-----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, RRlu2n6cerCkFYQ0eOgFEekqbQ260+FZfzRzvI4O2rM0y7Fjc3H0mishtHI56SbB 3EBDVDNmXT7gqnVIiK/Epw== /in/edgar/work/0000067347-00-500016/0000067347-00-500016.txt : 20001110 0000067347-00-500016.hdr.sgml : 20001110 ACCESSION NUMBER: 0000067347-00-500016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000926 FILED AS OF DATE: 20001109 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-Q SEC ACT: SEC FILE NUMBER: 001-01373 FILM NUMBER: 756669 BUSINESS ADDRESS: STREET 1: 1500 DEKOVEN AVE CITY: RACINE STATE: WI ZIP: 53403 BUSINESS PHONE: 2626361200 10-Q 1 r10q926.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 26, 2000 ------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 incorporation (I.R.S. Employer or organization) Identification No.) 1500 DeKoven Avenue, Racine, Wisconsin 53403-2552 ---------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (262) 636-1200 -------------- NOT APPLICABLE ---------------------------------------------------------------------- (Former name or former address, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at November 6, 2000 ------------------------------- ------------------------------- Common Stock, $0.625 Par Value 29,254,940 MODINE MANUFACTURING COMPANY INDEX Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - September 26 and March 31, 2000 3 Consolidated Statements of Earnings - For the Three Months Ended September 26, 2000 and 1999 and the Six Months Ended September 26, 2000 and 1999 4 Consolidated Statements of Cash Flows - For the Six Months Ended September 26, 2000 and 1999 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings 15 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 16 Signatures 19 MODINE MANUFACTURING COMPANY CONSOLIDATED BALANCE SHEETS September 26, 2000 and March 31, 2000 (In thousands, except per-share amounts) (Unaudited)
September 26, 2000 March 31, 2000 ------------------ -------------- ASSETS - ------ Current assets: Cash and cash equivalents $ 17,914 $ 31,070 Trade receivables, less allowance for doubtful accounts of $4,063 and $4,436, respectively 169,229 182,724 Inventories 152,749 168,597 Deferred income taxes and other current assets 39,180 47,164 --------- --------- Total current assets 379,072 429,555 --------- --------- Noncurrent assets: Property, plant, and equipment -- net 345,802 337,987 Investment in affiliates 27,892 28,440 Goodwill and other intangible assets -- net 65,945 70,339 Deferred charges and other noncurrent assets 66,700 64,786 --------- --------- Total noncurrent assets 506,339 501,552 --------- --------- Total assets $ 885,411 $ 931,107 ========= ========= LIABILITIES AND SHAREHOLDERS' INVESTMENT - ---------------------------------------- Current liabilities: Short-term debt $ 6,437 $ 6,319 Long-term debt -- current portion 3,621 3,128 Accounts payable 72,124 84,893 Accrued compensation and employee benefits 45,139 46,479 Income taxes 10,421 7,336 Accrued expenses and other current liabilities 30,434 27,322 --------- --------- Total current liabilities 168,176 175,477 --------- --------- Other liabilities: Long-term debt 155,274 211,112 Deferred income taxes 25,256 24,536 Other noncurrent liabilities 39,740 39,740 --------- --------- Total noncurrent liabilities 220,270 275,388 --------- --------- Total liabilities 388,446 450,865 --------- --------- 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 13,863 13,573 Retained earnings 525,618 505,522 Accumulated other comprehensive loss (26,926) (21,629) Treasury stock at cost: 1,062 and 1,081 shares, respectively (33,030) (34,394) Restricted stock - unamortized value (1,524) (1,794) --------- --------- Total shareholders' investment 496,965 480,242 --------- --------- Total liabilities and shareholders' investment $ 885,411 $ 931,107 ========= ========= (See accompanying notes to consolidated financial statements.)
