-highway-equipment customers were nine percent of total revenues in fiscal 2000. The company sees the global marketplace in this area continuing to consolidate in the new fiscal year. Modine continues to offer cutting-edge technology and testing capabilities for its customers and is poised for growth when the market bounces back. Vehicle aftermarket: Modine's sales in this market grew ------------------- 14 percent over the prior year to become 26 percent of total consolidated sales. The growth resulted mainly from six additional months of sales in fiscal 2000 from the purchase of Core Holdings in the southeastern United States during the second half of fiscal 1999. The acquisition added automotive air- conditioning parts to Modine's aftermarket product line and increased the number of U.S. sales branches. In order to increase the sales potential in Europe, Modine opened a new sales and service center in Daventry, United Kingdom, in the fall of 1999. The company continues to face pricing competition from competitors, which it offsets, to some degree, by emphasizing - with a lifetime, limited warranty - the high quality of the aftermarket products it offers. Building-HVAC market: Revenues from the building-HVAC (heating, -------------------- ventilating, and air-conditioning) market were basically flat year over year, remaining at approximately seven percent of the company's total revenues. The popularity of the Hot Dawg low- profile, gas-fired, unit heater continues to remain strong. A targeted, niche marketing campaign led to significant sales for the product in fiscal 2000. Sales and profitability for this market continue to drive new and improved products, exhibited in the rollout of the new WeatherHawk rooftop, duct furnace. Also, Modine has recently secured the business of the first PF product application in the building-HVAC market. The company remains confident that the success of this first application will breed further success in the industry. SALES BY PRODUCT LINE - --------------------- Modine's customers continue to demand more modular assemblies and complete heat-transfer systems. To help respond to the needs of these customers, Modine has invested in state-of-the-art technical centers to serve customers on two continents. The technical centers facilitate the development of new technology that Modine produces for the heat-transfer industry. Total modules & complete heat-transfer packages: Modine is ----------------------------------------------- shifting from being a component supplier to being a module or system supplier. This allows the company to be more involved in the initial design stages of our partners. The product category grew six percent over the year before. It made up 22 percent of total revenues. Radiators: Sales of radiators and radiator cores were nearly --------- even with the previous year, making up about 31 percent of Modine's total revenues for fiscal 2000. Increased sales of complete replacement radiators in the aftermarket offset a decline in sales of radiator cores, continuing a trend from recent years. Oil coolers: The oil cooler component product-line - for cooling ----------- engine and transmission oil as well as certain fuels - had sales that were flat year-over-year, remaining at about 16 percent of total sales. Donut oil-cooler sales were up once again. The Donut product line, which now includes an aluminum version, is a sophisticated, compact cooler often used in high-performance automobiles, particularly in Europe. It remains a specialty that has gained Modine much respect in the worldwide industry. Vehicular air-conditioning parts & systems: There was a six-percent ------------------------------------------ increase in sales of vehicular air-conditioning parts, which made up 12 percent of the company's total revenues. The increase in fiscal 2000 was due mainly to the air-parts area within the vehicular aftermarket, resulting from the integration of a full year's sales from the Core Holdings acquisition that Modine made halfway through fiscal 1999. Charge-air coolers: Sales of charge-air coolers grew seven ------------------ percent over the year before and constituted nine percent of Modine's total revenues for fiscal 2000. This product line's growth has been aided lately by record sales in the truck industry as well as by emissions regulations that affect most trucks and even automobiles, especially in Europe, where there is a larger portion of diesel vehicles. Building-HVAC: Sales to the building-HVAC product line were ------------- relatively flat for fiscal 2000, coming in at seven percent of total company revenues. The outlook for fiscal 2001 looks promising. Among other activities, Modine will be introducing the new WeatherHawk rooftop product line, which is a redesign of current duct-furnace and make-up air units. CAPITAL EXPENDITURES - -------------------- Capital expenditures of $90.1 million in fiscal 2000 were similar to the prior year. Significant expenditures included those for: the installation and implementation of SAP financial software in the United States, major computing platform migration from Unisys mainframe to HP/UNIX in the United States, replacement of two corporate airplanes, Racine Technical Center wind tunnel, European Technical Center, expansions of Modine's European facilities, process improvements, tooling for new products, and the addition of processing equipment at a number of facilities. Capital expenditures were financed primarily from cash generated internally, as well as some external borrowings. Outstanding commitments for capital expenditures at March 31, 2000, were approximately $36.3 million. Most of the commitments relate to the European Technical Center, European plant expansions and conversions, the Racine Technical Center, new Chrysler Jeep programs, a new International Truck and Engine program, process improvements, tooling for new products, and various new equipment. Approximately $17.5 million of the outstanding commitment amount covers the European Technical Center, facility expansions, improvements, equipment upgrades, and new equipment for the European locations. A year earlier, there were outstanding commitments of $38.6 million. RESEARCH AND DEVELOPMENT - ------------------------ Modine's investment in research and development of $20.5 million was 12 percent over the year before. The company's investments in creating new technology have shown a 12-percent compound annual growth rate over the last ten years. The 1,130 worldwide patents that Modine held at March 31, 2000, represented a six-percent increase from the prior year. Modine's research activities relate to the development of new products, processes, and services, or the improvement of existing products, processes, and services. QUALITY IMPROVEMENT - ------------------- Modine keeps focused on continuous quality improvement through several corporate quality initiatives. These initiatives include: implementing one common, global, quality-management system; assuring design, product, and process consistency; measuring and improving key quality indicators; and recognizing quality achievement. The global quality-management system is being implemented at all sites to help ensure that customers receive the same, high-quality products and services worldwide. It also minimizes the risks associated with unacceptable product quality and serves to exceed customer expectations - one of Modine's guiding principles. Continuous quality improvement is measured by eleven quality indicators that include customer satisfaction, quality costs, and supplier performance. Executive management encourages and rewards continuous quality improvement throughout the company. Modine's efforts to continuously improve its quality-management system resulted in numerous achievements worldwide during the last fiscal year. Three U.S. sites (Camdenton, Missouri; Jefferson City, Missouri; and the Commercial Heating, Ventilating, Air Conditioning, and Refrigeration Division in Racine, Wisconsin) were registered to ISO-9000. The Nuevo Laredo, Mexico, and Washington, Iowa, plants earned QS-9000 registration, and the European central administration and division-support functions earned registration to VDA6.1 in the last fiscal year. Twenty-nine Modine sites are now registered to ISO-9000, QS-9000, or VDA6.1. Five sites (Camdenton, Missouri; Joplin, Missouri; Nuevo Laredo, Mexico; Trenton, Missouri; and Bernhausen, Germany) received quality awards from customers. Modine divisions continue to pursue quality-system registration to ISO-9000, QS-9000, VDA6.1, and other international or customer standards to assist in obtaining new business, as well as to be recognized by current and future customers worldwide. HEDGING AND FOREIGN-CURRENCY-EXCHANGE CONTRACTS - ----------------------------------------------- On a limited basis, Modine enters into foreign-exchange options and forward contracts on foreign currencies as hedges against the impact of currency fluctuations. See Note 14 to the consolidated financial statements. ENVIRONMENTAL, HEALTH AND SAFETY - -------------------------------- Modine has a long-standing corporate environmental policy that demonstrates the company's commitment to the environment and compliance with all environmental laws and regulations worldwide. Modine continues to appraise environmental issues and regulatory compliance with a proactive approach. Expenditures to comply with these increasingly complex and stringent laws could be significant in future years but are not expected to have a material impact on the company's competitive or financial position. If new laws containing more-stringent requirements are enacted, expenditures may be higher than the estimates of future environmental costs provided below. About $1.1 million in capital expenditures related to environmental projects were made in fiscal 2000. Modine currently expects expenditures for environmentally related, capital projects to be about $2.5 million in fiscal 2001. Environmental expenses charged to current operations, including remediation costs, totaled about $3.5 million in fiscal 2000. These expenses include solid-waste disposal and operating and maintenance costs for air- and water-pollution-control facilities, environmental compliance activities, and other matters. 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. Modine from time to time receives notices from the Environmental Protection Agency and state environmental agencies that the company is a "potentially responsible party" (PRP) under CERCLA and state law. These notices claim potential liability for remediation costs of disposal sites that are not company-owned and allegedly contain wastes attributable to Modine from past operations. Modine's share of remediation costs at these sites cannot be accurately predicted due to the large number of PRPs involved. For the six sites currently known, the company's potential liability will be significantly less than the total site remediation cost, because the percentage of material attributable to Modine is relatively low. It is likely that Modine will, in the future, incur additional remediation charges, but such costs are unknown and not determinable at this time. There are no currently known, unrecorded liabilities that would have a material effect on the company's consolidated financial position or results of operations. The company's safety-management processes are currently driving changes in the organizational culture. In fiscal 2000, OSHA (Occupational Safety & Health Administration) recordable injuries for U.S. plants were reduced by 25 percent and restricted/lost-time cases were reduced by 19 percent. Modine also finished the year with incident rates below its Standard Industrial Classification (SIC) code rates, indicating performance relative to competition. SIC codes used were 3714 "Motor Vehicle Parts and Accessories" and 34 "Fabricated Metal Products." Based on data from the Bureau of Labor Statistics in 1998, Modine was under the recordable-incident average in both code 3714 and 34 by 23 percent and 38 percent respectively. It also did better than the industry standards in the restricted/lost-time category by 5 percent and 82 percent respectively. Continuous improvement in health and safety resulted in a 50- percent reduction in recordable injuries and illnesses over the past four years. Plant recognition, through a newly launched program called "Modine Star," will elevate Modine's health and safety to a level that challenges the best in the industry. YEAR 2000 REMEDIATION - --------------------- To prepare for the Year 2000 issue, Modine initiated a number of global projects in early 1997 to identify, evaluate, and implement changes to its existing, computerized systems for its business. The total global cost was $9.8 million, with funding provided by cash flows from operations. The company's preparation paid off, as changes to all major, data-critical systems were successfully completed by the spring of 1999. Modine's global operations functioned normally throughout the entire Year 2000 process. Modine's remediation program comprehensively addressed its computerized systems, equipment, and facilities as well as its base of key suppliers to ensure that an adequate pipeline of material and services would enable Modine to support its customers without any business interruption to them. Along with the Y2K remediation, substantial enhancements were made in Modine's overall, technology infrastructure worldwide, most of which costs were capitalized. EURO CONVERSION - --------------- The Euro was introduced in Europe on January 1, 1999. Eleven of the fifteen, member countries of the European Union agreed to adopt the Euro as their common legal currency on that date. Fixed conversion rates between these participating countries' existing currencies and the Euro have been established. The legacy currencies are scheduled to remain legal tender as denominations of the Euro until at least January 1, 2002, but not later than July 1, 2002. During this transition period, the parties may settle transactions using either the Euro or a participating country's legacy currency. Certain of Modine's business functions in Europe introduced Euro- capability as of January 1, 1999, including systems for making and receiving certain payments, pricing, and invoicing. Other business functions and financial reporting are in the process of being converted to the Euro by the end of the transition period; however, some will be converted earlier where operationally efficient or cost effective, or to meet customer requirements. Any delays in the company's ability to become Euro-compliant, or in its key suppliers and customers to become Euro-compliant, could result in an interruption of the company's business activities or operations. The impact, if any, of these interruptions upon the results of operations, financial condition, and cash flows has not yet been determined. FORWARD-LOOKING STATEMENTS - -------------------------- These cautionary statements are being made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995 and with the intention of obtaining the benefits of the "safe harbor" provisions of the Act. Investors are cautioned that any forward- looking statements made by Modine are not guarantees of future performance and that actual results may differ materially from those in the forward-looking statements as a result of various factors, including: customers' integration of products currently being supplied by the company; the success of Modine or its competitors in obtaining the business of the customer base; the ability to pass on increased costs to customers; variations in currency-exchange rates in view of a large portion of the company's business being nondomestic; labor relations at Modine, its customers, and its suppliers, which may affect the continuous supply of product; and the ability to improve acquisitions' operations. In making statements about Modine's fiscal-2001 operating results, management has assumed relatively stable economic conditions in the United States and worldwide, no unanticipated swings in the business cycles affecting customer industries, and a reasonable legislative and regulatory climate in those countries where Modine does business. Readers are cautioned not to place undue reliance on Modine's forward-looking statements, which speak only as of the date of this report's writing. MANAGEMENT'S DISCUSSION & ANALYSIS OF RESULTS OF OPERATIONS - ----------------------------------------------------------- SALES - ----- For the year ended March 31, 2000, sales of $1.14 billion were 2.5-percent higher than last year's sales of $1.11 billion. Weaker European currencies had a negative translation effect on fiscal-2000 sales of approximately $28 million compared with the prior year. Excluding the impact of changes in currency-exchange rates, worldwide- consolidated sales were five-percent higher than the prior year. Distributed Products segment sales were up ten percent, primarily due to a full year's operation of the Core Holdings, Inc., acquisition made mid-way through fiscal 1999. The European Operations segment produced increased sales to the OEM-automotive market while sales to the off-highway markets declined in conjunction with the worldwide slowdown in these markets. The Original Equipment segment declined marginally, as strong sales to the heavy- and medium-truck market were more than offset by the continuing slowdown in sales to the construction and agricultural-equipment markets. Net sales by U.S. facilities accounted for 66 percent of consolidated revenues for the year ended March 31, 2000, essentially unchanged from the 67 percent in the prior year. Approximately 17 percent of U.S. production was for export. Net sales of European Operations improved three percent year-over-year despite the negative impact of a stronger dollar internationally. Overall, 55 percent of net sales were to U.S. customers and 45 percent to non-U.S. customers, reflecting the company's continuing strong global presence. For the year ended March 31, 1999, sales of $1.11 billion were seven-percent higher than the previous year's $1.04 billion. Sales in the Distributed Products segment were up six percent, primarily due to the Core Holdings, Inc., acquisition made mid-year. Net sales of the European Operations segment improved 16 percent year-over-year with improved automotive-OEM sales leading the way. Also influencing the European sales results were positive currency-translation effects of approximately $4.0 million compared with the prior year. The Original Equipment segment was essentially flat, with stronger sales to the truck market and lower sales to the agricultural-equipment market. Sales for the year ended March 31, 1998, were $1.04 billion, up $41.4 million or four percent from the prior year. Increases were greatest in the medium- and heavy-truck markets, followed by the off-highway-equipment market, partially offset by a slight decline in the car and light-truck market due to currency-translation effects. With about one-third of Modine's annual sales being in other than U.S. currency, the stronger dollar again had a negative translation effect of approximately $45.5 million on fiscal-1998 consolidated sales, compared with the prior year. GROSS PROFIT - ------------ Fiscal-2000 gross profit of $317.5 million grew by $7.6 million from the $309.9 million in the previous year while it remained steady at 28 percent of sales. Improvement recorded in the OE North America truck market was generally offset by lower gross-profit returns, as a percent of sales, earned by the company's other operations. Continuing pricing pressures in the aftermarket and new facility start-ups once again were major factors affecting profit margins. Gross profit was 28 percent of sales for fiscal 1999, one percentage point lower than 1998, primarily due to temporary start-up inefficiencies at new European production and assembly facilities and to pricing constraints imposed by certain OEM customers. For fiscal 1998, gross profit was 29 percent of sales, one percentage point higher than 1997, primarily due to efficiency improvements in Europe, the volume effect of the truck market, and reduced material costs. SELLING, GENERAL, AND ADMINISTRATIVE (SG&A) EXPENSES - ---------------------------------------------------- SG&A expenses of $218.5 million in fiscal 2000 grew by $21.8 million, to 19 percent of sales from 18 percent of sales in the preceding year. Factors influencing the changes were: the full-year effect of Core Holdings, acquired in fiscal 1999; ongoing litigation costs to protect Modine patents; increased depreciation as the new technical center in Racine was put into service; and recent worldwide upgrades to computer-related business systems. In fiscal 1999, SG&A expenses of $196.6 million, 18 percent of sales, were $13.3 million over last year's $183.3 million, yet remained the same as a percent of sales. Without the mid-year Core Holdings acquisition, SG&A expenses rose only three percent over the prior year. Primarily as a result of sales increases, SG&A expense for fiscal 1998 increased by $6.8 million, or four percent, from the prior year to $183.3 million. As a percent of sales, however, SG&A remained flat at 18 percent. INCOME FROM OPERATIONS - ---------------------- Income from operations of $99.0 million for fiscal 2000 declined $14.3 million from the previous year. The 13-percent reduction is predominantly a result of higher SG&A costs as discussed in the preceding section. Income from operations of $113.3 million for fiscal 1999 compares with $117.5 for the prior period. The four-percent decline was principally the result of start-up inefficiencies at new production facilities located in Europe and higher SG&A costs from including the Core Holdings acquisition for six months of fiscal 1999. In fiscal 1998, income from operations was $117.5 million, up $16.6 million or 16 percent from the previous year. European operations, strong activity in the North American truck market, and lower material costs account for the majority of this increase. INTEREST EXPENSE - ---------------- In fiscal 2000, interest expense rose $2.7 million from the previous year to $8.5 million. Financing of technical center construction in the U.S. and Europe, expansion of European facilities, debt assumed and incurred in conjunction with a prior-year acquisition, and equity investments in joint ventures made in the prior year were the primary reasons for the growth in interest expense. Higher interest rates also influenced the increase. Interest expense of $5.7 million in fiscal 1999 increased $1.7 million over fiscal 1998. The increase is the result of borrowing to provide financing for an acquisition, equity investments in joint ventures, and construction projects in Europe and North America. The increased borrowing was partially offset by improved borrowing rates. Fiscal-1998 interest expense was $4.0 million, down $1.0 million or 19 percent from the prior year. Lower interest rates caused this reduction. OTHER INCOME, NET - ----------------- Other income in fiscal 2000 of $4.8 million declined by $5.7 million from the previous fiscal-year's total of $10.5 million, which included a large royalty settlement and also a gain relative to the earlier sale of a facility in Michigan. In fiscal 1999, other income of $10.5 million was $8.0 million over the prior period. Patent royalty income, including the royalty settlement, increased $3.7 million, combined with $3.9 million recognized on the earlier sale of a non-strategic, copper-tubing facility in Michigan. Other income for fiscal 1998 was $2.5 million, which was $0.6 million more than 1997. This increase was due, primarily, to increases in royalty income. PROVISION FOR INCOME TAXES - -------------------------- For fiscal 2000, the effective tax rate declined 6.0 percentage points to 31.4 percent. Foreign-tax-rate differentials and implementation of a tax strategy that allowed the company to release the tax-valuation allowance relating to a net-operating-loss carry- forward at a foreign subsidiary were the main factors contributing to the change. The 37.4-percent effective tax rate for fiscal 1999 compares with a 37.5-percent rate for fiscal-year 1998. Higher state taxes, net of federal benefit, were more than offset by reduced taxation on non-U.S. earnings and losses and other changes. The effective tax rate for fiscal 1998 was 37.5 percent, up 2.7 percentage points from fiscal 1997, due primarily to higher tax rates on increased foreign earnings. Also, use of tax losses carried forward in prior years in certain European operations resulted in an increased tax rate in fiscal 1998. NET EARNINGS - ------------ Net earnings declined 12 percent in fiscal 2000 to $65.4 million ($2.20 per diluted share) from $73.9 million ($2.46 per diluted share). Return on average shareholder's investment (ROI) was 14 percent. As a percent of sales, net earnings dipped to 6 percent of sales in fiscal 2000. Increased aftermarket distribution costs and pricing pressures, new-plant start-up costs, and the adverse effect of a stronger U.S. dollar on international results were the major factors leading to lower earnings. For the year ended March 31, 1999, net earnings were $73.9 million ($2.46 per diluted share), a $1.4-million or two-percent improvement over the prior year's $72.5 million ($2.39 per diluted share). Net earnings were seven percent of sales, the same as the prior year, and a 17 percent ROI. Net earnings in fiscal 1998 were $72.5 million, representing seven percent of sales and an 18-percent ROI. This was an increase of $8.7 million over fiscal 1997. Improved European operations, higher North American truck-market sales, and lower material costs were the major causes of this improvement. CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per-share amounts)
- ----------------------------------------------------------------------------- For the years ended March 31 2000 1999 1998 - ----------------------------------------------------------------------------- Net sales $1,139,269 $1,111,447 $1,040,418 Cost of sales 821,779 801,520 739,619 ---------------------------------------- Gross profit 317,490 309,927 300,799 Selling, general, and administrative expenses 218,452 196,636 183,323 ---------------------------------------- Income from operations 99,038 113,291 117,476 Interest expense (8,467) (5,722) (4,010) Other income - net 4,760 10,501 2,506 ---------------------------------------- Earnings before income taxes 95,331 118,070 115,972 Provision for income taxes 29,928 44,127 43,501 ---------------------------------------- Net earnings $ 65,403 $ 73,943 $ 72,471 ======================================== Net earnings per share of common stock: Basic $2.22 $2.50 $2.44 Assuming dilution $2.20 $2.46 $2.39 ---------------------------------------- The notes to consolidated financial statements are an integral part of these statements.
