2 0 2 1 A N N U A L R E P O R T
UNLOCKING VALUE
FOCUSING
THROUGH A NEW LENS
Fiscal Year 2021 presented the most challenging year in our history.
COVID forced us to change our business-as-usual approach and respond
with fresh solutions for both customers and employees. This quick action
resulted in the realization of several opportunities as well as a renewed focus,
stronger profile and a commitment to unlocking value in each of our segments.
ADJUSTED EARNINGS PER SHARE
NET SALES (IN MILLIONS)
$1.50
1.00
.50
0
$2,000
1,500
1,000
500
0
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
FISCAL YEARS ENDED MARCH 31
2021
2020
Net Sales
$ 1,808
$ 1,976
Adjusted EBITDA
$ 165
$ 174
Adjusted Earnings Per Share
$ 1.14
$ 1.05
Free Cash Flow
$ 117
$ (13)
Net Debt
$ 297
$ 412
Adjusted EBITDA and adjusted earnings per share exclude
impairment charges, restructuring-related expenses, automotive
separation and exit strategy costs, and certain other gains
or charges. In addition, adjusted earnings per share excludes
charges and benefits related to income tax valuation allowances
and the impact of tax from legal entity restructuring.
Free cash flow is calculated as net cash provided by operating
activities less expenditures for property, plant and equipment.
Net debt is total debt less cash and cash equivalents.
DEAR SHAREHOLDERS
First of all, allow me to say how pleased
the products and markets with the highest growth and best returns.
and honored I am to be leading this great
company and serving all of you. We started
our fiscal year responding to the initial
impact of the pandemic, sending employees
home to shelter in place, and temporarily
closing various plants around the world.
Our focus was on the health and safety of
our employees and stakeholders.
I’m so pleased with how the organization came together and met
the many challenges presented in those early days, often while
working remotely. One of those challenges involved the automotive
exit strategy, which was necessarily paused during the height of
the crisis. Once we were able to resume activities, the team moved
forward with marketing two smaller deals.
The more I studied Modine, the more I was convinced that reducing
complexity, improving our commercial acumen and redesigning
our organizational structure would unlock and unleash the potential
inherent in this business. Going forward, we will transform our
business by aligning our resources around our best opportunities
in our strongest and most attractive markets.
Have there been any surprises since I joined Modine? In a word, yes.
I am pleasantly surprised by the many strengths of this organization,
including superior products and technologies, a strong and
knowledgeable employee base, and a collaborative culture with
a willingness to change. Over the past few months, I’ve visited
most of our North American facilities and it is clear that we are
experienced operators with the ability to manage and overcome
the obstacles inherent in running a global business. This
company has tremendous assets and great potential. Now that
the automotive exit is well underway, it is time to focus and
provide resources to those parts of the business that are ripe
After a challenging first quarter, we emerged stronger than
for growth.
expected in the second quarter. By the end of the fiscal year,
we had reached agreements to sell both the liquid-cooled and
air-cooled automotive businesses in two separate transactions.
T H E Y E A R I N R E V I E W
We recently closed on the sale of the air-cooled business, and
Overall, because of the pandemic, sales decreased eight percent
continue to diligently execute on the remainder of our automotive
to $1.8 billion and adjusted EBITDA decreased six percent to
exit strategy. Although the challenges were substantial, we
$165 million. Most of this decrease resulted from the economic
delivered on our commitments. I am impressed by the performance
slowdown and related plant closures in our first fiscal quarter.
of this team and confident in their ability to achieve great things
Our cash flow performance was particularly strong this year, due
even under less than ideal circumstances.
I am frequently asked what drew me to this opportunity and to be
primarily to the spending controls enacted in response to the
pandemic. Free cash flow increased $130 million to $117 million.
honest, it seemed to be a perfect fit. I’ve spent the past 20 years of
Looking across our segments, our Building HVAC business continued
my career accelerating growth using tools and processes designed
to shine, with sales up nine percent from the prior year. This was
to unlock value. In my experience, 80/20 has been an excellent
driven by a nearly 40 percent increase in sales to the data center
first step in this process. The 80/20 practice is a systematic way
market, primarily to co-location customers. The continued success
of examining a business using data analytics to focus resources on
of this business is key to Modine, and will be one of our early areas
of focus for growth. Sales in other segments were down year-over-
It is still early in this process but the future is bright. We navigated
year with the Commercial and Industrial Solutions (CIS) segment
the pandemic with a focus on employee safety while remaining
down 15 percent, Heavy Duty Equipment (HDE) down nine percent
committed to serving our customers and protecting our financial
and Automotive down ten percent. We expect our end markets
security. This involved a great deal of flexibility and commitment
to continue to improve in Fiscal Year 2022 leading to a return to
from our workforce and they certainly rose to the challenge.
pre-COVID level growth.
Our talent is our greatest resource and I am passionate about
DEAR SHAREHOLDERS
“It is time to focus and provide resources to those
parts of the business that are ripe for growth.”
A N I N F LE CT I O N P O I N T
This is an inflection point for Modine. Much of our work over the
past several years has been reactive in nature, countering the
negative forces that have impacted our margins and limited
our growth. This forced us to continually focus on improving our
cost structure and operating efficiency to remain competitive
in challenging markets. As we worked to strengthen and diversify
our business, we made the important decision to exit the
automotive business. While that is a key step in our transformation,
it is only the beginning.
As we pivot away from some of these markets, we can be more
proactive in our choices. We can put our best talent and technology
to work in those areas with the best underlying growth trends.
A N E W J O U R N EY
Here at Modine, we often talk about being on a journey. We are
clearly at the beginning of this journey, deciding on a destination
and planning our route. We are analyzing the data to segment
our business by end-market and evaluating what we need to do
more of, and what we need to stop. Now is the time to chart a new
course and execute our growth strategy.
We will run the business with a different organizational
structure based on markets, with general managers empowered
to make decisions and held accountable for results. We will
unleash our entrepreneurial spirit and deliver products that
provide mission critical solutions. This structure will improve
our key account and channel management, reducing complexity
and accelerating our decision making. We will get the right
having a human capital management strategy that gets the
right people in the right jobs. The transformation of our business
creates a great opportunity for our employees to become more
engaged as we focus on the new technologies that will allow
our customers to operate in this changing world. We thrive on
innovation, and we will continue to build and develop the right
team to lead us into the future.
Here at Modine, our strength is our ability to design products
that better the world around us. Whether it’s improving indoor air
quality or facilitating the transition to alternative powertrains, our
customers turn to us in response to ever-increasing regulations,
and because creating a cleaner environment is the right thing to do.
We improved lives throughout the pandemic by providing products
that helped to purify the air and keep vaccines cold during transport.
We’ll continue to focus on those opportunities that improve
our world including better ventilation in our schools, more energy
efficient data centers, and cleaner running electric vehicles.
We will accomplish this by designing systems for our customers that
reduce water and energy consumption, lower harmful emissions,
and use more environmentally friendly refrigerants. This is our
purpose, and why I’m so excited to be part of this great company.
There is a lot of work to do but we have the right tools in the toolbox
and a team ready and willing to change. We will get there together.
Thank you for your ongoing support.
Sincerely,
people in the right roles, redeploying our talented resources
Neil D. Brinker / President and Chief Executive Officer
to areas with the greatest market potential. In addition, we
will evaluate where we need to grow faster and will look for
inorganic opportunities to add to the portfolio.
Marsha C. Williams / Chairperson, Board of Directors
K E E P I N G U P W I T H D E M A N D
Building HVAC again proved to
B U I LD I N G A S P R I N G B O A R D
be a bright spot, growing steadily
Several factors contributed to the strong performance
throughout the year. Like most
this year. Macro trends in the data center market
companies, our heating, ventilation,
and data center markets were
negatively impacted in our first
quarter from COVID shutdowns.
related to cloud storage, digitalization and the internet
of things were key to our strong sales performance.
We were able to provide our customers with product
solutions that improve efficiency by reducing both
water and energy consumption. In addition, as people
However, we experienced steadily
spent more time at home, we saw increased sales
improving markets as the year
progressed. Innovative cooling
solutions and shorter lead times than our
competitors led to market share gains
for our heating and data center cooling
products. Our Building HVAC teams worked
diligently to keep up with demand. This all
resulted in another year of record sales and
of our residential heating products, increasing the
ability to use garages, workspaces and outbuildings
throughout the year.
LO O K I N G A H E A D
This past year has reminded all of us of the need
for improved indoor air quality in our schools
and workplaces. Going forward, this will be a key
factor in fully returning to in-person gatherings.
earnings, while improving indoor air quality
This will drive increased demand for our ventilation
and energy efficiency for our customers.
products, particularly in schools. Our classroom
solution includes controlled mechanical ventilation,
humidity control, increased filtration, and a bipolar
ionization option that decreases the spread of
airborne pathogens.
To meet the increasing demand for our data center
solutions, we are making key investments in our
business, focusing on the geographic expansion of
our manufacturing capabilities in the US and Western
Europe. This will allow us to support our existing
co-location customers in region, driving future growth.
.
BUILDING HVAC
SYSTEMS
$241M in Building
HVAC net sales
T ES T I N G O U R
C O N TI N G E N CY P L A N
The first quarter of our fiscal year
had us throwing business-as-usual
out the window. COVID forced us to
activate backup plans we had in place
for this type of situation, but hoped
S T R O N G E R , S M A R T E R
A N D M O R E R E S I LI E N T
These new processes exposed several soft spots and
weak links in our systems, forcing us to take a sharper
look and focus on doing what’s important. Zeroing
in on opportunities and markets like hospitals, vaccine
we would never have to implement.
storage and shipment, and environmental and space
We had to make some hard decisions,
but our first priority was to keep our
employees safe. Those who were able to
cleanliness enabled us to work more closely as
a unified Modine team with a common purpose.
We’re proud of the many contributions made to keep
people healthy and safe, as our products helped to
work from home did so. For those who needed
keep hospitals functioning, vaccines cold and moving,
to be present at work to support our essential
and workplaces clean and disinfected.
customers, we made sure all CDC guidelines
were met. But it wasn’t just Modine employees
A N A R R O W E D FO C U S
who were affected. The entire supply chain,
from suppliers to customers, was forced to
deal with a new normal. China was affected
months before US industries were and we
found ourselves constantly having to pivot
and adjust globally, both for the immediate
impact and subsequent staggered recoveries.
The flexibility of the organization was tested
in every process.
As we continue down the recovery path, our priorities
now shift to key trends, buying patterns, and market
demands that provide the greatest opportunities in a
post-pandemic world. We anticipate that cold storage,
creature comforts, green technologies, and anything
related to data centers should see improved growth
in Fiscal Year 2022. Green regulations will accelerate
providing new market opportunities for carbon footprint
friendly products. Our primary goal beyond recovery is
to provide more value to our customers and shareholders
in the markets we serve by focusing our precious
resources on what matters the most. This pandemic has
afforded us the opportunity to re-evaluate our customer
value proposition and re-position our focus and efforts
with renewed clarity of purpose.
COMMERCIAL AND
INDUSTRIAL SOLUTIONS
$532M in Commercial &
Industrial net sales
A N U N P R E C E D E N T E D
C H A L L E N G E
We started last fiscal year with
R E M A R K A B LE R E B O U N D
several of our key vehicular
On the other side of the decline, we witnessed a swift
markets already in a downturn and
and decisive recovery. Our dedicated employees and
the pandemic only made matters
worse. Sales plummeted in April
and May and compensation and
staffing reductions soon followed.
But the pandemic also had a
positive effect on our vehicular
businesses. It forced us to apply filters
to help us determine what was important
supply chain partners were able to quickly and effectively
satisfy our customers’ requirements throughout the crisis.
This was especially important for our electric vehicle (EV)
partners, where we are unlocking significant opportunities
in EV trucks and buses. And as we expand our product
portfolio, we are shifting to being a full-systems provider
rather than our historical position as a heat exchanger
component supplier.
In addition, we continue to diligently work on our
and allowed us to put a plan in place
automotive exit strategy. Despite the necessary pause
to deal with the volatility. This renewed
focus enabled us to recognize new
opportunities and make critical changes
that carried us forward.
taken early in our fiscal year, we subsequently reached
two separate agreements for the sale of the vast majority
of the business in our automotive segment.
C A P I T A LI Z I N G O N S T R E N G T H S
Beyond the automotive industry, we’re seeing significant
opportunities in off-highway and commercial vehicle
markets. As the world continues to prioritize the
importance of reducing greenhouse gas emissions, we are
well-positioned to facilitate the increased use of alternate
energy sources. For example, as China, India, and other
countries have continued to tighten emission regulations,
we have provided our customers with the technology
necessary to meet their objectives. EV development has
opened doors to new relationships where we are providing
value to our customers. We’ve developed critical battery
thermal management systems (BTMS), electronics cooling
packages, and are working closely with customers as other
hydrogen-based powertrains become industrialized.
.
HEAVY DUTY EQUIPMENT
$682M in Heavy Duty Equipment
net sales
AUTOMOTIVE
$398M in Automotive net sales
Fiscal Year 2021 was a challenging year. A lot of energy and attention
was directed toward dealing with COVID and keeping employees safe.
But we also accomplished a lot. We made significant progress
towards the exit of our automotive business, established new leadership,
realized new opportunities, and created new relationships.
Change is the keyword that best describes
the past year and creates the foundation
for an exciting year ahead.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended March 31, 2021
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ____________ to ____________
Commission file number 1-1373
MODINE MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)
Wisconsin
(State or other jurisdiction of incorporation or organization)
39-0482000
(I.R.S. Employer Identification No.)
1500 DeKoven Avenue, Racine, Wisconsin
(Address of principal executive offices)
53403
(Zip Code)
Registrant's telephone number, including area code (262) 636-1200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.625 par value
MOD
New York Stock Exchange
Securities Registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No []
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No []
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files).
Yes [] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer [ ]
Non-accelerated Filer [ ]
Accelerated Filer []
Smaller reporting company [ ]
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act. [ ]
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. []
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes [ ] No []
Approximately 98 percent of the outstanding shares are held by non-affiliates. The aggregate market value of these shares
was approximately $313 million based upon the market price of $6.25 per share on September 30, 2020, the last business
day of our most recently completed second fiscal quarter. Shares of common stock held by each executive officer and
director and by each person known to beneficially own more than 10 percent of the outstanding common stock have been
excluded in that such persons may be deemed to be affiliates. The determination of affiliate status is not necessarily a
conclusive determination for other purposes.
The number of shares outstanding of the registrant's common stock, $0.625 par value, was 51,626,626 at May 21, 2021.
An Exhibit Index appears at pages 92-94 herein.
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
Proxy Statement for the 2021 Annual
Meeting of Shareholders
Part III of Form 10-K
(Items 10, 11, 12, 13, 14)
MODINE MANUFACTURING COMPANY
TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS. ........................................................................................................................................ 1
ITEM 1A. RISK FACTORS. ............................................................................................................................. 11
ITEM 1B. UNRESOLVED STAFF COMMENTS. ........................................................................................... 18
ITEM 2. PROPERTIES. .................................................................................................................................. 19
ITEM 3. LEGAL PROCEEDINGS. ................................................................................................................ 19
ITEM 4. MINE SAFETY DISCLOSURES. ................................................................................................... 19
INFORMATION ABOUT OUR EXECUTIVE OFFICERS. ........................................................... 20
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. ......................................... 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. ........................................................................................................ 22
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. ................ 41
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. ................................................ 44
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE. ................................................................................................. 87
ITEM 9A. CONTROLS AND PROCEDURES. ................................................................................................. 87
ITEM 9B. OTHER INFORMATION................................................................................................................. 87
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. .......................... 88
ITEM 11. EXECUTIVE COMPENSATION. .................................................................................................... 88
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS. ............................................................................ 89
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE. ........................................................................................................................... 89
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. .................................................................. 89
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. ....................................................... 90
ITEM 16. FORM 10-K SUMMARY. ............................................................................................................... 90
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS .............................................. 91
EXHIBIT INDEX ............................................................................................................................. 92
SIGNATURES ................................................................................................................................. 95
(This page intentionally left blank.)
PART I
ITEM 1. BUSINESS.
Modine Manufacturing Company specializes in providing innovative thermal management solutions to diversified global
markets and customers. We are a global leader in thermal management technology and solutions for sale into a wide
array of commercial, industrial, and building heating, ventilating, air conditioning, and refrigeration (“HVAC&R”)
markets. In addition, we are a leading provider of engineered heat transfer systems and high-quality heat transfer
components for use in on- and off-highway original equipment manufacturer (“OEM”) vehicular applications. Our
primary product groups include i) heating, ventilation and air conditioning; ii) coils, coolers, and coatings; and iii)
powertrain cooling and engine cooling. Our primary customers across the globe include:
Heating, ventilation and cooling OEMs;
Construction architects and contractors;
Wholesalers of heating equipment;
Agricultural, industrial and construction equipment OEMs;
Commercial and industrial equipment OEMs; and
Automobile, truck, bus, and specialty vehicle OEMs.
We focus our development efforts on solutions that meet the ever-increasing heat transfer needs of our customers.
Our products and systems are aimed at solving complex heat transfer challenges requiring effective thermal
management. Typical customer and market demands include products and systems that are lighter weight, more
compact, more efficient and more durable to meet customer standards as they work to ensure compliance with
increasingly stringent global emissions, fuel economy and energy efficiency requirements. Our heritage provides a depth
and breadth of expertise in thermal management, which, when combined with our global manufacturing presence,
standardized processes, and state-of-the-art technical resources, enables us to rapidly bring highly-valued, customized
solutions to our customers.
History
Modine was incorporated under the laws of the State of Wisconsin on June 23, 1916 by its founder, Arthur B. Modine.
Mr. Modine’s “Turbotube” radiators became standard equipment on the famous Ford Motor Company Model T. When
he died at the age of 95, A.B. Modine had personally been granted more than 120 U.S. patents for his heat transfer
innovations. The standard of innovation exemplified by A.B. Modine remains the cornerstone of Modine today.
Terms and Year References
When we use the terms “Modine,” “we,” “us,” the “Company,” or “our” in this report, unless the context otherwise
requires, we are referring to Modine Manufacturing Company. Our fiscal year ends on March 31 and, accordingly, all
references to a particular year mean the fiscal year ended March 31 of that year, unless indicated otherwise.
Business Strategy and Results
We thrive on innovation and use our thermal management expertise to design products that better the world. From
improving indoor air quality to increasing energy efficiency of data centers to lowering harmful vehicular emissions, our
businesses design quality systems and products to enable our customers to operate in the ever-changing global
marketplace.
Fiscal 2021 presented challenges, largely driven by the COVID-19 pandemic. Since the onset of the pandemic, our top
priorities have been, and continue to be, the health and overall well-being of our employees and delivering quality
products and services to our customers. COVID-19 has broadly impacted the global economy and our key end markets.
Our businesses were most severely impacted during the first quarter of fiscal 2021. In response, we swiftly implemented
cost-saving actions, including, but not limited to, production staffing adjustments, furloughs, shortened work weeks, and
temporary salary reductions at all levels of our organization. We withdrew most of these cost-saving actions in the third
quarter of fiscal 2021 as production returned to more normal levels as markets recovered.
Despite the challenges, we ended the year in a position of strength. By the end of fiscal 2021, we had reached
agreements to sell both the liquid- and air-cooled automotive businesses in separate transactions. These sale agreements
1
1
represent significant progress towards our strategic exit of our Automotive segment businesses. The sale of the air-
cooled automotive business closed in April 2021. The sale of the liquid-cooled automotive business is subject to the
receipt of governmental and third-party approvals and satisfaction of other closing conditions. We are currently working
with the buyer through the regulatory approval process. At this time, we are not able to estimate the ultimate impact of
the regulatory approval process or the closing date for this transaction. We also completed the transition to our new
President and Chief Executive Officer (“CEO”), Neil D. Brinker. Under Mr. Brinker’s leadership, our teams are
energized in implementing an 80/20 strategy to examine our business using data analytics in order to focus our resources
on products and markets with the highest growth and best returns.
During fiscal 2021, our consolidated net sales were $1.81 billion, an 8 percent decrease from $1.98 billion in fiscal 2020.
This decrease was primarily due to lower sales in our Commercial and Industrial Solutions (“CIS”), Heavy-Duty
Equipment (“HDE”), and Automotive segments, largely driven by impacts of the COVID-19 pandemic. Our Building
HVAC Systems (“BHVAC”) segment sales increased 9 percent compared with the prior year. Our operating loss of $98
million in fiscal 2021 was primarily due to $167 million of impairment charges recorded in the Automotive segment,
partially offset by lower selling, general and administrative (“SG&A”) expenses, which benefitted from lower project
costs associated with our strategic exit of the automotive businesses and cost-reduction initiatives in response to COVID-
19.
Our top five customers are in the commercial vehicle, off-highway and automotive and light vehicle markets and our ten
largest customers accounted for 43 percent of our fiscal 2021 sales. In fiscal 2021, 63 percent of our total sales were
generated from customers outside of the U.S., with 56 percent of total sales generated by foreign operations and 7
percent generated by exports from the U.S. In fiscal 2020, 59 percent of our total sales were generated from customers
outside of the U.S., with 52 percent of total sales generated by foreign operations and 7 percent generated by exports
from the U.S. In fiscal 2019, 58 percent of our total sales were generated from customers outside of the U.S., with 52
percent of total sales generated by foreign operations and 6 percent generated by exports from the U.S.
Markets
We sell products to multiple end markets. The following is a summary of our primary end markets, categorized as a
percentage of our net sales:
Commercial HVAC&R
Commercial HVAC&R
Automotive
Automotive
Commercial vehicle
Commercial vehicle
Off-highway
Off-highway
Data center cooling
Data center cooling
Industrial cooling
Industrial cooling
Other
Other
Competitive Position
Fiscal 2021
Fiscal 2021
33%
25%
15%
15%
6%
3%
3%
Fiscal 2020
Fiscal 2020
32%
26%
16%
13%
8%
2%
3%
We compete with many manufacturers of heat transfer and HVAC&R products, some of which are divisions of larger
companies. The markets for our products continue to be very dynamic. Our traditional OEM customers are faced with
dramatically increased international competition and have expanded their global manufacturing footprints to compete in
local markets. In addition, consolidation within the supply base and vertical integration have introduced new or
restructured competitors to our markets. Some of these market changes have caused us to experience competition from
suppliers in other parts of the world that enjoy economic advantages such as lower labor costs, lower healthcare costs,
and lower tax rates. As a result, we continue to optimize our geographic footprint to provide more flexibility to serve our
customers around the globe. Many of our customers also continue to ask us, as well as their other primary suppliers, to
provide research and development (“R&D”), design, and validation support for new potential projects. This combined
work effort often results in stronger customer relationships and more partnership opportunities for us.
2
2
Business Segments
Each of our operating segments is managed by a vice president and has separate financial results reviewed by our chief
operating decision maker (“CODM.”) These results are used by management in evaluating the performance of each
business segment and in making decisions on the allocation of resources amongst our various businesses. Financial
information for our operating segments is included in Note 22 of the Notes to Consolidated Financial Statements.
Effective April 1, 2020, we began managing our automotive business separate from the previously-reported Vehicular
Thermal Solutions (“VTS”) segment. The other businesses of the VTS segment, including the commercial vehicle and
off-highway businesses, are being managed as the HDE segment.