MODINE MANUFACTURING COMPANY CONSOLIDATED STATEMENTS OF EARNINGS For the three months ended September 26, 2000 and 1999 For the six months ended September 26, 2000 and 1999 (In thousands, except per-share amounts) (Unaudited)
Three months ended Six months ended ------------------------- ------------------------- September 26 September 26 ------------------------- ------------------------- 2000 1999 2000 1999 --------- --------- --------- --------- Net Sales $ 269,775 $ 286,691 $ 556,259 $ 570,538 Cost of sales 198,764 207,103 402,661 408,985 --------- --------- --------- --------- Gross profit 71,011 79,588 153,598 161,553 Selling, general, and administrative expenses 57,654 54,707 110,942 106,451 --------- --------- --------- --------- Income from operations 13,357 24,881 42,656 55,102 Interest expense (2,026) (1,921) (4,171) (3,514) Patent settlements 15,084 - 16,959 1,000 Other income -- net 3,829 921 4,554 2,595 --------- --------- --------- --------- Earnings before income taxes 30,244 23,881 59,998 55,183 Provision for income taxes 11,226 8,785 23,018 20,578 --------- --------- --------- --------- Net earnings $ 19,018 $ 15,096 $ 36,980 $ 34,605 ========= ========= ========= ========= Net earnings per share of common stock - Basic $0.65 $0.51 $1.26 $1.17 - Assuming dilution $0.65 $0.51 $1.26 $1.16 ========= ========= ========= ========= Dividends per share $0.25 $0.23 $0.50 $0.46 ========= ========= ========= ========= Weighted average shares -- basic 29,275 29,536 29,270 29,532 Weighted average shares -- assuming dilution 29,484 29,838 29,434 29,844 ========= ========= ========= ========= (See accompanying notes to consolidated financial statements.)
MODINE MANUFACTURING COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) For the Six Months Ended September 26, 2000 and 1999 (Unaudited)
Six months ended September 26 ----------------------------- 2000 1999 -------- -------- Net cash provided by operating activities $ 82,068 $ 29,689 Cash flows from investing activities: Expenditures for property, plant, and equipment (36,725) (48,390) Acquisitions, net of cash acquired 249 - Return of capital/ (investments in affiliates) 467 (1,500) Proceeds from dispositions of property, plant, and equipment 133 151 Other -- net 106 (193) -------- -------- Net cash used for investing activities (35,770) (49,932) Cash flows from financing activities: Increase in short-term debt -- net 542 3,514 Additions to long-term debt 2,386 61,074 Reductions of long-term debt (46,862) (22,683) Issuance of common stock, including treasury stock 1,811 2,539 Purchase of treasury stock (2,692) (2,767) Cash dividends paid (14,639) (13,583) -------- -------- Net cash (used for)/provided by financing activities (59,454) 28,094 -------- -------- Net (decrease)/increase in cash and cash equivalents (13,156) 7,851 Cash and cash equivalents at beginning of period 31,070 49,163 -------- -------- Cash and cash equivalents at end of period $ 17,914 $ 57,014 ======== ======== (See accompanying notes to consolidated financial statements.)
MODINE MANUFACTURING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The amounts of raw material, work in process and finished goods cannot be determined exactly except by physical inventories. Based on partial interim physical inventories and percentage relationships at the time of complete physical inventories, Management believes the amounts shown below are reasonable estimates of raw material, work in process and finished goods. (in thousands) -------------------------------------------------------------------- September 26, 2000 March 31, 2000 -------------------------------------------------------------------- Raw materials $ 31,637 $ 35,872 Work in process 38,417 39,146 Finished goods 82,695 93,579 -------- -------- Total inventories $152,749 $168,597 ======== ======== 2. Property, plant, and equipment is composed of: (in thousands) -------------------------------------------------------------------- September 26, 2000 March 31, 2000 -------------------------------------------------------------------- Gross property, plant & equipment $655,083 $634,170 Less accumulated depreciation (309,281) (296,183) -------- -------- Net property, plant & equipment $345,802 $337,987 ======== ======== 3. Intangible assets include: (in thousands) -------------------------------------------------------------------- September 26, 2000 March 31, 2000 -------------------------------------------------------------------- Goodwill $ 88,202 $ 89,815 Patents and product technology 8,389 8,389 Other intangibles 3,166 3,204 Less accumulated amortization (33,812) (31,069) -------- -------- Net intangible assets $ 65,945 $ 70,339 ======== ======== 4. Segment data: (In thousands) -------------------------------------------------------------------- Quarter ended September 26, 2000 1999 ---- ---- Sales: Original Equipment $102,905 $110,400 Distributed Products 105,916 118,140 European Operations 69,122 68,791 -------------------------------------------------------------------- Segment sales 277,943 297,331 Eliminations (8,168) (10,640) -------------------------------------------------------------------- Total net sales $269,775 $286,691 -------------------------------------------------------------------- Operating income: Original Equipment $ 12,429 $ 19,007 Distributed Products 9,910 16,479 European Operations 7,546 4,437 -------------------------------------------------------------------- Segment operating income 29,885 39,923 Corporate & administrative expenses (16,568) (15,017) Eliminations 40 (20) Other items not allocated to segments 16,887 (1,005) -------------------------------------------------------------------- Earnings before income taxes $ 30,244 $ 23,881 -------------------------------------------------------------------- (In thousands) -------------------------------------------------------------------- Six Months ended September 26, 2000 1999 ---- ---- Sales: Original Equipment $223,455 $231,473 Distributed Products 202,042 215,728 European Operations 149,324 144,514 -------------------------------------------------------------------- Segment sales 574,821 591,715 Eliminations (18,562) (21,177) -------------------------------------------------------------------- Total net sales $556,259 $570,538 -------------------------------------------------------------------- Operating income: Original Equipment $ 36,238 $ 43,889 Distributed Products 19,144 27,742 European Operations 17,906 12,506 -------------------------------------------------------------------- Segment operating income 73,288 84,137 Corporate & administrative expenses (30,684) (29,026) Eliminations 52 (6) Other items not allocated to segments 17,342 78 -------------------------------------------------------------------- Earnings before income taxes $ 59,998 $ 55,183 -------------------------------------------------------------------- At the end of the fourth quarter in fiscal 2000, several changes were introduced in the basis for measuring segment profit or loss. Two changes that affected amounts previously reported for the quarter and six months ended September 1999 were the relocation of certain goodwill amortization previously recorded at Corporate to the Distributed Products segment and the allocation of Corporate headquarters functions to include only a general building, technical center, and aircraft use allocation. Another modification from classifications originally reported last September was a change to relocate goodwill expense to SG&A expense from other expenses not allocated to a particular segment. Additionally, in the first quarter of fiscal 2001, a change was made by management to relocate the aftermarket business unit of the European Operations segment to the Distributed Products segment. The quarterly and six-month sales and operating income information presented above has been restated for earlier periods to reflect the effects of these changes. (In thousands) -------------------------------------------------------------------- September 26, March 31, Period ending 2000 2000 -------------------------------------------------------------------- Assets: Original Equipment $249,266 $265,495 Distributed Products 244,843 263,733 European Operations 174,788 189,803 Corporate & Administrative 266,731 264,562 Eliminations (50,217) (52,486) -------------------------------------------------------------------- Total assets $885,411 $931,107 -------------------------------------------------------------------- In the first quarter of fiscal 2001, management relocated the aftermarket business unit of the European Operations segment to the Distributed Products segment. The asset data presented for March 31, 2000 has been restated to reflect the effect of this change. 5. Recent developments concerning legal proceedings reported in Modine Manufacturing Company ("Modine or Company") Form 10-K report for the year ended March 31, 2000, are updated in Part II, Other Information, Item 1, Legal Proceedings. While the outcome of these proceedings is uncertain, in the opinion of Modine's management, any liabilities that may result from such proceedings are not reasonably likely to have a material effect on Modine's liquidity, financial condition, or results of operations. 6. The net earnings per share of common stock and computation components of basic and diluted earnings per share are as follows: (In thousands, except per-share amounts) ------------------------------------------------------------------------- Three months ended Six months ended September 26 September 26 ------------------------------------------------------------------------- 2000 1999 2000 1999 ------------------------------------------------------------------------- Net earnings per share of common stock: ------------------------- - basic $0.65 $0.51 $ 1.26 $1.17 - assuming dilution $0.65 $0.51 $ 1.26 $1.16 Numerator: ---------- Income available to common shareholders $19,018 $15,096 $36,980 $34,605 Denominator: ----------- Weighted average shares outstanding - basic 29,275 29,536 29,270 29,532 Effect of dilutive securities - options* 209 302 164 312 ------ ------ ------ ------ Weighted average shares outstanding - assuming dilution 29,484 29,838 29,434 29,844 ------------------------------------------------------------------------- *There were outstanding options to purchase common stock at prices that exceeded the average market price for the income statement period as follows: Average market price per share $28.00 $30.30 $25.26 $30.37 Number of shares 1,104 740 1,263 740 7. Comprehensive earnings (in thousands), which represents net earnings adjusted by the change in foreign-currency translation and minimum pension liability recorded in shareholders' equity for the periods ended September 26, 2000 and 1999, respectively, were $17,228 and $15,762 for three months, and $31,683 and $34,716 for six months. 