MANAGEMENT'S DISCUSSION OF FINANCIAL POSITION - --------------------------------------------- CURRENT ASSETS - -------------- Cash and cash equivalents decreased by $18.1 million to $31.1 million. Details of the sources and uses of funds can be found in the accompanying statement of cash flows. Trade receivables, net of allowances for doubtful accounts, at $182.7 million, were essentially unchanged from the prior year. Inventories declined by $10.4 million to $168.6 million with the majority of the change attributable to the off-highway market. The inventory turnover rate remained constant at 4.8 turns for the year. Deferred income taxes and other current assets grew by $5.1 million to $47.2 million. A higher level of unbilled customer tooling was the main factor contributing to the increase. The current ratio of 2.4-to-1 increased by 33 percent from last year's 1.8-to-1. The primary factor responsible for the change was the replacement of short-term debt with new long-term borrowing arrangements in Europe and the United States. NONCURRENT ASSETS - ----------------- Net property, plant, and equipment of $338.0 million increased by $34.2 million due primarily to capital expenditures of $90.1 million. Continuing production- and test-facility expansions in Europe, equipment purchases for a new assembly facility in the United States, and preparation for the introduction of new customer programs over the next several years were the major factors contributing to the growth in fixed assets. Investment in affiliates of $28.4 million increased $4.1 million in the current year, due chiefly to earnings and a favorable currency-translation impact recognized from Modine's 50-percent equity investment in Radiadores Visconde, Ltda., in Brazil. Intangible assets of $70.3 million were $10.1 million lower than last year, largely as a result of amortization and the impact of foreign-currency translation. Deferred charges and other noncurrent assets of $64.8 million increased $10.6 million over the prior period, primarily a result of a $5.4-million increase to the surplus in the company's over- funded pension plans and of a $4.8-million increase in deferred tax assets resulting from release of a tax-valuation allowance recorded the year before. CURRENT LIABILITIES - ------------------- Short-term debt and the current portion of long-term debt, totaling $9.4 million, decreased by $64.3 million. Proceeds from a new, long-term, $60-million, multi-currency, revolving-credit agreement and a new, $53.0-million, Euro-denominated, credit agreement were applied, in part, to lower outstanding short-term debt. Accounts payable decreased by $12.6 million to $84.9 million. Lower inventory levels, variations in the level of overall purchasing activity, and the favorable impact from foreign-currency translation were the main factors leading to the reduction. NONCURRENT LIABILITIES - ---------------------- Long-term debt increased by $67.3 million to $211.1 million at year-end. New long-term-credit facilities totaling $113.0 million were used to finance ongoing capital expenditures, to repay bank debt with less-favorable interest rates, and to reduce short-term debt as discussed above. As a percent of shareholders' investment, long-term debt was 44.0 percent. Total debt to equity was 45.9 percent, down 2.1 percentage points from fiscal 1999. SHAREHOLDERS' INVESTMENT - ------------------------ Total shareholders' investment of $480.2 million increased $27.0 million over the prior period. The major change was from retained earnings, which benefited from net earnings of $65.4 million (less dividends paid of $27.1 million). Accumulated other comprehensive loss of $21.6 million increased $3.3 million over the prior year. The most significant component was the foreign-currency translation adjustment, which increased $3.1 million. The Euro, which weakened against the dollar during the year, more than offset translation gains recorded on the company's equity investment in its Brazilian affiliate and reductions in the dollar value of loans outstanding denominated in foreign currencies. During fiscal 2000, $12.1 million was expended to acquire 459,000 treasury shares, 300,000 shares of which were repurchased for $7.6 million under a buy-back program announced in October, while $5.9 million of treasury stock (195,000 shares) was used to satisfy requirements for stock options, stock awards, and employee stock-purchase plans. The number of shares of common stock outstanding at year-end dropped to 29,261,000 shares. During fiscal 1999, $15.2 million was expended to acquire 418,000 treasury shares, while $8.0 million of treasury stock (279,000 shares) was used to satisfy requirements for stock options, stock awards, and employee stock-purchase plans. The number of shares of common stock outstanding at year-end was 29,525,000 shares. During fiscal 1998, $17.0 million was expended to acquire 523,000 treasury shares, while 354,000 shares were used to satisfy requirements for stock options, stock awards, and employee stock- purchase plans. The number of shares of common stock outstanding at year-end was 29,664,000. Book value per share increased by $1.06 during fiscal 2000 to $16.41, a 9.6-percent compound annual growth rate for the last five years. CONSOLIDATED BALANCE SHEETS (In thousands, except per-share amounts)
- -------------------------------------------------------------------------- March 31 2000 1999 - -------------------------------------------------------------------------- Assets Current assets: - -------------- Cash and cash equivalents $ 31,070 $ 49,163 Trade receivables, less allowance for doubtful accounts of $4,436 and $3,749 182,724 182,910 Inventories 168,597 178,949 Deferred income taxes and other current assets 47,164 42,074 ---------------------- Total current assets 429,555 453,096 ---------------------- Noncurrent assets: - ----------------- Property, plant, and equipment - net 337,987 303,764 Investment in affiliates 28,440 24,327 Goodwill and other intangible assets - net 70,339 80,411 Deferred charges and other noncurrent assets 64,786 54,141 ---------------------- Total noncurrent assets 501,552 462,643 ---------------------- Total assets $931,107 $915,739 ====================== Liabilities and shareholders' investment Current liabilities: - ------------------- Short-term debt $ 6,319 $ 68,998 Long-term debt - current portion 3,128 4,766 Accounts payable 84,893 97,443 Accrued compensation and employee benefits 46,479 48,869 Income taxes 7,336 9,694 Accrued expenses and other current liabilities 27,322 26,825 ---------------------- Total current liabilities 175,477 256,595 ---------------------- Noncurrent liabilities: - ---------------------- Long-term debt 211,112 143,838 Deferred income taxes 24,536 20,533 Other noncurrent liabilities 39,740 41,554 ---------------------- Total noncurrent liabilities 275,388 205,925 ---------------------- Total liabilities 450,865 462,520 ---------------------- Shareholders' investment: - ------------------------ Preferred stock, $0.025 par value, authorized 16,000 shares, issued - none -- -- Common stock, $0.625 par value, authorized 80,000 shares, issued 30,342 shares 18,964 18,964 Additional paid-in capital 13,573 13,543 Retained earnings 505,522 469,142 Accumulated other comprehensive loss (21,629) (18,341) Treasury stock at cost: 1,081 and 817 common shares (34,394) (28,198) Restricted stock - unamortized value (1,794) (1,891) ---------------------- Total shareholders' investment 480,242 453,219 ---------------------- Total liabilities and shareholders' investment $931,107 $915,739 ====================== The notes to consolidated financial statements are an integral part of these statements.
MANAGEMENT'S DISCUSSION OF CASH FLOWS - ------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES - ----------------------------------------- Net cash provided by operating activities in fiscal 2000 was $91.2 million, down $14.0 million from the prior year. Major items contributing to the overall change were lower earnings, a noncash adjustment for deferred income taxes that moved in the opposite direction from the previous year, and working-capital demands that were higher in fiscal 2000, which were partially offset by higher noncash depreciation and amortization adjustments. Net cash provided by operating activities in fiscal 1999 was $105.2 million, up $2.2 million from the prior year as a result of higher earnings and positive noncash adjustments in deferred income taxes and in depreciation and amortization. These increases were offset in part as working-capital requirements grew from increased sales volume and the post-acquisition impact of the U.S. aftermarket expansion. Net cash from operating activities in fiscal 1998 was $102.9 million, up $2.7 million from the prior year mainly as a result of higher earnings. Working-capital requirements grew as a result of the increased sales volume. The company believes that cash, earnings, and borrowing capacity will continue to provide adequate support for the cash needs of its operations and long-term credit requirements, including capital expenditures and debt maturities. CAPITAL EXPENDITURES - -------------------- Capital expenditures for fiscal 2000 were $90.1 million, slightly lower than prior year, and include: the on-going construction and equipment costs of new technical centers in North America and Europe, production and administrative facility expansion in Europe, replacement of two corporate aircraft, the migration to a new computer platform and implementation of new systems software in North America, and the costs associated with equipment and tooling for new customer programs. Capital expenditures for fiscal 1999 were $90.9 million, $10.2 million higher than in fiscal 1998, reflecting: construction and equipment costs associated with the Racine Technical Center, continuing expansion and upgrading of our European production facilities, and tooling and equipment purchases at existing facilities in North America and Europe. Capital expenditures for fiscal 1998 were $80.7 million, $26.2 million higher than in fiscal 1997, reflecting: construction of Racine Technical Center, upgrading and expanding European facilities, and process improvements at North American plants. ACQUISITIONS AND INVESTMENTS IN AFFILIATES - ------------------------------------------ During fiscal 2000, Modine made an additional $2.7-million investment in Daikin-Modine, Inc. Total investment in the 50-percent- owned joint venture is $4.2 million. See note 10 to the consolidated financial statements for further detail. During fiscal 1999, Modine acquired Core Holdings, Inc., of Orlando Florida, an aftermarket wholesale distributor. The cash cost of the acquisition was $19.8 million, net of cash acquired, and promissory notes to the sellers of $3.9 million. Investments in affiliates during the year consisted of the purchase of a 50- percent interest in Radiadores Visconde, Ltda., a Brazilian heat- transfer company based in S European, bank debt. The company also entered into a long-term, $60-million, multi-currency, revolving-credit agreement that was used to replace short-term debt. Overall, company debt increased by $72.0 million in fiscal 1999. New borrowings include short- and long-term debt used to provide financing for acquisitions, equity investments in affiliates, and construction projects in Europe and North America. Reductions in long-term debt resulted from refinancing existing bank debt in Europe with governmental loans and prepayment of an industrial revenue bond in the United States. In fiscal 1998, company debt increased by $17.1 million. New borrowings included short-term debt to provide financing for construction projects in Europe and North America. Also, maturing debt was refinanced with long-term borrowing. TREASURY STOCK - -------------- Treasury stock activity is detailed in Management's discussion of financial position and Note 16 to the consolidated financial statements. DIVIDENDS PAID - -------------- Dividends for fiscal 2000 totaled $27.1 million, or 92 cents per share. This represented an increase of eight cents per share over the previous year. Dividends in fiscal 1999 and 1998 were $24.8 and $22.6 million, respectively, representing rates of 84 and 76 cents per share, respectively, and those dividends increased eight cents per share each year over the previous year. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
- ------------------------------------------------------------------------------ For the years ended March 31 2000 1999 1998 - ------------------------------------------------------------------------------ Cash flows from operating activities: - ------------------------------------ Net earnings $ 65,403 $ 73,943 $ 72,471 Adjustments to reconcile net earnings with cash provided by operating activities: Depreciation and amortization 48,822 44,182 41,767 Pensions (2,686) (2,465) (2,256) Loss from disposition of property, plant, and equipment 582 123 837 Deferred income taxes (2,235) 5,652 (91) Provision for losses on accounts receivable 734 (855) 497 Undistributed earnings of affiliates, net of dividends received 800 841 679 Other - net 163 1,577 2,884 ---------------------------- 111,583 122,998 116,788 ---------------------------- Change in operating assets and liabilities excluding acquisitions: Trade receivables (9,147) (15,100) (16,526) Inventories 4,799 (6,789) (13,236) Deferred income taxes and other current assets (5,909) 4,661 (2,781) Accounts payable (8,674) 4,819 13,855 Accrued compensation and employee benefits (2,936) (715) 3,724 Income taxes (1,257) (2,234) 3,081 Accrued expenses and other current liabilities 2,743 (2,469) (1,977) ---------------------------- Net cash provided by operating activities 91,202 105,171 102,928 ---------------------------- Cash flows from investing activities: - ------------------------------------ Expenditures for property, plant, and equipment (90,147) (90,860) (80,682) Acquisitions, net of cash acquired -- (19,826) (2,604) Proceeds from dispositions of assets 2,140 524 1,927 Investments in affiliates (2,700) (17,687) -- Increase in deferred charges and other noncurrent assets (2,537) (895) (1,003) Other - net (56) (150) (200) ---------------------------- Net cash used for investing activities (93,300) (128,894) (82,562) Cash flows from financing activities: - ------------------------------------ (Decrease)/increase in short-term debt - net (60,569) 48,112 18,597 Additions to long-term debt 129,818 46,810 27,102 Reductions of long-term debt (47,837) (22,924) (28,607) Issuance of common stock, including treasury stock 2,965 5,054 4,567 Purchase of treasury stock (12,102) (15,203) (16,990) Cash dividends paid (27,102) (24,832) (22,605) ---------------------------- Net cash (used for)/provided by financing activities (14,827) 37,017 (17,936) ---------------------------- Effect of exchange-rate changes on cash (1,168) (541) (842) ---------------------------- Net (decrease)/increase in cash and cash equivalents (18,093) 12,753 1,588 Cash and cash equivalents at beginning of year 49,163 36,410 34,822 ---------------------------- Cash and cash equivalents at end of year $ 31,070 $ 49,163 $ 36,410 ============================ Cash paid during the year for: Interest, net of amounts capitalized $ 8,297 $ 4,948 $ 4,434 Income taxes $ 33,314 $ 37,071 $ 37,715 ---------------------------- The notes to consolidated financial statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT (In thousands, except per-share amounts)
- ---------------------------------------------------------------------------------------------------------------------- Accumulated Restricted For the years Additional other stock- ended March 31, Common paid-in Retained comprehensive Treasury unamortized 2000, 1999, 1998 stock capital earnings income/(loss) stock value Total - ---------------------------------------------------------------------------------------------------------------------- Balance, March 31, 1997 $18,964 $ 9,760 $378,740 $ (3,016) $(14,949) $(3,811) $385,688 - ---------------------------------------------------------------------------------------------------------------------- Net earnings -- -- 72,471 -- -- -- 72,471 Other comprehensive (loss): Foreign-currency translation -- -- -- (5,086) -- -- (5,086) Total comprehensive income -- -- -- -- -- -- 67,385 Cash dividends, $0.76 per share -- -- (22,605) -- -- -- (22,605) Purchase of treasury stock -- -- -- -- (16,990) -- (16,990) Stock options and awards including related tax benefits -- 2,583 (5,585) -- 10,736 (798) 6,936 Employee stock-purchase and -ownership plans -- 41 (20) -- 226 -- 247 Amortization of deferred compensation under restricted stock plans -- -- -- -- -- 1,814 1,814 - ---------------------------------------------------------------------------------------------------------------------- Balance, March 31, 1998 18,964 12,384 423,001 (8,102) (20,977) (2,795) 422,475 - ---------------------------------------------------------------------------------------------------------------------- Net earnings -- -- 73,943 -- -- -- 73,943 Other comprehensive (loss): Foreign-currency translation -- -- -- (9,831) -- -- (9,831) Minimum pension liability (net of tax benefit of $260) -- -- -- (408) -- -- (408) Total comprehensive income -- -- -- -- -- -- 63,704 Cash dividends, $0.84 per share -- -- (24,832) -- -- -- (24,832) Purchase of treasury stock -- -- -- -- (15,203) -- (15,203) Stock options and awards including related tax benefits -- 882 (2,970) -- 6,165 (11) 4,066 Employee stock-purchase and -ownership plans -- 277 -- -- 1,817 -- 2,094 Amortization of deferred compensation under restricted stock plans -- -- -- -- -- 915 915 - ---------------------------------------------------------------------------------------------------------------------- Balance, March 31, 1999 18,964 13,543 469,142 (18,341) (28,198) (1,891) 453,219 - ---------------------------------------------------------------------------------------------------------------------- Net earnings -- -- 65,403 -- -- -- 65,403 Other comprehensive (loss): Foreign-currency translation -- -- -- (3,144) -- -- (3,144) Minimum pension liability (net of tax benefit of $5) -- -- -- (144) -- -- (144) Total comprehensive income -- -- -- -- -- -- 62,115 Cash dividends, $0.92 per share -- -- (27,102) -- -- -- (27,102) Purchase of treasury stock -- -- -- -- (12,102) -- (12,102) Stock options and awards including related tax benefits -- 28 (1,798) -- 3,719 (975) 974 Employee stock-purchase and -ownership plans -- 2 (123) -- 2,187 -- 2,066 Amortization of deferred compensation under restricted stock plans -- -- -- -- -- 1,072 1,072 - ---------------------------------------------------------------------------------------------------------------------- Balance, March 31, 2000 $18,964 $13,573 $505,522 $(21,629) $(34,394) $(1,794) $480,242 - ---------------------------------------------------------------------------------------------------------------------- The notes to consolidated financial statements are an integral part of these statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 Significant accounting policies - ----------------------------------------- Nature of operations: Modine Manufacturing Company (Modine) is -------------------- a leading global developer, manufacturer, and marketer of heat exchangers and systems for use in on-highway and off-highway OEM (original-equipment-manufacturer) vehicular applications and for sale to the automotive aftermarket (as replacement parts) and to a wide array of building markets. Product lines include radiators and radiator cores, vehicular air- conditioning, oil coolers, charge-air coolers, heat-transfer and heat-storage packages and modules, and building-HVAC (heating, ventilating, and air- conditioning) equipment. Basis