Our Industrial Businesses
Building HVAC Systems Segment
Market Overview
In North America, the heating market experienced modest growth in fiscal 2021. The ventilation markets, driven by new
construction and renovations, were negatively impacted by COVID-19, especially within the hospitality sectors. In fiscal
2022, we expect continued modest growth in the North American heating markets. We also expect strong growth in the
North American ventilation markets, largely driven by an increased focus on and available federal and local funding for
ventilation improvements by school and healthcare systems as a result of the COVID-19 pandemic.
Our businesses in the United Kingdom (“U.K.”) serve ventilation, air conditioning and data center markets in the U.K.,
mainland Europe, the Middle East, Far East and Africa. In fiscal 2021, the data center market experienced strong
growth, including heightened demand from increasing reliance on virtual capabilities resulting from stay-at-home edicts.
We expect increasing reliance on digital technologies, specifically colocation and cloud usage, to drive continued strong
growth in the data center markets in the U.K. and Europe in fiscal 2022. The ventilation and air conditioning markets
served by our U.K. business saw some softness in fiscal 2021 due to COVID-19, similar to the North American markets.
We expect these markets will exhibit moderate growth in fiscal 2022. Looking forward, we expect that European
legislation, designed to increase equipment efficiency and reduce the use of high global warming potential refrigerants,
will result in customer buying pattern shifts over the next few years, as HVAC equipment providers shift products
towards more efficient and environmentally-friendly alternatives. While future impacts associated with the COVID-19
pandemic are currently uncertain, we expect commercial investment, construction market activity, and energy efficiency
legislation will drive increased demand in the ventilation and air conditioning markets in the years to come.
Products
Unit heaters (gas-fired, hydronic, electric and oil-fired); duct furnaces (indoor and outdoor); infrared units (high- and
low-intensity); hydronic products (commercial fin-tube radiation, cabinet unit heaters, and convectors); roof-mounted
direct- and indirect-fired makeup air units; commercial packaged rooftop ventilation units; unit ventilators; single
packaged vertical units; precision air conditioning units for data center applications; air-handling units; chillers; ceiling
cassettes; hybrid fan coils; and condensing units. Aftersales includes spare parts, maintenance service and control
solutions for existing plant equipment and new building management controls and systems.
Customers
Mechanical contractors; HVAC wholesalers; installers; and end users in a variety of commercial and industrial
applications, including data center management, including colocation and cloud providers, banking and finance,
education, hospitality, telecommunications, entertainment arenas, hotels, restaurants, hospitals, warehousing,
manufacturing, and food and beverage processing.
Primary Competitors
Lennox International Inc (ADP); Reznor (Nortek Global HVAC); Sterling (Mestek Inc.); Vertiv (formerly Emerson
Electric Company (Liebert)); Stulz; Schneider Electric (APC / Uniflair); Johnson Controls, Inc. (York); Daikin (McQuay
International); System Air (ChangeAir); Trane Technologies; Bard Manufacturing; Greenheck (Greenheck and Valent);
and Aaon, Inc.
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Commercial and Industrial Solutions Segment
Market Overview
With the exception of the data center market, the primary markets served by our CIS segment were negatively impacted
by the COVID-19 pandemic during fiscal 2021. The HVAC&R and industrial cooling markets were most severely
impacted early in our fiscal year and have been recovering since. We expect most markets will continue to recover in
fiscal 2022, with stronger recovery expected in the second half of the fiscal year.
Beyond the COVID-19 pandemic, trends influencing the primary CIS markets include refrigerant substitution, data usage
and storage demand, and energy efficiency requirements, all of which are expected to benefit the commercial HVAC&R
and data center markets. We also expect that global population growth will drive changes in food consumption and food
chain cooling demand trends and general increases in global trade will drive investments in refrigeration infrastructure.
Demand for more efficient HVAC&R systems in buildings and processes is driven by more stringent energy efficiency
regulations. In addition, regulatory bodies are imposing stricter guidelines aimed at reducing carbon footprint and
demand is growing for data center cooling and on-site power backup capabilities, both of which we expect will drive
growth in the data center market.
Products
Coils (microchannel, heat recovery and round tube plate fin); coolers (unit coolers, remote condensers, fluid coolers,
transformer oil coolers and brine coolers); and coatings to protect against corrosion.
Customers
Commercial and industrial equipment manufacturers; distributors, contractors, and end users in a variety of commercial
and industrial applications, including commercial and residential HVAC, mobile air conditioning, refrigeration, data
center management, and precision and industrial cooling.
Primary Competitors
Kelvion Holding GmbH; Alfa-Laval AB; LU-VE S.p.A; Lennox International, Inc.; Super Radiator Coils; DunAn
Precision Manufacturing, Inc.; and Guntner GmbH & Co. KG.
Our Vehicular Businesses
Heavy Duty Equipment and Automotive Segments
Geographically, we have a strong presence in the vehicular markets within the U.S., Mexico, Brazil, Europe, India,
China, and South Korea. We leverage our global organizational structure and expertise to solve our customers’ technical
challenges. Our customers value our technical support presence in all regions, our extensive product portfolio, and our
ability to provide them with global standard designs.
Vehicular OEMs often expect cost reductions from suppliers while requiring a consistent level of quality. In addition,
OEMs often seek new technology solutions at low prices for their thermal management needs. In general, this creates
challenges for us and the entire supply base, but also provides an opportunity for suppliers, like Modine, who develop
innovative solutions at a competitive cost.
Each of our main vehicular competitors, AKG Group, BorgWarner, Dana Corporation, Denso Corporation, Mahle, Tata
Toyo, TitanX, T. Rad Co. Ltd., UFI Filters, Valeo SA, Hanon Systems, and Zhejiang Yinlun Machinery Co. Ltd., have a
multi-regional or worldwide presence. Increasingly, we face heightened competition as these competitors expand their
product offerings and manufacturing footprints through expansion into lower-cost countries or lower-cost sourcing
initiatives. In addition, competitors from some lower-cost regions are beginning to expand into new geographical
markets.
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The following summarizes the primary vehicular markets we serve:
Commercial Vehicle
Market Overview
During fiscal 2021, the North American and European commercial vehicle markets, particularly for heavy- and medium-
duty trucks, were negatively impacted by the COVID-19 pandemic. The most severe impacts occurred early in fiscal
2021 and these commercial vehicle markets have been recovering since. While future impacts associated with the
COVID-19 pandemic are uncertain, we expect these markets will continue to recover and exhibit strong growth during
fiscal 2022. We expect the Asian commercial vehicle markets will experience growth during the first part of fiscal 2022;
however, we anticipate there may be some cyclical market weakness during the second half of fiscal 2022.
Beyond the COVID-19 pandemic, trends influencing the commercial and specialty vehicle markets include the continued
need by commercial vehicle manufacturers to meet increasingly stringent emissions and fuel consumption requirements
in all regions of the world. For example, Modine has realized incremental business in Asia as China 6 and Bharat Stage
6 regulations have been implemented in China and India, respectively. Additionally, truck and bus manufacturers are
developing and bringing to market alternative powertrains, including battery electric, waste heat recovery, fuel cells, and
other hydrogen-based technologies aimed at improving vehicle efficiency and reducing carbon footprint. These trends
are driving the advancement of product development worldwide and are creating demand for incremental improvements
to thermal transfer products and systems. We are active in these developments with numerous customers – both
traditional OEM’s and start-up companies – on vehicles that cover the full range of commercial vehicle applications
from last-mile to Class 8 trucks. We are well positioned to support these changes.
Products
Powertrain cooling (engine cooling modules, radiators, charge air coolers, condensers, oil coolers, fan shrouds, and surge
tanks); on-engine cooling (EGR coolers, engine oil coolers, fuel coolers, charge air coolers and intake air coolers);
auxiliary cooling (transmission and retarder oil coolers and power steering coolers); and complete battery thermal
management systems and electronics cooling packages.
Customers
Commercial, medium- and heavy-duty truck and engine manufacturers; and bus and specialty vehicle manufacturers.
Primary Competitors
Mahle; TitanX; T. Rad Co. Ltd.; BorgWarner; and Tata Toyo.
Off-Highway
Market Overview
Overall, global off-highway markets were relatively flat in fiscal 2021. The North and South American off-highway
markets, including agricultural, construction, and mining markets, were negatively impacted by the COVID-19
pandemic. The most severe COVID-19 impacts occurred early in fiscal 2021 and were followed by strong recovery in
the second half of fiscal 2021. While future impacts associated with the COVID-19 pandemic are uncertain, we expect
strong growth in the Americas and in European off-highway markets during fiscal 2022, particularly in the first half of
the fiscal year. We expect the Asian off-highway markets will experience slight declines in fiscal 2022, primarily due to
cyclicality of the markets and lower government spending in China.
We expect wide-scale adoption of alternative powertrains will happen more gradually in the off-highway markets
compared with commercial vehicle markets. However, there are several off-highway customers and applications that are
currently active in developing and bringing this technology to market. We are actively engaged with them and see
additional opportunities in the future.
Products
Powertrain cooling (engine cooling modules, radiators, condensers, charge air coolers, fuel coolers and oil coolers);
auxiliary cooling (power steering coolers and transmission oil coolers); on-engine cooling (EGR coolers, engine oil
coolers, fuel coolers, charge air coolers and intake air coolers); and complete battery thermal management systems and
electronics cooling packages.
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Customers
Construction, agricultural, and mining equipment and engine manufacturers, and industrial manufacturers of material
handling equipment, generator sets and compressors.
Primary Competitors
Adams Thermal Systems Inc.; AKG Group; Denso Corporation; Zhejiang Yinlun Machinery Co., Ltd.; ThermaSys
Corp.; T. Rad Co. Ltd.; Haesong Engineering Co., Ltd.; Mahle Industrial Thermal Systems; and RAAL.
Automotive and Light Vehicle
Market Overview
The North American and European automotive and light vehicle markets declined during fiscal 2021, primarily driven
by the negative impacts of the COVID-19 pandemic. The most severe impacts occurred early in fiscal 2021 and these
markets have been recovering since. While future impacts associated with the COVID-19 pandemic are uncertain, we
expect these markets will continue to recover and exhibit growth during fiscal 2022. The automotive market in China
experienced modest growth during fiscal 2021; we expect slight declines in the Chinese automotive market in fiscal
2022, primarily due to market cyclicality. Overall, we expect longer-term growth of the global automotive market will
be supported by tightening of emissions standards, in-vehicle technology enhancements and growth in emerging markets.
Products
Powertrain cooling (engine cooling assemblies, radiators, condensers and charge air coolers); auxiliary cooling (power
steering coolers and transmission oil coolers); component assemblies; radiators for special applications; on-engine
cooling (exhaust gas recirculation (“EGR”) coolers, engine oil coolers, fuel coolers, charge air coolers and intake air
coolers); and chillers and cooling plates for battery thermal management.
Customers
Automobile, light truck, motorcycle, and power sports vehicle and engine manufacturers.
Primary Competitors
Mahle; Dana Corporation; UFI Filters; Denso Corporation; Hanon Systems; BorgWarner; Valeo SA; and Zhejiang
Yinlun Machinery Co., Ltd
Geographical Areas
We maintain administrative organizations in all key geographical regions to facilitate customer support, development
and testing, and other administrative functions. We operate in the following countries:
North America
South America
Europe
Asia/Pacific
Middle East/Africa
United States
Mexico
Brazil
China
India
South Korea
United Arab Emirates
Belgium
Germany
Hungary
Italy
Netherlands
Serbia
Spain
Sweden
United Kingdom
Our non-U.S. subsidiaries and affiliates manufacture and sell a number of vehicular and commercial, industrial and
building HVAC&R products similar to those produced in the U.S.
Exports
Export sales from the U.S. to foreign countries, as a percentage of consolidated net sales, were 7 percent, 7 percent and 6
percent in fiscal 2021, 2020, and 2019, respectively.
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We believe our international presence positions us to benefit from the anticipated long-term growth of the global
commercial, industrial and building HVAC&R and vehicular markets. We are committed to increasing our involvement
and investment in international markets in the years ahead.
Customer Dependence
Our ten largest customers, some of which are conglomerates or otherwise affiliated, accounted for 43 percent of our
consolidated net sales in fiscal 2021. In fiscal 2021 and 2020, Daimler AG accounted for 10 percent or more of our
sales. In fiscal 2019, Daimler AG and Volkswagen AG each accounted for 10 percent or more of our sales.
Our top customers operate primarily in the commercial vehicle, off-highway, automotive and light vehicle, commercial
air conditioning and refrigeration markets. Our top customers, listed alphabetically, include: Carrier; Caterpillar;
Daimler AG (including Daimler Trucks, Detroit Diesel, Mercedes-Benz, and Western Star Trucks); Deere & Company;
Navistar (including MWM International); Stallantis (including Chrysler, CNH, Fiat, Iveco, PSA-Peugeot-Citroen, and
VM Motori); Trane Technologies; Volkswagen AG (including Audi, MAN, Porsche, and Scania); AB Volvo (including
Mack Trucks and Renault Trucks); and ZF Friedrichshafen AG. Generally, we supply products to our customers on the
basis of individual purchase orders received from them. When it is in the mutual interest of Modine and our customers,
we utilize long-term sales agreements to minimize investment risks and provide the customer with a proven source of
competitively-priced products. These contracts are typically three to five years in duration.
Backlog of Orders
Our operating segments maintain their own inventories and production schedules. We believe that our current
production capacity is capable of handling our expected sales volume in fiscal 2022 and beyond.
Raw Materials
We purchase aluminum, nickel and steel from several domestic and foreign suppliers. In general, we do not rely on any
one supplier for these materials, which are, for the most part, available from numerous sources in quantities required by
us. The supply of copper and brass material is concentrated between two global suppliers, with other suppliers qualified
and supplying lesser amounts to mitigate risk. While our suppliers may become constrained due to global demand, we
typically do not experience raw material shortages and believe that our suppliers’ production of these metals will be
adequate throughout the next fiscal year. We typically adjust metals pricing with our raw material suppliers on a
monthly basis and our major fabricated component suppliers on a quarterly basis. When possible, we have included
provisions within our long-term customer contracts which provide for adjustments to customer prices, on a prospective
basis, based upon increases and decreases in the cost of key raw materials. When applicable, however, these contract
provisions are typically limited to the underlying cost of the material based upon the London Metal Exchange, and do not
include related premiums or fabrication costs. In addition, there can often be a three-month to one-year lag until the time
that the price adjustments take effect.
Patents
We own or license numerous patents related to our products and operations. Because we have many product lines, we
believe that our business as a whole is not materially dependent upon any particular patent or license, or any particular
group of patents or licenses. We consider each of our patents, trademarks and licenses to be of value and aggressively
defend our rights throughout the world against infringement. We have been granted and/or acquired more than 2,500
patents worldwide over the life of our company.
Research and Development
We remain committed to our vision of creating value through technology and innovation. We focus our engineering and
R&D efforts on solutions that meet challenging heat transfer needs of OEMs and other customers within the commercial,
industrial, and building HVAC&R and commercial vehicle, construction, agricultural, powersports and automotive and
light vehicle markets. Our products and systems are often aimed at solving difficult and complex heat transfer
challenges requiring advanced thermal management. Typical market demands are for products and systems that are
lighter weight, more compact, more efficient and more durable to meet customer standards as customers work to ensure
compliance with increasingly stringent global emissions and energy efficiency requirements. Our heritage includes a
depth and breadth of expertise in thermal management that, combined with our global manufacturing presence,
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standardized processes, and state-of-the-art technical resources, enables us to rapidly bring customized solutions to our
customers.
R&D expenditures, including certain application engineering costs for specific customer solutions, totaled $46 million,
$60 million, and $70 million in fiscal 2021, 2020, and 2019, respectively. As a percentage of our consolidated net sales,
we have spent approximately 3 percent on R&D in each of the last three years. This level of investment reflects our
continued commitment to R&D in an ever-changing marketplace. To achieve efficiencies and lower development costs,
our R&D groups work closely with our customers on special projects and system designs. Projects include refrigerant
heat exchangers, EGR technology, oil coolers, charge air coolers, and battery thermal management systems for the
residential and commercial energy storage, commercial vehicle, agriculture, construction, and automotive and light
vehicle markets, which enable our customers to meet more stringent emission and energy efficiency standards. Most of
our current R&D activities are focused on internal development in the areas of building HVAC, commercial and
industrial thermal management products and powertrain and engine cooling. We also collaborate with several industry,
university, and government-sponsored research organizations that conduct research and provide data on practical
applications in the markets we serve. We continue to identify, evaluate and engage in external research projects that
complement our strategic internal research initiatives in order to further leverage our significant thermal technology
expertise and capabilities.
Quality Improvement
Globally, we drive quality improvement by maintaining the Global Modine Management System and executing the
Modine Quality Strategy.
Through our integrated and process-oriented Global Modine Management System, the majority of our manufacturing
facilities and administrative offices are registered to ISO 9001:20015 or IATF 16949:2016 standards, helping to ensure
that our customers receive high quality products and services. Modine puts emphasis on monitoring process
performance and adherence to meet rising customer expectations for performance, quality and service.
Our Global Modine Management System focuses on well-defined improvement principles and leadership behaviors to
engage our teams in facilitating rapid improvements. We drive sustainable and systematic continuous improvement
throughout our company by utilizing the principles, processes and behaviors that are related to the Global Modine
Management System.
To ensure future quality, we continue to execute the Modine Quality Strategy, which focuses on people, process,
performance, quality engineering and the Global Modine Management System.
Environmental Matters
We are committed to preventing pollution, eliminating waste and reducing environmental risks and employ waste
management programs to advance our environmental stewardship and minimize our environmental footprint. The
majority of our facilities maintain Environmental Management System (“EMS”) certification to the international
ISO14001 standard through independent third-party audits.
We are focused on reducing both our energy and water usage and have empowered each of our global facilities to create
and carry out action plans that will contribute to our company-wide reduction goals. Examples of steps we are taking to
meet these goals include the installation of more efficient LED lighting systems, the replacement of inefficient boilers
and air compressors, improved building HVAC management systems, increased industrial water recycling, and the
installation of water-saving faucets.
We are committed to continuously driving energy efficiency across our product portfolio, reflecting our sense of
environmental responsibility. For our data center customers, we are focused on designing and providing cooling
solutions that reduce both electrical and water usage. We are also shifting our product portfolios in our industrial
businesses toward lower-emission propellants and refrigerants that greatly reduce the environmental impact and enhance
energy efficiency for our customers’ heating and cooling systems. In addition, we are focusing on reducing energy use
by recycling waste heat produced from air conditioning systems. Lastly, products in our vehicular businesses include oil,
charge-air, and exhaust gas recirculation (ERG) coolers, radiators, air conditioning condensers, and battery thermal
management systems for cars, trucks, buses, specialty vehicles, and off-highway equipment. These products allow both
internal combustion and electric vehicle systems to run at optimal temperatures, which promotes better fuel efficiency,
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lower emissions, and improved vehicle lifespans. We continue to focus on component design and development to
improve fuel efficiency and reduce overall energy consumption, while still providing the vehicle performance that our
customers expect.
Obligations for remedial activities may arise at our facilities due to past practices, or as a result of a property purchase or
sale. These obligations most often relate to sites where past operations followed practices that were considered
acceptable under then-existing regulations, but now require investigative and/or remedial work to ensure appropriate
environmental protection or where we are a successor to the obligations of prior owners and current laws and regulations
require investigative and/or remedial work to ensure sufficient environmental compliance. Liabilities for environmental
investigative work and remediation at sites in the U.S. and abroad totaled $16 million at March 31, 2021.
Seasonal Nature of Business
Our overall operating performance is generally not subject to a significant degree of seasonality. Both our BHVAC and
CIS segments experience some seasonality, as demand for HVAC&R products can be affected by heating and cooling
seasons, weather patterns, construction, and other factors. Sales volume within the BHVAC segment is generally
stronger in our second and third fiscal quarters, corresponding with demand for heating products. We generally expect
sales volume within our CIS segment to be higher during our first and second fiscal quarters due to the construction
seasons in the northern hemisphere. Sales to vehicular OEM customers are dependent upon market demand for new
vehicles. However, our second fiscal quarter production schedules are typically impacted by customer summer
shutdowns and our third fiscal quarter is affected by holiday schedules.
Working Capital
We manufacture products for the majority of customers in our CIS, HDE, and Automotive segments on an as-ordered
basis, which makes large inventories of finished products unnecessary. In Brazil, within our HDE segment, we maintain
aftermarket product inventory in order to timely meet customer needs in the Brazilian automotive and commercial
vehicle aftermarkets. In our BHVAC segment, we maintain varying levels of finished goods inventory due to seasonal
demand and the timing of sales programs. We have not experienced a significant number of returned products within
any of our operating segments.
Human Capital Resource Management
As of March 31, 2021, we employed approximately 10,900 persons worldwide.
We recognize that our continued success is a direct result of the quality of our people. As such, we strive to be an
employer of choice in every community in which we operate. We do this by fostering a fair, respectful, and safe work
environment for our people in alignment with our core values.
We have identified priorities that we believe are essential to attract, develop and retain highly-qualified talent. These
include, among others, i) providing career development programs; ii) promoting health and safety; iii) fostering diversity
and inclusion in the workplace; and iv) providing competitive compensation and benefits.
Workforce Development
Our operations require expertise across a wide range of disciplines, from engineering and manufacturing to accounting
and finance and information technology. Both our human resources team at our corporate headquarters and our local
facility managers work to hire talented individuals who align with our values.
All of our new employees go through a comprehensive onboarding program with their managers to ensure proper
training is provided to succeed in their respective roles. We encourage our employees to grow their skills through both
internal and external training programs.
We are committed to growing our employees’ capabilities. Through our annual Performance and Development Process
(“PDP”), we provide all salaried employees with a consistent, structured development and performance review
experience. The PDP provides employees with a development pathway that focuses on both annual performance goals
and longer-term career development. In addition, we perform strategic talent reviews and succession planning on a
regular cadence.
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Health and Safety
The health and safety of our employees is paramount to us. In response to the COVID-19 pandemic, we have taken steps
at all of our global locations to limit the risk of exposure. These actions have included increasing the spacing between
work stations, rotating or splitting shifts to reduce the number of employees in our plants, providing additional personal
protective equipment as necessary, removing chairs from cafeterias to improve social distancing, providing
communication on personal hygiene best practices, implementing additional cleansing and sanitizing processes in critical
areas, and establishing programs allowing employees to work from home where possible, which are helping to protect
both those employees who are working remotely and those who remain in our facilities.
We employ a behavior-based safety program which proactively seeks to correct at-risk behaviors while positively
reinforcing safe behaviors. We have consistently out-performed the private-industry Recordable Incident Rate (“RIR” as
defined by the Occupational Safety and Health Administration) average for the manufacturing sector, which was 3.3 in
2019. During fiscal 2021, we recorded an RIR of 1.24, well below the manufacturing sector average.
Diversity and Inclusion
We are committed to a diverse workforce, founded on respect and value for people of different backgrounds,
experiences, and perspectives. Incorporating diverse talent and fostering an inclusive workforce is a key focus of our
talent management strategy. We track and focus on indicators of diversity and inclusion across our global operations.
These indicators include the number of women in supervisory roles and minority new hires in the U.S.
Competitive Compensation and Benefits
We offer our employees competitive compensation and comprehensive benefit packages. We frequently benchmark our
compensation practices and benefits programs against those of comparable industries and in the geographic areas where
our facilities are located. We believe that our compensation and employee benefits are competitive and allow us to
attract and retain talent throughout our organization.