8. In June 2000, Modine purchased for cash the remaining 50-percent share of Daikin-Modine, Inc. from its joint venture partner Daikin Industries, Ltd. Daikin-Modine is not considered material to the financial statements of Modine and, accordingly, pro-forma information is not presented. The operation has been integrated into Modine's Commercial HVAC&R Division and its operating results are being reported on a consolidated basis in the Distributed Products segment from the date of acquisition. 9. On July 14, 2000, Modine reached an agreement with Showa Aluminum Corporation to cross-license each other's patents on PF(r) and SC air-conditioning condensers. As a result of the agreement and another agreement with Mitsubishi Heavy Industries, Modine received in the first and second quarter payments totaling $17.0 million representing partial settlement for past infringement of Modine's PF(r) Parallel Flow technology. The agreements settle the companies' respective lawsuits on the subject technology. Contingent royalties of approximately $27 million may be received in about a year, and additional contingent royalties that could meet or exceed that amount may be received over the next eight years. Beyond the initial $17.0 million in payments already received, the future lump-sum payments and running royalties are contingent on confirmation of the validity of Modine's PF(r) technology patents in Japan, Europe, and the United States and on Showa's and Mitsubishi's future sales of the subject condensers. The reported results of operations for the second quarter of fiscal 2001 include the initial amount of $15.1 million from the Showa agreement. 10. The accompanying consolidated financial statements, which have not been audited by independent certified public accountants, were prepared in conformity with generally accepted accounting principles and such principles were applied on a basis consistent with the preparation of the consolidated financial statements in Modine's March 31, 2000 Annual Report filed with the Securities and Exchange Commission. The financial information furnished includes all normal recurring accrual adjustments that are, in the opinion of Management, necessary for a fair presentation of results for the interim period. Results for the first six months of fiscal 2001 are not necessarily indicative of the results to be expected for the full year. 11. Certain notes and other information have been condensed or omitted from these interim financial statements which consolidate both domestic and foreign wholly-owned subsidiaries. Therefore, these statements should be read in conjunction with the consolidated financial statements and related notes contained in Modine's 2000 Annual Report to shareholders which were incorporated by reference in Modine's Form 10-K Report for the year ended March 31, 2000. MANAGEMENT'S DISCUSSION AND ANALYSIS OF --------------------------------------- RESULTS OF OPERATIONS AND FINANCIAL CONDITION --------------------------------------------- The following discussion and analysis provides information which Management believes is relevant to an assessment and understanding of Modine's consolidated results of operations and financial condition. This discussion should be read in conjunction with the consolidated financial statements and notes thereto. RESULTS OF OPERATIONS - --------------------- Comparison of the Second Quarter of 2000-01 with the Second Quarter - ------------------------------------------------------------------- of 1999-00 - ---------- Net sales for the second quarter of fiscal 2000-2001 were $269.8 million, down 5.9% from the $286.7 million reported in the second quarter of last year. Sales would have been approximately $10.7 million higher without the impact of a stronger U.S. dollar in relation to the Euro. The quarter's sales results were affected by a number of factors. Revenues in the Distributed Products segment declined by over 10%. An extremely soft North American aftermarket and the negative currency impact on the segment's operations in Europe were the main factors contributing to the decline. In the Original Equipment segment, mixed results were recorded for the quarter with overall revenues down by almost 7%. North American heavy truck sales decreased from an all-time high in the prior year to a lower than average level in the current year while North American automotive results were also weaker than expected due to lower demand. On the positive side, improved results were recorded in the off-highway business. Overall, revenues in the European Operations segment grew by less than 1% for the quarter. Improved results in the European off-highway and automotive markets were offset by the negative currency-translation impact recorded in the quarter which lowered European sales results by more than 12%. Gross margin at 26.3%, as a percentage of sales, was down 1.5% from the second quarter of the previous year. Material costs as a percentage of sales grew by 1.7% while labor and overhead declined slightly. Improvements in the European Operations segment and in the construction and agricultural market of the Original Equipment segment were more than offset by lower margins earned in truck and automotive markets of the Original Equipment segment and by lower margins in the Distributed Products