of presentation: The financial statements are prepared --------------------- in conformity with generally accepted accounting principles in the United States. These principles require management to make certain estimates and assumptions in determining Modine's assets, liabilities, revenue, expenses, and related disclosures. Actual amounts could differ from those estimates. Consolidation principles: The consolidated financial statements ------------------------ include the accounts of Modine Manufacturing Company and its majority-owned subsidiaries. Material intercompany transactions and balances are eliminated in consolidation. Operations of subsidiaries outside the United States and Canada are included for periods ending one month prior to Modine's year end in order to ensure timely preparation of the consolidated financial statements. Investments in affiliated companies in which ownership exceeds 20 percent are accounted for by the equity method. The investments are stated at cost plus or minus a proportionate share of the undistributed net income (loss). Modine's share of the affiliates' net income (loss) is reflected in net earnings. Revenue Recognition: Sales revenue is recognized at the time ------------------- of product shipment to customers and appropriate provision is made for uncollectible accounts. Translation of foreign currencies: Assets and liabilities of --------------------------------- foreign subsidiaries and equity investments are translated into U.S. dollars at year-end exchange rates, and income and expense items are translated at the average exchange rates for the year. Resulting translation adjustments are reported as an other- comprehensive-income (loss) item, included in shareholders' investment. Translation adjustments relating to countries with highly inflationary economies and foreign-currency transaction gains or losses are included in net earnings. Financial instruments: Foreign-exchange options and forward --------------------- contracts on foreign currencies are entered into by Modine as hedges against the impact of currency fluctuations on certain sales and purchase transactions and are not used to engage in speculation. Gains and losses are recognized when these instruments are settled. Income taxes: Deferred tax liabilities and assets are ------------ determined based on the difference between the amounts reported in the financial statements and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Earnings per share: Basic earnings per share is calculated ------------------ based on the weighted average number of common shares outstanding during the year, while diluted earnings per share is calculated based on the dilutive effect of common shares that could be issued. Also see Note 6. Cash equivalents: For purposes of the cash flows statement, ---------------- Modine considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Inventories: Inventories are valued at the lower of cost, ----------- on a first-in, first-out basis, or market value. Property, plant, and equipment: These assets are stated at ------------------------------ cost. Depreciation is provided using, principally, declining-balance methods for machinery and equipment, and the straight-line method for buildings and other assets over their expected useful lives. Maintenance and repair costs are charged to earnings as incurred. Costs of improvements are capitalized. Upon the sale or other disposition of an asset, the cost and related accumulated depreciation are removed from the accounts and the gain or loss is included in net earnings. Modine monitors events or changes in circumstances for long- lived assets, which may result in the carrying amount of the assets exceeding the sum of the expected undiscounted future cash flows associated with such assets. The measurement of any impairment losses recognized is based on the difference between the fair values and the carrying amounts of the assets. Intangible assets: The excess of cost over fair value of the ----------------- net assets of businesses acquired is amortized using the straight- line method primarily over a fifteen-year period. Costs of acquired patents and product technology are amortized using the straight-line method over the shorter of their estimated useful life or 15 years. Environmental expenditures: Environmental expenditures related -------------------------- to current operations that qualify as property, plant, and equipment or that substantially increase the economic value or extend the useful life of an asset are capitalized and all other expenditures are expensed as incurred. Environmental expenditures that relate to an existing condition caused by past operations are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. Stock-based compensation: Stock-based compensation is recognized ------------------------ using the intrinsic value method. Accordingly, compensation cost for stock options is measured at the excess, if any, of the quoted market price of Modine stock at the date of the grant over the amount an employee must pay to acquire the stock. Also see Note 18. Accounting principles to be adopted: In 1998, the Financial ----------------------------------- Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." The statement requires companies to recognize all derivatives as either assets or liabilities, with the instruments measured at fair value. The accounting for changes in fair value, gains, or losses depends on the intended use of the derivative and its resulting designation. The statement, which had its effective date deferred by SFAS No. 137, is now effective for fiscal years beginning after June 15, 2000. Modine will adopt SFAS No. 133 beginning April 1, 2001. Adoption of this statement is not expected to have a material effect on Modine's financial position or results of operations. Reclassifications: Certain prior-year amounts have been ----------------- reclassified to conform with the current-year presentation. NOTE 2 Research and development costs - ---------------------------------------- Research and development costs charged to operations totaled $20,528,000 in fiscal 2000, $18,252,000 in fiscal 1999, and $16,816,000 in fiscal 1998. NOTE 3 Pension and other postretirement benefit plans - -------------------------------------------------------- Pensions: Modine has several noncontributory, defined-benefit, -------- pension plans that cover most of its domestic employees. The benefits provided are based primarily on years of service and average compensation for the salaried plans and some hourly plans. Other hourly plans are based on a monthly retirement benefit amount. Funding policy for domestic, qualified plans is to contribute annually not less than the minimum required by applicable law and regulation, nor more than the maximum amount that can be deducted for federal income-tax purposes. Plan assets principally consist of equity and fixed-income securities. As of March 31, 2000 and 1999, the plans, held 994,000 and 1,420,000 shares, respectively, of Modine common stock. Modine's foreign subsidiaries have defined-benefit plans and/or termination indemnity plans covering substantially all of their eligible employees. The benefits under these plans are based on years of service and final average compensation levels. Funding is limited to statutory requirements. The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $15,638,000, $14,306,000, and $687,000, respectively, as of March 31, 2000, and $18,220,000, $15,235,000, and $1,178,000, respectively, as of March 31, 1999. Modine has several defined-contribution plans that cover most of its domestic employees. These 401(k) and savings plans provide company matching under various formulas. The cost of Modine's contributions to the plans (including retirement plans discussed in Note 18) for fiscal 2000, 1999, and 1998 were $7,744,000, $6,831,000, and $6,666,000, respectively. Other postretirement plans: Modine and certain of its domestic -------------------------- subsidiaries provide selected healthcare and life-insurance benefits for retired employees. Designated employees may become eligible for those benefits when they retire. These plans are unfunded. Modine periodically amends the plans, changing the contribution rate of retirees and the amounts and forms of coverage. An annual limit on Modine's liability (a "cap") was established for most plans between fiscal 1994 and fiscal 1996 after original recognition of the liability in fiscal 1993. It maximizes future costs at 200 percent of Modine's then-current cost. These changes reduced the accrued obligation and the reduction is being amortized as a component of the benefit cost. The change in benefit obligations and plan assets as well as the funded status of Modine's pension and other postretirement plans were as follows: (In thousands) - ---------------------------------------------------------------------------- Pensions Other postretirement ------------------ -------------------- Years ended March 31 2000 1999 2000 1999 - ---------------------------------------------------------------------------- Change in benefit obligation: Benefit obligation at beginning of year $155,754 $137,090 $ 23,816 $ 22,706 Service cost 5,875 5,567 374 327 Interest cost 10,630 10,299 1,629 1,626 Plan amendments 1,256 344 -- -- Actuarial (gain)/loss (13,237) 7,302 (825) 974 Benefits paid (6,723) (4,945) (2,286) (2,234) Settlement 166 -- -- -- Contributions by plan participants -- -- 427 417 Currency-translation adjustment (1,687) 97 -- -- - ---------------------------------------------------------------------------- Benefit obligation at end of year $152,034 $155,754 $ 23,135 $ 23,816 - ---------------------------------------------------------------------------- Change in plan assets: Fair value of plan assets at beginning of year $196,396 $188,762 $ -- $ -- Actual return on plan assets 1,808 10,485 -- -- Employer contributions 5,025 2,218 1,859 1,817 Contributions by plan participants -- -- 427 417 Benefits paid (6,723) (4,945) (2,286) (2,234) Currency-translation adjustment (172) (124) -- -- - ---------------------------------------------------------------------------- Fair value of plan assets at end of year $196,334 $196,396 $ -- $ -- - ---------------------------------------------------------------------------- Funded status: Funded status at end of year $ 44,300 $ 40,642 $(23,135) $(23,816) Unrecognized net (gain)/loss (3,890) (6,060) (737) 42 Unrecognized prior service cost 3,028 2,306 (2,091) (2,564) Unrecognized net transition obligation 487 663 -- -- - ---------------------------------------------------------------------------- Net amount recognized $ 43,925 $ 37,551 $(25,963) $(26,338) - ---------------------------------------------------------------------------- Amounts recognized in the balance sheet consist of: Prepaid benefit cost $ 56,974 $ 51,606 $ -- $ -- Accrued benefit liability (14,860) (15,526) (25,963) (26,338) Intangible asset 994 991 -- -- Accumulated other comprehensive income 817 480 -- -- - ---------------------------------------------------------------------------- Net amount recognized $ 43,925 $ 37,551 $(25,963) $(26,338) - ---------------------------------------------------------------------------- Costs for Modine's pension and other postretirement benefit plans include the following components: (In thousands) - ---------------------------------------------------------------------------- Years ended March 31 2000 1999 1998 - ---------------------------------------------------------------------------- Pensions: Components of net periodic benefit cost (gain): Service cost $ 5,875 $ 5,567 $ 5,280 Interest cost 10,630 10,299 9,625 Expected return on plan assets (17,567) (16,433) (14,925) Amortization of: Unrecognized net loss (gain) 95 (117) 108 Unrecognized prior service cost 380 340 437 Unrecognized net obligation (asset) 93 213 (288) Adjustment for settlement 574 -- -- - ---------------------------------------------------------------------------- Net periodic benefit cost (gain) $ 80 $ (131) $ 237 - ---------------------------------------------------------------------------- Other postretirement plans: Components of net periodic benefit cost: Service cost $ 374 $ 327 $ 310 Interest cost 1,629 1,626 1,624 Amortization of: Unrecognized net (gain) (46) (109) (87) Unrecognized prior service cost (473) (473) (473) - ---------------------------------------------------------------------------- Net periodic benefit cost $ 1,484 $ 1,371 $ 1,374 - ---------------------------------------------------------------------------- The following weighted-average assumptions were used to determine Modine's obligation under the plans: - ---------------------------------------------------------------------------- Years ended March 31 2000 1999 ---------------- --------------- U.S. Foreign U.S. Foreign plans plans plans plans - ---------------------------------------------------------------------------- Pensions: Discount rate 7.5% 7.4% 7.0% 7.1% Expected return on plan assets 9.0% 14.4% 9.0% 15.4% Rate of compensation increase 4.0% 3.1% 4.5% 3.0% - ---------------------------------------------------------------------------- Other postretirement plans: Discount rate 7.5% 7.0% Rate of compensation increase 4.0% 4.5% - ---------------------------------------------------------------------------- With regards to the postretirement plans, for measurement purposes, a 6.0-percent healthcare-cost trend rate was assumed for fiscal year 2000 for pre-65 benefits and 5.0 percent for post-65 benefits. Pre-65 trend rates were assumed to decrease to 5.0 percent in fiscal 2001 and remain at that level thereafter. Assumed healthcare-cost trend rates affect the amounts reported for the healthcare plan. A one-percentage-point change in assumed healthcare- cost trend rates would have the following effects: (In thousands) - ---------------------------------------------------------------------------- One percentage point -------------------- Year ended March 31, 2000 increase decrease - ---------------------------------------------------------------------------- Effect on total of service and interest cost $ 96 $ (95) Effect on post-retirement benefit obligation 1,309 (1,244) - ---------------------------------------------------------------------------- NOTE 4 Leases - ---------------- Modine leases various facilities and equipment. Rental expense under operating leases totaled $14,817,000 in fiscal 2000, $12,618,000 in fiscal 1999, and $10,912,000 in fiscal 1998. Future minimum rental commitments at March 31, 2000, under noncancelable operating leases were: (In thousands) - ---------------------------------------------------------------------------- Years ending March 31 - ---------------------------------------------------------------------------- 2001 $8,637 2004 $2,321 2002 5,646 2005 1,703 2003 3,134 2006 and beyond 2,556 - ---------------------------------------------------------------------------- Total future minimum rental commitments $23,997 - ---------------------------------------------------------------------------- NOTE 5 Income taxes - ---------------------- The U.S. and foreign components of earnings before income taxes and the income tax expense consist of: (In thousands) - ---------------------------------------------------------------------------- Years ended March 31 2000 1999 1998 - ---------------------------------------------------------------------------- Components of earnings before income taxes: United States $70,114 $ 98,945 $ 83,342 Foreign 25,217 19,125 32,630 - ---------------------------------------------------------------------------- Total earnings before income taxes $95,331 $118,070 $115,972 - ---------------------------------------------------------------------------- Income tax expense: Federal: Current $20,231 $ 22,983 $ 26,913 Deferred 2,959 4,995 (55) State: Current 3,319 4,836 4,008 Deferred 337 497 22 Foreign: Current 8,746 9,595 12,506 Deferred (5,664) 1,221 107 - ---------------------------------------------------------------------------- Totals charged to earnings $29,928 $ 44,127 $ 43,501 - ---------------------------------------------------------------------------- Income-tax expense attributable to earnings before income taxes differed from the amounts computed by applying the statutory U.S. federal income-tax rate as a result of the following: - ---------------------------------------------------------------------------- Years ended March 31 2000 1999 1998 - ---------------------------------------------------------------------------- Statutory federal tax 35.0% 35.0% 35.0% State taxes, net of federal benefit 2.6 3.0 2.3 Taxes on non-U.S. earnings and losses (7.8) (0.2) 0.2 Other 1.6 (0.4) -- - ---------------------------------------------------------------------------- Effective tax rate 31.4% 37.4% 37.5% - ---------------------------------------------------------------------------- The significant components of deferred income-tax expense attributable to earnings before income taxes are as follows: (In thousands) - ---------------------------------------------------------------------------- Years ended March 31 2000 1999 1998 - ---------------------------------------------------------------------------- Pensions $ 1,707 $1,294 $ 1,617 Depreciation 3,622 2,023 1,201 Inventories (575) (148) 432 Employee benefits 679 817 (1,357) Benefit of tax losses (7,185) (392) (162) Other (617) 3,119 (1,657) - ---------------------------------------------------------------------------- Totals charged to earnings $(2,369) $6,713 $ 74 - ---------------------------------------------------------------------------- The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows: (In thousands) - ---------------------------------------------------------------------------- March 31 2000 1999 - --------------------------------------------------------------------------- Deferred tax assets: Accounts receivable $ 1,366 $ 1,079 Inventories 5,660 4,488 Plant and equipment 937 566 Employee benefits 18,683 19,278 Net operating-loss and tax-credit carry-forwards 9,217 7,553 Other 7,747 6,867 ----------------- Total gross deferred assets 43,610 39,831 Less valuation allowance 856 5,154 ----------------- Net deferred tax assets 42,754 34,677 ----------------- Deferred tax liabilities: Pension 22,012 20,034 Plant and equipment 14,846 11,046 Other 2,686 2,311 ----------------- Total gross deferred tax liabilities 39,544 33,391 - ---------------------------------------------------------------------------- Net deferred tax asset $ 3,210 $ 1,286 - ---------------------------------------------------------------------------- The valuation allowance for deferred tax assets as of April 1, 1999, was $5,154,000. The valuation allowance decreased by $4,298,000 during the year and relates primarily to certain, foreign, net-operating-loss carryforward activities. The implementation of a tax strategy allowed Modine to release a tax-valuation allowance relating to the net-operating- loss carryforward at a foreign subsidiary. Available positive evidence and projected future earnings of the foreign subsidiary will, more likely than not, result in the realization of the net-operating-loss carryforward. At March 31, 2000, the company had tax-loss carryforwards of $21,628,000 existing in jurisdictions outside of the United States. If not utilized against taxable income, the tax losses will expire as follows: (In thousands) - ---------------------------------------------------------------------------- Years ending March 31 - ---------------------------------------------------------------------------- 2001 $184 2004 $ 471 2002 387 2005 2,405 2003 -- No expiration date 18,181 - ---------------------------------------------------------------------------- The undistributed earnings