Available Information
Through our website, www.modine.com (Investors link), we make available, free of charge, our annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, other Securities Exchange Act
reports and all amendments to those reports as soon as reasonably practicable after such material is electronically filed
with, or furnished to, the Securities and Exchange Commission (“SEC”). Our reports are also available free of charge on
the SEC’s website, www.sec.gov. Also available free of charge on our website are the following corporate governance
documents, among others:
Code of Conduct, which is applicable to all Modine directors and employees, including the principal
executive officer, the principal financial officer, and the principal accounting officer;
Corporate Governance Guidelines;
Audit Committee Charter;
Human Capital and Compensation Committee Charter;
Corporate Governance and Nominating Committee Charter; and
Technology Committee Charter.
All of the reports and corporate governance documents referenced above and other materials relating to corporate
governance may also be obtained without charge by contacting Corporate Secretary, Modine Manufacturing Company,
1500 DeKoven Avenue, Racine, Wisconsin 53403-2552. We do not intend to incorporate our internet website and the
information contained therein or incorporated therein into this Annual Report on Form 10-K.
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ITEM 1A. RISK FACTORS.
In the ordinary course of our business, we face various market, operational, strategic, financial and general risks. These
risks could have a material impact on our business, financial condition, and results of operations. Please consider each of
the risks described below, along with other information contained in this Annual Report on Form 10-K, when making
any investment decisions with respect to our securities.
Our Enterprise Risk Management process seeks to identify and address material risks. We believe that risk-taking is an
inherent aspect of operating a global business and, in particular, one focused on growth and cost-competitiveness. Our
goal is to proactively manage risks in a structured approach in conjunction with strategic planning, while preserving and
enhancing shareholder value. However, the risks set forth below and elsewhere in this report, as well as other risks
currently unknown or deemed immaterial at the date of this report, could adversely affect us and cause our financial
results to vary materially from recent or anticipated future results.
A. MARKET RISKS
COVID-19 Pandemic and Future Public Health Crises
The ongoing COVID-19 pandemic, and any future widespread outbreak of an illness or other public health threat,
could adversely affect our business, financial position, results of operations and cash flows.
In March 2020, the World Health Organization declared the outbreak of the novel coronavirus, COVID-19, a pandemic.
The spread of COVID-19 and the resulting work and travel restrictions, including international border closings, have
disrupted, and may continue to disrupt, global supply chains and have negatively impacted the global economy. As a
result of this pandemic, we experienced significant impacts on our operations. Local government requirements or
customer shutdowns caused us to suspend production at many of our manufacturing facilities around the world in March
and April 2020. All of the temporarily-closed facilities reopened in the first or second quarter of fiscal 2021 and have
generally returned to more normal production levels. However, since reopening, production at certain of our
manufacturing facilities has been negatively affected at times by employee absences related to COVID-19.
Our business operations could be further affected if any of our key management or leadership personnel are incapacitated
or if a significant portion of our workforce is unable to work effectively due to illness, quarantines, government actions
or similar pandemic-related impediments. The COVID-19 threat has caused us to modify certain business practices
(including employee work locations and limitations on physical participation in meetings) in ways that could be
detrimental to our business, including, among others, working remotely and associated cybersecurity risks.
At this time, we are unable to quantify or predict the ultimate impacts on our business, the full extent of which will
depend largely on future developments and the length and severity of the pandemic, all of which are unpredictable and
outside of our control. If we, our suppliers, or our customers experience further shutdowns or other significant business
disruptions, our ability to conduct business in the manner and on the timelines presently planned could be materially and
negatively impacted, which could have a material adverse effect on our business, financial position, results of operations
and cash flows.
Likewise, an outbreak of a disease or public health threat in the future could create economic and financial disruptions
and adversely affect our businesses around the world. Potential impacts of the COVID-19 pandemic and any future
epidemics, pandemics, or other health crises include, but are not limited to, (i) staffing shortages if portions of our
workforce are unable to work effectively due to illness, quarantines, government actions, facility closures, or other
restrictions; (ii) short- or long-term disruptions in our supply chain and our ability to deliver products to our customers;
(iii) deterioration in the markets that we or our customers operate in, which may result in lower sales or a lack in the
ability of our customers to pay us; and (iv) significant volatility or negative pressure in the financial markets, which
could adversely affect our access to capital and/or financing.
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Customer and Supplier Matters
Our vehicular customers continually seek price reductions from us. These price reductions adversely affect our
results of operations.
We face continuous price-reduction pressure from our vehicular OEM customers. Virtually all of these OEMs impose
aggressive price-reduction initiatives upon their suppliers, even if contrary to contractual terms, and we expect such
actions to continue in the future. In response, we must continually reduce our operating costs in order to maintain profit
margins that are acceptable to us. We have taken, and will continue to take, steps to reduce our operating costs to offset
customer price reductions; however, price reductions adversely affect our profit margins and are expected to do so in the
future. In addition, we must balance our ongoing need to reduce operating costs against any potential compromise in the
high quality of our products and our ability to provide the highest standard of service to our customers. If we are unable
to avoid price reductions for our customers, or if we are unable to offset price reductions through improved operating
efficiencies and manufacturing processes, sourcing alternatives, technology enhancements and other cost reduction
initiatives, our results of operations could be adversely affected.
Fluctuations in costs of materials, including aluminum, copper, steel and stainless steel (nickel), other raw materials
and purchased components, could place significant pressure on our results of operations.
Increases in the costs of raw materials and other purchased components, which may be impacted by a variety of factors,
including changes in trade laws, tariffs and inflation, could have a significant adverse effect on our results of operations.
In the short-term, our ability to adjust for cost increases is limited when prices are fixed for current orders. In these
cases, if we are not able to recover such cost increases through price increases to our customers, such cost increases will
have an adverse effect on our results of operations. With regard to our longer-term sales programs, we have sought to
reduce the risk of cost increases by including provisions within our customer contracts, where possible, which provide
for adjustments to customer prices, on a prospective basis, based upon increases and decreases in the cost of key raw
materials. However, where these contract provisions are applicable, there can often be a three-month to one-year lag
until the time of the price adjustment. To further mitigate our exposure, from time to time we enter into forward
contracts to hedge a portion of our forecasted aluminum and copper purchases. However, these hedges may only
partially offset increases in material costs, and significant increases could have an adverse effect on our results of
operations.
We could be adversely affected if we experience shortages of components or materials from our suppliers.
In an effort to manage and reduce our cost of purchased goods and services, we, like many suppliers and customers, have
been consolidating our supply base. As a result, we are dependent upon limited sources of supply for certain
components used in the manufacture of our products. We select our suppliers based upon total value (including price,
delivery and quality), taking into consideration their production capacities, financial condition and willingness and
ability to meet our demand. In some cases, it can take several months or longer to find a supplier due to qualification
requirements. However, strong demand, the potential effects of trade laws and tariffs, capacity constraints, financial
instability, public health crises, such as pandemics and epidemics, including the ongoing COVID-19 pandemic, or other
circumstances experienced by our suppliers could result in shortages or delays in their supply of product to us, or a
significant price increase resulting in our need to resource. For example, the COVID-19 pandemic and other factors
have contributed to a global shortage of semiconductor chips, which has negatively impacted automotive and other
markets, and in turn, order levels for certain products we provide to our automotive customers. In addition, recent
storms in Texas intensified already-constrained resin supply and, as a result, we experienced delays due to our suppliers’
inability to procure critical materials used in the production of certain of our products. If such shortages continue or
worsen, or if we were to experience significant or prolonged shortages of any critical components or materials from our
suppliers and could not procure the components or materials from other sources, we would be unable to meet our
production schedules and we would miss product delivery dates, which would adversely affect our sales, results of
operations and customer relationships.
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Our net sales and profitability could be adversely affected from business losses or declines with major customers.
Deterioration of a business relationship with a major customer could cause our sales and profitability to suffer. In certain
of our businesses, a large portion of sales are attributable to a relatively small number of customers. In our vehicular
businesses, the failure to obtain new business on new models or to retain or increase business on redesigned existing
models could adversely affect our business and financial results. In addition, as a result of the relatively long lead times
required for many of our complex vehicular components, it may be difficult in the short term for us to obtain new sales
to replace any unexpected decline in sales of existing products. The loss of a major customer in any of our businesses,
the loss of business with respect to one or more of the vehicle models that use our vehicular products, or a significant
decline in the production levels of such vehicles could have an adverse effect on our business, results of operations and
financial condition.
Continual customer pressure to absorb costs adversely affects our profitability.
Vehicular customers often request that we pay for design, engineering and tooling costs that are incurred prior to the start
of production and recover these costs through amortization in the piece price of the product. Some of these costs cannot
be capitalized, which adversely affects our profitability until the programs for which they have been incurred are
launched. If a given program is not launched, or is launched with significantly lower volumes than planned, we may not
be able to recover the design, engineering and tooling costs from our customers, further adversely affecting our results of
operations.
Competitive Environment
We face strong competition.
The competitive environment continues to be dynamic as many of our customers, faced with intense international
competition, have expanded their sourcing of components. As a result, we experience competition from suppliers in
other parts of the world that enjoy economic advantages, such as lower labor costs, lower health care costs, lower tax
rates, lower costs associated with legal compliance, and, in some cases, export or raw materials subsidies. In addition,
consolidation and vertical integration within the supply base have introduced new or restructured competitors to our
markets. Increased competition could adversely affect our business and our results of operations.
B. OPERATIONAL RISKS
Complexities of Global Presence
We are subject to risks related to our international operations.
We have manufacturing and technical facilities located in North America, South America, Europe, and Asia. In fiscal
2021, 58 percent of our sales were generated from non-U.S. operations. Consequently, our global operations are subject
to complex international laws and regulations and numerous risks and uncertainties, including changes in monetary and
fiscal policies, including those related to tax and trade, cross-border trade restrictions or prohibitions, import or other
charges or taxes, fluctuations in foreign currency exchange and interest rates, inflation, changing economic conditions,
public health crises, including the ongoing COVID-19 pandemic, unreliable intellectual property protection and legal
systems, insufficient infrastructures, social unrest, political instability and disputes (including, for example, the
continuing uncertainty related to the withdrawal of the United Kingdom from the European Union, commonly referred to
as “Brexit”), incompatible business practices, and international terrorism. Changes in policies or laws governing the
terms of foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we
either manufacture products, such as Mexico, or buy raw materials, such as China, could have a material adverse effect
on our results of operations. In addition, compliance with multiple and often conflicting laws and regulations of various
countries can be challenging and expensive.
Embargoes or sanctions imposed by the U.S. government or those abroad that restrict or prohibit sales to or purchases
from specific persons or countries or based upon product classification may expose us to potential criminal and civil
sanctions to the extent that we are alleged or found to be in violation, whether intentional or unintentional. We cannot
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predict future regulatory requirements to which our business operations may be subject or the manner in which existing
laws might be administered or interpreted.
In addition, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other similar anti-corruption laws
generally prohibit companies and their intermediaries from making payments to improperly influence foreign
government officials or other persons for the purpose of obtaining or retaining business. In recent years, there has been a
substantial increase in the global enforcement of anti-corruption laws. In the event that we believe our employees or
agents may have violated applicable anti-corruption laws, or if we are subject to allegations of any such violations, we
may have to expend significant time and financial resources towards the investigation and remediation of the matter,
which could disrupt our business and result in a material adverse effect on our financial condition, results of operations
and reputation.
Challenges of Maintaining a Competitive Cost Structure
We may be unable to maintain competitive cost structures within our business.
In recent years, we have engaged in various restructuring activities in our CIS, HDE and Automotive segments in order
to optimize our manufacturing footprint and cost structure. These restructuring activities have included targeted
headcount reductions that support our objective of reducing operational and SG&A cost structures and the consolidation
and/or closure of manufacturing facilities in North America, Europe and Asia. In addition, we continue to focus on
reducing costs for materials and services through targeted adjustments and negotiations with our supply base. Our
successful execution of these initiatives, and our ability to identify and execute future opportunities to optimize our cost
structures, is critical to enable us to establish a cost environment that will increase and sustain our long-term
competitiveness. Any failure to do so could, in turn, adversely affect our results of operations and financial condition.
Challenges of Program Launches
We continue to launch a significant number of new programs at our facilities across the world. The success of these
launches is critical to our business.
We design technologically advanced products, and the processes required to produce these products can be difficult and
complex. We spend significant time and financial resources to ensure the successful launch of new products and
programs. Due to our high level of launch activity, particularly within our HDE segment, we must appropriately manage
these launches and deploy our operational and administrative resources to take advantage of the resulting increase in our
business. If we do not successfully launch new products and programs, we may lose market share or damage
relationships with our customers, which could negatively affect our business. In addition, any failure in our
manufacturing strategy for these new products or programs could result in operating inefficiencies or asset impairment
charges, which could adversely affect our results of operations.
Information Technology (IT) Systems
We may be adversely affected by a substantial disruption in, or material breach of, our IT systems.
We are dependent upon our IT infrastructure, including network, hardware, and software systems, to conduct our
business. Despite network and other cybersecurity measures we have in place, our IT systems could be disrupted or we
could experience a security breach from computer viruses, break-ins or similar disruptions. A substantial disruption in
our IT systems for a prolonged time period, or a material breach of our IT systems, could result in delays in receiving
inventory and supplies or filling customer orders, and/or the release of otherwise confidential information, including
personal information that is protected by the General Data Protection Regulation, adversely affecting our customer
service and relationships as well as our reputation, and could lead to significant remediation expenses and litigation risks.
Our systems, and the systems of our service providers or others, could be breached, damaged or interrupted by cyber-
attacks or other man-made intentional or unintentional events, or by natural disasters or occurrences, many of which
may, despite our best efforts, be beyond our ability to effectively detect, anticipate or control. This impact may be
heightened by the increased disbursement of our workforce resulting from our own and from government efforts to
mitigate the spread of the COVID-19 pandemic. Any such events and the related delays, problems or costs could have a
material adverse effect on our business, financial condition, results of operations and reputation.
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Environmental, Health and Safety Regulations
We could be adversely impacted by the costs of environmental, health and safety regulations.
Our operations are subject to various federal, state, local and foreign laws and regulations governing, among other
things, emissions to air, discharge to waters and the generation, handling, storage, transportation, treatment and disposal
of waste and other materials. The operation of our manufacturing facilities entails risks in these areas and there can be
no assurance we will avoid material costs or liabilities relating to such matters. Our financial responsibility to clean up
contaminated property may extend to previously-owned or used property, properties owned by unrelated companies, as
well as properties we currently own and use, regardless of whether the contamination is attributable to prior owners. In
addition, potentially significant expenditures could be required in order to comply with evolving environmental, health
and safety laws, regulations or other requirements that may be adopted or imposed in the future.
Claims and Litigation
We may incur material losses and costs as a result of warranty and product liability claims and litigation or other
legal proceedings.
In the event our products fail to perform as expected, we are exposed to warranty and product liability claims and may be
required to participate in a recall or other field campaign of such products. Many of our vehicular customers offer
extended warranty protection for their vehicles and require their supply base to extend warranty coverage as well. If our
customers demand higher warranty-related cost recoveries, or if our products fail to perform as expected, it could have a
material adverse impact on our results of operations and financial condition. We are also involved in various legal
proceedings from time to time incidental to our business. If any such proceeding has a negative result, it could adversely
affect our business, results of operations, financial condition and reputation.
C. STRATEGIC RISKS
Business Exit Strategy
The optimization of our company’s future profitability depends, in part, upon the success of our evaluation of
strategic alternatives for our Automotive segment’s business operations.
We previously disclosed our evaluation of strategic alternatives for the businesses within our Automotive segment. As
of March 31, 2021, we classified the liquid- and air-cooled automotive businesses within the Automotive segment as
held for sale on our consolidated balance sheet. The sale of the air-cooled automotive business to Schmid Metall GmbH
closed on April 30, 2021. The sale of the liquid-cooled automotive business to Dana Incorporated is subject to the
receipt of governmental and third-party approvals and satisfaction of other closing conditions. There can be no
assurance that the pending sale will be consummated.
We are also evaluating strategic alternatives for the other Automotive segment business operations and are committed to
exiting this business in a manner that is in the best interest of our shareholders. It is possible that our exit strategy may
ultimately include winding-down or closing the remaining business operations within the Automotive segment.
If our evaluation process does not result in the successful consummation of strategic alternatives, or if we are otherwise
unable through such consummation to realize our goals for the Automotive segment, we may not be able to optimize our
future profitability, which could adversely affect our results of operations and financial condition.
Growth Strategies
Inability to identify and execute on growth opportunities may adversely impact our business and operating results.
We are pursuing growth, through both organic and inorganic opportunities. Under our new CEO’s leadership, we are
implementing a new strategy, which we refer to as our “80/20 strategy,” to examine our businesses using data analytics
in order to focus our resources on products and markets with the highest growth and best returns. In addition, we will
continue to review our business portfolio and pursue acquisitions to accelerate growth. If we are unable to successfully
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implement the 80/20 strategy, we may not achieve the financial or operational successes anticipated. In addition, there
can be no assurance we will be able to identify attractive acquisition targets and/or organic growth opportunities. If we
are unable to successfully complete acquisitions and execute on organic opportunities in the future, our growth may be
limited. In addition, future acquisitions will require integration of operations, sales and marketing, information
technology, finance, and administrative functions. If we are unable to successfully integrate acquisitions and operate
these businesses profitably, we may not achieve the financial or operational success expected from the acquisitions.
D. FINANCIAL RISKS
Liquidity and Access to Cash
Our indebtedness may limit our use of cash flow to support operating, development and investment activities, and
failure to comply with our debt covenants could adversely affect our liquidity and financial results.
As of March 31, 2021, we had total outstanding indebtedness of $340 million, of which $5 million was classified as held
for sale on our consolidated balance sheet. Our indebtedness and related debt service obligations (i) require that
significant cash flow from operations be used for principal and interest payments, which reduces the funds we have
available for other business purposes; (ii) limit our flexibility in planning for or reacting to changes in our business and
market conditions; and (iii) expose us to interest rate risk, since the majority of our debt obligations carry variable
interest rates.
Our credit and Senior Note agreements contain financial covenants that, among other things, require us to maintain a
minimum interest coverage ratio and impose a maximum leverage ratio. Failure to comply with debt covenants could
result in an event of default, which, if not cured or waived, could result in us being required to repay these borrowings
before their due date. If we are forced to refinance these borrowings on less favorable terms, our results of operations
and financial condition could be adversely affected by increased costs and interest rates.
The planned phase out of the London Interbank Offer Rate (“LIBOR”) could have an adverse effect on our financial
condition and access to capital.
Our revolving credit facility and current term loans utilize LIBOR to set the interest rate on outstanding borrowings. The
United Kingdom’s Financial Conduct Authority announced that after 2021 it would no longer persuade or compel panel
banks to submit the rates required to calculate LIBOR. On November 30, 2020, the ICE Benchmark Administration, the
administrator of LIBOR, announced a consultation on the extension of most tenors of USD LIBOR until June 2023. The
proposed extension would not apply to the rate’s other denominations, including the euro. Meanwhile, U.S. banking
regulators have advised that most USD LIBOR originations should end no later than 2021 and it is expected that LIBOR
may be replaced with the Secured Overnight Financing Rate (“SOFR”), a new index calculated on a daily basis by
reference to short-term repurchase agreements for U.S. Treasury securities. It is currently uncertain whether SOFR or
other alternative reference rates will attain market acceptance as replacements for LIBOR. As a result, it is not possible
to predict the effect of these changes, other reforms, or the establishment of alternative reference rates. Should a suitable
replacement for LIBOR not be available, however, the rates under our variable rate indebtedness could increase and
access to capital could be limited.
Market trends and regulatory requirements may require additional funding for our pension plans.
Our defined benefit pension plans in the U.S. are frozen to new participants. Our funding policy is to contribute
annually, at a minimum, the amount necessary on an actuarial basis to provide for benefits in accordance with applicable
laws and regulations. Our domestic plans have an unfunded liability totaling $41 million as of March 31, 2021. During
fiscal 2022, we anticipate making funding contributions totaling $13 million related to these domestic plans. Funding
requirements for our defined benefit plans are dependent upon, among other things, interest rates, underlying asset
returns, mortality rate assumptions, and the impact of legislative or regulatory changes. Should changes in actuarial
assumptions or other factors result in the requirement of significant additional funding contributions, our financial
condition could be adversely affected.
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Goodwill and Intangible Assets
Our balance sheet includes significant amounts of goodwill and intangible assets. An impairment of a significant
portion of these assets would adversely affect our financial results.
Our balance sheet includes goodwill and intangible assets totaling $271 million at March 31, 2021. We perform
goodwill impairment tests annually, as of March 31, or more frequently if business events or other conditions exist that
require a more frequent evaluation. In addition, we review intangible assets for impairment whenever business
conditions or other events indicate that the assets may be impaired. If we determine the carrying value of an asset is
impaired, we write down the asset to fair value and record an impairment charge to current operations.
We use judgment in determining if an indication of impairment exists. For our annual goodwill impairment tests, we use
significant estimates and assumptions, including revenue growth rates and operating profit margins to calculate estimated
future cash flows, risk-adjusted discount rates, business trends and market conditions. We cannot predict the occurrence
of future events or circumstances, including lower than forecasted revenues, market trends that fall below our current
expectations, actions of key customers, increases in discount rates, and the continued economic uncertainty and impacts
associated with the COVID-19 pandemic, which could adversely affect the carrying value of goodwill and intangible
assets. An impairment of a significant portion of goodwill or intangible assets could have a material adverse effect on
our financial results.
Income Taxes
We may be subject to additional income tax expense or become subject to additional tax exposure.
The subjectivity of or changes in tax laws and regulations in jurisdictions where we have significant operations could
materially affect our results of operations and financial condition. We are also subject to tax audits in each jurisdiction
in which we operate. Unfavorable or unexpected outcomes from one or more tax audits could adversely affect our
results of operations and financial condition.
President Biden recently unveiled a new infrastructure plan, which includes a proposal to increase the federal corporate
tax rate from 21 percent to 28 percent as part of a package of tax reforms to help fund the spending proposals in the plan.
The proposed infrastructure plan is in the early stages of the legislative process but is expected to proceed this year due
to the Democratic Party’s majority in both houses of Congress. If adopted as proposed, the increase of the corporate tax
rate would adversely affect our results of operations in future periods.
In addition, as of March 31, 2021, our net deferred tax assets totaled $19 million. Each quarter, we evaluate the
probability that our deferred tax assets will be realized and determine whether valuation allowances or adjustments
thereto are needed. This determination involves judgement and the use of significant estimates and assumptions,
including expectations of future taxable income and tax planning strategies. Future events or circumstances, such as
lower taxable income or unfavorable changes in the financial outlook of our operations in certain jurisdictions, could
require us to establish further valuation allowances, which could have a material adverse effect on our results of
operations and financial condition.
E. GENERAL RISKS
Customers and Markets
We are dependent upon the health of the customers and markets we serve.
We are highly susceptible to unfavorable trends or disruptions in the markets we serve, as our customers’ sales and
production levels are affected by general economic conditions, including access to credit, the price of fuel and electricity,
employment levels and trends, interest rates, labor relations issues, regulatory requirements, government-imposed
restrictions relating to health crises or other unusual events, trade agreements and other market factors, as well as by
customer-specific issues. Any significant decline in production levels for current and future customers could result in
asset impairment charges and a reduction in our sales, thereby adversely impacting our results of operations and financial
condition.