segment (aftermarket and HVAC). Selling, general and administrative expenses of $57.7 million increased 5.4% over last year's second quarter while increasing to 21.4% from 19.1% as a percentage of sales. On-going litigation costs to protect Modine's patents around the world, higher statutory and fringe benefits expenses and higher depreciation expense from capital expenditures made over the past several years were some of the items contributing to the increase. Operating income at 5.0% was 3.7% lower as a percentage of sales than last year as a result of the higher selling, general and administrative expenses and lower than expected sales volume. Interest expense increased $0.1 million, or 5%, from the same quarter a year ago while average outstanding debt levels during the quarter decreased from a year ago. Interest expense grew despite the reduction in debt due to rising interest rates when compared to the same quarter a year ago. Lower capitalized interest on major capital projects also contributed to the rise in interest expense. Net non-operating income in the current quarter increased $18.0 million from the same quarter of the previous year. The current year's quarter included a patent settlement with Showa Aluminum Corporation for $15.1 million as a settlement for past infringement of Modine's PF(r) parallel flow technology. Also included in the current year's quarter was a $1.3 million gain related to the sale of a closed facility in Michigan. Improved equity earnings for the quarter from the company's Brazilian joint-venture also contributed to the overall increase. The effective tax rate increased slightly to 37.1% when compared to the same period last year. Net earnings for the second quarter of $19.0 million were 26% higher than last year's $15.1 million earned in the second quarter. Earnings per share were $0.65 basic and diluted, compared to $0.51 basic and diluted in the prior year. The currency translation effect of a stronger U.S. dollar recorded during the quarter reduced reported after-tax earnings by $0.02 per diluted share while the impact of the lump-sum patent infringement settlement recorded in other non-operating income improved reported after-tax earnings by $0.32 per diluted share. Comparison of the First Six Months of 2000-01 with the First Six - ---------------------------------------------------------------- Months of 1999-00 - ----------------- Net sales for the first six months of fiscal 2000-2001 were $556.3 million, down 2.5% from the $570.5 million reported in the same period of last year. Sales were negatively impacted by a stronger U.S. dollar in relation to the Euro by approximately $24.9 million. Overall changes in the company's segment sales were very similar to those reported for the second quarter. The Distributed Products segment declined by over 6% with major factors being a very soft North American aftermarket and the negative currency impact on the segment's European sales. In the Original Equipment segment, sales declined by almost 3.5%. Improved results in the North American off-highway markets were offset by reduced demand in the North American heavy-truck and automotive markets. Overall revenues in the European Operations segment grew by over 3%. Improved results in the European automotive and off-highway markets, were negatively impacted by currency translation. Excluding the translation impact, European Operations sales would have grown by more than 17%. Gross margin of 27.6%, as a percent of sales, was down 0.7% from the first six months of the previous year. Material costs as a percentage of sales grew by 1.4%, while overhead and labor declined in total by 0.7%. Improvements in the European Operations segment and in the construction and agricultural market of the Original Equipment segment were more than offset by lower margins earned in truck and automotive markets of the Original Equipment segment and by lower margins in the Distributed Products segment (aftermarket and HVAC). Selling, general and administrative expenses of $110.9 million increased 4.2% over the first six months of last year while increasing to 19.9% from 18.7% as a percentage of sales. On- going litigation costs to protect Modine's patents around the world, higher statutory and fringe benefits expenses and higher depreciation expense from capital expenditures made over the past several years were items contributing to the increase. Higher research and development costs were also factor. Operating income at 7.7% of sales, was down 2% from the 9.7% in the first half of the previous year. Lower than expected sales volumes, higher selling, general and administrative expenses and negative currency translation were all factors contributing to the reduction. Interest expense increased $0.7 million, or 18.7% over the same six month period a year ago. Average outstanding debt levels for the six months declined from the same period a year ago. The debt reduction was influenced, in part, by the continuing decline of the Euro relative to the U.S. dollar. Despite the overall debt reduction, interest expense grew due to higher interest rates and lower capitalized interest. The effective tax rate increased by just over 1.1% when compared to the same period last year. The rate increase was mainly due to the differential in foreign tax rates. Net earnings for the first six months of the current year were $37.0 million, or $1.26 basic and diluted earnings per share. This compares to $34.6 million, or $1.17 basic and $1.16 diluted earnings per share, for the same six month period the year before. The higher earnings were due to the $17.0 million lump- sum royalty payments recorded as non-operating income in the first six months of this year. Annualized return on shareholders' investment, at 15.1% was within management's target range. Outlook for the Remainder of the Year - ------------------------------------- In July, Modine indicated expectation of steady sales for the fiscal year, with earnings up about five percent because of patent settlements. Due to unanticipated weakness in several of Modine's markets, coupled with the continued stagnation of the Euro versus the U.S. dollar and the deferment of some new programs until fiscal 2002, the company is updating its forecasts. Modine now expects fiscal 2001 revenues to be about five to ten percent below the prior year with net earnings down commensurately. Modine continues to aggressively address cost and working capital reductions, which take on even greater importance under current business conditions. In addition, the company remains optimistic about future programs. Over the next year, they include some market share gains and the startup of a new product line, exhaust- gas-recirculation-coolers. Longer term, the programs include thermal management of fuel cells, heat-exchange systems for microturbines, and CO2 (carbon dioxide) air-conditioning systems. Modine will continue to leverage its technological expertise and established global relationships to realize the full potential each of these opportunities represents. Forward looking statements about sales, earnings, and operations in this Outlook involve both risks and uncertainties, as detailed in Exhibit 99 to this Form 10-Q. FINANCIAL CONDITION - ------------------- Comparison between September 26, 2000 and March 31, 2000 - -------------------------------------------------------- Current assets - -------------- Cash and cash equivalents of $17.9 million were $13.2 million lower than March 31, 2000. Cash provided by operating activities was more than offset for the first six months by capital expenditures, debt repayments and the quarterly dividend payments. Trade receivables of $169.2 million were down $13.5 million (7.4%) over year-end primarily due to decreased sales volume (down $16.7 million over the previous quarter). Overall inventory levels decreased $15.8 million to $152.7 million compared to the prior year-end. The largest item contributing to the decrease was a reduction in finished goods in the aftermarket division. The continuing decline of the Euro relative to the dollar also had a continuing downward impact on the value of inventory levels. Deferred income taxes and other current assets declined by $8 million to $39.2 million compared to last year-end. Lower unbilled tooling to customers recorded in this category and a reduction in other receivables were two of the larger items contributing to the overall change. Working capital of $ 210.9 million decreased 17.0% from year-end. The current ratio decreased slightly to 2.3 to 1 from 2.4 to 1. Lower accounts payable were more than offset by lower cash and cash equivalents, trade receivables, inventories, deferred income taxes and other assets, and higher income taxes and accrued expenses payable. Noncurrent Assets - ----------------- Net property, plant and equipment increased $7.8 million to $345.8 million as capital expenditures exceeded depreciation, retirements and foreign currency translation impact. Expenditures for 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 were among the items contributing to the increase shown. Outstanding commitments for capital expenditures were $36.9 million at September 26, 2000. Approximately one-half of the commitments relate to Modine's European operations. The outstanding commitments will be financed through a combination of funds generated from continuing operations and third party borrowing as required. Intangible assets decreased by $4.4 million. Amortization and foreign currency translation were the main items contributing to the change. Deferred charges and other noncurrent assets increased $1.9 million. The net increase is primarily the result of continuing recognition of the surplus in Modine's overfunded pension plans. Current Liabilities - ------------------- Accounts payable and other current liabilities of $147.7 million were $11.0 million lower than March 2000. A concerted effort to reduce inventory levels resulting in lower payables, and normal timing differences in the level of operating activity were responsible for the decline. Accrued income taxes increased $3.1 million from timing differences in making estimated payments and certain federal tax benefits. Debt - ---- Outstanding debt decreased by $55.2 million to $165.3 million from March 31, 2000 balance of $220.6 million. Domestic long-term debt decreased $42.3 million. The reduction was primarily due to a decrease in working capital needs and a large lump-sum patent settlement received in September. Foreign long-term debt decreased $13.0 million. The foreign portion of short-term debt decreased $0.9 million, while domestic short-term debt increased $1.0 million. Consolidated available lines of credit decreased $6.5 million to $64.6 million during the