of certain foreign subsidiaries and equity investment companies totaled $112,084,000 as of March 31, 2000. The earnings are considered permanently reinvested in foreign operations and, therefore, no provision has been made for any U.S. taxes. NOTE 6 Earnings per share - ---------------------------- The computational components of basic and diluted earnings per share are as follows: (In thousands, except per-share amounts) - ---------------------------------------------------------------------------- Years ended March 31 2000 1999 1998 - ---------------------------------------------------------------------------- Net earnings per share of common stock: Basic $2.22 $2.50 $2.44 Assuming dilution 2.20 2.46 2.39 Numerator: Net earnings available to common shareholders $65,403 $73,943 $72,471 Denominator: Weighted average shares outstanding - basic 29,471 29,579 29,726 Effect of dilutive securities - options 232 436 563 --------------------------- Weighted average shares outstanding - assuming dilution 29,703 30,015 30,289 There were outstanding options to purchase common stock excluded from the dilutive calculation because their prices exceeded the average market price for the earnings statement periods as follows: Average market price per share $27.03 $32.57 $32.63 Number of shares 1,169 645 318 - ---------------------------------------------------------------------------- NOTE 7 Cash and cash equivalents - ----------------------------------- Under Modine's cash management system, certain cash balances reflect credit balances to the extent that checks written have not yet been presented for payment. These credit balances, included in accounts payable, were approximately $7,699,000, $9,814,000, and $10,002,000 at March 31, 2000, 1999, and 1998, respectively. All the short-term investments at March 31, 2000, 1999, and 1998, were of an initial duration of less than three months and were treated as cash equivalents, which approximate fair value. NOTE 8 Inventories - --------------------- Inventories include: (In thousands) - ---------------------------------------------------------------------------- March 31 2000 1999 - ---------------------------------------------------------------------------- Raw materials $ 35,872 $ 40,529 Work in process 39,146 41,863 Finished goods 93,579 96,557 - ---------------------------------------------------------------------------- Total inventories $168,597 $178,949 - ---------------------------------------------------------------------------- NOTE 9 Property, plant, and equipment - ---------------------------------------- Property, plant, and equipment is composed of: (In thousands) - ---------------------------------------------------------------------------- March 31 Depreciable lives 2000 1999 - ---------------------------------------------------------------------------- Land -- $ 7,966 $ 7,922 Buildings and improvements 10-40 years 164,449 147,153 Machinery and equipment 3-12 years 336,064 304,659 Office equipment 3-14 years 48,754 40,803 Transportation equipment 3-7 years 14,924 17,817 Construction in progress -- 62,013 76,292 ------------------ 634,170 594,646 Less accumulated depreciation 296,183 290,882 - ---------------------------------------------------------------------------- Net property, plant, and equipment $337,987 $303,764 - ---------------------------------------------------------------------------- Depreciation expense was $39,360,000, $37,411,000, and $35,192,000 for the fiscal years ended 2000, 1999, and 1998, respectively. NOTE 10 Acquisitions and equity investments - --------------------------------------------- In the first quarter of fiscal 1999, Modine formed a joint-venture company with Daikin Industries, Ltd. Modine made investments in fiscal 1999 of $1,500,000 and in fiscal 2000 of $2,700,000. The 50-percent-owned joint venture, Daikin-Modine, Inc., is manufacturing a new line of packaged, rooftop, air-conditioning products using state-of-the-art technology, including Modine's patented PF (parallel flow) heat exchangers. On April 11, 2000, Modine announced that it reached a basic agreement with Daikin Industries, Ltd. to purchase their share of ownership in the joint-venture in June 2000. The operation will be restructured into Modine's Commercial HVAC&R Division upon completion of the transaction. On August 6, 1998, Modine, through its wholly owned Brazilian subsidiary, purchased a 50-percent interest in Radiadores Visconde, Ltda., a Brazilian heat-transfer company based in Sao Paulo, Brazil. Visconde produces heat-exchanger components, assemblies, and modules primarily for the aftermarket but also for sale to original-equipment customers in the truck, engine, agricultural-tractor, hydraulic-system, compressor, marine, construction-equipment, power-generator, and industrial markets. The purchase price of $26,187,000 was financed through a combination of cash provided by operations, borrowing under Modine's revolver, and a promissory note in the amount of $10,000,000 to the sellers. Goodwill recorded as part of the investment was $17,536,000 and is being amortized on a straight-line basis over 15 years. The investment is being accounted for under the equity method using a one-month reporting delay. On October 6, 1998, Modine finalized the acquisition of Core Holdings, Inc., of Orlando, Florida, an aftermarket wholesale distributor specializing in complete lines of vehicular engine- cooling and air-conditioning systems products. The acquisition purchase price was $24,300,000. The transaction was financed with cash, existing short-term borrowing facilities, and $3,921,000 of promissory notes to the sellers. The investment is accounted for using the purchase method. Goodwill, recognized as a result of the acquisition, was $25,261,000 and is being amortized on a straight-line basis over 15 years. The results of operations are included in the consolidated financial statements since the effective date of the acquisition. Details of businesses acquired and equity investment transactions were as follows: (In thousands) - ---------------------------------------------------------------------------- Year ended March 31 2000 1999 - ---------------------------------------------------------------------------- Value of assets acquired, including intangibles, excluding cash acquired of $543 in fiscal 1999 $ -- $53,620 Liabilities assumed and created -- (43,794) Equity investment in affiliates 2,700 27,687 - ---------------------------------------------------------------------------- Net cash paid for acquisitions and equity investments $2,700 $37,513 - ---------------------------------------------------------------------------- Effective January 1, 1998, Modine acquired the business, assets, and certain liabilities of Sun Technology Corporation, located in Shelby Township, Michigan. Sun Technology manufactured Ray-Tec infrared heaters for commercial, industrial, and residential buildings. The acquisition purchase price of $3,173,000 was paid for with cash and a promissory note for $320,000. Goodwill created by the acquisition was $2,226,000 and is being amortized over 15 years on a straight-line basis. The investment is being accounted for by the purchase method. The results of operations are included in the consolidated financial statements since the date of acquisition. The investments presented above did not have a material effect on the consolidated results of operations and, accordingly, pro- forma information is not presented. NOTE 11 Intangible assets - --------------------------- Intangible assets include: (In thousands) - ------------------------------------------------------------------------- March 31 2000 1999 - ------------------------------------------------------------------------- Goodwill $ 89,815 $ 92,548 Patents and product technology 8,389 8,389 Other intangibles 3,204 3,326 ------------------ 101,408 104,263 Less accumulated amortization 31,069 23,852 - ------------------------------------------------------------------------- Net intangible assets $ 70,339 $ 80,411 - ------------------------------------------------------------------------- Amortization expense for intangible assets was $8,390,000, $5,856,000, and $4,761,000 for the fiscal years ended 2000, 1999, and 1998, respectively. NOTE 12 Deferred charges and other noncurrent assets - ------------------------------------------------------ Deferred charges and other noncurrent assets include: (In thousands) - ---------------------------------------------------------------------------- March 31 2000 1999 - ---------------------------------------------------------------------------- Prepaid pension costs - qualified and nonqualified plans $57,421 $52,000 Other noncurrent assets 7,365 2,141 - ---------------------------------------------------------------------------- Total deferred charges and other noncurrent assets $64,786 $54,141 - ---------------------------------------------------------------------------- NOTE 13 Indebtedness - ---------------------- Long-term debt at March 31, 2000 and 1999, includes: (Dollars in thousands) - ---------------------------------------------------------------------------- Fiscal Interest rate at year of Type of issue March 31, 2000 maturity 2000 1999 - ---------------------------------------------------------------------------- Denominated in U.S. dollars: Fixed rate - Notes 5.00%-9.00% 2001-2004 $ 13,391 $ 15,825 Weighted average interest rate 5.31% Revenue bonds 7.50% 2003 750 1,100 Variable rate - Note 6.50% 2003 55,000 1,660 Revenue bonds 3.85% 2008 3,000 3,000 Denominated in foreign currency: Fixed rate - Notes and other debt 3.25%-11.00% 2004-2009 13,301 11,784 Weighted average interest rate 3.92% Variable rate - Notes and other debt .30%-7.00% 2002-2010 128,798 115,235 Weighted average interest rate 3.78% ------------------ 214,240 148,604 Less current portion 3,128 4,766 - ---------------------------------------------------------------------------- Total $211,112 $143,838 - ---------------------------------------------------------------------------- During the second quarter of fiscal 2000, Modine entered into an unsecured $53,000,000 term loan denominated in Euros. This loan matures in August, 2001, with a one-year extension option subject to the lender's approval. In the fourth quarter of fiscal 2000, Modine entered into an unsecured $60,000,000 multi-currency revolving credit agreement with a term of three years. Certain of Modine's financing agreements require it to maintain specific financial ratios and place certain limitations on dividend payments and the acquisition of treasury stock. Other loan agreements give certain existing unsecured lenders security equal to any future secured borrowing. Modine is in compliance with these covenants at March 31, 2000. At March 31, 2000, the carrying value of Modine's long-term debt approximates fair value. Long-term debt matures as follows: - --------------------------------------------------------------------------- Years ending March 31 (In thousands) - --------------------------------------------------------------------------- 2001 $ 3,128 2004 $12,002 2002 67,931 2005 1,735 2003 100,762 2006 and beyond 28,682 - ---------------------------------------------------------------------------- Modine also maintains credit agreements with banks abroad. The foreign unused lines of credit at March 31, 2000, were approximately $27,888,000. Domestic unused lines of credit at March 31, 2000, were approximately $5,657,000. A maximum of $79,248,000 in short- term bank borrowings was outstanding during the year ended March 31, 2000. The weighted average interest rate on short-term borrowings was 4.67 percent at March 31, 2000, and 4.94 percent at March 31, 1999. Interest expense charged to earnings was as follows: (In thousands) - ---------------------------------------------------------------------------- Years ended March 31 2000 1999 1998 - ---------------------------------------------------------------------------- Gross interest cost $9,980 $7,538 $4,687 Capitalized interest on major construction projects (1,513) (1,816) (677) - ---------------------------------------------------------------------------- Interest expense $8,467 $5,722 $4,010 - ---------------------------------------------------------------------------- NOTE 14 Foreign exchange contracts/derivatives - ------------------------------------------------ Modine uses derivative financial instruments in a limited way as a tool to manage its financial risk. Their use is restricted primarily to hedging assets and obligations already held by Modine and they are used to protect cash rather than generate income or engage in speculative activity. Leveraged derivatives are prohibited by company policy. Modine from time to time enters into foreign-currency-exchange contracts, generally with terms of 90 days or less, to hedge specific foreign-currency-denominated transactions. The effect of this practice is to minimize the impact of foreign-exchange-rate movements on Modine's operating income. Modine's foreign-currency-exchange contracts do not subject it to significant risk due to exchange-rate movements because gains and losses on these contracts offset gains and losses on the assets and liabilities being hedged. As of March 31, 2000 and 1999, the parent company had approximately $2,549,000 and $3,971,000, respectively, in outstanding forward foreign-exchange contracts denominated in Euros and French francs, respectively. The difference between these contracts' values and the fair value of these instruments in the aggregate was not material. Certain subsidiaries have transactions in currencies other than their functional currencies and, from time to time, enter into forward and option contracts to hedge the purchase of inventory or to sell nonfunctional currency receipts. Non-U.S. dollar financing transactions through intercompany loans or local borrowings in the corresponding currency generally are effective as hedges of long-term investments. See also Note 13. NOTE 15 Other noncurrent liabilities - -------------------------------------- Other noncurrent liabilities include: (In thousands) - --------------------------------------------------------------------------- March 31 2000 1999 - --------------------------------------------------------------------------- Postretirement benefits other than pensions $23,595 $24,119 Pensions 13,583 14,521 Other 2,562 2,914 - --------------------------------------------------------------------------- Total other noncurrent liabilities $39,740 $41,554 - --------------------------------------------------------------------------- NOTE 16 Common and treasury stock - ----------------------------------- Following is a summary of common and treasury stock activity. - ---------------------------------------------------------------------------- Treasury stock Common stock at cost ----------------- ------------------- shares amount shares amount - ---------------------------------------------------------------------------- Balance March 31, 1997 30,342 $18,964 (509) $(14,949) - ---------------------------------------------------------------------------- Purchase of treasury stock -- -- (523) (16,990) Stock options and awards including related tax benefits -- -- 346 10,736 Employee stock-purchase and -ownership plans -- -- 8 226 - ---------------------------------------------------------------------------- Balance March 31, 1998 30,342 18,964 (678) (20,977) - ---------------------------------------------------------------------------- Purchase of treasury stock -- -- (418) (15,203) Stock options and awards including related tax benefits -- -- 215 6,165 Employee stock-purchase and -ownership plans -- -- 64 1,817 - ---------------------------------------------------------------------------- Balance March 31, 1999 30,342 18,964 (817) (28,198) - ---------------------------------------------------------------------------- Purchase of treasury stock -- -- (459) (12,102) Stock options and awards including related tax benefits -- -- 124 3,719 Employee stock-purchase and -ownership plans -- -- 71 2,187 - ---------------------------------------------------------------------------- Balance March 31, 2000 30,342 $18,964 (1,081) $(34,394) - ---------------------------------------------------------------------------- NOTE 17 Shareholder rights plan - --------------------------------- Modine has a shareholder rights plan to protect against coercive takeover tactics. Under the plan, each share of Modine's common stock carries one right that entitles the holder to purchase a unit of 1/100 Preferred Series A Participating Stock at $95.00 per unit. The rights are not currently exercisable but will become exercisable 10 days after a shareholder has acquired 20 percent or more, or has commenced a tender or exchange offer for 30 percent or more, of Modine's common stock. 