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Exposure to Foreign Currencies
As a global company, we are subject to foreign currency rate fluctuations, which affect our financial results.
Although our financial results are reported in U.S. dollars, a significant portion of our sales and operating costs are
realized in foreign currencies. Our sales and profitability are affected by movements of the U.S. dollar against foreign
currencies in which we generate sales and incur expenses. To the extent that we are unable to match sales in foreign
currencies with costs paid in the same currency, exchange rate fluctuations in any such currency could have an adverse
effect on our financial results. During times of a strengthening U.S. dollar, our reported sales and earnings from our
international operations will be lower because the applicable local currency will be translated into fewer U.S. dollars. In
certain instances, currency rate fluctuations may create pricing pressure relative to competitors quoting in different
currencies, which could result in our products becoming less competitive. Significant long-term fluctuations in relative
currency values could have an adverse effect on our results of operations and financial condition.
Reliance upon Technology Advantage
If we cannot differentiate ourselves from our competitors with our technology, our existing and potential customers
may seek lower prices and our sales and earnings may be adversely affected.
Price, quality, delivery, technological innovation, and application engineering development are the primary elements of
competition in our markets. If we fail to keep pace with technological changes and cannot differentiate ourselves from
our competitors with our technology or fail to provide high quality, innovative products and services that both meet or
exceed customer expectations and address their ever-evolving needs, we may experience price erosion, lower sales, and
lower profit margins. Significant technological developments by our competitors or others also could adversely affect
our business and results of operations.
Developments or assertions by or against us relating to intellectual property rights could adversely affect our
business.
We own and license significant intellectual property, including a large number of patents, trademarks, copyrights and
trade secrets. Our intellectual property plays an important role in maintaining our competitive position in a number of
the markets we serve. As we maintain or expand our operations in jurisdictions where the enforcement of intellectual
property rights is less robust, the risk of others duplicating our proprietary technologies increases, despite our efforts to
protect them. Developments or assertions by or against us relating to intellectual property rights could adversely affect
our business and results of operations.
Attracting and Retaining Talent
Our continued success is dependent on being able to attract, develop and retain qualified personnel.
Our ability to sustain and grow our business requires us to hire, develop, and retain skilled and diverse personnel in
managerial, leadership and administrative functions. We depend significantly on the engagement of our employees and
their skills, experience and industry knowledge to support our objectives and initiatives. Difficulty attracting,
developing, and retaining qualified personnel, particularly in light of tight global labor markets, could adversely affect
our business and results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
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ITEM 2. PROPERTIES.
We operate manufacturing facilities located in the U.S. and in multiple foreign countries. Our world headquarters,
including general offices and laboratory, experimental and tooling facilities, is located in Racine, Wisconsin. We have
additional technical support functions located in Grenada, Mississippi; Leeds, United Kingdom; Pocenia, Italy;
Guadalajara, Spain; Bonlanden, Germany; Söderköping, Sweden; Sao Paulo, Brazil; Changzhou, China; and Chennai,
India.
The following table summarizes the number of manufacturing facilities within each of our operating segments as of
March 31, 2021.
BHVAC
BHVAC
CIS
CIS
HDE
HDE
Automotive
Automotive
Total manufacturing facilities
Total manufacturing facilities
Americas
Americas
Europe
Europe
2
9
6
1
18
3
7
2
6
18
Asia
Asia
-
1
4
2
7
Total
Total
5
17
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Of the facilities summarized in the table above, 22 include leased manufacturing space. We consider our plants and
equipment to be well maintained and suitable for their purposes. We review our manufacturing capacity periodically and
make the determination as to our need to expand or, conversely, rationalize our facilities as necessary to meet changing
market conditions and our needs.
ITEM 3. LEGAL PROCEEDINGS.
The information required hereunder is incorporated by reference from Note 20 of the Notes to Consolidated Financial
Statements.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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INFORMATION ABOUT OUR EXECUTIVE OFFICERS.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS.
The following sets forth the name, age (as of March 31, 2021), recent business experience and certain other information
relative to each executive officer of the Company.
The following sets forth the name, age (as of March 31, 2021), recent business experience and certain other information
The following sets forth the name, age (as of March 31, 2021), recent business experience and certain other information
relative to each executive officer of the Company.
relative to each executive officer of the Company.
Name
Name
Name
Brian J. Agen
Brian J. Agen
Brian J. Agen
Neil D. Brinker
Neil D. Brinker
Neil D. Brinker
Age
Age
Age
52
52
52
45
45
45
Vice President, Human Resources (October 2012 – Present).
Vice President, Human Resources (October 2012 – Present).
Vice President, Human Resources (October 2012 – Present).
Position
Position
Position
President and Chief Executive Officer (December 2020 – Present). Prior to
President and Chief Executive Officer (December 2020 – Present). Prior to
President and Chief Executive Officer (December 2020 – Present). Prior to
joining Modine, Mr. Brinker served as President and Chief Operating
joining Modine, Mr. Brinker served as President and Chief Operating
joining Modine, Mr. Brinker served as President and Chief Operating
Officer of Advanced Energy Industries, Inc. after serving as its Executive
Officer of Advanced Energy Industries, Inc. after serving as its Executive
Officer of Advanced Energy Industries, Inc. after serving as its Executive
Vice President and Chief Operating Officer. Prior to joining Advanced
Vice President and Chief Operating Officer. Prior to joining Advanced
Vice President and Chief Operating Officer. Prior to joining Advanced
Energy Industries, Inc, Mr. Brinker served as a Group President at IDEX
Energy Industries, Inc, Mr. Brinker served as a Group President at IDEX
Energy Industries, Inc, Mr. Brinker served as a Group President at IDEX
Corporation.
Corporation.
Corporation.
Joel T. Casterton
Joel T. Casterton
Joel T. Casterton
49
49
49
Michael B. Lucareli
Michael B. Lucareli
Michael B. Lucareli
52
52
52
Matthew J. McBurney
Matthew J. McBurney
Matthew J. McBurney
51
51
51
Scott A. Miller
Scott A. Miller
Scott A. Miller
56
56
56
Sylvia A. Stein
Sylvia A. Stein
Sylvia A. Stein
54
54
54
Vice President, Heavy Duty Equipment (April 2020 – Present); previously
Vice President, Heavy Duty Equipment (April 2020 – Present); previously
Vice President, Heavy Duty Equipment (April 2020 – Present); previously
Vice President, Vehicular Thermal Solutions and Director – Global
Vice President, Vehicular Thermal Solutions and Director – Global
Program Management and Quality for the Company.
Program Management and Quality for the Company.
Vice President, Vehicular Thermal Solutions and Director – Global
Program Management and Quality for the Company.
Executive Vice President, Chief Financial Officer (May 2021 – Present);
Executive Vice President, Chief Financial Officer (May 2021 – Present);
Executive Vice President, Chief Financial Officer (May 2021 – Present);
previously Vice President, Finance and Chief Financial Officer for the
previously Vice President, Finance and Chief Financial Officer for the
previously Vice President, Finance and Chief Financial Officer for the
Company.
Company.
Company.
Vice President, Building HVAC (February 2021 – Present); previously
Vice President, Building HVAC (February 2021 – Present); previously
Vice President, Building HVAC (February 2021 – Present); previously
Vice President, Building HVAC and Corporate Strategy, Vice President,
Vice President, Building HVAC and Corporate Strategy, Vice President,
Vice President, Building HVAC and Corporate Strategy, Vice President,
Strategic Planning and Development; and Vice President, Commercial and
Strategic Planning and Development; and Vice President, Commercial and
Strategic Planning and Development; and Vice President, Commercial and
Industrial Solutions Integration for the Company.
Industrial Solutions Integration for the Company.
Industrial Solutions Integration for the Company.
Vice President, Commercial and Industrial Solutions (January 2021 –
Vice President, Commercial and Industrial Solutions (January 2021 –
Vice President, Commercial and Industrial Solutions (January 2021 –
Present); previously Vice President, Global Coils and Coolers; Vice
Present); previously Vice President, Global Coils and Coolers; Vice
Present); previously Vice President, Global Coils and Coolers; Vice
President, Building HVAC; and Managing Director – Global Operations
President, Building HVAC; and Managing Director – Global Operations
President, Building HVAC; and Managing Director – Global Operations
for the Company.
for the Company.
for the Company.
Vice President, General Counsel, Secretary and Chief Compliance Officer
Vice President, General Counsel, Secretary and Chief Compliance Officer
Vice President, General Counsel, Secretary and Chief Compliance Officer
(February 2020 – Present); previously Vice President, General Counsel and
(February 2020 – Present); previously Vice President, General Counsel and
(February 2020 – Present); previously Vice President, General Counsel and
Corporate Secretary for the Company. Prior to joining Modine, Ms. Stein
Corporate Secretary for the Company. Prior to joining Modine, Ms. Stein
Corporate Secretary for the Company. Prior to joining Modine, Ms. Stein
served as the Associate General Counsel, Marketing & Regulatory at the
served as the Associate General Counsel, Marketing & Regulatory at the
served as the Associate General Counsel, Marketing & Regulatory at the
Kraft Heinz Foods Company.
Kraft Heinz Foods Company.
Kraft Heinz Foods Company.
Executive Officer positions are designated in our Bylaws and the persons holding these positions are elected annually by
Executive Officer positions are designated in our Bylaws and the persons holding these positions are elected annually by
Executive Officer positions are designated in our Bylaws and the persons holding these positions are elected annually by
the Board, generally at its first meeting after the annual meeting of shareholders in July of each year. In addition, the
the Board, generally at its first meeting after the annual meeting of shareholders in July of each year. In addition, the
the Board, generally at its first meeting after the annual meeting of shareholders in July of each year. In addition, the
Human Capital and Compensation Committee of the Board may recommend and the Board of Directors may approve
Human Capital and Compensation Committee of the Board may recommend and the Board of Directors may approve
Human Capital and Compensation Committee of the Board may recommend and the Board of Directors may approve
promotions and other actions with regard to executive officers at any time during the fiscal year.
promotions and other actions with regard to executive officers at any time during the fiscal year.
promotions and other actions with regard to executive officers at any time during the fiscal year.
There are no family relationships among the executive officers and directors. All of the executive officers of Modine
There are no family relationships among the executive officers and directors. All of the executive officers of Modine
There are no family relationships among the executive officers and directors. All of the executive officers of Modine
have been employed by us in various capacities during the last five years with the exception of Mr. Brinker and Ms.
have been employed by us in various capacities during the last five years with the exception of Mr. Brinker and Ms.
have been employed by us in various capacities during the last five years with the exception of Mr. Brinker and Ms.
Stein, who joined in December 2020 and January 2018, respectively, whose business experience during the last five
Stein, who joined in December 2020 and January 2018, respectively, whose business experience during the last five
Stein, who joined in December 2020 and January 2018, respectively, whose business experience during the last five
years is described above.
years is described above.
years is described above.
There are no arrangements or understandings between any of the executive officers and any other person pursuant to
which he or she was elected an officer of Modine.
There are no arrangements or understandings between any of the executive officers and any other person pursuant to
There are no arrangements or understandings between any of the executive officers and any other person pursuant to
which he or she was elected an officer of Modine.
which he or she was elected an officer of Modine.
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PART II
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.
AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock is listed on the New York Stock Exchange. Our trading symbol is MOD. As of March 31, 2021,
Our common stock is listed on the New York Stock Exchange. Our trading symbol is MOD. As of March 31, 2021,
shareholders of record numbered 2,220.
shareholders of record numbered 2,220.
We did not pay dividends during fiscal 2021 or 2020. Under our credit agreements, we are permitted to pay dividends
We did not pay dividends during fiscal 2021 or 2020. Under our credit agreements, we are permitted to pay dividends
on our common stock, subject to certain restrictions based upon the calculation of debt covenants, as further described
on our common stock, subject to certain restrictions based upon the calculation of debt covenants, as further described
under “Liquidity and Capital Resources” under Item 7. Management’s Discussion and Analysis of Financial Condition
under “Liquidity and Capital Resources” under Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations. We currently do not intend to pay dividends in fiscal 2022.
and Results of Operations. We currently do not intend to pay dividends in fiscal 2022.
The following describes the Company’s purchases of common stock during the fourth quarter of fiscal 2021:
The following describes the Company’s purchases of common stock during the fourth quarter of fiscal 2021:
Period
Period
Total Number of
Total Number of
Shares Purchased
Shares Purchased
Average
Average
Price Paid
Price Paid
Per Share
Per Share
Total Number of
Total Number of
Shares Purchased
Shares Purchased
as Part of Publicly
as Part of Publicly
Announced Plans
Announced Plans
or Programs
or Programs
Maximum
Maximum
Number (or
Number (or
Approximate Dollar
Approximate Dollar
Value) of Shares
Value) of Shares
that May Yet Be
that May Yet Be
Purchased Under the
Purchased Under the
Plans or Programs (a)
Plans or Programs (a)
January 1 – January 31, 2021
January 1 – January 31, 2021
_______
_______
_______
_______
_______
_______
$50,000,000
$50,000,000
February 1 – February 28, 2021
February 1 – February 28, 2021
8,816 (b)
8,816 (b)
$14.52
$14.52
_______
_______
$50,000,000
$50,000,000
March 1 – March 31, 2021
March 1 – March 31, 2021
7,088 (b)
7,088 (b)
$15.25
$15.25
_______
_______
$50,000,000
$50,000,000
Total
Total
15,904 (b)
15,904 (b)
$14.85
$14.85
_______
_______
(a) Effective November 5, 2020, the Board of Directors approved a two-year, $50.0 million share repurchase
(a) Effective November 5, 2020, the Board of Directors approved a two-year, $50.0 million share repurchase
program, which allows the Company to repurchase Modine common stock through solicited and unsolicited
program, which allows the Company to repurchase Modine common stock through solicited and unsolicited
transactions in the open market or in privately-negotiated or other transactions, at such times and prices and
transactions in the open market or in privately-negotiated or other transactions, at such times and prices and
upon such other terms as the authorized officers of the Company deem appropriate.
upon such other terms as the authorized officers of the Company deem appropriate.
(b) Consists of shares delivered back to the Company by employees and/or directors to satisfy tax withholding
(b) Consists of shares delivered back to the Company by employees and/or directors to satisfy tax withholding
obligations that arise upon the vesting of stock awards. The Company, pursuant to its equity compensation
obligations that arise upon the vesting of stock awards. The Company, pursuant to its equity compensation
plans, gives participants the opportunity to turn back to the Company the number of shares from the award
plans, gives participants the opportunity to turn back to the Company the number of shares from the award
sufficient to satisfy tax withholding obligations that arise upon the termination of restrictions. These shares are
sufficient to satisfy tax withholding obligations that arise upon the termination of restrictions. These shares are
held as treasury shares.
held as treasury shares.
21
21
21
PERFORMANCE GRAPH
The following graph compares the cumulative five-year total return on our common stock with similar returns on the
Russell 2000 Index and the Standard & Poor’s (S&P) MidCap 400 Industrials Index. The graph assumes a $100
investment and reinvestment of dividends.
Company / Index
Company / Index
Modine Manufacturing Company
Modine Manufacturing Company
Russell 2000 Index
Russell 2000 Index
S&P MidCap 400 Industrials Index
S&P MidCap 400 Industrials Index
Initial Investment
Initial Investment
March 31, 2016
March 31, 2016
$100
100
100
2017
110.81
$
126.22
124.60
Indexed Returns
Indexed Returns
Years ended March 31,
Years ended March 31,
2019
2020
125.98
2018
192.10
$
$
29.52
$
141.10
145.10
143.99
146.90
109.45
119.46
2021
134.15
$
213.26
224.07
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Overview
Founded in 1916, Modine Manufacturing Company is a global leader in thermal management systems and components,
bringing heating and cooling technology and solutions to diversified global markets. We operate on five continents, in
16 countries, and employ approximately 10,900 persons worldwide.
Our primary product groups include i) heating, ventilation and air conditioning; ii) coils, coolers, and coatings; and iii)
powertrain cooling and engine cooling. We provide our thermal management technology and solutions to a wide array
of commercial, industrial, and building heating, ventilating, air conditioning, and refrigeration markets. In addition, our
products are used in on- and off-highway original-equipment vehicular applications.
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Company Strategy
Fiscal 2021 presented challenges, including business disruptions and market weakness spurred by the COVID-19
pandemic. Since the onset of the pandemic, our top priorities have been, and continue to be, the health and overall well-
being of our employees and delivering quality products and services to our customers. COVID-19 has broadly impacted
the global economy and our key end markets. Our businesses were most severely impacted during the first quarter of
fiscal 2021. In response, we swiftly implemented cost-saving actions, including, but not limited to, production staffing
adjustments, furloughs, shortened work weeks, and temporary salary reductions at all levels of our organization. We
withdrew most of these cost-saving actions in the third quarter of fiscal 2021 as production returned to more normal
levels as markets recovered.
We met the challenges presented by the COVID-19 pandemic head on and ended the year in a position of strength. By
the end of fiscal 2021, we had reached separate agreements to sell the liquid- and air-cooled automotive businesses.
These sale agreements represent significant progress toward our strategy of exiting the Automotive segment businesses.
The sale of the air-cooled automotive business closed in April 2021 and the sale of the liquid-cooled automotive business
is subject to the receipt of governmental and third-party approvals. We also completed the transition to our new
President and Chief Executive Officer (“CEO”), Neil D. Brinker.
Under new leadership, our teams are energized in implementing an “80/20 strategy” in order to focus our resources on
products and markets with the highest growth and best returns. We are in the early stages of implementing this new
strategy and are in process of examining our customer base and product portfolio by end market to identify areas of our
business that we should focus more of our resources, and also areas that we should emphasize less in the future. We see
opportunities to grow our businesses and are particularly focused on expanding our presence in and increasing sales to
the data center and ventilation markets. We expect continued growth in the data center market related to cloud storage,
digitalization and the internet of things. We also see opportunities in the ventilation market, as the COVID-19 pandemic
has highlighted the need for improved indoor air quality. In addition, we are engaged with truck and bus manufacturers
on solutions for alternative powertrains, including battery electric.
Development of New Products and Technology
Our ability to develop new products and technologies based upon our building block methodology for new and emerging
markets is one of our competitive strengths. Under this methodology, we focus on creating core technologies that form
the basis for multiple products and product lines across multiple business segments. Each of our business segments have
a strong heritage of new product development, and our entire global technology organization benefits from mutual
strengths. We own four global, state-of-the-art technology centers, dedicated to the development and testing of products
and technologies. The centers are located in Racine, Wisconsin, Grenada, Mississippi, Pocenia, Italy and Bonlanden,
Germany. Our reputation for providing high quality products and technologies has been a strength valued by our
customers.
We continue to benefit from relationships with customers that recognize the value of having us participate directly in
product design, development and validation processes. This has resulted, and we expect it to continue to result, in
strong, long-term customer relationships with companies that value partnerships with their suppliers.
Strategic Planning and Corporate Development
We employ both short-term (one-to-three year) and longer-term (five-to-seven year) strategic planning processes, which
enable us to continually assess our opportunities, competitive threats, and economic market challenges.
We devote significant resources to global strategic planning and development activities to strengthen our competitive
position. We will continue to pursue organic- and external-growth opportunities, particularly to grow our global, market
leading positions in our industrial businesses. In particular, we are focused on expanding our presence in the data center
market. We are bringing together the full systems capability and established roots of our BHVAC segment in the data
center space with the global manufacturing expertise and customer relationships within CIS. We are also redesigning
our organizational structure to reduce complexity and to be better aligned with the markets we serve, with general
managers who will be both empowered to make decisions and held accountable for results.
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Operational and Financial Discipline
We operate in a dynamic, global marketplace; therefore, we manage our business with a disciplined focus on increasing
productivity and reducing waste. The nature of the global marketplace requires us to move toward a greater
manufacturing scale in order to create a more competitive cost base. In order to optimize our cost structure and improve
efficiency of our operations, we have executed restructuring activities in our CIS, HDE, and Automotive segments
during recent years. We have also refined our approach to the data center market by aligning the resources and
capabilities of our data center businesses to increase our speed to market. In addition, as costs for materials and
purchased parts may rise from time to time due to increases in commodity prices, we seek low-cost sourcing, when
appropriate, and enter into contracts with some of our customers that provide for commodity price adjustments, on a lag
basis.
We are implementing an 80/20 methodology, intended to better focus our resources on products and markets that offer
the highest growth and best returns. We are using data analytics to examine our businesses by end-market to determine
areas of our business that we should focus more of our resources, and also areas that we should emphasize less in the
future.
Our executive management incentive compensation (annual cash incentive) plan for fiscal 2021 was based upon two
performance goals: growth in consolidated net earnings before interest, taxes, depreciation, amortization, and certain
other adjustments (“Adjusted EBITDA”); and a cash flow margin metric. These performance goals drive alignment of
management and shareholders’ interests in both our earnings growth and cash flow targets. In addition, we provide a
long-term incentive compensation plan for officers and certain key employees to attract, retain, and motivate employees
who directly impact the long-term performance of our company. The plan is comprised of stock awards, stock options,
and performance-based stock or cash awards. The performance-based awards for the fiscal 2021 through 2023
performance period are based upon a target three-year average annual revenue growth and a target three-year average
consolidated cash flow return on invested capital.
Segment Information – Strategy, Market Conditions and Trends
Each of our operating segments is managed by a vice president and has separate strategic and financial plans, and
financial results, all of which are reviewed by our chief operating decision maker. These plans and results are used by
management to evaluate the performance of each segment and to make decisions on the allocation of resources.
Effective April 1, 2020, we began managing our automotive business separate from the previously-reported Vehicular
Thermal Solutions (“VTS”) segment. The other businesses of the VTS segment, including the commercial vehicle and
off-highway businesses, are being managed as the HDE segment.
Building HVAC Systems (13 percent of fiscal 2021 net sales)
Our BHVAC segment manufactures and distributes a variety of original equipment and aftersales HVAC products,
primarily for commercial buildings and data centers in North America, the U.K., mainland Europe, the Middle East,
Asia, and Africa. We sell and distribute our heating, ventilation and cooling products through wholesalers, distributors,
consulting engineers, contractors and data center operators for applications such as data centers, schools, greenhouses,
hotels, hospitals, restaurants, stadiums, warehouses, repair garages, residential garages, and manufacturing facilities.
Our heating products include gas (natural and propane), electric, oil and hydronic unit heaters, low- and high-intensity
infrared and duct furnace units. Our ventilation products include large roof-mounted direct- and indirect-fired makeup
air units, single-packaged vertical units and unit ventilators used in school room applications, air-handling equipment,
and rooftop packaged ventilation units used in a variety of commercial building applications. Our cooling products
include precision air conditioning units used primarily for data center cooling applications, air- and water-cooled chillers,
and ceiling cassettes, which are used in a variety of commercial building applications.
Economic conditions, such as demand for new commercial construction, building renovations, including HVAC
replacement, growth in data centers and school renovations, and higher efficiency requirements, are growth drivers for
our building HVAC products. During fiscal 2021, sales increased in both the U.K. and North America, primarily driven
by increased sales of data center products in the U.K. and heating products in North America. These sales were partially
offset by lower sales of ventilation products, largely associated with the negative impacts of COVID-19 during the year,
particularly within the hospitality sectors.
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24
We expect growth in each of the HVAC markets we serve during fiscal 2022. The markets we serve are heavily
impacted by construction activity, building regulations, owner/occupant comfort requirements, and demand for digital
infrastructure. Growth rates in these markets have shown increasing strength as the need for digital infrastructure
expands and manufacturing, housing, and business investments increase. In fiscal 2022, we expect sales growth in our
BHVAC segment through focused market share gains and the expansion of data center sales in the North American
market.