quarter. Domestically, Modine's unused lines of credit were $40.7 million. Foreign unused lines of credit were $23.9 million. Total debt as a percentage of shareholders' equity decreased from 45.9% to 33.3%. Shareholders' Investment - ------------------------ Total shareholders' investment increased by $16.7 million to a total of $497.0 million. The net increase came primarily from net earnings of $37.0 million for the first six months. Offsetting items included an unfavorable foreign currency translation impact of $5.3 million during the period and dividends paid to shareholders of $14.6 million. PART II. OTHER INFORMATION Item 1. Legal Proceedings. In the normal course of business, Modine 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 Modine. While the outcome of these proceedings is uncertain, in the opinion of Modine's Management and counsel, any liabilities that may result from such proceedings are not reasonably likely to have a material effect on Modine's liquidity, financial condition or results of operations. Many of the pending damage claims are covered by insurance and, in addition, Modine from time to time establishes reserves for uninsured liabilities. The Mitsubishi and Showa Litigation ----------------------------------- Over the last 10 years Modine and Showa Aluminum Corporation (and Mitsubishi Motors in some cases) have instituted various lawsuits and legal proceedings against each other pertaining to Modine's PF(r) Parallel Flow technology and Showa's SC condenser. On July 14, 2000, Modine and Showa reached a Settlement Agreement and License with respect to the same. The Agreement calls for cross licensing of the foregoing technologies between the parties with Modine receiving an initial payment of $15.1 million representing partial settlement for past infringement of Modine's PF(r) Parallel Flow technology. Subsequent payments of twice such amount are payable to Modine upon confirmation of the validity of Modine's PF patents in Japan, the United States, and the European Union. Running royalties are applicable to future sales by Showa for the use of Modine's PF technology through the expiration of the corresponding patents in 2006-2008. All legal proceedings between the parties are being dismissed. Other previously reported legal proceedings between the parties 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 5. Other Information. On October 26, 2000, Ernest T. Thomas was appointed Senior Vice President and Chief Financial Officer, replacing Alan D. Reid, Vice President and Chief Financial Officer who retired from the Company. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: -------- The following exhibits are included for information only unless specifically incorporated by reference in this report: Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- 3 Restated By-Laws (as amended) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 4(a) 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) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 4(b)(ii) Rights Agreement Amendment No. 2 dated as of January 18, 1995 between the Registrant and First Chicago Trust Company of New York (Rights Agent) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 4(b)(iii) Rights Agreement Amendment No. 3 dated as of October 15, 1996 between the Registrant and First Chicago Trust Company of New York (Rights Agent) (filed by reference to the exhibit contained within the Registrant's Quarterly Report on Form 10-Q dated December 26, 1996). Reference Number per Item 601 of Regulation S-K Page - ---------------- ---- 4(b)(iv) Rights Agreement Amendment No. 4 dated as of November 10, 1997 between the Registrant and Norwest Bank Minnesota, N.A., [now known as Wells Fargo 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. 27* Financial Data Schedule (electronic transmission only). 99* Important Factors and Assumptions Regarding Forwarding-Looking Statements. 20 *Filed herewith. (b) Reports on Form 8-K: ------------------- The Company filed one Report on Form 8-K after the quarter ended September 26, 2000. The Report announced the appointment of Ernest T. Thomas as Senior Vice President and Chief Financial Officer as referenced in Item 5. The date of the Report is October 26, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MODINE MANUFACTURING COMPANY (Registrant) By: E. T. THOMAS ------------------------------------ E. T. Thomas, Senior Vice President, and Chief Financial Officer (Principal Financial Officer) Date: November 8, 2000 By: W. E. PAVLICK ------------------------------------ W. E. Pavlick, Senior Vice President, General Counsel and Secretary EX-99 2 rexh99.txt EXHIBIT 99 IMPORTANT FACTORS AND ASSUMPTIONS REGARDING 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 Modine; 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 Modine's business being non-domestic; 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 such statements are made. EX-27 3 r10qex27.xfd
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF EARNINGS FOR THE PERIOD ENDING 9/26/00 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S.DOLLARS 6-MOS Apr-01-2000 Mar-31-2001 Sep-26-2000 1 17,914 0 173,292 4,063 152,749 379,072 655,083 309,281 885,411 168,176 155,274 0 0 18,964 478,001 885,411 556,259 556,259 402,661 402,661 0 (6) 4,171 59,998 23,018 36,980 0 0 0 36,980 1.26 1.26
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