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 holder 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 Modine, at a price of $0.0125 per right, at any time before 20 percent or more of Modine's common stock has been acquired. The rights expire on October 27, 2006, unless previously redeemed. NOTE 18 Stock-retirement, option, and award plans - --------------------------------------------------- Retirement plans: Modine has adopted several, qualified, ---------------- defined-contribution, stock-purchase plans; 401(k) plans; and a non-qualified, deferred-compensation plan for certain, designated employees. The stock-purchase plans permitted employees to make monthly investments at current market prices based on a specified percentage of compensation. As of December 31, 1998, the stock- purchase plans were frozen and no additional contributions were made. The plans continue to earn dividends, which are reinvested in Modine common stock. The 401(k) plans and deferred-compensation plan allow employees to choose among various investment alternatives, including Modine common stock. Modine matches a portion of the employees' contribution, primarily in Modine common stock. Activity in the plans for fiscal 2000, 1999, and 1998 resulted in the purchase of 487,000, 506,000, and 577,000 shares of Modine common stock, respectively. These purchases were made from the employee-pension-plan trusts, private purchases, and treasury shares. It is anticipated that future purchases will be made from all three sources at the discretion of the plans' administrative committees. Costs of Modine's contributions to the plans for fiscal 2000, 1999, and 1998 were $7,288,000, $6,321,000, and $6,179,000, respectively. Stock option and award plans: In July of 1985 and 1994, ---------------------------- shareholders approved plans providing for the granting of options to officers, other key employees, and to non-employee directors to purchase common stock of Modine. In July of 1999, shareholders reapproved the 1994 plan. Options granted under the plans, which vest immediately, are either nonqualified or incentive stock options and carry a price equal to the market price on the date of grant. Both incentive stock options and nonqualified stock options terminate 10 years after date of grant. The 1985 and 1994 Incentive Stock Plans also provide for the granting of stock awards. Restricted stock awards were granted for 39,000, 1,500, and 25,000 shares in fiscal 2000, 1999, and 1998, respectively. Shares are awarded at no cost to the employee and are placed in escrow until certain employment restrictions lapse. The value of shares awarded is amortized over the five-to- six year restriction periods. The amounts charged to operations in fiscal 2000, 1999, and 1998 were $1,072,000, $915,000, and $1,814,000, respectively. Following is a summary of incentive and nonqualified option activity under the plans. - ---------------------------------------------------------------------------- Shares Weighted-average in thousands) exercise price per share - ---------------------------------------------------------------------------- Outstanding March 31, 1997 2,085 $20.27 - ---------------------------------------------------------------------------- Granted 318 33.56 Exercised (323) 13.33 - ---------------------------------------------------------------------------- Outstanding March 31, 1998 2,080 23.38 - ---------------------------------------------------------------------------- Granted 333 33.36 Exercised (215) 13.77 Forfeitures (18) 27.31 - ---------------------------------------------------------------------------- Outstanding March 31, 1999 2,180 25.82 - ---------------------------------------------------------------------------- Granted 343 25.86 Exercised (85) 10.59 - ---------------------------------------------------------------------------- Outstanding March 31, 2000 2,438 $26.36 - ---------------------------------------------------------------------------- Options outstanding and exercisable as of March 31, 2000: - ---------------------------------------------------------------------------- Weighted- Weighted-average average exercise price Shares Range of exercise prices remaining life per share (in thousands) - ---------------------------------------------------------------------------- $ 8.75 - 14.99 1.51 $11.56 157 15.00 - 24.99 4.01 20.17 530 25.00 - 34.99 7.20 29.55 1,751 - ---------------------------------------------------------------------------- Total outstanding and exercisable $26.36 2,438 - ---------------------------------------------------------------------------- A further 1,480,000 shares were available for the granting of additional options or awards at March 31, 2000. Modine continues to account for its stock options using the intrinsic value method of accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Since the exercise price of the options that have been awarded was equal to the market price on the date of the grant, no compensation expense was required to be recognized. If the fair-value based method of accounting for the 2000, 1999, and 1998 stock option grants had been applied in accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," Modine's net earnings and net earnings per share would have been reduced as summarized below: (In thousands, except per-share amounts) - --------------------------------------------------------------------------- Years ended March 31 2000 1999 1998 - --------------------------------------------------------------------------- Net earnings as reported $65,403 $73,943 $72,471 Net earnings pro forma 62,855 71,206 69,597 Net earnings per share (basic) as reported $2.22 $2.50 $2.44 Net earnings per share (basic) pro forma 2.13 2.41 2.34 - ---------------------------------------------------------------------------- The following assumptions were used to compute the fair value of the option grants in fiscal 2000, 1999, and 1998 using the Black-Scholes option-pricing model: a risk-free interest rate of 5.82-6.60 percent, 4.53 percent, and 5.43 percent, respectively; stock volatility of 26.9-28.8 percent, 26.3 percent, and 27.0 percent, respectively; a dividend yield of 2.4-2.5 percent, 2.2 percent, and 2.2 percent, respectively; and, for each of the three years, an expected option life of five years. NOTE 19 Segment and geographic information - -------------------------------------------- Modine's product line consists of heat-transfer components and systems. Modine serves the vehicular, industrial, commercial, and building-HVAC original-equipment and replacement markets. Modine's segments, which are organized on the basis of market categories or geographical responsibility, are 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 vehicular replacement market and the building- HVAC market, from business units in North America; and European Operations, which provides heat-transfer products, primarily to European original-equipment manufacturers of on-highway and off-highway vehicles, industrial equipment manufacturers, and the vehicular replacement market from business units in Europe. Modine has assigned specific business units to a segment based principally on these defined markets and their geographical location. Each of Modine's segments is individually managed and has separate financial results reviewed by its chief, operating decisionmakers. These results are used by management both in evaluating the performance of, and in allocating current and future resources to, each of the segments. Modine evaluates segment performance based on operating income and the efficient use of long-lived and total assets. The accounting policies of the segments are the same as those of Modine as a whole. Totals presented are inclusive of all adjustments needed to reconcile to the data provided in Modine's consolidated financial statements and related notes. Segment data: (In thousands) - --------------------------------------------------------------------------- Years ended March 31 2000 1999 1998 - --------------------------------------------------------------------------- Sales: Original Equipment $ 485,338 $ 491,532 $ 491,128 Distributed Products 351,790 320,320 300,989 European Operations 342,834 334,245 283,751 ---------------------------------------- Segment sales 1,179,962 1,146,097 1,075,868 Eliminations (40,693) (34,650) (35,450) - --------------------------------------------------------------------------- Total net sales $1,139,269 $1,111,447 $1,040,418 - --------------------------------------------------------------------------- Operating income: Original Equipment $ 92,292 $ 92,488 $ 85,986 Distributed Products 39,179 49,041 51,004 European Operations 29,817 34,200 39,506 ---------------------------------------- Segment operating income 161,288 175,729 176,496 Corporate & administrative expenses (62,303) (62,546) (58,754) Eliminations 53 108 (266) Other items not allocated to segments (3,707) 4,779 (1,504) - --------------------------------------------------------------------------- Earnings before income taxes $ 95,331 $ 118,070 $ 115,972 - --------------------------------------------------------------------------- Intersegment sales are accounted for based on an established markup over production costs. At the end of the fourth quarter in fiscal 2000, several changes were introduced in the basis for measuring segment profit or loss. The amortization of goodwill was restored as a charge to SG&A expenses from other items not allocated to segments. Certain goodwill amortization previously recorded at Corporate was moved to the Distributed Products segment. Lastly, the allocation of Corporate headquarters functions was changed to include only a general building, technical center, and aircraft use allocation. These changes were introduced in preparation for using value-based- management criteria for assessing performance across the various business units within the segments. The corresponding prior years' data have been restated to reflect the effects of these changes. Operating income for the reportable segments excludes all general corporate and administrative expenses except for certain expenses allocated for use of the company aircraft, technical center, and general building use. Functions included in corporate and administrative expenses include: certain research and development costs, information technology, quality assurance, legal, finance, human resources, environmental, amortization of goodwill from acquisitions that benefit the entire company, and other general corporate expenses. Other items not allocated to segments include interest income and expenses, royalties, and dividend income. (In thousands) - --------------------------------------------------------------------------- Years ended March 31 2000 1999 1998 - --------------------------------------------------------------------------- Assets: Original Equipment $265,495 $231,841 $223,222 Distributed Products 216,586 211,171 149,006 European Operations 235,093 237,036 188,214 Corporate & administrative 264,562 249,044 210,010 Eliminations (50,629) (13,353) (11,428) - --------------------------------------------------------------------------- Total assets $931,107 $915,739 $759,024 - --------------------------------------------------------------------------- Capital expenditures: Original Equipment $ 19,714 $ 24,766 $ 24,730 Distributed Products 4,506 5,088 7,068 European Operations 39,744 45,514 25,447 Corporate & administrative 26,272 15,542 23,319 Eliminations (89) (50) 118 - --------------------------------------------------------------------------- Total capital expenditures $ 90,147 $ 90,860 $ 80,682 - --------------------------------------------------------------------------- Depreciation and amortization expense: Original Equipment $ 16,270 $ 15,764 $ 14,798 Distributed Products 7,618 6,477 5,064 European Operations 14,106 13,276 11,824 Corporate & administrative 10,955 8,788 10,185 Eliminations (127) (122) (104) - --------------------------------------------------------------------------- Total depreciation and amortization expense $ 48,822 $ 44,183 $ 41,767 - --------------------------------------------------------------------------- In the third and fourth quarters of fiscal 2000, changes were introduced by management in the basis of measuring segment assets. Since the third quarter, trade receivables previously reported as corporate and administrative assets have been reported directly in the individual segments. Since the fourth quarter, goodwill and its associated accumulated amortization previously reported in corporate and administrative assets has been reported in a segment if the benefit from the acquisition is directly associated with a single segment. As mentioned earlier, these changes were introduced in preparation for using value- based-management criteria for assessing performance within business units within the three segments. Corporate assets include: cash and cash equivalents, accounts and notes receivable, investments in affiliates, intangibles, and significant long-lived assets. Eliminations consist primarily of intracompany loans and receivables. Eliminations of capital expenditures are primarily due to sales between segments in excess of book value. Geographic data: (In thousands) - --------------------------------------------------------------------------- Years ended March 31 2000 1999 1998 - --------------------------------------------------------------------------- Sales to unaffiliated customers from company facilities located in: United States $ 757,074 $ 740,094 $ 719,221 Germany 212,474 221,725 178,855 Other countries 169,721 149,628 142,342 - -------------------------------------------------------------------------- Net sales $1,139,269 $1,111,447 $1,040,418 - -------------------------------------------------------------------------- Long-lived assets: United States $ 364,456 $ 344,948 $ 278,959 Germany 71,422 61,258 43,260 Other countries 66,572 61,923 46,651 Eliminations (898) (5,486) (3,029) - -------------------------------------------------------------------------- Total long-lived assets $ 501,552 $ 462,643 $ 365,841 - -------------------------------------------------------------------------- Net sales are attributed to countries based on the location of the selling unit. During the last three fiscal years, no single customer has accounted for more than ten percent of revenues. Long-lived assets are primarily physical property, plant, and equipment, but also include investments, intangibles, and other long-term assets. Eliminations are primarily intracompany loans and sales of property, plant, and equipment. NOTE 20 Contingencies and litigation - -------------------------------------- In the normal course of business, Modine and its subsidiaries have been named as defendants in various lawsuits and enforcement proceedings in which claims are asserted against Modine by private parties, the Occupational Safety and Health Administration, the Environmental Protection Agency, other governmental agencies, and others. Modine is also subject to other liabilities that arise in the ordinary course of its business. Based on the information available, Modine does not expect that any unrecorded liability related to these matters would have a material effect on the consolidated financial statements. In November 1991, Modine filed a lawsuit against Mitsubishi Motor Sales of America, Inc., and Showa Aluminum Corporation, alleging infringement of Modine's patent on parallel-flow air-conditioning condensers. The suit seeks an injunction to prohibit continued infringement, an accounting for damages, a trebling of such damages for willful infringement, and reimbursement of attorneys' fees. In December 1991, Modine submitted a complaint to the U.S. International Trade Commission (ITC) requesting that the ITC ban the import and sale of parallel-flow air-conditioning condensers and systems or vehicles that contain them, which are the subject of the November 1991 lawsuit. In August 1997, the ITC issued an Order excluding from U.S. import Showa condensers that infringe Modine Manufacturing Company's parallel-flow patent. The ITC's Order covers condensers, their parts, and certain products including them, such as air-conditioning kits and systems. It directs the U.S. Customs Service to exclude from importation into the United States such products manufactured by Showa Aluminum Corporation of Japan and Showa Aluminum Corporation of America. The decision is based on a Modine U.S. patent covering condensers with tube hydraulic diameters less than 0.04822 inches. The Showa companies must certify to Customs officials that any condenser items imported by them do not infringe Modine's parallel-flow patent. The Showa companies must also file annual reports with the ITC regarding their sales of Showa parallel-flow condensers in the United States. In July of 1994, Showa filed a lawsuit against Modine alleging infringement by Modine of certain Showa patents pertaining to condensers. In June 1995, Modine filed a motion for partial summary judgment against such lawsuit. In December of 1994, Modine filed another lawsuit against Mitsubishi and Showa pertaining to a newly issued patent on parallel- flow air-conditioning condensers. Both 1994 suits have been stayed pending the outcome of re-examination in the U.S. Patent Office of the patents involved. In October of 1999, the U.S. Patent Office Board of Appeals rejected Modine's 1994 PF patent, which rejection is being appealed to the Court of Appeals for the Federal Circuit. In October of 1997, Modine was issued a Japanese patent covering parallel-flow air-conditioning condensers having tube hydraulic diameters less than 0.070 inches. In August of 1998, Modine filed a patent infringement suit in Japan against Showa with respect to this patent seeking an injunction and damages. Several patents have been issued to Modine by the European Patent Office, one having been rejected at the opposition level, which is being appealed, and a second having been validated at an opposition hearing. In February 2000, Modine filed a complaint against Delphi Automotive Systems Corporation in the U.S. District Court in Milwaukee, Wisconsin, alleging infringement of its PF patent. All legal and court costs associated with these cases have been expensed as they were incurred. NOTE 21 Quarterly financial data (unaudited) - --------------------------------------------- Quarterly financial data are summarized below: (In thousands, except per-share amounts) - --------------------------------------------------------------------------- Fiscal 2000 quarters ended June Sept. Dec. March - --------------------------------------------------------------------------- Net sales $283,847 $286,691 $283,520 $285,211 Gross profit 81,965 79,588 78,336 77,601 Net earnings 19,509 15,096 16,195 14,603 Net earnings per share of common stock: Basic $0.66 $0.51 $0.55 $0.50 Assuming dilution 0.65 0.51 0.55 0.49 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- Fiscal 1999 quarters ended June Sept. Dec. March - --------------------------------------------------------------------------- Net sales $273,104 $272,961 $284,355 $281,027 Gross profit 78,458 75,958 77,113 78,398 Net earnings 20,080 19,081 17,341 17,441 Net earnings per share of common stock: Basic $0.68 $0.64 $0.59 $0.59 Assuming dilution 0.67 0.63 0.58 0.58 - --------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors Modine Manufacturing Company Racine, Wisconsin In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, cash flows, and shareholders' investment present fairly, in all material respects, the financial position of Modine Manufacturing Company and its subsidiaries at March 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2000, in conformity with accounting priniciples generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICEWATERHOUSECOOPERS LLP PricewaterhouseCoopers LLP Chicago, Illinois April 26, 2000 EX-21 12 0012.txt EXHIBIT 21 Subsidiaries of the Registrant The table below indicates each of the Registrant's subsidiaries, each subsidiary's jurisdiction of incorporation, and the percentage of its voting securities owned by the Registrant or its subsidiaries.
State or country of Percentage incorporation of voting Subsidiaries or organization securities Owned by Industrial Airsystems, Inc. Minnesota 100% Registrant Manufacturera Mexicana de Partes de Automoviles, S.A. ("Mexpar") Mexico 100% Registrant Modine, Inc. Delaware 100% Registrant Modine Acquisition Corp. Delaware 100% Registrant Modine Aftermarket Holdings, Inc. North Carolina 100% Registrant Modine Asia K.K. Japan 100% Registrant Modine Austria Ges.m.b.H Austria 100% Registrant Modine do Brasil Ltda. Brazil 99% Modine, Inc. Modine of Canada, Ltd. Canada 100% Registrant Modine Climate Systems, Inc. Kentucky 100% Registrant Modine Export Sales Corp. Barbados 100% Registrant Modine Foundation, Inc. Wisconsin 100% Registrant Modine Manufacturing Company Foundation, Inc. Wisconsin 100% Registrant Modine of Puerto Rico, Inc. Delaware 100% Registrant Radman, Inc. Michigan 100% Registrant TRT Heating Products, Inc. Rhode Island 100% Registrant Modine Holding GmbH Germany 100% Modine, Inc. Modine Transferencia de Calor, S.A. de C.V. Mexico 99.6% Modine, Inc. NRF B.V. The Netherlands 100% Modine, Inc. Modine Climate Systems GmbH Germany 100% Modine Climate Systems Inc. Modine Automobiltechnik GmbH Germany 100% Modine Holding GmbH Modine Bernhausen GmbH Germany 100% Modine Holding GmbH Modine Europe GmbH Germany 100% Modine Holding GmbH Modine Grundstucksverwaltungs GmbH Germany 100% Modine Holding GmbH Modine Hungaria Kft. Hungary 100% Modine Holding GmbH Modine Kirchentellinsfurt GmbH Germany 100% Modine Holding GmbH Modine Montage GmbH Germany 100% Modine Holding GmbH Modine Neuenkirchen GmbH Germany 100% Modine Holding GmbH Modine Pontevico S.r.l. Italy 100% Modine Holding GmbH - -------------------------------- One share of Mexpar is held by Modine, Inc. Balance of voting securities held by the Registrant. Formerly known as Signet Systems, Inc. Merged into Modine Manufacturing Company on April 1, 2000 EXHIBIT 21 continued State or country of Percentage incorporation of voting Subsidiaries or organization securities Owned by Modine Tubingen GmbH Germany 100% Modine Holding GmbH Modine Uden B.V. The Netherlands 100% Modine Holding GmbH NRF B.V.B.A. Belgium 100% NRF B.V. NRF Deutschland GmbH Germany 100% NRF B.V. NRF Espania S.A. Spain 100% NRF B.V. NRF France SARL France 100% NRF B.V. NRF Handelgesellschaft mbH Austria 100% NRF B.V NRF Italia SRL Italy 100% NRF B.V. NRF Poland Spolka Z.O.O. Poland 100% NRF B.V. NRF Services AS Denmark 100% NRF B.V. NRF Switzerland AG Switzerland 100% NRF B.V. NRF UK Ltd. United Kingdom 100% NRF B.V.