Commercial and Industrial Solutions (29 percent of fiscal 2021 net sales)
Our CIS segment provides a broad offering of thermal management products to the HVAC&R and data center markets,
including solutions tailored to indoor, outdoor, and mobile climates, food storage and transport-refrigeration, and
industrial processes. CIS’s primary product groups include coils, coolers, and coatings. Our coils products include
custom-designed condensers, evaporators, round-tube solutions, as well as steam and water/fluid coils. Our coolers
include commercial refrigeration units, which are used across the food supply chain, products for precision climate
control for applications such as data center cooling, carbon dioxide and ammonia unit coolers, remote condensers,
transformer oil coolers, and brine coolers. In addition, we offer proprietary coating solutions for corrosion protection,
prolonging the life of heat-transfer equipment.
During fiscal 2021, CIS segment sales volume decreased, primarily due to the impacts of the COVID-19 pandemic on
the HVAC&R and industrial cooling markets. Sales were most severely impacted early in our fiscal year and sales
volumes have been recovering since. In addition, sales in fiscal 2021 were negatively impacted by lower sales to a
significant data center customer. During fiscal 2021, we transferred production from our Zhongshan, China
manufacturing facility to our Wuxi, China manufacturing facility, consolidating two manufacturing locations into one.
While costs incurred for our plant consolidation activities negatively impacted on our fiscal 2021 operating results, we
expect to realize operating efficiencies going forward. Despite the challenging market conditions in fiscal 2021, we are
proud to have supported numerous customers that produced products used in battling the COVID-pandemic and
improving safety, from disinfectant application to vaccine storage.
Looking ahead, we anticipate continued market recovery, with stronger recovery expected in the second half of fiscal
2022. We are poised to generate new sales in Europe, as heat pump technology is improved to address regulatory
guidelines. Our CIS team is focused on improving financial results through manufacturing efficiencies, pricing
strategies, and vertical integration projects. We will continue to support our customers with innovative products, such as
computer room air handlers, antimicrobial coating lines, and low-VOC topcoats, which have reduced amounts of volatile
organic compounds and are less harmful to the environment. In addition, we see growth opportunities with our product
offerings that use alternative refrigerants, including carbon dioxide, which are more environmentally friendly. We aim
to capitalize on opportunities arising from energy and environmental regulations and post-pandemic shifting consumer
buying patterns. We believe we are well-positioned to be the partner of choice for our customers.
Heavy Duty Equipment (37 percent of fiscal 2021 net sales)
Our HDE segment provides powertrain and engine cooling products, including, but not limited to, radiators, charge air
coolers, condensers, oil coolers, EGR coolers, fuel coolers, electronics cooling packages, and battery thermal
management systems to OEMs in the commercial vehicle, off-highway, and automotive and light vehicle markets in
North America, South America, Europe, and Asia. In addition, our HDE segment serves Brazil’s commercial vehicle
and automotive aftermarkets.
Sales volume in the HDE segment decreased during fiscal 2021, as compared with the prior year, primarily due to the
negative impacts of the COVID-19 pandemic. The COVID-19 impacts were most severe in the Americas and Europe
during the first half of fiscal 2021 and most negatively impacted sales to commercial vehicle and automotive and light
vehicle customers.
Looking ahead to fiscal 2022, we expect that the combination of market recovery, particularly in the Americas and
Europe, and new business wins in all regions will result in increased sales in our HDE segment. In addition, we are
working with numerous customers on products for alternative powertrains, including battery electric, and expect to
launch exciting new products and systems related to electric trucks and buses. We are focused on controlling SG&A and
operational expenses to improve the HDE segment’s profitability, while also expanding our capability and capacity in
critical areas.
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25
Automotive (21 percent of fiscal 2021 net sales)
Our Automotive segment provides powertrain and engine cooling products, including, but not limited to, radiators,
charge air coolers, condensers, oil coolers, and EGR coolers, to OEMs primarily in the automotive and light vehicle
markets in North America, Europe, and Asia.
Sales volume in the Automotive segment decreased during fiscal 2021, as compared with the prior year, primarily due to
the negative impacts of the COVID-19 pandemic. In particular, sales in Europe and North America decreased
significantly compared with the prior year. The decline in those regions were partially offset by increased sales in Asia.
The automotive and light vehicle markets were most severely impacted by the COVID-19 pandemic early in fiscal 2021
and have been recovering since. We expect these markets will continue to recover and exhibit growth during fiscal
2022.
During fiscal 2021, we signed definitive agreements to sell our liquid- and air-cooled automotive businesses. The sale of
the air-cooled automotive business to Schmid Metall GmbH closed on April 30, 2021 and the sale of the liquid-cooled
automotive business to Dana Incorporated is subject to the receipt of governmental and third-party approvals. We are
evaluating strategic alternatives for the other businesses in the Automotive segment and are committed to exiting these
businesses in a manner that is in the best interest of our shareholders.
Consolidated Results of Operations
Liquid- and Air-cooled Automotive Businesses
On November 2, 2020, we signed a definitive agreement to sell our liquid-cooled automotive business to Dana
Incorporated, subject to the receipt of governmental and third-party approvals and satisfaction of other closing
conditions. We are currently working with the buyer through the regulatory approval process. At this time, we are not
able to estimate the ultimate impact of the regulatory approval process or the closing date for this transaction.
On February 19, 2021, we signed a definitive agreement to sell our air-cooled automotive business to Schmid Metall
GmbH; this transaction closed on April 30, 2021.
We report the financial results of both the liquid- and air-cooled automotive businesses within the Automotive segment.
We recorded non-cash impairment charges totaling $165 million during fiscal 2021 related to the long-lived assets within
these held for sale businesses. We are in the process of accounting for the sale of the air-cooled automotive business and
currently expect to record a loss on sale of approximately $6 million in the first quarter of fiscal 2022. In addition, we
currently estimate that we will record a loss on sale of approximately $20 million to $30 million when the sale of the
liquid-cooled automotive business is completed. It is possible that the losses recorded could differ materially from our
estimates. See Note 2 of the Notes to Consolidated Financial Statements for information regarding the accounting
impacts of these sales.
We are also evaluating strategic alternatives for the other businesses in the Automotive segment and are committed to
exiting these businesses in a manner that is in the best interest of our shareholders.
COVID-19
As the COVID-19 pandemic continues, both the health and overall well-being of our employees and delivering quality
products and services to our customers remain our top priorities.
The COVID-19 pandemic has broadly impacted the global economy and our key end markets, which were most severely
impacted during the first quarter of fiscal 2021. Beginning largely in April 2020 and in an effort to mitigate the negative
impacts of COVID-19 on our financial results, we implemented actions, including, but not limited to, production staffing
adjustments, furloughs, shortened work weeks, and temporary salary reductions at all levels of our organization. In
addition, we reduced operating and administrative expenses, including travel and entertainment expenditures. We have
also focused on limiting capital expenditures and, where possible, have delayed certain projects and the purchase of
some program-related equipment and tooling. Our swift cost-saving actions, coupled with a slow but steady recovery in
most of our key end markets, favorably impacted our fiscal 2021 financial results.
We withdrew most of the cost-saving actions, including the temporary salary reductions, in the third quarter of fiscal
2021 as production returned to more normal levels as markets recovered. As a result, while we remain focused on
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26
controlling expenses, we expect compensation-related expenses, particularly SG&A expenses, will increase in fiscal
2022.
The impacts of the COVID-19 pandemic, which will largely depend on the length and severity of the pandemic, could
have a material adverse effect on our business, results of operations, and cash flows.
Fiscal 2021 Highlights
Fiscal 2021 net sales decreased $167 million, or 8 percent, from the prior year, primarily due to lower sales in our CIS,
HDE, and Automotive segments, partially offset by higher sales in our BHVAC segment. Foreign currency exchange
rate changes favorably impacted sales in fiscal 2021 by $28 million. Cost of sales decreased $153 million, or 9 percent,
from last year, primarily due to lower sales volume. Gross profit decreased $14 million and gross margin improved 60
basis points to 16.2 percent. SG&A expenses decreased $39 million, primarily due to lower costs associated with our
review of strategic alternatives for our Automotive segment businesses and preparing the liquid- and air-cooled
automotive businesses for sale. In addition, SG&A expenses decreased due to cost-reduction initiatives implemented
early in the fiscal year in response to the negative impacts of COVID-19. The operating loss of $98 million during fiscal
2021 represents a $136 million decline from the prior-year operating income of $38 million and was primarily due to
$167 million of impairment charges recorded primarily for assets of the liquid- and air-cooled automotive businesses,
partially offset by lower SG&A expenses.
Fiscal 2020 Highlights
Fiscal 2020 net sales decreased $237 million, or 11 percent, from the prior year, primarily due to lower sales in our HDE,
CIS, and Automotive segments, partially offset by higher sales in our BHVAC segment. Foreign currency exchange rate
changes negatively impacted sales in fiscal 2020 by $46 million. Cost of sales decreased $179 million, or 10 percent,
from the prior year, primarily due to lower sales volume. Gross profit decreased $58 million and gross margin declined
90 basis points to 15.6 percent. SG&A expenses increased $6 million, primarily due to higher costs associated with the
review of strategic alternatives for our Automotive segment businesses, partially offset by lower-compensation related
expenses. Operating income during fiscal 2020 decreased $72 million to $38 million, primarily due to lower gross profit
and higher SG&A expenses.
The following table presents our consolidated financial results on a comparative basis for fiscal years 2021, 2020 and
2019.
Years ended March 31,
Years ended March 31,
2021
2020
2019
(in millions)
(in millions)
Net sales
Net sales
Cost of sales
Cost of sales
Gross profit
Gross profit
Selling, general and administrative expenses
Selling, general and administrative expenses
Restructuring expenses
Restructuring expenses
Impairment charges
Impairment charges
(Gain) loss on sale of assets
(Gain) loss on sale of assets
Operating (loss) income
Operating (loss) income
Interest expense
Interest expense
Other expense - net
Other expense - net
(Loss) earnings before income taxes
(Loss) earnings before income taxes
(Provision) benefit for income taxes
(Provision) benefit for income taxes
Net (loss) earnings
Net (loss) earnings
$
$
$
$'s
1,808
1,515
293
211
13
167
-
(98)
(19)
(2)
(119)
(90)
(209)
% of sales
100.0%
83.8%
16.2%
11.7%
0.7%
9.2%
-
-5.4%
-1.1%
-0.1%
-6.6%
-5.0%
-11.6%
$'s
1,976
1,668
308
250
12
9
(1)
38
(23)
(5)
10
(12)
(2)
% of sales
100.0%
84.4%
15.6%
12.6%
0.6%
0.4%
-
1.9%
-1.1%
-0.2%
0.5%
-0.6%
-0.1%
$'s
2,213
1,847
366
244
10
-
2
110
(25)
(4)
81
5
86
% of sales
100.0%
83.5%
16.5%
11.0%
0.4%
-
0.1%
5.0%
-1.1%
-0.2%
3.7%
0.2%
3.9%
$
$
$
Year Ended March 31, 2021 Compared with Year Ended March 31, 2020
Fiscal 2021 net sales of $1,808 million were $167 million, or 8 percent, lower than the prior year, primarily due to lower
sales volume in the CIS, HDE, and Automotive segments, partially offset by a $28 million favorable impact of foreign
currency exchange rate changes and higher sales volume in the BHVAC segment. Sales in the CIS, HDE and
Automotive segments decreased $92 million, $64 million and $47 million, respectively, and were significantly impacted
27
27
by market-driven volume declines and temporary plant closures early in the fiscal year due to the COVID-19 pandemic.
Sales increased $20 million in our BHVAC segment.
Fiscal 2021 cost of sales of $1,515 million decreased $153 million, or 9 percent, primarily due to lower sales volume.
Fiscal 2021 cost of sales was negatively impacted by $24 million from foreign currency exchange rate changes. As a
percentage of sales, cost of sales decreased 60 basis points to 83.8 percent. The unfavorable impacts of lower sales
volume and, to a lesser extent, higher material costs, which negatively impacted cost of sales as a percentage of sales by
approximately 50 basis points, were more than offset by benefits from procurement and other cost-reduction initiatives
and an $8 million decrease in depreciation expense in the Automotive segment. We ceased depreciating the long-lived
assets within the liquid- and air-cooled automotive businesses once they were classified as held for sale during fiscal
2021. In addition, program and equipment transfer costs to prepare the liquid-cooled automotive business for sale
decreased approximately $3 million compared with the prior year.
As a result of lower sales and lower cost of sales as a percentage of sales, fiscal 2021 gross profit decreased $14 million
and gross margin improved 60 basis points to 16.2 percent.
Fiscal 2021 SG&A expenses decreased $39 million. The decrease in SG&A expenses was primarily due to lower costs
recorded at Corporate associated with our review of strategic alternatives for the Automotive segment businesses, which
decreased approximately $30 million, and lower compensation-related expenses, which decreased approximately $13
million, largely resulting from cost-saving actions taken in response to COVID-19. These favorable drivers were
partially offset by approximately $7 million of CEO transition costs recorded at Corporate and a $3 million unfavorable
impact of foreign currency exchange rate changes.
Restructuring expenses totaled $13 million during fiscal 2021 and increased $1 million compared with the prior year,
primarily due to higher severance expenses. The fiscal 2021 restructuring expenses primarily consisted of severance
expenses related to headcount reductions within the CIS, Automotive and HDE segments.
During fiscal 2021, we recorded impairment charges totaling $167 million within the Automotive segment, an increase
of $158 million compared with the prior year. The impairment charges during fiscal 2021 primarily related to writing-
down the long-lived assets in the liquid- and air-cooled automotive businesses in connection with their pending sales.
The $9 million of impairment charges recorded in fiscal 2020 primarily related to two manufacturing facilities in the
Automotive segment.
The operating loss of $98 million during fiscal 2021 represents a $136 million decline from the prior-year operating
income of $38 million. The decline was primarily due to higher impairment charges, which increased $158 million,
and lower earnings in the CIS segment, which decreased $25 million. These negative drivers were partially offset by
lower costs associated with our review of strategic alternatives for the Automotive segment businesses, which decreased
$33 million, and higher earnings in our BHVAC segment, which increased $11 million.
The provision for income taxes was $90 million and $12 million in fiscal 2021 and 2020, respectively. The $78 million
increase was primarily due to an increase in income tax charges related to valuation allowances, partially offset by
income tax benefits totaling $38 million related to the impairment charges recorded during fiscal 2021. In fiscal 2021,
we recorded income tax charges totaling $117 million to increase the valuation allowances on deferred tax assets in the
U.S. and in certain foreign jurisdictions, compared with $7 million of income tax charges for valuation allowances in
fiscal 2020. See Note 8 of the Notes to Consolidated Financial Statements for additional information.
Year Ended March 31, 2020 Compared with Year Ended March 31, 2019
Fiscal 2020 net sales of $1,976 million were $237 million, or 11 percent, lower than the prior year, primarily due to
lower sales in our HDE, CIS, and Automotive segments and a $46 million unfavorable impact of foreign currency
exchange rate changes, partially offset by higher sales in our BHVAC segment. Sales decreased $126 million, $84
million, and $44 million in our HDE, CIS, and Automotive segments, respectively. Sales increased $9 million in our
BHVAC segment.
Fiscal 2020 cost of sales of $1,668 million decreased $179 million, or 10 percent, primarily due to lower sales volume
and a $39 million favorable impact of foreign currency exchange rate changes. As a percentage of sales, cost of sales
increased 90 basis points to 84.4 percent and was negatively impacted by approximately 80 basis points due to higher
labor and inflationary costs and, to a lesser extent, by sales mix. These negative impacts were partially offset by
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28
favorable material costs, which impacted costs of sales by approximately 30 basis points. The favorable material costs
primarily resulted from lower commodity pricing, which more than offset a negative impact from tariffs. In addition, we
recorded $3 million of costs at Corporate for program and equipment transfers associated with the separation of the
liquid-cooled automotive business in preparation for a potential sale.
As a result of lower sales and higher cost of sales as a percentage of sales, fiscal 2020 gross profit decreased $58 million
and gross margin declined 90 basis points to 15.6 percent.
Fiscal 2020 SG&A expenses increased $6 million. The increase in SG&A was primarily due to separation and project
costs recorded at Corporate associated with our review of strategic alternatives for the Automotive segment businesses,
which increased approximately $29 million. This increase was partially offset by lower compensation-related expenses,
which decreased approximately $13 million, lower environmental charges related to previously-owned manufacturing
facilities in the U.S., which decreased approximately $3 million, and a $4 million favorable impact from foreign
currency exchange rate changes.
Restructuring expenses totaled $12 million during fiscal 2020 and increased $2 million compared with the prior year.
The fiscal 2020 restructuring expenses primarily consisted of severance expenses related to targeted headcount
reductions in the HDE and Automotive segments and equipment transfer and plant consolidation costs in the CIS
segment.
During fiscal 2020, we recorded impairment charges totaling $9 million, primarily related to two manufacturing facilities
in the Automotive segment.
Operating income of $38 million during fiscal 2020 decreased $72 million compared with the prior year. This decrease
was primarily due to an increase of $32 million of separation and project costs associated with our review of strategic
alternatives for our automotive businesses and lower earnings in our HDE, CIS, and Automotive segments, which
decreased $27 million, $20 million, and $10 million respectively, partially offset by higher earnings in our BHVAC
segment, which increased $9 million.
The provision for income taxes was $12 million in fiscal 2020, compared with a benefit for income taxes of $5 million in
fiscal 2019. The $17 million change was primarily due to the absence of income tax benefits totaling $25 million
recorded in fiscal 2019 and income tax charges totaling $10 million in fiscal 2020, partially offset by lower operating
earnings in fiscal 2020. The $25 million of income tax benefits recorded in fiscal 2019 related to the recognition of tax
assets for foreign tax credits and a manufacturing deduction in the U.S. and our accounting for the Tax Act. The $10
million of income tax charges in fiscal 2020 were comprised of net charges totaling $7 million resulting from
adjustments of valuation allowances on certain deferred tax assets in the U.S. and in a foreign jurisdiction and $3 million
associated with legal entity restructuring in preparation for a potential sale of the liquid-cooled automotive business.
Segment Results of Operations
Effective April 1, 2020, we began managing our global automotive business separate from the other businesses within
the previously-reported VTS segment. We have been managing the automotive business as the Automotive segment as
we work towards the sale or eventual exit of its underlying automotive business operations. We are managing the other
businesses of the VTS segment, including the commercial vehicle and off-highway businesses, as the HDE segment. We
began reporting financial results for our new segment structure beginning for fiscal 2021. Segment financial information
for fiscal 2020 and 2019 has been recast to conform to the fiscal 2021 presentation. The segment realignment had no
impact on the CIS and BHVAC segments.
29
29
BHVAC
2021
Years ended March 31,
Years ended March 31,
2020
2019
(in millions)
(in millions)
Net sales
Net sales
Cost of sales
Cost of sales
Gross profit
Gross profit
Selling, general and administrative expenses
Selling, general and administrative expenses
Loss on sale of assets
Loss on sale of assets
Operating income
Operating income
$'s
% of sales
$'s
% of sales
$'s
% of sales
$
241
100.0%
$
221
100.0%
$
212
100.0%
158
83
36
-
47
$
65.5%
34.5%
14.9%
-
19.6%
150
72
35
-
36
$
67.7%
32.3%
15.8%
-
16.5%
149
63
35
2
27
$
70.1%
29.9%
16.4%
0.8%
12.6%
Year Ended March 31, 2021 Compared with Year Ended March 31, 2020
BHVAC net sales increased $20 million, or 9 percent, in fiscal 2021 compared with the prior year, primarily due to
higher sales in the U.K. and the U.S., which increased $14 million and $5 million, respectively. The higher sales in the
U.K. were primarily due to higher sales of data center cooling products. The higher sales in the U.S. were primarily due
to higher sales of heating products, partially offset by lower sales of ventilation products.
BHVAC cost of sales increased $8 million, or 5 percent, in fiscal 2021, primarily due to higher sales volume. As a
percentage of sales, cost of sales decreased 220 basis points to 65.5 percent and was positively impacted by favorable
sales mix and customer pricing.
As a result of the higher sales and lower cost of sales as a percentage of sales, gross profit increased $11 million and
gross margin improved 220 basis points to 34.5 percent.
BHVAC SG&A expenses increased $1 million from the prior year. The increase in SG&A expenses was primarily due
to higher compensation-related expenses, including commission expenses.
Operating income in fiscal 2021 of $47 million increased $11 million, primarily due to higher gross profit.
Year Ended March 31, 2020 Compared with Year Ended March 31, 2019
BHVAC net sales increased $9 million, or 4 percent, in fiscal 2020 compared with the prior year, primarily due to higher
sales in the U.S., which increased $14 million, partially offset by lower sales in the U.K., which decreased $5 million.
The higher sales in the U.S. were primarily driven by the increased sales of ventilation and heating products. The lower
sales in the U.K. were primarily due to lower sales of air conditioning and ventilation products and a $3 million
unfavorable impact of foreign currency exchange rate changes, partially offset by higher data center sales.
BHVAC cost of sales increased $1 million, or less than 1 percent, in fiscal 2020. As a percentage of sales, cost of sales
decreased 240 basis points to 67.7 percent, primarily due to favorable sales mix and favorable customer pricing.
As a result of the higher sales and lower cost of sales as a percentage of sales, gross profit increased $9 million and gross
margin improved 240 basis points to 32.3 percent.
BHVAC SG&A expenses remained consistent with the prior year yet decreased 60 basis points as a percentage of sales.
During fiscal 2019, we sold our business in South Africa and, as a result, recorded a loss of $2 million. Annual net sales
attributable to this disposed business were less than $2 million.
Operating income in fiscal 2020 of $36 million increased $9 million, primarily due to higher gross profit.
30
30
CIS
(in millions)
(in millions)
Net sales
Net sales
Cost of sales
Cost of sales
Gross profit
Gross profit
Selling, general and administrative expenses
Selling, general and administrative expenses
Restructuring expenses
Restructuring expenses
Impairment charges
Impairment charges
Operating income
Operating income
2021
Years ended March 31,
Years ended March 31,
2020
2019
$'s
% of sales
$'s
% of sales
$'s
% of sales
$
532
100.0%
$
624
100.0%
$
708
100.0%
465
67
53
5
-
$
8
87.5%
12.5%
10.0%
1.0%
-
1.5%
531
93
57
2
1
33
$
85.1%
14.9%
9.2%
0.3%
0.1%
5.3%
593
115
61
-
-
53
$
83.8%
16.2%
8.6%
-
0.1%
7.5%
Year Ended March 31, 2021 Compared with Year Ended March 31, 2020
CIS net sales decreased $92 million, or 15 percent, in fiscal 2021 compared with the prior year, primarily due to lower
sales volume associated with the impacts of the COVID-19 pandemic and lower sales to a significant data center
customer, partially offset by a $13 million favorable impact of foreign currency exchange rate changes. Sales to data
center cooling and commercial HVAC&R customers decreased $60 million and $43 million, respectively.
CIS cost of sales decreased $66 million, or 12 percent, primarily due to lower sales volume, partially offset by an $11
million unfavorable impact of foreign currency exchange rate changes. As a percentage of sales, cost of sales increased
240 basis points to 87.5 percent, primarily due to the impact of lower sales volume and unfavorable sales mix, partially
offset by cost-reduction and procurement initiatives.