EX-23 13 0013.txt EXHIBIT 23 Consent of Independent Accountants We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (File Numbers 2-63714, 2-86984, 2-87299, 2-86985, 33-1764, 33-58544, 2-55398, 33-66436, 33-66438, 33-66442, 33-66440, 33-54719, 33-54721, 33-54723, 33-54725, 333-29789, 333-52639, 333-78991, 333-78989, 333-66111, 333-66115, 333-66109 and 333-71523) of Modine Manufacturing Company and Subsidiaries of our report dated April 26, 2000 relating to the financial statements of Modine Manufacturing Company and Subsidiaries, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated April 26, 2000 relating to the financial statement schedule, which appears in this Form 10-K. PRICEWATERHOUSECOOPERS LLP PricewaterhouseCoopers LLP Chicago, Illinois June 21, 2000 EX-27 14 0014.txt
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF EARNINGS FOR THE PERIOD ENDING 3/31/00 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 YEAR MAR-31-2000 APR-1-1999 MAR-31-2000 31,070 0 187,160 4,436 168,597 429,555 634,170 296,183 931,107 175,477 211,112 0 0 18,964 461,278 931,107 1,139,269 1,139,269 821,779 821,779 0 1,173 8,467 95,331 29,928 65,403 0 0 0 65,403 2.22 2.20
EX-99 15 0015.txt EXHIBIT 99(a) notice of meeting and proxy statement annual meeting 2000 of shareholders - ---------------------------------------------------------------------- NOTICE OF ANNUAL MEETING OF SHAREHOLDERS - ---------------------------------------------------------------------- Date: Wednesday, July 19, 2000 Time: 9:30 a.m. Place: 1500 DeKoven Ave. Racine, WI 53403 Record Date: May 30, 2000 Matters to be voted on: 1. Election of three directors; and 2. Any other matters properly brought before the shareholders at the meeting. By order of the Board of Directors, W. E. PAVLICK W. E. PAVLICK, Secretary June 9, 2000 Contents Page ---- General Information About Voting 2 Proposal No. 1: Election of Directors 3 PROXY STATEMENT Your vote at the annual meeting is important to us. Please vote your shares of Common Stock by calling a toll-free telephone number or by completing the enclosed proxy card and returning it to us in the enclosed envelope. This proxy statement has information about the annual meeting and was prepared by the Company's management for the Board of Directors. This proxy statement was first mailed to shareholders on June 9, 2000. PROXY STATEMENT Annual Shareholders' Meeting of Modine Manufacturing Company--2000 - ---------------------------------------------------------------------- GENERAL INFORMATION ABOUT VOTING Who can vote? - ------------- You can vote your shares of common stock if our records show that you owned the shares on May 30, 2000. A total of 29,264,026 shares of common stock can vote at the annual meeting. You get one vote for each share of common stock. The holders of common stock do not have cumulative voting rights. The enclosed proxy card shows the number of shares you can vote. How do I vote? - -------------- Starting this year, stockholders of record can give a proxy to be voted at the meeting by calling a toll-free telephone number or, if you prefer, you may mail in the enclosed proxy card as you have in the past. Stockholders who hold their shares in "street name" will continue to vote their shares in the manner required by their brokers. The telephone voting procedure has been set up for your convenience and has been designed to authenticate your identity, to allow you to give voting instructions, and to confirm that those instructions have been recorded properly. The enclosed proxy card contains instructions for telephone and mail voting. Whichever method you use, the proxies identified on the back of the proxy card will vote your shares in accordance with your instructions. If you submit a proxy card without giving specific voting instructions, the proxies will vote those shares as recommended by the Board of Directors. What if other matters come up at the annual meeting? - ---------------------------------------------------- The matters described in this proxy statement are the only matters we know will be voted on at the annual meeting. If other matters are properly presented at the meeting, the proxyholders will vote your shares as they see fit. Can I change my vote after I return my proxy card? - -------------------------------------------------- You can revoke your proxy card by: - Submitting a new proxy card; - Giving written notice before the meeting to the Secretary of the Company, stating that you are revoking your proxy card; or - Attending the meeting and voting your shares in person. Unless you decide to vote your shares in person, you should revoke your prior proxy card in the same way you initially submitted it - that is, by telephone or mail. Can I vote in person at the annual meeting? - ------------------------------------------- Although we encourage you to complete and return the proxy card or vote by phone to ensure that your vote is counted, you can attend the annual meeting and vote your shares in person. What do I do if my shares are held in "street name"? - ---------------------------------------------------- If your shares are held in the name of your broker, or other nominee, that party should give you instructions for voting your shares. How are votes counted? - ---------------------- We will hold the annual meeting if holders of a majority of the shares of common stock entitled to vote either appear by proxy or attend the meeting. If you appear by proxy, your shares will be counted to determine whether we have a quorum even if you abstain or fail to vote on any of the proposals listed on the proxy card. If your shares are held in the name of a nominee, and you do not tell the nominee how to vote your shares (so-called "broker nonvotes"), the nominee can vote them as it sees fit only on matters that are determined to be routine, and not on any other proposal. Broker nonvotes will be counted as present to determine if a quorum exists but will not be counted as present and entitled to vote on any nonroutine proposal. Who will count the vote? - ------------------------ Norwest Bank Minnesota, NA, (Wells Fargo) Shareowner Services, an independent tabulator, will count the vote under the supervision of Inspectors of Election appointed by the Board. Who pays for this proxy solicitation? - ------------------------------------- We do. In addition to sending you these materials, some of our employees may contact you by telephone, mail, or in person. None of these employees will receive any extra compensation for doing this. 1. ELECTION OF DIRECTORS The Board of Directors currently consists of ten members. R. T. Savage is retiring from the Board and is not a nominee for election in 2000. By Board of Directors' action in March, 2000, effective as of July 19, 2000, the authorized number of directors will be fixed at nine. The Restated By-Laws of the Company, as amended in March, 2000, effective as of July 19, 2000, will classify the Board of Directors into three classes: each class consisting of three directors; with each class of directors serving three-year terms of office. Each class of directors is staggered so that each expires in succeeding years. This year the terms of Frank W. Jones, Dennis J. Kuester, and Michael T. Yonker expire at the 2000 Annual Meeting of Shareholders. Messrs. Jones, Kuester, and Yonker have been nominated for a new three-year term expiring at the Annual Meeting in 2003. While it is not anticipated that any of the nominees will be unable to take office, if such is the case, proxies will be voted in favor of such other person or persons as the Board of Directors may propose to fill the three directorships. In accordance with the Restated By-Laws, a director shall hold office until the Annual Meeting for the year in which his or her term expires and until his or her successor shall be elected and qualify; subject, however, to prior death, resignation, retirement, disqualification, or removal from office. Vacancies may be filled by the remaining directors. The nominees for the Board of Directors, the directors whose terms will continue, their ages, other directorships, and their tenure and expiration dates of their terms are set forth as follows: Nominees to be Elected - ---------------------- FRANK W. JONES Director since 1982 Mr. Jones, 60, is an independent management consultant, Tucson, Arizona. He is also a director of Jason Incorporated, Ingersoll Milling Machine Co., Star Cutter Co., Gardner Publications, Inc., and General Tool Co. Term to expire in 2000. DENNIS J. KUESTER Director since 1993 Mr. Kuester, 58, is President of Marshall & Ilsley Corporation and of M&I Marshall & Ilsley Bank, and Chairman of M&I Data Services, Inc., a Milwaukee, Wisconsin, bank holding company, bank, and banking services company, respectively. He is also a director of M&I Data Services, Inc., M&I Marshall & Ilsley Bank, Marshall & Ilsley Corporation, Super Steel Products Corp., TYME Corporation, and Krueger International. Term to expire in 2000. MICHAEL T. YONKER Director since 1993 Mr. Yonker, 57, is retired. Prior to June 15, 1998, he was President and Chief Executive Officer of Portec, Inc., Lake Forest, Illinois, a manufacturer of material handling equipment. He is also a director of Woodward Governor Company. Term to expire in 2000. Directors Continuing in Service - ------------------------------- FRANK P. INCROPERA Director since 1999 Dr. Incropera, 60, is the McCloskey Dean of the University of Notre Dame's College of Engineering, South Bend, Indiana, and has served in that position since 1998. Prior to that, he served as the Head of the School of Mechanical Engineering at Purdue University, West Lafayette, Indiana. Term to expire in 2002. VINCENT L. MARTIN Director since 1992 Mr. Martin, 60, is Chairman, Chief Executive Officer (through June 30, 1999), and a director of Jason Incorporated, a diversified manufacturing company based in Milwaukee, Wisconsin. He is also a director of Crane Manufacturing & Service. Term to expire in 2002. MARSHA C. WILLIAMS Director since 1999 Ms. Williams, 49, is Chief Administrative Officer of Crate & Barrel, a privately held retailer of home furnishings and accessories headquartered in Northbrook, Illinois. Previously, Ms. Williams had been Vice President and Treasurer of Amoco Corporation and Carson Pirie Scott & Company, and Vice President of The First National Bank of Chicago. She is also a director of Chicago Bridge & Iron, Davis Funds and Selected Funds. Term to expire in 2002. DONALD R. JOHNSON Director since 1997 Mr. Johnson, 58, is President and Chief Executive Officer of the Company. He is also a director of Grede Foundries, Inc. and the M&I Marshall & Ilsley Bank. Term to expire in 2001. GARY L. NEALE Director since 1977 Mr. Neale, 60, is Chairman, President, Chief Executive Officer, and a director of NiSource, Inc., Hammond, Indiana, a holding company for gas and electric utilities and other energy-related subsidiaries. He is also a director of Chicago Bridge & Iron. Term to expire in 2001. RICHARD J. DOYLE Director since 1987 Mr. Doyle, 67, is retired. Prior to April 30, 1998, he was Chief Executive Officer and a director of three private electrical contracting corporations. Prior to January 1, 1989, Mr. Doyle was a Vice President of Borg-Warner Corporation, Chicago, Illinois, a diversified manufacturing and services company, and President and Chief Executive Officer of Borg-Warner Automotive, Inc., Troy, Michigan, a subsidiary of Borg-Warner Corporation. Term to expire in 2001. The Board of Directors recommends a vote FOR all of the director-nominees, Mr. Jones, Mr. Kuester, and Mr. Yonker. PRINCIPAL SHAREHOLDERS AND SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS Principal Shareholders - ---------------------- The following table shows the number of shares of common stock beneficially owned by each person who we know beneficially owns more than 5% of the common stock. Title Name and Address of Amount and Nature of Percent of Class Beneficial Ownership Beneficial Ownership of Class - -------- ------------------------------ --------------------------- -------- Common Administrative Committee of 4,727,175** Power to vote 16.16% Modine Contributory Employee Plans' stock Stock Ownership & Investment not voted by Plans, 1500 DeKoven Avenue, employees Racine, Wisconsin 53403-2552 owning it Members: D. B. Spiewak, R. L. Hetrick and D. R. Zakos* Common Gabelli Funds, Inc. and 5,244,702*** Sole or shared 17.92% affiliates voting and/or One Corporate Center power to Rye, New York 10580-1434 dispose of stock - ------------------------------------------------------------------------------ * M&I Marshall and Ilsley Trust Company is trustee and holder of record of the Modine Contributory Employee Stock Ownership and Investment Plans, Employees' Retirement Trusts and 401(k) Retirement Plans stock, and is the escrow agent for participants' stock under the 1995 through 2000 Stock Award Plans. The Marshall & Ilsley Trust Company, as custodian, may be viewed as having voting or dispositive authority in certain situations pursuant to Department of Labor regulations or interpretations or federal case law. Pursuant to SEC Rule 13d-4, inclusion of such shares in this statement shall not be construed as an admission that the Reporting Person or its subsidiaries are, for purposes of Sections 13(d) or 13(g) of the Act, the beneficial owners of such securities. D. J. Kuester is president of Marshall & Ilsley Corporation and of M&I Marshall & Ilsley Bank. M&I Marshall & Ilsley Corporation and its subsidiaries specifically disclaim beneficial ownership of stock held by these plans and trusts. ** As of March 31, 2000. *** Based on a Schedule 13D dated October 11, 1999, by Gabelli Funds, Inc. and affiliates. We know of no other person or group that is a beneficial owner of five percent (5%) or more of the Company's common stock. Securities Owned by Management - ------------------------------ The following table shows the number of shares of common stock beneficially owned as of March 31, 2000 by: - each director; - each executive officer named in the Summary Compensation Table on page 10; and - the directors and executive officers as a group. Title Name of Amount and Nature of Percent of Class Beneficial Owner Beneficial Ownership of Class -------- ---------------- -------------------- -------- Common R. J. Doyle* 52,000(a) ** Common F. P. Incropera* 15,000(a) ** Common F. W. Jones* 86,050(a) ** Common D. J. Kuester* 36,000(b) ** Common V. L. Martin* 52,200(c) ** Common G. L. Neale* 63,917(a) ** Common M. C. Williams* 20,000(a) ** Common M. T. Yonker* 37,000(a) ** Common R. T. Savage* 316,319(d) 1.08% Common D. R. Johnson 304,742(e) 1.04% Common E. T. Thomas 49,289(e) ** Common W. E. Pavlick 300,543(e) 1.03% Common D. B. Rayburn 159,120(e) ** Common L. D. Howard 229,911(e) ** Common All executive officers and directors as a group (23 persons) 2,336,802(f) 7.98% * Non-employee directors have the right to acquire additional shares of common stock (not listed in the above table) through the exercise of options automatically granted upon re-election pursuant to the 1994 Stock Option Plan for Non-Employee Directors discussed on page 9. ** Denotes less than one percent of shares outstanding. (a) The 52,000 shares listed for Mr. Doyle include options to acquire 45,000 shares; the 15,000 shares listed for Mr. Incropera include options to acquire 15,000 shares; the 86,050 shares listed for Mr. Jones include options to acquire 45,000 shares; the 63,917 shares listed for Mr. Neale include options to acquire 45,000 shares; the 20,000 shares listed for Ms. Williams include options to acquire 20,000 shares and the 37,000 shares listed for Mr. Yonker include options to acquire 35,000 shares. (b) The 36,000 shares listed for Mr. Kuester exclude shares held of record by M&I Marshall & Ilsley Bank. See footnote to the Five Percent Stock Ownership table. This number includes options to acquire 35,000 shares. (c) The 52,200 shares listed for Mr. Martin include options to acquire 50,000 shares and include 200 shares held in trusts for his children with Mr. Martin as trustee. (d) The 316,319 shares listed for Mr. Savage include options to acquire 144,126 shares. (e) The 304,742 shares listed for Mr. Johnson include 2,288 shares held by Mr. Johnson's wife, options to acquire 210,000 shares, 23,600 restricted shares awarded to Mr. Johnson and 2,879.5 units held in the form of Modine Common Stock Fund Units (Modine 401(k) Retirement Plan and Deferred Compensation Plan) (each Unit consisting of Modine common stock and a cash component); the 49,289 shares listed for Mr. Thomas include options to acquire 40,000 shares, 5,000 restricted shares awarded to Mr. Thomas, and 3,963.4 units held in the form of Modine Common Stock Fund Units (Modine 401(k) Retirement Plan and Deferred Compensation Plan) (each Unit consisting of Modine common stock and a cash component); the 300,543 shares listed for Mr. Pavlick include 3,271 shares held by Mr. Pavlick's wife, options to acquire 98,700 shares, 3,100 restricted shares awarded to Mr. Pavlick and 713.6 units held in the form of Modine Common Stock Fund Units (Modine 401(k) Retirement Plan and Deferred Compensation Plan) (each Unit consisting of Modine common stock and a cash component); the 159,120 shares listed for Mr. Rayburn include options to acquire 131,375 shares, 14,200 restricted shares awarded to Mr. Rayburn and 2,411.3 units held in the form of Modine Common Stock Fund Units (Modine 401(k) Retirement Plan and Deferred Compensation Plan) (each Unit consisting of Modine common stock and a cash component); and the 229,911 shares listed for Mr. Howard include options to acquire 118,000 shares, 9,800 restricted shares awarded to Mr. Howard and 846.7 units held in the form of Modine Common Stock Fund Units (Modine 401(k) Retirement Plan and Deferred Compensation Plan) (each Unit consisting of Modine common stock and a cash component). The awards granted pursuant to the 1995 through 1998 Stock Award Plan are subject to restrictions that lapse annually in fifths over a period commencing at the end of the second year from the date of grant. The awards granted pursuant to the 2000 Stock Award Plan are subject to restrictions that lapse annually in fifths over a period commencing at the end of the first year from the date of grant. (f) This number includes 619,678 shares held by officers (other than the five named executive officers) as a group (9 persons) and includes options to acquire 379,000 shares; 5,000 shares awarded pursuant to the 1995 through 1998 Stock Award Plan are subject to restrictions that lapse annually in fifths over a period commencing at the end of the second year from the date of grant while the awards granted pursuant to the 2000 Stock Award Plan are subject to restrictions that lapse annually in fifths over a period commencing at the end of the first year from the date of grant; and 5,532.1 units held in the form of Modine Common Stock Fund Units (Modine 401(k) Retirement Plan and Deferred Compensation Plan) (each Unit consisting of Modine common stock and a cash component). Approximately forty-two percent (42%) of all outstanding shares are owned or controlled by or for directors, officers, employees, retired employees, and their families. BOARD MEETINGS, COMMITTEES AND COMPENSATION The Board of Directors held eight regular meetings during the fiscal year. An additional seven meetings were held by standing Committees of the board. The following chart describes the function and membership of each committee and the number of times it met in 1999-2000: Audit Committee - 3 meetings Function - -------- - recommends engagement of auditors; - meets with independent auditors to: - discuss plan and scope of audit; - review results of audit; - evaluates internal audit procedures and accounting controls; - approves budget for non-audit services; and - reviews and approves audit and non-audit fees. Members - ------- R. J. Doyle, Chair F. W. Jones V. L. Martin G. L. Neale M. C. Williams Officer Nomination and Compensation Committee - 2 meetings Function - -------- - reviews candidates for positions as Company officers; - makes recommendations to Board on candidates; - makes recommendations to Board on compensation for officers; - administers the 1985 Incentive Stock Plan; and - administers the 1994 Incentive Compensation Plan. Members - ------- G. L. Neale, Chair R. J. Doyle D. J. Kuester V. L. Martin M. T. Yonker Pension Committee - 2 meetings Function - -------- - provides oversight for pension trust investments. Members - ------- F. W. Jones, Chair D. J. Kuester M. C. Williams M. T. Yonker The Board of Directors does not have a committee that nominates directors since nomination and review of director candidates is a function of the full Board. In addition, shareholders who wish to nominate candidates for election to the Board may do so. All directors attended seventy-five percent or more of all Board meetings and meetings of Committees of which they were members during the fiscal year, except G. L. Neale and M. C. Williams. Generally, if a shareholder intends to propose business or make a nomination for the election of directors at an annual meeting, or make a nomination for the election of directors at a special meeting of shareholders, the Company must receive written notice of such intention. The deadline for shareholder nominations for directors and proposals at the 2000 Annual Meeting of Shareholders was February 4, 2000. Compensation of Directors - ------------------------- Non-employee directors receive: - a retainer fee of $6,000 per quarter; - $1,000 for each Board, committee and special meeting attended; - an additional $1,000 for acting as Chairman of the Audit Committee; - reimbursement for travel, lodging, and related expenses incurred in attending Board and committee meetings; and - travel-accident and director and officer liability insurance. Directors who are officers of the Company do not receive any fees in addition to their remuneration as officers. Commencing April 1, 1998, in lieu of all other Board compensation, the Chairman of the Board has received a retainer fee of $12,000 