As a result of the lower sales and higher cost of sales as a percentage of sales, gross profit decreased $26 million and
gross margin declined 240 basis points to 12.5 percent.
CIS SG&A expenses decreased $4 million compared with the prior year. The decrease in SG&A expenses was primarily
due to lower compensation-related expenses, which decreased approximately $5 million, partially offset by a $1 million
unfavorable impact of foreign currency exchange rate changes.
Restructuring expenses during fiscal 2021 increased $3 million, and primarily consisted of severance expenses and
equipment transfer costs related to plant consolidation activities in China and targeted headcount reductions in North
America.
Operating income in fiscal 2021 decreased $25 million to $8 million, primarily due to lower gross profit and higher
restructuring expenses, partially offset by lower SG&A expenses.
Year Ended March 31, 2020 Compared with Year Ended March 31, 2019
CIS net sales decreased $84 million, or 12 percent, in fiscal 2020 compared with the prior year, primarily due to lower
sales volume and a $12 million unfavorable impact of foreign currency exchange rate changes. Sales to commercial
HVAC&R and data center cooling customers decreased $43 million and $38 million, respectively.
CIS cost of sales decreased $62 million, or 10 percent, primarily due to lower sales volume and an $11 million favorable
foreign currency exchange rate impact. As a percentage of sales, cost of sales increased 130 basis points to 85.1 percent,
primarily due to the unfavorable impact of lower sales volume and unfavorable sales mix.
As a result of the lower sales and higher cost of sales as a percentage of sales, gross profit decreased $22 million and
gross margin declined 130 basis points to 14.9 percent.
CIS SG&A expenses decreased $4 million compared with the prior year, primarily due to lower compensation-related
expenses, which decreased approximately $2 million, and the favorable impact of cost-control initiatives.
31
31
Restructuring expenses during fiscal 2020 increased $2 million, primarily due to higher equipment transfer and plant
consolidation costs.
During fiscal 2020, we recorded a $1 million asset impairment charge related to a previously-closed manufacturing
facility in Austria.
Operating income in fiscal 2020 decreased $20 million to $33 million, primarily due to lower gross profit, partially offset
by lower SG&A expenses.
HDE
(in millions)
(in millions)
Net sales
Net sales
Cost of sales
Cost of sales
Gross profit
Gross profit
Selling, general and administrative expenses
Selling, general and administrative expenses
Restructuring expenses
Restructuring expenses
Operating income
Operating income
2021
Years ended March 31,
Years ended March 31,
2020
2019
$'s
% of sales
$'s
% of sales
$'s
% of sales
$
682
100.0%
$
746
100.0%
$
872
100.0%
594
88
49
3
37
$
87.0%
13.0%
7.1%
0.4%
5.4%
649
97
56
3
38
$
87.0%
13.0%
7.4%
0.4%
5.1%
744
128
62
1
65
$
85.3%
14.7%
7.1%
0.1%
7.5%
Year Ended March 31, 2021 Compared with Year Ended March 31, 2020
HDE net sales decreased $64 million, or 9 percent, in fiscal 2021 compared with the prior year, primarily due to lower
sales volume resulting from the impacts of the COVID-19 pandemic, which were most severe in the Americas and
Europe during the first half of the fiscal year. Sales to off-highway customers increased $20 million and were offset by
lower sales to commercial vehicle and automotive and light vehicle customers, which decreased $52 million and $11
million, respectively.
HDE cost of sales decreased $55 million, or 8 percent, primarily due to lower sales volume. As a percentage of sales,
cost of sales was consistent at 87.0 percent. Beyond the unfavorable impacts of the lower sales volume, higher material
costs impacted cost of sales as a percentage of sales by approximately 100 basis points. The unfavorable materials costs
primarily resulted from higher commodity pricing and tariffs on imported materials. These negative impacts were
largely offset by favorable impacts from improved operating efficiencies and cost savings from procurement and other
cost-reduction initiatives.
As a result of the lower sales, gross profit decreased $9 million. Gross margin of 13.0 percent was consistent with the
prior year.
HDE SG&A expenses decreased $7 million compared with the prior year. The decrease in SG&A expenses was
primarily due to lower compensation-related expenses, which decreased approximately $6 million, and cost-reduction
initiatives, including lower travel expenses.
Restructuring expenses during fiscal 2021 totaled $3 million, consistent with the prior year. Fiscal 2021 restructuring
expenses primarily consisted of severance expenses resulting from targeted headcount reductions in North America.
Operating income in fiscal 2021 decreased $1 million to $37 million, primarily due to lower gross profit, partially offset
by lower SG&A expenses.
Year Ended March 31, 2020 Compared with Year Ended March 31, 2019
HDE net sales decreased $126 million, or 14 percent, in fiscal 2020 compared with the prior year, primarily due to lower
sales volume, a $15 million unfavorable impact of foreign currency exchange rate changes, and, to a lesser extent,
unfavorable customer pricing largely resulting from contractually-scheduled price-downs. Sales to off-highway and
commercial vehicle customers decreased $57 million and $51 million, respectively. These sales declines largely resulted
from weakness in global vehicular markets and the planned wind-down of certain commercial vehicle programs.
32
32
HDE cost of sales decreased $95 million, or 13 percent, primarily due to lower sales volume and a $13 million favorable
impact of foreign currency exchange rate changes. As a percentage of sales, cost of sales increased 170 basis points to
87.0 percent. Beyond the unfavorable impact of the lower sales volume, higher labor and inflationary costs and
unfavorable customer pricing negatively impacted cost of sales as a percentage of sales by approximately 110 basis
points and 80 basis points, respectively. These negative impacts were partially offset by improved operating efficiencies
and cost savings from procurement initiatives.
As a result of the lower sales and higher cost of sales as a percentage of sales, gross profit decreased $31 million and
gross margin declined 170 basis points to 13.0 percent.
HDE SG&A expenses decreased $6 million compared with the prior year, primarily due to lower compensation-related
expenses and environmental charges related to previously-owned manufacturing facilities in the U.S, which each
decreased approximately $3 million.
Restructuring expenses during fiscal 2020 increased $2 million, primarily due to higher severance expenses resulting
from targeted headcount reductions in the Americas.
Operating income in fiscal 2020 decreased $27 million to $38 million, primarily due to lower gross profit, partially offset
by lower SG&A expenses.
AUTOMOTIVE
(in millions)
(in millions)
Net sales
Net sales
Cost of sales
Cost of sales
Gross profit
Gross profit
Selling, general and administrative expenses
Selling, general and administrative expenses
Restructuring expenses
Restructuring expenses
Impairment charges
Impairment charges
Gain on sale of assets
Gain on sale of assets
Operating loss
Operating loss
2021
Years ended March 31,
Years ended March 31,
2020
2019
$'s
% of sales
$'s
% of sales
$'s
% of sales
$
398
100.0%
$
445
100.0%
$
489
100.0%
342
56
36
4
167
-
(151)
$
85.9%
14.1%
9.1%
1.0%
41.9%
-
-37.9%
396
48
45
6
8
(1)
(10)
$
89.1%
10.9%
10.1%
1.5%
1.8%
-0.2%
-2.3%
430
59
51
8
-
-
$
-
87.9%
12.1%
10.5%
1.7%
-
-
-0.1%
Year Ended March 31, 2021 Compared with Year Ended March 31, 2020
Automotive net sales decreased $47 million, or 11 percent, in fiscal 2021 compared with the prior year, primarily due to
lower sales volume largely resulting from the impacts of the COVID-19 pandemic, partially offset by an $18 million
favorable impact of foreign currency exchange rate changes. Sales in Europe and North America decreased $39 million
and $19 million, respectively. Sales in Asia increased $12 million.
Automotive cost of sales decreased $54 million, or 14 percent, compared with the prior year, primarily due to lower sales
volume, partially offset by a $15 million unfavorable impact of foreign currency exchange rate changes. As a percentage
of sales, cost of sales decreased 320 basis points to 85.9 percent and was favorably impacted by lower depreciation
expenses of approximately $8 million, cost savings from procurement initiatives and improved operating efficiencies,
partially offset by the unfavorable impact of lower sales volume. We ceased depreciating the long-lived assets within the
liquid- and air-cooled automotive businesses when they were classified as held for sale in November 2020 and February
2021, respectively.
As a result of the lower sales and lower cost of sales as a percentage of sales, gross profit increased $8 million and gross
margin improved 320 basis points to 14.1 percent.
Automotive SG&A expenses decreased $9 million compared with the prior year. The decrease in SG&A expenses was
primarily due to lower compensation-related expenses, which decreased approximately $8 million.
33
33
Restructuring expenses during fiscal 2021 totaled $4 million, a decrease of $2 million compared with the prior year. The
decrease was primarily driven by lower severance expenses in Europe resulting from fewer targeted headcount
reductions.
Impairment charges during fiscal 2021 totaled $167 million and primarily related to assets in the liquid- and air-cooled
automotive businesses. Upon classifying these businesses as held for sale, we recorded impairment charges to write-
down the long-lived assets of these businesses based upon the selling prices in the agreements.
The Automotive operating loss in fiscal 2021 of $151 million, as compared with an operating loss of $10 million in the
prior year, was significantly impacted by the large impairment charges, which were partially offset by higher gross profit
and lower SG&A and restructuring expenses.
Year Ended March 31, 2020 Compared with Year Ended March 31, 2019
Automotive net sales decreased $44 million, or 9 percent, in fiscal 2020 compared with the prior year, primarily due to
lower sales volume, a $16 million unfavorable impact of foreign currency exchange rate changes, and, to a lesser extent,
unfavorable customer pricing largely resulting from contractually-scheduled price-downs. Sales decreased $48 million
in Europe and increased $5 million in Asia. The sales declines in Europe largely resulted from general weakness in
vehicular markets.
Automotive cost of sales decreased $34 million, or 8 percent, primarily due to lower sales volume and a $14 million
favorable impact of foreign currency exchange rate changes. As a percentage of sales, cost of sales increased 120 basis
points to 89.1 percent. Beyond the unfavorable impact of the lower sales volume, unfavorable customer pricing and
higher labor and inflationary costs negatively impacted cost of sales as a percentage of sales by approximately 40 basis
points and 30 basis points, respectively. Higher depreciation costs, primarily resulting from recent manufacturing
capacity expansion in China and Hungary, also negatively impacted cost of sales to a lesser extent. These negative
impacts were partially offset by favorable material costs, which impacted cost of sales by approximately 30 basis points,
improved operating efficiencies and cost savings from procurement initiatives. The favorable material costs primarily
resulted from lower commodity pricing, which more than offset the negative impacts of tariffs.
As a result of the lower sales and higher cost of sales as a percentage of sales, gross profit decreased $11 million and
gross margin declined 120 basis points to 10.9 percent.
Automotive SG&A expenses decreased $6 million compared with the prior year, primarily due to lower compensation-
related expenses, which decreased approximately $5 million, and a $2 million favorable impact of foreign currency
exchange rate changes.
Restructuring expenses during fiscal 2020 decreased $2 million, primarily due to lower severance expenses resulting
from fewer targeted headcount reductions in Europe.
During fiscal 2020, we recorded asset impairment charges totaling $8 million, primarily related to manufacturing
facilities in Austria and Germany.
During fiscal 2020, we completed the sale of a previously-closed manufacturing facility in Germany and, as a result,
recorded a gain of $1 million.
The operating loss in fiscal 2020 of $10 million represents a $10 million decline from the prior year and was primarily
due to lower gross profit and higher impairment charges, partially offset by lower SG&A and restructuring expenses.
Liquidity and Capital Resources
Our primary sources of liquidity are cash flow from operating activities, our cash and cash equivalents as of March 31,
2021 of $38 million, and an available borrowing capacity of $238 million under our revolving credit facility. Given our
extensive international operations, approximately $35 million of our cash and cash equivalents are held by our non-U.S.
subsidiaries. Amounts held by non-U.S. subsidiaries are available for general corporate use; however, these funds may
be subject to foreign withholding taxes if repatriated. We believe our sources of liquidity will provide sufficient cash
flow to adequately cover our funding needs on both a short-term and long-term basis.
34
34
Our primary contractual obligations include pension obligations, debt and related interest payments, lease obligations,
and obligations for capital expenditures. Our pension liabilities totaled $77 million as of March 31, 2021. We expect to
contribute approximately $13 million to our U.S. pension plans during fiscal 2022. We are currently evaluating the
provisions within the American Rescue Plan Act of 2021, which include funding relief for single-employer pension
plans. We believe this recent legislation could allow for lower contributions to our pension plans during fiscal 2022.
Net Cash Provided by Operating Activities
Net cash provided by operating activities in fiscal 2021 was $150 million, an increase of $92 million from $58 million in
the prior year. This increase in operating cash flow was primarily due to favorable net changes in working capital,
including impacts from the timing of payments to vendors and receipts from customers, as compared with the prior year.
The favorable changes in working capital also included lower payments for incentive compensation, employee benefits,
and payroll taxes. During fiscal 2021, we deferred payments of U.S. payroll taxes totaling $7 million, as permitted by
the Coronavirus Aid, Relief, and Economic Security Act. We resumed payment of these payroll taxes during the fourth
quarter of fiscal 2021 and expect to pay the deferred amounts in two equal installments when required in December 2021
and 2022. Also during fiscal 2021, payments for separation and project costs associated with our review of strategic
alternatives for the Automotive segment businesses and restructuring activities decreased $31 million and $5 million,
respectively, compared with fiscal 2020.
Net cash provided by operating activities in fiscal 2020 was $58 million, a decrease of $45 million from $103 million in
the prior year. This decrease in operating cash flow was primarily due to lower operating earnings in the current year
and payments for separation and project costs associated with our strategic review of alternatives for the automotive
businesses, partially offset by favorable net changes in working capital. The favorable changes in working capital, as
compared with the prior year, included lower employee benefit and incentive compensation payments.
Capital Expenditures
Capital expenditures of $33 million during fiscal 2021 decreased $39 million compared with fiscal 2020. Similar to
prior years, our capital spending in fiscal 2021 primarily occurred in the HDE and Automotive segments, which totaled
$14 million and $11 million, respectively, and included tooling and equipment purchases in conjunction with new and
renewal programs with customers.
During fiscal 2021 and in response to the economic impacts of the COVID-19 pandemic, we reduced our capital
expenditures and delayed certain projects and the purchase of certain program-related equipment and tooling in our
vehicular businesses. We are currently planning to increase our capital investments in fiscal 2022, as compared with
fiscal 2021.
Debt
Our total debt outstanding decreased $143 million to $340 million at March 31, 2021 compared with the prior year,
primarily due to repayments during fiscal 2021.
Our credit agreements require us to maintain compliance with various covenants, including a leverage ratio covenant and
an interest expense coverage ratio covenant discussed further below. Also, as specified in the credit agreement, the term
loans may require prepayments in the event of certain asset sales. In addition, at the time of each incremental borrowing
under the revolving credit facility, we must represent to the lenders that there has been no material adverse effect, as
defined in the credit agreement, on our business, property, or results of operations.
The leverage ratio covenant within our primary credit agreements requires us to limit our consolidated indebtedness, less
a portion of our cash balance, both as defined by the credit agreements, to no more than three and one-quarter times
consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted
EBITDA”). We are also subject to an interest expense coverage ratio covenant, which requires us to maintain Adjusted
EBITDA of at least three times consolidated interest expense. As of March 31, 2021, our leverage ratio and interest
coverage ratio were 1.9 and 9.3, respectively. We expect to remain in compliance with our debt covenants during fiscal
2022 and beyond.
See Note 17 of the Notes to Consolidated Financial Statements for additional information regarding our credit
agreements.
35
35
Critical Accounting Policies
The following critical accounting policies reflect the more significant judgments and estimates used in preparing our
consolidated financial statements. Application of these policies results in accounting estimates that have the greatest
potential for a significant impact on our financial statements. The following discussion of these judgments and estimates
is intended to supplement the significant accounting policies presented in Note 1 of the Notes to Consolidated Financial
Statements. In addition, recently issued accounting pronouncements that either have or could significantly impact our
financial statement are disclosed in Note 1 of the Notes to Consolidated Financial Statements.
Revenue Recognition
We recognize revenue based upon consideration specified in a contract and as we satisfy performance obligations by
transferring control over our products to our customers, which may be at a point in time or over time. The majority of our
revenue is recognized at a point in time, based upon shipment terms. A limited number of our customer contracts provide
an enforceable right to payment for performance completed to date. For these contracts, we recognize revenue over time
based upon our estimated progress towards the satisfaction of the contract’s performance obligations. We record an
allowance for credit losses and we accrue for estimated warranty costs at the time of sale. We base these estimates upon
historical experience, current business trends and economic conditions, and risks specific to the underlying accounts
receivable or warranty claims.
Impairment of Long-Lived Assets
We perform impairment evaluations of long-lived assets, including property, plant and equipment and intangible assets,
whenever business conditions or events indicate that those assets may be impaired. We consider factors such as
operating losses, declining financial outlooks and market conditions when evaluating the necessity for an impairment
analysis. When the net asset values exceed undiscounted cash flows expected to be generated by the assets, we write
down the assets to fair value and record an impairment charge to current operations. We estimate fair value in various
ways depending on the nature of the underlying assets. Fair value is generally based upon appraised value, estimated
salvage value, or selling prices under negotiation, as applicable.
The most significant long-lived assets we evaluated for impairment indicators were property, plant and equipment and
intangible assets, which totaled $270 million and $101 million, respectively, at March 31, 2021. Within property, plant
and equipment, the most significant assets evaluated are buildings and improvements and machinery and equipment.
Our most significant intangible assets evaluated are customer relationships, trade names, and acquired technology, the
majority of which are related to our CIS segment. We evaluate impairment at the lowest level of separately identifiable
cash flows, which is generally at the manufacturing plant level. We monitor manufacturing plant financial performance
to determine whether indicators exist that would require an impairment evaluation for the facility. This includes
significant adverse changes in plant profitability metrics; substantial changes in the mix of customer products
manufactured in the plant; changes in manufacturing strategy; and the shifting of programs to other facilities under a
manufacturing realignment strategy. When such indicators are present, we perform an impairment evaluation.
During fiscal 2021 and upon classifying the liquid- and air-cooled automotive businesses within the Automotive segment
as held for sale, we evaluated the disposal groups for impairment. Based upon the selling prices of the businesses and
anticipated costs to sell, we estimated implied losses in excess of the respective carrying value of each disposal group’s
long-lived assets. As a result, we wrote down the carrying value of the disposal groups’ long-lived assets, which consist
entirely of property, plant and equipment and right-of-use lease assets, to zero. See Note 2 of the Notes to the
Consolidated Financial Statements for additional information regarding the $167 million of impairment charges that we
recorded during fiscal 2021.
Impairment of Goodwill
We perform goodwill impairment tests annually, as of March 31, unless business events or other conditions exist that
require a more frequent evaluation. We consider factors such as operating losses, declining financial and market
outlooks, and market capitalization when evaluating the necessity for an interim impairment analysis. We test goodwill
for impairment at a reporting unit level. Reporting units resulting from recent acquisitions generally represent the
highest risk of impairment, which typically decreases as the businesses are integrated into the Company and positioned
36
36
for future operating and financial performance. We test goodwill for impairment by comparing the fair value of each
reporting unit with its carrying value. We determine the fair value of a reporting unit based upon the present value of
estimated future cash flows. If the fair value of a reporting unit exceeds the carrying value of the reporting unit’s net
assets, goodwill is not impaired. However, if the carrying value of the reporting unit’s net assets exceeds its fair value,
we would conclude goodwill is impaired and would record an impairment charge equal to the amount that the reporting
unit’s carrying value exceeds its fair value.
Determining the fair value of a reporting unit involves judgment and the use of significant estimates and assumptions,
which include assumptions regarding the revenue growth rates and operating profit margins used to calculate estimated
future cash flows, risk-adjusted discount rates, business trends and market conditions. We determine the expected future
revenue growth rates and operating profit margins after consideration of our historical revenue growth rates and earnings
levels, our assessment of future market potential and our expectations of future business performance. The discount
rates used in determining discounted cash flows are rates corresponding to our cost of capital, adjusted for country-
specific risks where appropriate. While we believe the assumptions used in our goodwill impairment tests are
appropriate and result in a reasonable estimate of the fair value of each reporting unit, future events or circumstances
could have a potential negative effect on the estimated fair value of our reporting units. These events or circumstances
include lower than forecasted revenues, market trends that fall below our current expectations, actions of key customers,
increases in discount rates, and the continued economic uncertainty and impacts associated with the COVID-19
pandemic. We cannot predict the occurrence of certain events or changes in circumstances that might adversely affect
the carrying value of goodwill.
At March 31, 2021, our goodwill totaled $171 million related to our CIS and BHVAC segments. Each of these segments
is comprised of two reporting units. We conducted annual goodwill impairment tests as of March 31, 2021 by applying
a fair value-based test and determined the fair value of each of our reporting units exceeded the respective book value.
Acquisitions
From time to time, we make strategic acquisitions that have a material impact on our consolidated results of operations
or financial position. We allocate the purchase price of acquired businesses to the identifiable tangible and intangible
assets acquired and liabilities assumed in the transaction based upon their estimated fair values as of the acquisition date.
We determine the estimated fair values using information available to us and engage third-party valuation specialists
when necessary. The estimates we use to determine the fair value of long-lived assets, such as intangible assets, can be
complex and require significant judgments. While we use our best estimates and assumptions, our estimates are
inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year
from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding
offset to goodwill. Upon conclusion of the measurement period or final determination of the values of assets acquired or
liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statement of
operations. We also estimate the useful lives of intangible assets to determine the amount of amortization expense to
record in future periods. We periodically review the estimated useful lives assigned to our intangible assets to determine
whether such estimated useful lives continue to be appropriate.
Warranty Costs
We estimate costs related to product warranties and accrue for such costs at the time of the sale, within cost of sales. We
estimate warranty costs based upon the best information available, which includes statistical and analytical analysis of
both historical and current claim data. We adjust our warranty accruals, which totaled $5 million at March 31, 2021, if it
is probable that expected claims will differ from previous estimates.
Pension Obligations
Our calculation of the expense and liabilities of our pension plans is dependent upon various assumptions. At March 31,
2021, our pension liabilities totaled $77 million. The most significant assumptions include the discount rate, long-term
expected return on plan assets, and mortality rates. We base our selection of assumptions on historical trends and
economic and market conditions at the time of valuation. In accordance with U.S. GAAP, actual results that differ from
these assumptions are accumulated and amortized over future periods. These differences impact future pension
expenses. Currently, participants in our domestic pension plans are not accruing benefits based upon their current
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service as the plans do not include increases in annual earnings or for future service in calculating the average annual
earnings and years of credited service under the pension plan formula.
For the following discussion regarding sensitivity of assumptions, all amounts presented are in reference to our domestic
pension plans, since our domestic plans comprise all of our pension plan assets and the large majority of our pension
plan expense.
To determine the expected rate of return on pension plan assets, we consider such factors as (a) the actual return earned
on plan assets, (b) historical rates of return on the various asset classes in the plan portfolio, (c) projections of returns on
those asset classes, (d) the amount of active management of the assets, (e) capital market conditions and economic
forecasts, and (f) administrative expenses paid with the plan assets. The long-term rate of return utilized in both fiscal
2021 and 2020 was 7.5 percent. For fiscal 2022, we have also assumed a rate of 7.5 percent. A change of 25 basis
points in the expected rate of return on assets would impact our fiscal 2022 pension expense by $0.4 million.