per quarter. Directors of the Company who are not employees are eligible to participate in the 1994 Stock Option Plan for Non-Employee Directors (the "Directors' Plan") which is authorized to grant non-qualified stock options through July 20, 2004, on up to 500,000 shares of the Company's common stock. These options are granted at one hundred percent of the fair market value on the date of the grant and will expire no later than ten years after the date they are granted and will terminate no later than three years after termination of director status for any reason other than death. Within 30 days after election or re-election to the Board, each director so elected or re-elected is automatically granted an option for that number of shares equal to the multiple of 5,000 and the number of years in the term to which such director has been so elected or re-elected. The Directors' Plan may be administered by the Board or by a committee of two or more directors of the Company if deemed necessary or advisable in order to comply with the exemptive rules promulgated pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended. The Board or any such committee shall have no authority to administer the Directors' Plan with respect to the selection of participants under the plan or the timing, pricing, or amounts of any grants. The Board of Directors has adopted the Modine Manufacturing Company Director Emeritus Retirement Plan (the "Director Emeritus Retirement Plan") whereby any person (non-employee) who is or becomes a director of Modine on or after April 1, 1992, and who retires from the Board will be paid a retirement benefit equal to the annualized rate at which directors are being paid for their services to the Company as directors (including Board meeting attendance fees but excluding any applicable committee attendance fees) as in effect at the time such director ceases his service as a director. The retirement benefit will continue until the period of time the retirement benefit paid equals the period of time of the director's Board services. If a director dies before or after retirement, his or her spouse or other beneficiary will receive the applicable retirement benefit. In the event of a change in control (as defined in the Plan) of Modine, each eligible director, or his or her spouse or other beneficiary entitled to receive a retirement benefit through him or her, would be entitled to receive a lump-sum payment equal to the present value of the total of all benefit payments which would otherwise be payable under the Director Emeritus Retirement Plan. The retirement benefit is not payable if the director directly or indirectly competes with the Company or if the director is convicted of fraud or a felony and such fraud or felony is determined by disinterested members of the Board of Directors to have damaged Modine. EXECUTIVE COMPENSATION Summary Compensation Table - -------------------------- The following table sets forth compensation awarded to, earned by, or paid to the Company's Chief Executive Officer and the four most highly compensated executive officers other than the Chief Executive Officer who were serving as executive officers at March 31, 2000, for services rendered to the Company and its subsidiaries during fiscal 1999-2000. Also included is salary, bonus, restricted common stock awards, and stock option information for fiscal years ended March 31, 1999, and March 31, 1998. SUMMARY COMPENSATION TABLE
Annual Compensation (1) Long-Term Compensation ------------------------ ------------------------------------- Restricted Stock All Other Year Name Principal Position Salary Bonus Stock(2) Options(3) Comp.(4) - ------------------------------------------------------------------------------------------------------------------------ 1999/2000 D. R. Johnson President and Chief $500,000 $220,000 $187,500 35,000 $33,792 1998/1999 Executive Officer 452,500 321,275 0 30,000 34,734 1997/1998 President and Chief 326,250 219,240 254,531 30,000 24,160 Operating Officer 1999/2000 D. B. Rayburn Executive Vice President, $305,000 $111,833 $125,000 25,000 $20,137 Operations 1998/1999 Executive Vice President, 262,000 155,017 0 20,000 20,100 1997/1998 Original Equipment 205,000 120,540 152,719 15,000 15,277 1999/2000 E. T. Thomas* Group Vice President $232,500 $ 71,610 $ 87,500 15,000 $15,272 1998/1999 Group Vice President, 140,000 88,200 49,406 25,000 7,845 Highway Products 1999/2000 L. D. Howard** Group Vice President, $250,000 $ 77,000 $ 0 0 $16,512 1998/1999 Europe 237,000 117,789 0 15,000 18,260 1997/1998 200,000 114,800 135,760 15,000 14,895 1999/2000 W. E. Pavlick Senior Vice President, $207,000 $ 63,756 $ 0 8,000 $13,871 1998/1999 General Counsel and 198,500 98,655 0 11,000 15,339 1997/1998 Secretary 180,500 103,607 50,910 11,000 13,460 * Mr. Thomas joined Modine on August 3, 1998, at which time he received 10,000 stock options and 1,500 shares as stock awards in addition to the 15,000 stock options granted in January 1999. ** Mr. Howard retired April 1, 2000. (1) Excludes "Other Annual Compensation" under Securities and Exchange Commission regulations since such does not exceed the lesser of $50,000 or 10% of each individual's combined salary and bonus. (2) The Restricted Stock awarded to an employee on January 19, 2000, was awarded at no cost to the employee but the market price of $25 was used to calculate the dollar value of such long-term compensation. The total number of restricted shares and the aggregate market value at March 31, 2000, were: Mr. Johnson - 23,600 shares valued at $592,950; Mr. Rayburn - 14,200 shares valued at $356,775; Mr. Thomas - 5,000 shares valued at $125,625; Mr. Howard - 9,800 shares valued at $246,225; and Mr. Pavlick - 3,100 shares valued at $77,887.50. Dividends are paid on the restricted shares at the same time and the same rate as dividends paid to shareholders of unrestricted shares. Aggregate market value is based on a fair market value of $25.125 at March 31, 2000. The stock awarded pursuant to the 1995 through 1998 Stock Award Plan was granted to an employee at no cost and placed in escrow until the beginning of the third, fourth, fifth, sixth, and seventh years, respectively, at which time one- fifth of the shares are released to the employee. The awards granted pursuant to the 2000 Stock Award Plan are subject to restrictions that lapse annually in fifths over a period commencing at the end of the first year from the date of grant. In the event of retirement, the shares may, if authorized by the Officer Nomination and Compensation Committee of the Board, be released at an earlier date. In the event of a change-in- control, the share restrictions will lapse. (3) The 1994 Incentive Compensation Plan authorized the Officer Nomination and Compensation Committee of the Board to grant stock options (incentive stock options and non-qualified stock options) and other stock-based rights through July 20, 2004, on up to 3,000,000 shares of the Company's common stock. Incentive stock options and non-qualified stock options granted are at one hundred percent of the fair market value on the date of the grant and will expire no later than ten years after the date of the grant. Grants pursuant to the Plan may be made to such officers or certain other employees as shall be determined by the Committee. Upon the exercise of the option, the optionee may pay the purchase price in cash, stock, optioned stock, or a combination thereof. The optionee may also satisfy any tax withholding obligation by using optioned stock. In the event of a sale, merger, consolidation, or other specified transaction involving the Company, the optionee will have the right to receive (regardless of whether or to what extent the option would then have been exercisable) the difference between the exercise price and the fair market value of the stock. (4) Includes employer matching contributions to the Company Tax Saver (401(k)) Plan, Stock Purchase Plan, Executive Supplemental Stock Plan, and, since January 1, 1999, the Modine 401(k) Retirement Plan and the Modine Non-Qualified Deferred Compensation Plan. The Company has a program (the Executive Supplemental Stock Plan and, after January 1, 1999, the Modine Non-Qualified Deferred Compensation Plan) to pay, out of general assets, an amount substantially equal to the difference between the amount that would have been allocated to a participant's account as Company matching contributions, in the absence of legislation limiting such allocations, and the amount actually allocated under the plans. Payment of this amount and appreciation thereon is deferred until termination of service or retirement. Because the Company's contributions to the Executive Supplemental Retirement Plan and the Modine Non-Qualified Deferred Compensation Plan are actuarially based and are not allocated to the individual named executive officers' accounts until retirement, such contributions are not readily ascertainable and are not included in this column. See page 16 herein regarding the Pension Plan Table for additional information.
Officer Nomination and Compensation Committee Report on Executive - ----------------------------------------------------------------- Compensation - ------------ The Officer Nomination and Compensation Committee has provided the following report on Executive Compensation: Compensation Philosophy ----------------------- The Company's executive compensation philosophy is designed to address the needs of the Company, its executives, and its shareholders. The specific factors underlying the Committee's decision with respect to compensation for each of the named executives for the last fiscal year are two-fold: 1. The first factor is the ability to accomplish the Company's goal of preserving and enhancing the shareholders' investment over the long-term without bearing undue risk in the process. The Committee recognizes that there will be short-term fluctuations in the Company's business and is of the opinion that incentive compensation should be based primarily upon attainment of the Company's goals over a longer period of time. It is the Committee's intention to compensate its executive officers appropriately for superior performance; however, inherent in attaining the Company's goal is the premise that shareholder assets will not be wasted by the payment of excessive compensation. 2. The second factor underlying the Committee's compensation decision is that achieving the foregoing Company goals can only be accomplished by the retention of competent, highly skilled people. Accordingly, the design of the compensation package must include sufficient tools to assure retention of key individuals. Numerous other criteria are considered in the compensation decision, including high ethical standards, concern for employees, regard for the environment, and commitment to the highest levels of product quality and customer service. Each of these criteria is an intrinsic part of attaining the Company's long-term goals. Total Annual Compensation ------------------------- The Company's executive compensation program is composed of an annual cash component, consisting of salary and a bonus based on the financial performance of the Company, and a long-term incentive component, currently consisting of stock awards and stock options. For fiscal 1999-2000, the Company used a formula bonus program that does not commence payout until an after-tax return of 10% on shareholders' investment is earned. Thereafter, Company executives can earn a cash bonus that increases at a linear rate with Company earnings and is proportional with the executive's level of management responsibility, including the Chief Executive Officer ("CEO"), who could earn a cash bonus of up to 120% of his base salary (the maximum payout under the program). All other incentive awards are calculated as a job-slotted percentage of the CEO's percent of earned award. By so doing, the entire management team shares the risks and rewards of overall Company performance. For fiscal year 1999-2000, the Committee determined that several changes were appropriate, including base pay adjustments for certain named executive officers, to align compensation more closely with industry competitive compensation. Long-Term Compensation ---------------------- To further align the Company's executives' interests with those of the shareholder, the Compensation Committee utilizes long-term based incentives in the form of stock options and stock awards. Individual stock option grants are determined based on a subjective assessment of individual performance, contribution, and potential. The stock options currently granted are at market value and are exercisable within ten years of date of grant. The options may be rescinded at any time up until two years after exercise should the individual be terminated for cause, compete in any way against the Company, not fully comply with applicable laws and government regulations, fail to maintain high ethical standards, or breach the Company's policies such as Guidelines for Business Conduct, Antitrust Compliance, or confidentiality of proprietary technology and information. The size of option grants is based upon many factors including (1) Company and individual performance, (2) previous grants of stock options and stock awards, and (3) the competitive market for long-term incentive compensation. Grants made in January 2000 reflect each of these factors including the increased reliance on long-term incentives seen in the U.S. market. As all grants are made at fair market value, it should be noted that executives receive no value from stock options unless all shareholders see an increase in the value of their holdings. For the plan prior to 1998-99, stock awards were grants of Company stock to a limited number of top executives at no cost. These awards vest only at the rate of 20% per year commencing at the end of the second year after grant, acting thereby as both a retention tool and involving the executive in a longer-term stake in the Company. Stock awards not previously vested are terminated should the executive cease to be employed by the Company for any reason other than normal retirement or a change of control of the Company. Beginning with the 1998-99 fiscal year and continuing for the 1999-2000 fiscal year, stock awards were provided on the basis of meeting specified targets and will vest 20% per year commencing at the end of the first year. Achievement is measured based on the fiscal year's performance of specified percentages of sales growth and earnings per share growth over the prior year's results. The sales growth and earnings per share growth achievements are calculated separately and carry equal weight. Target achievement for each element will earn half of the target awards so that full target awards are earned if both goals are achieved. Each element has a minimum, target, and maximum goal. For each fiscal year, the determination of the CEO's target shares was based on compensation data used to determine the CEO's base pay. The target stock award is set at the stock equivalent of a designated percentage (50%) of the CEO comparator group base pay. This amount is then divided by the stock price and rounded up to the nearest 500 share equivalent. At minimum achievement of the goal, the plan pays 50% of the target awards for that goal. At maximum achievement, the plan will pay 150% of the target awards for that goal. Participants other than the CEO receive awards based on a specified percentage of the CEO's awards. The sales and earnings growth for both fiscal years did not reach minimum achievement of the goals and, accordingly, no restricted stock was awarded. A similar stock award program has been set for fiscal year 2000-2001. Although performance goals were not achieved and no stock awards were therefore earned under the Plan, in keeping with the Company's executive retention philosophy, the Committee decided to provide discretionary stock awards similar to those used prior to 1998-99 (except that vesting commences at the end of the first year) to a limited number of key executives in January 2000. These awards were deemed necessary for retention purposes. However, over the long term, each of the named executive officers is compensated through both the stock option and stock award programs as the Company sales and earnings per share and the Company stock price increases, which will also benefit the shareholders. Chief Executive Officer Compensation ------------------------------------ The Committee recognizes that effective management of the Company is a team effort, led by the CEO. The CEO and the named officers must possess the difficult-to-define qualities of leadership, ability to instill confidence in their actions, and the ability to inspire others to even greater effort. These qualities can only be determined through observation over a longer period of time and through the ultimate results attained. Accordingly, the CEO's and senior executive officers' team compensation decisions were not based solely on fiscal 1999-2000 annual financial results but were based on the compensation philosophy referenced above, on the Company's favorable return on shareholders' investment over the longer term and on the Committee's subjective assessment of the performance of the management team. Other Executive Officer Compensation ------------------------------------ Since, as stated above, we believe that corporate management is a team effort, we also believe that it is appropriate for the CEO to select his team members and make a substantial contribution to the compensation decision for each of such team members. Accordingly, upon detailed consultation with the CEO, assessment of the experience, capabilities, and performance of each of the named executives toward attaining Company goals, and the policies and plans referenced above, compensation decisions were made. As a background for such decisions, the Compensation Committee reviewed several major compensation consultant data bases with respect to compensation. The compensation consultant data bases are large data bases of industrial companies that the Committee believes appropriately reflect the broad labor market for Modine executives. Within a range of acceptable total compensation for each individual, compensation is determined as described above. Compliance with Internal Revenue Code Section 162(m) ---------------------------------------------------- Section 162(m) of the Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to public companies for compensation over one million dollars paid to the Company's CEO and four other most highly compensated executive officers. Qualifying performance-based compensation will not be subject to the deduction limit if certain requirements are met. The Committee currently intends to structure its executive- compensation packages to meet these requirements. Compensation Committee Interlocks and Insider Participation ----------------------------------------------------------- None of the Committee members is or has been a Company officer or employee. No Company executive officer currently serves on the compensation committee or any similar committee of another public company. G. L. Neale, Chair R. J. Doyle D. J. Kuester V. L. Martin M. T. Yonker Performance Graph - ----------------- The following graph shows the cumulative total stockholder return on the Company's common stock over the last five fiscal years as compared with the returns of the Standard & Poor's 500 Stock Index and the NASDAQ Industrials Stock Index (non- financial index). The NASDAQ Industrials Stock Index consists of approximately 3,000 industrial companies (including Modine), and includes a broad range of manufacturers. The Company believes, because of the diversity of its business, that comparison with this broader index is appropriate. The graph assumes $100 was invested on March 31, 1995, in the Company's common stock, the S&P 500 Stock Index, and the NASDAQ Industrials Stock Index and assumes reinvestment of dividends. COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN Measurement Period (Fiscal Year Covered Modine NASDAQ S&P 500 - -------------------- ---------- ---------- ----------- Measurement Pt. 4/1/95 100 100 100 FYE 96 81 135 132 FYE 97 77 146 158 FYE 98 111 218 235 FYE 99 92 305 279 FYE 00 86 599 330 Options Granted - --------------- The following table sets forth information about stock option grants during the last fiscal year for the five executive officers named in the Summary Compensation Table. OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at Assumed Annual Rates of Stock Appreciation - Individual Grants Appreciation for Option Term(1)(2)(3) ---------------------------------------------- --------------------------------------- % of Total Options Options Granted to Exercise Expiration Name Granted Employees Price Date 0% 5% 10% ---- ------- ---------- -------- ---------- -- -- --- D. R. Johnson 35,000 12.05% $25.00 1/19/2010 $0 $ 551,250 $ 1,391,250 D. B. Rayburn 25,000 8.61% $25.00 1/19/2010 $0 $ 393,750 $ 993,750 E. T. Thomas 15,000 5.16% $25.00 1/19/2010 $0 $ 236,250 $ 596,250 L. D. Howard 0 0% N/A N/A $0 $ 0 $ 0 W. E. Pavlick 8,000 2.75% $25.00 1/19/2010 $0 $ 126,000 $ 318,000 All Optionees 290,500 100% $25.00 1/19/2010 $0 $ 4,622,625 $ 11,666,625 All Shareholders N/A N/A N/A N/A $0 $465,805,148 $1,175,603,468 (1) All options granted are immediately exercisable except within the first year of employment. Holders may use shares previously owned or received upon exercise of options to exercise options. The Company may accept shares to cover withholding or other employee taxes. (2) The dollar amounts under these columns are the result of calculations at zero percent and at the five-percent and ten- percent rates set by the Securities and Exchange Commission and, therefore, are not intended to forecast possible future appreciation, if any, of the Company's stock price. (3) No gain to the optionee is possible without stock price appreciation, which will benefit all shareholders commensurately. A zero percent gain in stock price appreciation will result in zero dollars for the optionee.
Option Exercises and Fiscal Year-End Values - ------------------------------------------- The following table sets forth information with respect to the five executive officers named in the Summary Compensation Table concerning the number of option exercises and value of options outstanding at the end of the last fiscal year. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
Total Value of Total Number Unexercised Number of of Unexercised In-the-Money Shares Options Held Options Held at Acquired on Value at Fiscal Year End (1) Fiscal Year End (1) Name Exercise Realized Exercisable (2) Exercisable (2) ---- ----------- -------- ---------------------- ------------------- D. R. Johnson 0 $ 0 210,000 $ 238,125 D. B. Rayburn 0 $ 0 131,375 $ 200,859 E. T. Thomas 0 $ 0 40,000 $ 1,875 L. D. Howard 0 $ 0 118,000 $ 445,875 W. E. Pavlick 0 $ 0 98,700 $ 295,813 (1) All options granted are immediately exercisable except within the first year of employment. (2) Granted at fair market value on the date of Grant. Total value of outstanding options is based on a fair market value of Company stock of $25.125 as of March 31, 2000. Pension Plan Table - ------------------ The following table sets forth the estimated annual benefits payable upon retirement at normal retirement age for the years of service indicated under the Company's defined pension plan at the indicated remuneration levels (average of five years' earnings). - ---------------------------------------------------------------------- Average Annual Representative Years of Service Earnings 15 Years 20 Years 25 Years 30 Years 35 Years - -------------- -------- -------- -------- -------- -------- $125,000 $ 28,905 $ 38,541 $ 48,176 $ 57,811 $ 67,446 200,000 47,749 63,666 79,582 95,498 111,415 275,000 66,593 88,791 110,988 133,186 155,383 350,000 85,437 113,916 142,394 170,873 199,352 425,000 104,280 139,041 173,801 208,561 243,321 500,000 123,124 164,166 205,207 246,248 287,290 575,000 141,968 189,291 236,613 283,936 331,258 650,000 160,812 214,416 268,019 321,623 375,227 725,000 179,655 239,541 299,426 359,311 419,196 - ---------------------------------------------------------------------- The five executive officers named in the Summary Compensation Table participate on the same basis as other salaried employees in the non-contributory Modine Pension and Disability Plan for Salaried Employees. Because the Company's contributions to the plan are actuarially based on all eligible salaried employees and are not allocated to individual employee accounts, expenses for a specific person cannot readily be separately or individually calculated. Retirement benefits are based on an employee's earnings for the five highest consecutive of the last ten calendar years preceding retirement and on years of service. Applicable earnings include salary, bonuses, and any deferred amount under the Modine Tax Saver (401(k)) Plan or, since January 1, 1999, the Modine 401(k) Retirement Plan. They are approximately the same as cash compensation reported in the Summary Compensation Table, but on a calendar year rather than a fiscal year basis. A minimum of five years of service is required for eligibility. The principal benefit under the plan is a lifetime monthly benefit for the joint lives of participants and their spouses based on the employee's earnings and period of employment, and is not subject to offset by Social Security benefits. Employees can retire with unreduced early retirement benefits at age sixty-two or may be eligible for disability, deferred, or other early retirement benefits depending on age and years of service upon retirement or termination. In addition, an employee who has reached age sixty-two and who has accumulated thirty or more years of eligible service may request that the accrued benefit be paid immediately in a lump-sum amount, even if not retired at the time of election. Assuming continued employment until age sixty-five (sixty-six in the case of Mr. Pavlick), the estimated credited years of service under the plan for Messrs. Johnson, Rayburn, Thomas, Howard, and Pavlick are twenty-eight, twenty-two, twenty-one, thirty-nine, and twenty-one years, respectively. Pension benefits under the plan are subject to possible limitations imposed by the Employee Retirement Income Security Act of 1974 and subsequent amendments thereto. To the extent that an individual employee's retirement benefit exceeds these limits, the excess will be paid from general operating funds of the Company. Employees, including officers, may also qualify for long-term disability payments of approximately sixty percent of their base salary, up to a maximum of $15,000 per month, if they become disabled. Employment Agreements, Termination and Change-of-Control Arrangements - --------------------------------------------------------------------- The Company entered into an employment contract effective October 16, 1996, with Mr. D. R. Johnson covering his employment for a two-year term; the change-of-control provisions were amended May 20, 1999. The contract is automatically extended annually for an additional year so that the remaining contract term is between one and two years, unless notice is given by either party to the contrary. This contract provides for a minimum annual salary equal to that paid the past fiscal year to Mr. Johnson plus bonus participation. Mr. Johnson will continue to receive all employee benefits plus supplements to his retirement pension and 401(k) benefits designed to provide him with benefits that otherwise are reduced by statutory limitations on qualified benefit plans. In the event of disability, salary continuation is provided at a level of one hundred percent for the first twelve months and up to sixty percent thereafter with no maximum dollar amount. In the event of a "Change-in-Control," as defined in the Agreement, as amended, at any time during the 24 months after a change in control occurs, if Mr. Johnson is terminated without "Good Cause" or if Mr. Johnson terminates the Agreement, a 36- month "Severance Period" is triggered during which Mr. Johnson is entitled to receive an amount equal to three times the greater of: - the sum of his base salary and target bonus; or - the sum of his five-year average base salary and five-year average actual bonus payable in a lump sum within 60 days after the date of termination of employment; and - an amount equal to the pro-rata portion of the target bonus for the calendar year in which his employment terminated; and - applicable benefits and credited service for pension purposes for the 36-month period. In the event of Mr. Johnson's death, such amounts will be payable to his estate. Any stock options or stock awards will immediately vest, or restrictions lapse, as the case may be, on the date of termination. In the event a change in control occurs, and if payments made to Mr. Johnson are subject to the excise tax provisions of Section 4999 of the Internal Revenue Code, Mr. Johnson will be entitled to receive a lump-sum payment (the "Gross-up Payment"), sufficient to cover the full cost of such excise taxes and his federal, state, and local income and employment taxes on the additional payment. Mr. D. B. Rayburn has a similar Change-in-Control Agreement on substantially the same terms and conditions as stated for Mr. Johnson. Mr. Rayburn's Agreement was entered into on May 20, 1999. As of February 26, 1997, the Company entered into change-in- control agreements (the "Change-in-Control Agreements") with the named executive officers (except Mr. Johnson and Mr. Rayburn and Mr. Thomas, whose agreement is dated August 7, 1998) and certain other key employees. The Change-in-Control Agreements were amended and restated May 20, 1999. In the event of a "Change-in-Control," as defined in the Agreements, as amended and restated, certain key executives (including the named executive officers other than Mr. Johnson and Mr. Rayburn), if terminated by the Company for any reason other than "Good Cause," or if terminated by the executive for "Good Reason" within 24-months after the change in control occurs, or if terminated by the executive for any reason during the 13th month after the change in control, will trigger a 24-month "Severance Period" during which the executive is entitled to receive an amount equal to two times the greater of: - the sum of his base salary and target bonus; or - the sum of his five-year average base salary and five- year average actual bonus payable in a lump sum within 60 days after the date of termination of employment; and - an amount equal to the pro-rata portion of the target bonus for the calendar year in which his employment terminated; and - applicable benefits and credited service for pension purposes for the 24-month period. In the event of the executive's death, such amounts will be payable to his estate. Any stock option or stock awards will immediately vest, or restrictions lapse, as the case may be, on the date of termination. In the event a change in control occurs, and if payments made to the executive are subject to the excise tax provisions of Section 4999 of the Internal Revenue Code, the executive will be entitled to receive a lump-sum payment (the "Gross-up Payment"), sufficient to cover the full cost of such excise taxes and the executive's federal, state, and local income and employment taxes on the additional payment. One other key executive also has a Change-in-Control Agreement that was amended and restated on May 20, 1999. This agreement is substantially identical to the change-in-control agreements previously described for Mr. Johnson and Mr. Rayburn. Mr. W. E. Pavlick also has a three-year employment contract effective April 1, 1986, that is similar to Mr. Johnson's employment contract. TRANSACTIONS In the regular course of business since April 1, 1999, the Company has had transactions with corporations or other firms of which certain non-employee directors are executive officers or otherwise principally involved. Such transactions were in the ordinary course of business and at competitive prices and terms. The Company does not consider the amounts involved to be material. The Company anticipates that similar transactions will occur in fiscal year 2000-2001. OTHER INFORMATION Independent Accountants - ----------------------- PricewaterhouseCoopers LLP have been the independent certified public accountants since 1935 and were selected as the Company's auditors for the fiscal year ended March 31, 2000. They are appointed by the Board of Directors of the Company and report to the Audit Committee. A representative of PricewaterhouseCoopers LLP will not be attending the 2000 Annual Meeting of Shareholders. Section 16(a) Beneficial Ownership Reporting Compliance - ------------------------------------------------------- Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the National Association of Securities Dealers, Inc. Officers, directors, and greater-than-ten-percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on review of the copies of such forms furnished to the Company, the Company believes that, during the period April 1, 1999, to March 31, 2000, all Section 16(a) filing requirements applicable to its officers, directors, and greater-than-ten-percent beneficial owners were complied with except that one Form 4 Report, covering a single option exercise transaction, was filed late by R. L. Hetrick. ADDITIONAL MATTERS The Board of Directors is not aware of any other matters that will be presented for action at the 2000 annual meeting. Should any additional matters come before the meeting, the persons named in the enclosed proxy will vote on those matters in accordance with their best judgment. SHAREHOLDER PROPOSALS FOR 2001 If a shareholder wishes to present a proposal for consideration at next year's Annual Meeting of Shareholders, such proposal must be received at Modine's offices on or before February 5, 2001. ANNUAL REPORT The Annual Report of the Company, including financial statements for the fiscal year ended March 31, 2000, is enclosed. W. E. PAVLICK, Secretary APPENDIX Annual Meeting of Stockholders Wednesday, July 19, 2000 9:30 a.m. CDT Modine shareholders can build their investments in Modine Manufacturing Company Modine through a no-cost 1500 DeKoven Avenue plan for automatically Racine, Wisconsin 53403 reinvesting dividends and making additional cash purchases of Modine stock. Systematic investments can be established for your account by authorizing direct deductions from your bank account on a monthly basis. To receive material and enrollment information, call 800-813-3324. The Modine Manufacturing Company Dividend Reinvestment and Direct Stock Purchase Plan is administered by the company's transfer agent, Norwest (Wells Fargo) Shareowner Services, 800-468-9716. Modine Manufacturing Company 1500 DeKoven Avenue, Racine, Wisconsin 53403-2552 proxy - ---------------------------------------------------------------------------- This proxy is solicited on behalf of the Board of Directors. The undersigned hereby appoints D. R. Johnson and W. E. Pavlick, or either of them, with full power of substitution to each, as attorneys and proxies to represent the undersigned at the Annual Meeting of Stockholders of Modine Manufacturing Company to be held at the corporate offices of Modine Manufacturing Company, 1500 DeKoven Avenue, Racine, Wisconsin 53403 on the 19th day of July, 2000 at 9:30 a.m. CDT, and at any adjournment(s) thereof, and to vote all shares of Common Stock which the undersigned may be entitled to vote at said meeting as directed with respect to the proposals as set forth in the Proxy Statement. The Board of Directors does not know of any other business that may be presented for consideration at the Annual Meeting. If any other business should properly come before the Meeting, the shares represented by the proxies and voting instructions solicited thereby may be discretionarily voted on such business in accordance with the best judgment of the proxy holders. You are encouraged to specify your choices by marking the appropriate boxes on the reverse side, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors' recommendations. The tabulator cannot vote your shares unless you sign, date and return this proxy card or vote by telephone. IF YOU VOTE BY PHONE, PLEASE DO NOT MAIL YOUR PROXY CARD -------------------------------------------------------- See Reverse Side Dear Shareholder: ------------------ /COMPANY # / /CONTROL # / ------------------ Modine Manufacturing Company encourages you to take advantage of a new and convenient way by which you can vote your shares. You can vote your shares by telephone. This eliminates the need to return the proxy card. To vote your shares by telephone you must use the control number printed in the box at the top of this page. The series of numbers that appear in the box above must be used to access the system. To vote over the telephone: - On a touch-tone telephone -- call 1-800-240-6326 -- 24 hours a day, 7 days a week, until 12:00 p.m. on July 18, 2000. - You will be prompted to enter your 3-digit Company Number and your 7-digit Control Number which are located above. - Follow the simple instructions the Voice provides you. Your electronic vote authorizes the named Proxies in the same manner as if you marked, signed, dated and returned the proxy card. Modine Manufacturing Company 401(k) Retirement Plan Voting Instructions to Trustee Marshall & Ilsley Trust Company for the Annual Meeting of Stockholders As a participant in the Modine Manufacturing Company 401(k) Plan, you have the right to give instructions to the Plan Trustee as to the voting of certain shares of Modine Manufacturing Company Common Stock allocated to your account at the Annual Meeting of Shareholders or at any and all adjournments or postponements of the Annual Meeting. In this regard, please indicate your voting choices on this card, sign and date it, and return this card promptly in the enclosed postage prepaid envelope or vote by phone. If your instructions are not received at least five days prior to the Annual Meeting, or if you do not respond, shares held in your account for which a proxy is not received will be voted by the Trustee in its own discretion and in accordance with ERISA. Modine Manufacturing Company Contributory Employee Stock Ownership and Investment Plan Voting Instructions to Trustee Marshall & Ilsley Trust Company for the Annual Meeting of Stockholders As a participant in the Modine Manufacturing Company Contributory Employee Stock Ownership and Investment Plan, you have the right to vote certain shares of Modine Manufacturing Company Common Stock allocated to your account at the Annual Meeting or at any and all adjournments or postponements of the Annual Meeting. In this regard, please indicate your voting choices on this card, sign and date it, and return this card promptly in the enclosed postage prepaid envelope or vote by phone. If you do not respond, shares held in your account for which a proxy is not received will be voted by the Trustee in the same proportion as votes actually cast by plan participants. Modine Subsidiaries 401(k) Defined Contribution Plan Voting Instructions to Trustee New York Life Trust Company for the Annual Meeting of Stockholders As a participant in the Modine Subsidiaries 401(k) Defined Contribution Plan, you have the right to vote certain shares of Modine Manufacturing Company Common Stock allocated to your account at the Annual Meeting or at any and all adjournments or postponements of the Annual Meeting. In this regard, please indicate your voting choices on this card, sign and date it, and return this card promptly in the enclosed postage prepaid envelope or vote by phone. If you sign without otherwise marking the proxy, the securities will be voted as recommended by the Board of Directors on all matters to be considered at the meeting. For this meeting, the extent of New York Life Trust Company's authority to vote your securities in the absence of your instructions, as directed by the Administrative Fiduciary, is that securities for which no voting instructions have been given shall be voted in the same proportion as the vote of proxies returned. PLEASE FOLD HERE
The Board of Directors Recommends a Vote FOR Item 1 1. Election of Directors: 01 Frank W. Jones / / Vote FOR all nominees / / WITHHOLD 02 Dennis J. Kuester except as marked Authority 03 Michael J. Yonker contrary below) --------------------- (Instructions: To withhold authority to vote for any indicated nominee, / / write the number(s) of the nominee(s) in the box provided to the right.) / / --------------------- * NOTE * To consider and act upon such other matters as may properly come before the meeting or any adjournments thereof. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL. --- Address Change? Mark Box / / Indicate changes below: Date_________________________, 2000 ------------------------------------ / / / / ------------------------------------ Signature(s) in Box Please sign exactly as your name(s) appear on Proxy. If held in joint tenancy, all persons must sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy.
EX-99 16 0016.txt EXHIBIT 99b APPENDIX -------- Pursuant to Item 304 of Regulation S-T, the following is a narrative description of graphic or image material incorporated by reference from the Company's 2000 Annual Report to Shareholders at Item 7. Management's Discussions and Analysis of Financial Condition and Results of Operations. Some pages contain illustrations of Modine products, customers and employees. Page 12 of Annual Report Net earnings by quarter Dollars in millions
Measurement Period (Fiscal Year Covered) 1ST QTR 2ND QTR 3RD QTR 4TH QTR ------- ------- ------- ------- FYE 1996 $15,983 $16,736 $14,855 $13,825 FYE 1997 16,390 15,654 15,402 16,317 FYE 1998 18,185 18,229 17,836 18,221 FYE 1999 20,080 19,081 17,341 17,441 FYE 2000 19,509 15,096 16,195 14,603
Net sales by quarter Dollars in millions
Measurement Period (Fiscal Year Covered) 1ST QTR 2ND QTR 3RD QTR 4TH QTR ------- ------- -------- -------- FYE 1996 $239,216 $254,292 $252,817 $244,168 FYE 1997 248,514 254,224 252,972 243,336 FYE 1998 256,923 260,806 267,699 254,990 FYE 1999 273,104 272,961 284,355 281,027 FYE 2000 283,847 286,691 283,520 285,211
Page 13 of Annual Report Sales dollar distribution
FYE 99-00 FYE 98-99 --------- --------- Material cost 40.1% 39.2% Conversion Costs 32.0% 32.9% Operating and Other Costs 19.5% 17.3% Income Taxes 2.6% 4.0% Dividends paid to shareholders 2.4% 2.2% Earnings retained in the business 3.4% 4.4%
Page 14 of Annual Report Shipments by market Dollars in millions
FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Aftermarket $156 $165 $169 $193 $220 $229 $229 $231 $258 $294 Off-highway equipment 58 48 48 55 94 120 127 147 140 107 Industrial 69 68 77 96 112 117 125 134 141 137 Heavy & med. trucks 50 51 86 107 158 168 154 184 200 222 Cars & light trucks 64 89 93 119 202 245 263 245 275 289 Miscellaneous 18 25 20 26 44 35 23 21 20 14 Building HVAC 67 81 78 74 83 76 78 78 77 76 FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Aftermarket 32% 31% 30% 29% 24% 23% 23% 22% 23% 26% Off-highway equipment 12 9 8 8 10 12 13 14 13 9 Industrial 14 13 13 14 12 12 13 13 13 12 Heavy & med. trucks 11 10 15 16 18 17 15 18 18 20 Cars & light trucks 13 17 16 18 22 25 26 24 25 25 Miscellaneous 4 5 4 4 5 3 2 1 1 1 Building HVAC 14 15 14 11 9 8 8 8 7 7
Page 15 of Annual Report Shipments by product Dollars in millions
FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Building HVAC $ 67 $ 81 $ 78 $ 74 $ 83 $ 76 $ 78 $ 78 $ 77 $ 76 Miscellaneous 30 36 35 39 66 54 39 26 37 43 Charge-air coolers 31 39 59 73 107 118 107 97 93 100 Air conditioning 47 66 67 83 129 177 217 140 130 138 Oil coolers 65 67 74 99 145 155 163 172 182 182 Radiators 242 238 258 302 383 410 395 349 354 348 Modules/Packages * - - - - - - - 178 238 252 * New category (prior years are not restated) FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Building HVAC 14% 15% 14% 11% 9% 8% 8% 7% 7% 7% Miscellaneous 6 7 6 6 7 5 4 3 3 3 Charge-air Coolers 6 7 10 11 12 12 11 9 8 9 Air conditioning 10 13 12 12 14 18 22 14 12 12 Oil Coolers 13 13 13 15 16 16 16 17 16 16 Radiators 51 45 45 45 42 41 39 33 32 31 Modules/Packages * 0 0 0 0 0 0 0 17 22 22 *New category (prior years are not restated)
Page 17 of Annual Report Book value per share
Measurement Period (Fiscal Year Covered) Book value/share - --------------------- ---------------- FYE 96 11.74 FYE 97 12.93 FYE 98 14.24 FYE 99 15.35 FYE 00 16.41
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