The discount rate reflects rates available on long-term, high-quality fixed-income corporate bonds on the measurement
date of March 31. For fiscal 2021 and 2020, for purposes of determining pension expense, we used a discount rate of 3.4
and 4.0 percent, respectively. We determined these rates based upon a yield curve that was created following an analysis
of the projected cash flows from our plans. See Note 18 of the Notes to Consolidated Financial Statements for additional
information. A change in the assumed discount rate of 25 basis points would impact our fiscal 2022 pension expense by
less than $1 million.
Income Taxes
We operate in numerous taxing jurisdictions; therefore, we are subject to regular examinations by federal, state and non-
U.S. taxing authorities. Due to the application of complex and sometimes ambiguous tax laws and rulings in the
jurisdictions in which we do business, there is an inherent level of uncertainty within our worldwide tax provisions.
Despite our belief that our tax return positions are consistent with applicable tax laws, it is possible that taxing
authorities could challenge certain positions.
Our deferred tax assets and liabilities reflect temporary differences between the amount of assets and liabilities for
financial and tax reporting purposes. We adjust these amounts to reflect changes in tax rates expected to be in effect
when the temporary differences reverse. We record a valuation allowance if we determine it is more likely than not that
the net deferred tax assets in a particular jurisdiction will not be realized. This determination, which is made on a
jurisdiction-by-jurisdiction basis, involves judgment and the use of significant estimates and assumptions, including
expectations of future taxable income and tax planning strategies. We believe the assumptions that we used are
appropriate and result in a reasonable determination regarding the future realizability of deferred tax assets. However,
future events or circumstances, such as lower-than-expected taxable income or unfavorable changes in the financial
outlook of our operations in certain jurisdictions, could cause us to record additional valuation allowances.
See Note 8 of the Notes to Consolidated Financial Statements for additional information regarding income taxes.
Other Loss Reserves
We maintain liabilities and reserves for a number of other loss exposures, such as environmental remediation costs, self-
insurance reserves, estimated credit losses associated with trade receivables, regulatory compliance matters, and
litigation. Establishing loss reserves for these exposures requires the use of estimates and judgment to determine the risk
exposure and ultimate potential liability. We estimate these reserve requirements by using consistent and suitable
methodologies for the particular type of loss reserve being calculated. See Note 20 of the Notes to Consolidated
Financial Statements for additional information regarding contingencies and litigation.
Forward-Looking Statements
This report, including, but not limited to, the discussion under Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations, contains statements, including information about future financial
performance, accompanied by phrases such as “believes,” “estimates,” “expects,” “plans,” “anticipates,” “intends,” and
other similar “forward-looking” statements, as defined in the Private Securities Litigation Reform Act of 1995.
Modine’s actual results, performance or achievements may differ materially from those expressed or implied in these
statements, because of certain risks and uncertainties, including, but not limited to, those described under “Risk Factors”
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in Item 1A. in Part I. of this report and identified in our other public filings with the U.S. Securities and Exchange
Commission. Other risks and uncertainties include, but are not limited to, the following:
Market Risks:
The impact of the COVID-19 pandemic on the national and global economy, our business, suppliers, customers,
and employees;
Economic, social and political conditions, changes, challenges and unrest, particularly in the geographic,
product and financial markets where we and our customers operate and compete, including, in particular,
foreign currency exchange rate fluctuations; tariffs (and any potential trade war resulting from tariffs or
retaliatory actions); inflation; changes in interest rates; recession and recovery therefrom; restrictions and
uncertainty associated with cross-border trade, public health crises, such as pandemics and epidemics, including
the ongoing COVID-19 pandemic; and the general uncertainties about the impact of regulatory and/or policy
changes, including those related to tax and trade, the COVID-19 pandemic and other matters, that have been or
may be implemented in the U.S. or abroad, as well as continuing uncertainty regarding the short- and long-term
implications of “Brexit”;
The impact of potential price increases associated with raw materials, including aluminum, copper, steel and
stainless steel (nickel), and other purchased component inventory including, but not limited to, increases in the
underlying material cost based upon the London Metal Exchange and related premiums or fabrication costs.
These prices may be impacted by a variety of factors, including changes in trade laws and tariffs, the behavior
of our suppliers and significant fluctuations in demand. This risk includes our ability to successfully manage
our exposure and our ability to adjust product pricing in response to price increases, whether through our
quotation process or through contract provisions for prospective price adjustments, as well as the inherent lag in
timing of such contract provisions; and
The impact of current and future environmental laws and regulations on our business and the businesses of our
customers, including our ability to take advantage of opportunities to supply alternative new technologies to
meet environmental and/or energy standards and objectives.
Operational Risks:
The overall health and continually increasing price-down focus of our vehicular customers in light of economic
and market-specific factors, and the potential impact on us from any deterioration in the stability or
performance of any of our major customers;
The impact of any problems with suppliers meeting our time, quantity, quality and price demands, and the
overall health of our suppliers, including their ability and willingness to supply our volume demands if their
production capacity becomes constrained;
Our ability to maintain current customer relationships and compete effectively for new business, including our
ability to offset or otherwise address increasing pricing pressures from competitors and price reduction and
overall service pressures from customers, particularly in the face of macro-economic instability;
The impact of product or manufacturing difficulties or operating inefficiencies, including any program launch
and product transfer challenges and warranty claims and delays or inefficiencies resulting from restrictions
imposed in response to the COVID-19 pandemic;
The impact of any delays or modifications initiated by major customers with respect to program launches,
product applications or requirements;
Our ability to consistently structure our operations in order to develop and maintain a competitive cost base
with appropriately skilled and stable labor, while also positioning ourselves geographically, so that we can
continue to support our customers with the technical expertise and market-leading products they demand and
expect from Modine;
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Our ability to effectively and efficiently reduce our cost structure in response to sales volume declines and to
complete restructuring activities and realize the anticipated benefits of those activities;
Costs and other effects of the investigation and remediation of environmental contamination; particularly when
related to the actions or inactions of others and/or facilities over which we have no control;
Our ability to recruit and maintain talent, including personnel in managerial, leadership and administrative
functions, in light of tight global labor markets;
Our ability to protect our proprietary information and intellectual property from theft or attack by internal or
external sources;
The impact of any substantial disruption or material breach of our information technology systems, and any
related delays, problems or costs;
Increasingly complex and restrictive laws and regulations, including those associated with being a U.S. public
company and others present in various jurisdictions in which we operate, and the costs associated with
compliance therewith;
Work stoppages or interference at our facilities or those of our major customers and/or suppliers;
The constant and increasing pressures associated with healthcare and associated insurance costs; and
Costs and other effects of litigation, claims, or other obligations.
Strategic Risks:
Our ability to successfully complete the pending sale of our liquid-cooled automotive business, including the
receipt of governmental and third-party approvals and the risk that the sale will not close because of a failure to
satisfy one or more of the closing conditions (including governmental and third-party approvals) on a timely
basis or at all, and our ability to successfully exit our other automotive businesses in a manner that is in the best
interest of our shareholders;
Our ability to successfully realize anticipated benefits from our increased “industrial” market presence, with our
BHVAC and CIS businesses, while maintaining appropriate focus on the market opportunities presented by our
vehicular businesses;
Our ability to identify and execute growth and diversification opportunities in order to position us for long-term
success; and
The potential impacts from any actions by activist shareholders, including disruption of our business and related
costs.
Financial Risks:
Our ability to fund our global liquidity requirements efficiently for Modine’s current operations and meet our
long-term commitments in the event of disruption in or tightening of the credit markets or extended
recessionary conditions in the global economy;
The impact of potential increases in interest rates, particularly in LIBOR and the Euro Interbank Offered Rate
(“EURIBOR”) in relation to our variable-rate debt obligations, and of the continued uncertainty around the
utilization of LIBOR or alternative reference rates;
The impact of changes in federal, state or local taxes that could have the effect of increasing our income tax
expense;
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Our ability to comply with the financial covenants in our credit agreements, including our leverage ratio (net
debt divided by Adjusted EBITDA, as defined in our credit agreements) and our interest coverage ratio
(Adjusted EBITDA divided by interest expense, as defined in our credit agreements);
The potential unfavorable impact of foreign currency exchange rate fluctuations on our financial results; and
Our ability to effectively realize the benefits of deferred tax assets in various jurisdictions in which we operate.
Forward-looking statements are as of the date of this report; we do not assume any obligation to update any forward-
looking statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
In the normal course of business, we are subject to market exposure from changes in foreign currency exchange rates,
interest rates, commodity prices, credit risk and other market changes.
Foreign Currency Risk
We are subject to the risk of changes in foreign currency exchange rates due to our operations in foreign countries. We
have manufacturing facilities in Brazil, China, India, Mexico, and throughout Europe. We also have joint ventures in
China and South Korea. We sell and distribute products throughout the world and also purchase raw materials from
suppliers in foreign countries. As a result, our financial results are affected by changes in foreign currency exchange
rates and economic conditions in the foreign markets in which we do business. Whenever possible, we attempt to
mitigate foreign currency risks on transactions with customers and suppliers in foreign countries by entering into
contracts that are denominated in the functional currency of the entity engaging in the transaction. In addition, for
certain transactions that are denominated in a currency other than the engaging entity’s functional currency, we may
enter into foreign currency derivative contracts to further manage our foreign currency risk. In fiscal 2021, we recorded
a net loss of less than $1 million within our statement of operations related to foreign currency derivative contracts. In
addition, our consolidated financial results are impacted by the translation of revenue and expenses in foreign currencies
into U.S. dollars. These translation impacts are primarily affected by changes in exchange rates between the U.S. dollar
and European currencies, primarily the euro, and changes between the U.S. dollar and the Brazilian real. In fiscal 2021,
more than 50 percent of our sales were generated in countries outside the U.S. A change in foreign currency exchange
rates will positively or negatively affect our sales; however, this impact will be offset, usually to a large degree, with a
corresponding effect on our cost of sales and other expenses. In fiscal 2021, changes in foreign currency exchange rates
favorably impacted our sales by $28 million; however, the impact on our operating income was $2 million. Foreign
currency exchange rate risk can be estimated by measuring the impact of a near-term adverse movement of 10 percent in
foreign currency exchange rates. If these rates were 10 percent higher or lower during fiscal 2021, there would not have
been a material impact on our fiscal 2021 earnings.
We maintain foreign currency-denominated debt obligations and intercompany loans that are subject to foreign currency
exchange risk. We seek to mitigate this risk through maintaining offsetting positions between external and intercompany
loans; however, from time to time, we also enter into foreign currency derivative contracts to manage the currency
exchange rate exposure. These derivative instruments are typically not accounted for as hedges, and accordingly, gains
or losses on the derivatives are recorded in other income and expense in the consolidated statements of operations and
typically offset the foreign currency changes on the outstanding loans.
Interest Rate Risk
We seek to reduce the potential volatility of earnings that could arise from changes in interest rates. We generally utilize
a mixture of debt maturities and both fixed-rate and variable-rate debt to manage exposure to changes in interest rates.
Interest on both our term loans and borrowings under our primary multi-currency revolving credit facility is based upon a
variable interest rate, primarily either LIBOR or EURIBOR, plus 137.5 to 250 basis points, depending on our leverage
ratio. As a result, we are subject to risk of fluctuations in LIBOR and EURIBOR and changes in our leverage ratio,
which would affect the variable interest rate on our term loans and revolving credit facility and could create variability in
interest expense. As of March 31, 2021, our outstanding borrowings on variable-rate term loans and the revolving credit
facility totaled $179 million and $5 million, respectively. Based upon our outstanding debt with variable interest rates at
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March 31, 2021, a 100-basis point increase in interest rates would increase our annual interest expense in fiscal 2022 by
approximately $2 million.
Commodity and Supply Risks
We are dependent upon the supply of raw materials and supplies in our production processes and, from time to time,
enter into firm purchase commitments for aluminum, copper, nickel, and natural gas. We seek to mitigate commodity
price risk by adjusting product pricing in response to any applicable price increases. In addition, we maintain contract
provisions with certain vehicular customers that provide for prospective price adjustments based upon changes in raw
material prices. These prospective price adjustments generally lag behind the actual raw material price fluctuations by
three months or longer, and typically the contract provisions are limited to the underlying material cost based upon the
London Metal Exchange and exclude additional cost elements, such as related premiums and fabrication.
In an effort to manage and reduce our costs, we have been consolidating our supply base. As a result, we are dependent
upon limited sources of supply for certain components used in the manufacture of our products, including aluminum,
copper, steel and stainless steel (nickel). We are exposed to the risk of suppliers of certain raw materials not being able
or willing to meet strong customer demand (including the potential effects of trade laws and tariffs), as they may not
increase their output capacity as quickly as customers increase their orders, and of increased prices being charged by raw
material suppliers.
In addition, we purchase parts from suppliers that use our tooling to create the parts. In most instances, and for financial
reasons, we do not have duplicate tooling for the manufacture of the purchased parts. As a result, we are exposed to the
risk of a supplier being unable to provide the quantity or quality of parts that we require. Even in situations where
suppliers are manufacturing parts without the use of our tooling, we face the challenge of obtaining consistently high-
quality parts from suppliers that are financially stable. We utilize a supplier risk management program that leverages
internal and third-party tools to identify and mitigate higher-risk supplier situations.
Credit Risk
Credit risk represents the possibility of loss from a customer failing to make payment according to contract terms. Our
principal credit risk consists of outstanding trade accounts receivable. At March 31, 2021, 35 percent of our trade
accounts receivable was concentrated with our top ten customers. These customers operate primarily in the commercial
vehicle, off-highway, automotive and light vehicle, commercial air conditioning, and refrigeration markets and are
influenced by similar market and general economic factors. In the past, credit losses from our customers have not been
significant, nor have we experienced a significant increase in credit losses in connection with the COVID-19 pandemic.
We manage credit risk through a focus on the following:
Cash and investments – We review cash deposits and short-term investments to ensure banks have acceptable
credit ratings, and short-term investments are maintained in secured or guaranteed instruments. We consider
our holdings in cash and investments to be stable and secure at March 31, 2021;
Trade accounts receivable – Prior to granting credit, we evaluate each customer, taking into consideration the
customer's financial condition, payment experience and credit information. After credit is granted, we
actively monitor the customer's financial condition and applicable business news;
Pension assets – We have retained outside advisors to assist in the management of the assets in our pension
plans. In making investment decisions, we utilize an established risk management protocol that focuses on
protection of the plan assets against downside risk. We ensure that investments within these plans provide
appropriate diversification, the investments are monitored by investment teams, and portfolio managers
adhere to the established investment policies. We believe the plan assets are subject to appropriate investment
policies and controls; and
Insurance – We monitor our insurance providers to ensure they maintain financial ratings that are acceptable
to us. We have not identified any concerns in this regard based upon our reviews.
In addition, we are also exposed to risks associated with demands by our customers for decreases in the price of our
products. We attempt to offset this risk with firm agreements with our customers whenever possible, but these
agreements sometimes contain provisions for future price reductions.
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Economic and Market Risk
Economic risk represents the possibility of loss resulting from economic instability in certain areas of the world or
downturns in markets in which we operate. We sell a broad range of products that provide thermal solutions to
customers operating in diverse markets, including the commercial, industrial, and building HVAC&R and commercial
vehicle, off-highway, and automotive and light vehicle markets. The COVID-19 pandemic has negatively impacted
many of these markets. While conditions in these markets have been steadily improving, future impacts of the COVID-
19 pandemic are uncertain.
Considering our global presence, we also encounter risks imposed by potential trade restrictions, including tariffs,
embargoes, and the like. We continue to pursue non-speculative opportunities to mitigate these economic risks, and
capitalize, when possible, on changing market conditions. We pursue new market opportunities after careful
consideration of the potential associated risks and benefits. Successes in new markets are dependent upon our ability to
commercialize our investments. Current examples of new and emerging markets for us include those related to electric
vehicles, coils and coolers in certain markets, and coatings. Our investment in these areas is subject to the risks
associated with technological success, customer and market acceptance, and our ability to meet the demands of our
customers as these markets grow.
Hedging and Foreign Currency Forward Contracts
We use derivative financial instruments as a tool to manage certain financial risks. We prohibit the use of leveraged
derivatives.
Commodity Derivatives
From time to time, we enter into over-the-counter forward contracts related to forecasted purchases of aluminum and
copper. Our strategy is to reduce our exposure to changing market prices of these commodities. In fiscal 2021 and 2020,
we designated certain commodity forward contracts as cash flow hedges for accounting purposes. Accordingly, for these
designated hedges, we record unrealized gains and losses related to the change in the fair value of the contracts in other
comprehensive income (loss) within shareholders’ equity and subsequently recognize the gains and losses within cost of
sales as the underlying inventory is sold. In fiscal 2021, 2020 and 2019, net gains and losses recognized in cost of sales
related to commodity forward contracts were less than $1 million in each year.
Foreign Currency Forward Contracts
We use derivative financial instruments in a limited way to mitigate foreign currency exchange risk. We periodically
enter into foreign currency forward contracts to hedge specific foreign currency-denominated assets and liabilities as
well as forecasted transactions. We have designated certain hedges of forecasted transactions as cash flow hedges for
accounting purposes. Accordingly, for these designated hedges, we record unrealized gains and losses related to the
change in the fair value of the contracts in other comprehensive income (loss) within shareholders’ equity and
subsequently recognize the gains and losses as a component of earnings at the same time and in the same financial
statement line that the underlying transactions impact earnings. In fiscal 2021, 2020, and 2019, net gains and losses
recognized in sales and cost of sales related to foreign currency forward contracts were less than $1 million in each year.
We have not designated forward contracts related to foreign currency-denominated assets and liabilities as hedges.
Accordingly, for these non-designated contracts, we record unrealized gains and losses related to the change in the fair
value of the contracts in other income and expense. Gains and losses on these non-designated foreign currency forward
contracts are offset by foreign currency gains and losses associated with the related assets and liabilities.
Counterparty Risks
We manage counterparty risks by ensuring that counterparties to derivative instruments maintain credit ratings
acceptable to us. At March 31, 2021, all counterparties had a sufficient long-term credit rating.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended March 31, 2021, 2020 and 2019
For the years ended March 31, 2021, 2020 and 2019
(In millions, except per share amounts)
(In millions, except per share amounts)
2021
2021
2020
2020
2019
2019
Net sales
Net sales
Cost of sales
Cost of sales
Gross profit
Gross profit
Selling, general and administrative expenses
Selling, general and administrative expenses
Restructuring expenses
Restructuring expenses
Impairment charges
Impairment charges
(Gain) loss on sale of assets
(Gain) loss on sale of assets
Operating (loss) income
Operating (loss) income
Interest expense
Interest expense
Other expense - net
Other expense - net
(Loss) earnings before income taxes
(Loss) earnings before income taxes
(Provision) benefit for income taxes
(Provision) benefit for income taxes
Net (loss) earnings
Net (loss) earnings
Net earnings attributable to noncontrolling interest
Net earnings attributable to noncontrolling interest
Net (loss) earnings attributable to Modine
Net (loss) earnings attributable to Modine
Net (loss) earnings per share attributable to Modine shareholders:
Net (loss) earnings per share attributable to Modine shareholders:
Basic
Basic
Diluted
Diluted
Weighted-average shares outstanding:
Weighted-average shares outstanding:
Basic
Basic
Diluted
Diluted
$
$
1,808.4
1,808.4
$
$
1,975.5
1,975.5
$
$
2,212.7
2,212.7
1,515.0
1,515.0
293.4
293.4
210.9
210.9
13.4
13.4
166.8
166.8
-
-
(97.7)
(19.4)
(97.7)
(19.4)
(2.2)
(2.2)
(119.3)
(119.3)
1,668.0
1,668.0
307.5
307.5
249.6
249.6
12.2
12.2
8.6
8.6
(0.8)
(0.8)
37.9
37.9
(22.7)
(22.7)
(4.8)
(4.8)
10.4
10.4
1,847.2
1,847.2
365.5
365.5
244.1
244.1
9.6
9.6
0.4
1.7
0.4
1.7
109.7
109.7
(24.8)
(24.8)
(4.1)
(4.1)
80.8
80.8
(90.2)
(90.2)
(209.5)
(209.5)
(1.2)
(1.2)
(210.7)
(210.7)
$
$
(12.4)
(12.4)
(2.0)
(2.0)
(0.2)
(0.2)
(2.2)
(2.2)
$
$
5.1
5.1
85.9
85.9
(1.1)
(1.1)
84.8
84.8
$
$
$
$
(4.11)
(4.11)
$
$
(4.11)
(4.11)
$
$
(0.04)
(0.04)
$
$
(0.04)
(0.04)
$
$
1.67
1.67
$
$
1.65
1.65
51.3
51.3
51.3
51.3
50.8
50.8
50.8
50.8
50.5
50.5
51.3
51.3
The notes to consolidated financial statements are an integral part of these statements.
The notes to consolidated financial statements are an integral part of these statements.
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44
44
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended March 31, 2021, 2020 and 2019
For the years ended March 31, 2021, 2020 and 2019
(In millions)
(In millions)
2021
2021
$
(209.5)
2020
2020
$
(2.0)
$
(209.5)
$
(2.0)
30.9
30.9
30.1
30.1
1.6
1.6
62.6
62.6
(146.9)
(146.9)
(1.7)
(19.2)
(19.2)
(24.6)
(24.6)
(1.5)
(1.5)
(45.3)
(45.3)
(47.3)
(47.3)
0.2
2019
2019
$
85.9
$
85.9
(37.6)
(37.6)
(1.4)
(1.4)
0.4
0.4
(38.6)
(38.6)
47.3
47.3
(0.6)
$
(1.7)
(148.6)
$
(148.6)
$
0.2
(47.1)
$
(47.1)
$
(0.6)
46.7
$
46.7
Net (loss) earnings
Net (loss) earnings
Other comprehensive income (loss):
Other comprehensive income (loss):
Foreign currency translation
Foreign currency translation
Defined benefit plans, net of income taxes of $10.4, ($8.3) and ($0.3) million
Defined benefit plans, net of income taxes of $10.4, ($8.3) and ($0.3) million
Cash flow hedges, net of income taxes of $0.6, ($0.5) and $0.1 million
Cash flow hedges, net of income taxes of $0.6, ($0.5) and $0.1 million
Total other comprehensive income (loss)
Total other comprehensive income (loss)
Comprehensive income (loss)
Comprehensive income (loss)
Comprehensive (income) loss attributable to noncontrolling interest
Comprehensive (income) loss attributable to noncontrolling interest
Comprehensive income (loss) attributable to Modine
Comprehensive income (loss) attributable to Modine
The notes to consolidated financial statements are an integral part of these statements.
The notes to consolidated financial statements are an integral part of these statements.
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45
MODINE MANUFACTURING COMPANY
CONSOLIDATED BALANCE SHEETS
MODINE MANUFACTURING COMPANY
March 31, 2021 and 2020
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
March 31, 2021 and 2020
(In millions, except per share amounts)
2021
2020
$
$
$
$
$
$
$
1,276.7
$
1,536.1
$
$
$
$
2021
37.8
267.9
37.8
195.6
267.9
107.6
195.6
35.9
107.6
644.8
35.9
269.9
644.8
100.6
269.9
170.7
100.6
24.5
170.7
66.2
24.5
1,276.7
66.2
1.4
21.9
1.4
233.9
21.9
66.5
233.9
103.3
66.5
42.2
103.3
469.2
42.2
311.2
469.2
5.9
311.2
58.6
5.9
75.7
58.6
920.6
75.7
920.6
2020
70.9
292.5
70.9
207.4
292.5
-
207.4
62.5
-
633.3
62.5
448.0
633.3
106.3
448.0
166.1
106.3
104.8
166.1
77.6
104.8
1,536.1
77.6
14.8
15.6
14.8
227.4
15.6
65.0
227.4
-
65.0
49.2
-
372.0
49.2
452.0
372.0
8.1
452.0
130.9
8.1
79.5
130.9
1,042.5
79.5
1,042.5
-
-
33.9
-
-
33.3
255.0
33.9
259.2
255.0
(161.2)
259.2
(38.2)
(161.2)
348.7
(38.2)
7.4
348.7
356.1
7.4
1,276.7
356.1
1,276.7
$
$
245.1
33.3
469.9
245.1
(223.3)
469.9
(37.1)
(223.3)
487.9
(37.1)
5.7
487.9
493.6
5.7
1,536.1
493.6
1,536.1
$
$
ASSETS
Cash and cash equivalents
ASSETS
Trade accounts receivable – net
Cash and cash equivalents
Inventories
Trade accounts receivable – net
Assets held for sale
Inventories
Other current assets
Assets held for sale
Total current assets
Other current assets
Property, plant and equipment – net
Total current assets
Intangible assets – net
Property, plant and equipment – net
Goodwill
Intangible assets – net
Deferred income taxes
Goodwill
Other noncurrent assets
Deferred income taxes
Total assets
Other noncurrent assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt
LIABILITIES AND SHAREHOLDERS' EQUITY
Long-term debt – current portion
Short-term debt
Accounts payable
Long-term debt – current portion
Accrued compensation and employee benefits
Accounts payable
Liabilities held for sale
Accrued compensation and employee benefits
Other current liabilities
Liabilities held for sale
Total current liabilities
Other current liabilities
Long-term debt
Total current liabilities
Deferred income taxes
Long-term debt
Pensions
Deferred income taxes
Other noncurrent liabilities
Pensions
Total liabilities
Other noncurrent liabilities
Commitments and contingencies (see Note 20)
Total liabilities
Shareholders' equity:
Commitments and contingencies (see Note 20)
Preferred stock, $0.025 par value, authorized 16.0 million shares, issued - none
Shareholders' equity:
Common stock, $0.625 par value, authorized 80.0 million shares, issued 54.3
Preferred stock, $0.025 par value, authorized 16.0 million shares, issued - none
million and 53.4 million shares
Common stock, $0.625 par value, authorized 80.0 million shares, issued 54.3
Additional paid-in capital
million and 53.4 million shares
Retained earnings
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Treasury stock, at cost, 2.7 million and 2.5 million shares
Accumulated other comprehensive loss
Total Modine shareholders' equity
Treasury stock, at cost, 2.7 million and 2.5 million shares
Noncontrolling interest
Total Modine shareholders' equity
Noncontrolling interest
Total liabilities and equity
Total equity
Total equity
Total liabilities and equity
The notes to consolidated financial statements are an integral part of these statements.
The notes to consolidated financial statements are an integral part of these statements.
46
46
46
2021
2020
2019
2021
$
2021
(209.5)
2020
$
2020
(2.0)
2019
$
2019
85.9
$
(209.5)
$
(209.5)
$
(2.0)
$
(2.0)
$
85.9
$
85.9
68.6
166.8
68.6
-
166.8
6.3
-
67.9
6.3
6.3
67.9
6.3
(17.1)
(5.0)
(17.1)
44.0
(5.0)
15.7
44.0
27.5
15.7
(21.7)
27.5
149.8
(21.7)
149.8
68.6
166.8
-
6.3
67.9
6.3
(17.1)
(5.0)
44.0
15.7
27.5
(21.7)
149.8
77.1
8.6
77.1
(0.8)
8.6
6.6
(0.8)
1.0
6.6
5.6
1.0
5.6
36.6
(12.0)
36.6
(37.7)
(12.0)
(15.2)
(37.7)
14.7
(15.2)
(24.6)
14.7
57.9
(24.6)
57.9
77.1
8.6
(0.8)
6.6
1.0
5.6
36.6
(12.0)
(37.7)
(15.2)
14.7
(24.6)
57.9
76.9
0.4
76.9
1.7
0.4
7.9
1.7
(4.4)
7.9
5.3
(4.4)
5.3
(15.3)
(22.0)
(15.3)
16.6
(22.0)
(10.1)
16.6
(11.8)
(10.1)
(27.8)
(11.8)
103.3
(27.8)
103.3
76.9
0.4
1.7
7.9
(4.4)
5.3
(15.3)
(22.0)
16.6
(10.1)
(11.8)
(27.8)
103.3
(32.7)
0.7
(32.7)
-
0.7
3.4
-
(3.6)
3.4
0.9
(3.6)
(31.3)
0.9
(31.3)
(32.7)
0.7
-
3.4
(3.6)
0.9
(31.3)
(71.3)
6.2
(71.3)
3.8
6.2
4.1
3.8
(3.3)
4.1
-
(3.3)
(60.5)
-
(60.5)
(71.3)
6.2
3.8
4.1
(3.3)
-
(60.5)
(73.9)
0.3
(73.9)
-
0.3
4.9
-
(3.8)
4.9
(0.3)
(3.8)
(72.8)
(0.3)
(72.8)
(73.9)
0.3
-
4.9
(3.8)
(0.3)
(72.8)
32.7
(183.6)
32.7
3.6
(183.6)
-
3.6
-
-
(0.8)
-
3.0
(0.8)
(145.1)
3.0
(145.1)
1.4
(25.2)
1.4
71.3
(25.2)
46.1
71.3
46.1
32.7
(183.6)
3.6
-
-
(0.8)
3.0
(145.1)
1.4
(25.2)
$
71.3
46.1
$
672.0
(630.3)
672.0
1.2
(630.3)
(1.3)
1.2
(2.4)
(1.3)
(2.8)
(2.4)
(3.1)
(2.8)
33.3
(3.1)
33.3
(1.6)
29.1
(1.6)
42.2
29.1
71.3
42.2
71.3
672.0
(630.3)
1.2
(1.3)
(2.4)
(2.8)
(3.1)
33.3
(1.6)
29.1
$
42.2
71.3
$
221.3
(241.9)
221.3
(0.1)
(241.9)
(1.8)
(0.1)
(0.6)
(1.8)
-
(0.6)
(2.8)
-
(25.9)
(2.8)
(25.9)
(2.7)
1.9
(2.7)
40.3
1.9
42.2
40.3
42.2
221.3
(241.9)
(0.1)
(1.8)
(0.6)
-
(2.8)
(25.9)
(2.7)
1.9
$
40.3
42.2
$
$
$
$
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended March 31, 2021, 2020 and 2019
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
(In millions)
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended March 31, 2021, 2020 and 2019
For the years ended March 31, 2021, 2020 and 2019
(In millions)
(In millions)
Cash flows from operating activities:
Net (loss) earnings
Adjustments to reconcile net (loss) earnings to net cash provided
by operating activities:
Cash flows from operating activities:
Net (loss) earnings
Cash flows from operating activities:
Adjustments to reconcile net (loss) earnings to net cash provided
Net (loss) earnings
by operating activities:
Adjustments to reconcile net (loss) earnings to net cash provided
Depreciation and amortization
by operating activities:
Impairment charges
Depreciation and amortization
Depreciation and amortization
(Gain) loss on sale of assets
Impairment charges
Impairment charges
Stock-based compensation expense
(Gain) loss on sale of assets
(Gain) loss on sale of assets
Deferred income taxes
Stock-based compensation expense
Stock-based compensation expense
Other – net
Deferred income taxes
Deferred income taxes
Other – net
Other – net
Trade accounts receivable
Changes in operating assets and liabilities:
Inventories
Trade accounts receivable
Trade accounts receivable
Accounts payable
Inventories
Inventories
Accrued compensation and employee benefits
Accounts payable
Accounts payable
Other assets
Accrued compensation and employee benefits
Accrued compensation and employee benefits
Other liabilities
Other assets
Other assets
Other liabilities
Other liabilities
Changes in operating assets and liabilities:
Changes in operating assets and liabilities:
Net cash provided by operating activities
Net cash provided by operating activities
Net cash provided by operating activities
Cash flows from investing activities:
Expenditures for property, plant and equipment
Cash flows from investing activities:
Cash flows from investing activities:
Proceeds from dispositions of assets
Expenditures for property, plant and equipment
Expenditures for property, plant and equipment
Proceeds from sale of investment in affiliate
Proceeds from dispositions of assets
Proceeds from dispositions of assets
Proceeds from maturities of short-term investments
Proceeds from sale of investment in affiliate
Proceeds from sale of investment in affiliate
Purchases of short-term investments
Proceeds from maturities of short-term investments
Proceeds from maturities of short-term investments
Other – net
Purchases of short-term investments
Purchases of short-term investments
Net cash used for investing activities
Other – net
Other – net
Net cash used for investing activities
Net cash used for investing activities
Cash flows from financing activities:
Borrowings of debt
Cash flows from financing activities:
Cash flows from financing activities:
Repayments of debt
Borrowings of debt
Borrowings of debt
Borrowings on bank overdraft facilities – net
Repayments of debt
Repayments of debt
Dividend paid to noncontrolling interest
Borrowings on bank overdraft facilities – net
Borrowings on bank overdraft facilities – net
Purchase of treasury stock under share repurchase program
Dividend paid to noncontrolling interest
Dividend paid to noncontrolling interest
Financing fees paid
Purchase of treasury stock under share repurchase program
Purchase of treasury stock under share repurchase program
Other – net
Financing fees paid
Financing fees paid
Net cash (used for) provided by financing activities
Other – net
Other – net
Net cash (used for) provided by financing activities
Net cash (used for) provided by financing activities
Effect of exchange rate changes on cash
Net (decrease) increase in cash, cash equivalents, restricted cash and cash held for sale
Effect of exchange rate changes on cash
Effect of exchange rate changes on cash
Cash, cash equivalents, restricted cash and cash held for sale – beginning of year
Net (decrease) increase in cash, cash equivalents, restricted cash and cash held for sale
Net (decrease) increase in cash, cash equivalents, restricted cash and cash held for sale
Cash, cash equivalents, restricted cash and cash held for sale – end of year
Cash, cash equivalents, restricted cash and cash held for sale – beginning of year
Cash, cash equivalents, restricted cash and cash held for sale – beginning of year
Cash, cash equivalents, restricted cash and cash held for sale – end of year
Cash, cash equivalents, restricted cash and cash held for sale – end of year
The notes to consolidated financial statements are an integral part of these statements.
The notes to consolidated financial statements are an integral part of these statements.
The notes to consolidated financial statements are an integral part of these statements.
47
47
47
47
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended March 31, 2021, 2020 and 2019
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
(In millions)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended March 31, 2021, 2020 and 2019
For the years ended March 31, 2021, 2020 and 2019
For the years ended March 31, 2021, 2020 and 2019
(In millions)
(In millions)
(In millions)
Common stock
Shares Amount
Common stock
32.7
Shares Amount
-
$
$
32.7
-
Common stock
Common stock
52.3
$
Shares Amount
Shares Amount
-
32.7
52.3
32.7
$
-
Additional
paid-in
capital
Additional
Additional
Additional
229.9
$
paid-in
paid-in
paid-in
capital
capital
capital
-
229.9
$
229.9
$
229.9
-
$
Retained
earnings
394.9
$
Retained
Retained
Retained
earnings
earnings
earnings
(7.6)
$
394.9
394.9
$
$
394.9
84.8
Accumulated other
comprehensive
loss
Accumulated other
Accumulated other
Accumulated other
(140.3)
$
comprehensive
comprehensive
comprehensive
loss
loss
loss
$
$
$
-
(140.3)
(140.3)
(140.3)
-
Treasury
stock, at
cost
Treasury
Treasury
Treasury
(27.1)
$
stock, at
stock, at
stock, at
cost
cost
cost
-
(27.1)
$
(27.1)
$
(27.1)
$
-
Balance, March 31, 2018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
52.3
52.3
-
-
0.8
0.8
-
-
0.5
0.5
-
-
0.3
0.3
Net earnings
Net earnings
Balance, March 31, 2019
Balance, March 31, 2019
Balance, March 31, 2018
Balance, March 31, 2018
Other comprehensive loss
Other comprehensive loss
Other comprehensive loss
Other comprehensive loss
-
-
0.8
-
-
0.8
7.9
-
-
238.6
7.9
7.9
7.9
-
-
-
-
238.6
238.6
238.6
-
-
-
-
(0.1)
-
Adoption of new accounting guidance (Note 1)
Adoption of new accounting guidance (Note 1)
-
-
0.3
-
-
0.3
-
-
-
33.0
-
-
-
-
-
-
-
33.0
33.0
33.0
-
-
-
-
0.3
-
-
-
0.5
-
-
0.5
-
-
-
52.8
-
-
-
-
-
-
-
52.8
52.8
52.8
-
-
-
-
0.6
-
Adoption of new accounting guidance (Note 1)
Balance, March 31, 2018
Net earnings
Adoption of new accounting guidance (Note 1)
Other comprehensive loss
Net earnings
Stock options and awards
Other comprehensive loss
Purchase of treasury stock
Stock options and awards
Stock options and awards
Stock options and awards
Stock-based compensation expense
Dividend paid to noncontrolling interest
Purchase of treasury stock
Purchase of treasury stock
Purchase of treasury stock
Balance, March 31, 2019
Stock-based compensation expense
Stock-based compensation expense
Stock-based compensation expense
Dividend paid to noncontrolling interest
Dividend paid to noncontrolling interest
Dividend paid to noncontrolling interest
Net (loss) earnings
Balance, March 31, 2019
Other comprehensive loss
Net (loss) earnings
Net (loss) earnings
Net (loss) earnings
Stock options and awards
Other comprehensive loss
Purchase of treasury stock
Stock options and awards
Stock options and awards
Stock options and awards
Stock-based compensation expense
Purchase of treasury stock
Purchase of treasury stock
Purchase of treasury stock
Dividend paid to noncontrolling interest
Stock-based compensation expense
Stock-based compensation expense
Stock-based compensation expense
Balance, March 31, 2020
Dividend paid to noncontrolling interest
Dividend paid to noncontrolling interest
Dividend paid to noncontrolling interest
Net (loss) earnings
Balance, March 31, 2020
Balance, March 31, 2020
Balance, March 31, 2020
Other comprehensive income
Net (loss) earnings
Net (loss) earnings
Net (loss) earnings
Stock options and awards
Other comprehensive income
Purchase of treasury stock
Stock options and awards
Stock options and awards
Stock options and awards
Stock-based compensation expense
Purchase of treasury stock
Purchase of treasury stock
Purchase of treasury stock
Balance, March 31, 2021
Stock-based compensation expense
255.0
Balance, March 31, 2021
The notes to consolidated financial statements are an integral part of these statements.
Stock-based compensation expense
Stock-based compensation expense
Balance, March 31, 2021
Balance, March 31, 2021
-
(0.1)
6.6
-
-
6.6
245.1
-
-
3.6
6.3
-
255.0
6.3
Other comprehensive income
Other comprehensive income
-
245.1
245.1
245.1
-
-
0.6
-
-
-
0.3
-
-
-
53.4
-
-
54.3
-
-
33.3
-
-
33.9
-
-
53.4
-
-
33.3
-
-
0.9
-
-
0.6
-
-
0.9
-
-
0.6
-
-
3.6
-
6.6
6.6
-
-
$
$
$
$
$
$
33.9
255.0
255.0
$
$
54.3
54.3
54.3
53.4
53.4
33.9
33.9
33.3
33.3
0.6
0.6
0.3
0.3
0.9
0.9
0.6
0.6
3.6
3.6
6.3
6.3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(0.1)
(0.1)
(7.6)
(7.6)
(7.6)
-
84.8
-
84.8
84.8
-
-
-
-
-
-
-
-
-
-
-
-
472.1
-
-
-
-
-
-
(2.2)
472.1
472.1
472.1
-
(2.2)
(2.2)
(2.2)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
469.9
-
(210.7)
469.9
469.9
469.9
-
(210.7)
(210.7)
(210.7)
-
Total
$
498.5
Total
Total
(7.6)
498.5
85.9
Total
$
$
$
498.5
498.5
Non-
controlling
interest
Non-
Non-
Non-
$
8.4
controlling
controlling
controlling
interest
interest
interest
-
$
$
$
8.4
1.1
-
(0.5)
1.1
-
(0.5)
(0.5)
(0.5)
-
-
-
-
1.1
1.1
8.4
8.4
-
-
85.9
85.9
(7.6)
(7.6)
(4.3)
(4.3)
(7.6)
(38.6)
85.9
1.1
(38.6)
(38.6)
(38.6)
(4.3)
1.1
1.1
1.1
7.9
(4.3)
(1.8)
541.1
7.9
7.9
7.9
(1.8)
(1.8)
(1.8)
(2.0)
541.1
541.1
541.1
(45.3)
(2.0)
(2.0)
(2.0)
0.2
(45.3)
(5.7)
0.2
6.6
(5.7)
(1.3)
6.6
493.6
(1.3)
(209.5)
493.6
62.6
(209.5)
(209.5)
(209.5)
4.2
62.6
(1.1)
4.2
6.3
(1.1)
6.6
6.6
(1.3)
(1.3)
(45.3)
(45.3)
493.6
493.6
(1.1)
(1.1)
(5.7)
(5.7)
62.6
62.6
0.2
0.2
4.2
4.2
356.1
6.3
6.3
6.3
-
-
-
-
(1.8)
7.2
-
-
-
(1.8)
(1.8)
(1.8)
0.2
7.2
7.2
7.2
(0.4)
0.2
0.2
0.2
-
(0.4)
-
(0.4)
(0.4)
-
-
-
-
-
-
-
(1.3)
-
-
-
5.7
(1.3)
(1.3)
(1.3)
1.2
5.7
0.5
1.2
-
0.5
-
0.5
0.5
1.2
1.2
5.7
5.7
-
-
-
7.4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4.3)
-
-
-
-
-
(4.3)
(4.3)
-
(4.3)
-
(31.4)
-
-
-
-
-
-
-
(31.4)
(31.4)
(31.4)
-
-
-
-
-
-
-
-
-
-
(5.7)
-
-
(5.7)
-
(5.7)
(5.7)
-
(37.1)
-
-
(37.1)
(37.1)
(37.1)
-
-
-
-
(1.1)
-
-
(1.1)
(38.2)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(38.1)
-
-
(38.1)
(38.1)
(38.1)
-
-
-
-
-
-
-
(178.4)
-
-
-
-
-
-
-
(178.4)
(178.4)
(178.4)
(44.9)
-
-
-
-
(44.9)
(44.9)
(44.9)
-
-
-
-
-
-
-
-
-
-
(223.3)
-
-
-
-
-
-
(223.3)
(223.3)
(223.3)
62.1
-
-
-
-
62.1
-
62.1
62.1
-
-
-
-
-
-
-
-
-
-
-
-
$
-
259.2
-
-
-
$
-
(161.2)
-
-
-
-
-
-
-
$
(1.1)
(1.1)
$
$
$
$
$
259.2
259.2
259.2
$
$
$
(161.2)
(161.2)
(161.2)
$
$
$
(38.2)
(38.2)
(38.2)
$
$
$
7.4
7.4
7.4
$
$
$
356.1
356.1
356.1
The notes to consolidated financial statements are an integral part of these statements.
The notes to consolidated financial statements are an integral part of these statements.
The notes to consolidated financial statements are an integral part of these statements.
48
48
48
48
48
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Note 1: Significant Accounting Policies
Note 1: Significant Accounting Policies
Nature of Operations
Nature of Operations
Modine Manufacturing Company (“Modine” or the “Company”) specializes in providing innovative thermal management
Modine Manufacturing Company (“Modine” or the “Company”) specializes in providing innovative thermal management
solutions to diversified global markets and customers. The Company is a global leader in thermal management technology and
solutions to diversified global markets and customers. The Company is a global leader in thermal management technology and
solutions for sale into a wide array of commercial, industrial, and building heating, ventilating, air conditioning, and
solutions for sale into a wide array of commercial, industrial, and building heating, ventilating, air conditioning, and
refrigeration (“HVAC&R”) markets. In addition, the Company is a leading provider of engineered heat transfer systems and
refrigeration (“HVAC&R”) markets. In addition, the Company is a leading provider of engineered heat transfer systems and
high-quality heat transfer components for use in on- and off-highway original equipment manufacturer (“OEM”) vehicular
high-quality heat transfer components for use in on- and off-highway original equipment manufacturer (“OEM”) vehicular
applications. The Company’s primary product groups include i) heating, ventilation and air conditioning; ii) coils, coolers, and
applications. The Company’s primary product groups include i) heating, ventilation and air conditioning; ii) coils, coolers, and
coatings; and iii) powertrain cooling and engine cooling.
coatings; and iii) powertrain cooling and engine cooling.
COVID-19
In March 2020, the World Health Organization declared the outbreak of the novel coronavirus, COVID-19, a pandemic. See
Note 20 for additional information regarding the risks and uncertainties to our business resulting from this global pandemic.
COVID-19
In March 2020, the World Health Organization declared the outbreak of the novel coronavirus, COVID-19, a pandemic. See
Note 20 for additional information regarding the risks and uncertainties to our business resulting from this global pandemic.
Disposition of Air-cooled Automotive Business
Disposition of Air-cooled Automotive Business
On February 19, 2021, the Company signed a definitive agreement to sell its air-cooled automotive business to Schmid Metall
On February 19, 2021, the Company signed a definitive agreement to sell its air-cooled automotive business to Schmid Metall
GmbH. In connection with this sale, which closed on April 30, 2021, the Company classified the air-cooled automotive
GmbH. In connection with this sale, which closed on April 30, 2021, the Company classified the air-cooled automotive
business as held for sale as of March 31, 2021. Accordingly, the Company has reported the assets and liabilities of this
business as held for sale as of March 31, 2021. Accordingly, the Company has reported the assets and liabilities of this
business as held for sale on the March 31, 2021 consolidated balance sheet. See Note 2 for additional information.
business as held for sale on the March 31, 2021 consolidated balance sheet. See Note 2 for additional information.
Pending Disposition of Liquid-cooled Automotive Business
Pending Disposition of Liquid-cooled Automotive Business
On November 2, 2020, the Company signed a definitive agreement to sell its liquid-cooled automotive business to Dana
On November 2, 2020, the Company signed a definitive agreement to sell its liquid-cooled automotive business to Dana
Incorporated. In connection with the pending sale, the Company classified the liquid-cooled automotive business as held for
Incorporated. In connection with the pending sale, the Company classified the liquid-cooled automotive business as held for
sale and, accordingly, has reported the assets and liabilities of this business as held for sale on the March 31, 2021
sale and, accordingly, has reported the assets and liabilities of this business as held for sale on the March 31, 2021
consolidated balance sheet. See Note 2 for additional information.
consolidated balance sheet. See Note 2 for additional information.
Chief Executive Officer (“CEO”) Transition
In August 2020, Thomas A. Burke stepped down from his position as President and CEO. The Board of Directors
subsequently conducted a search for his successor and, effective December 1, 2020, appointed Neil D. Brinker as President
and CEO.
Chief Executive Officer (“CEO”) Transition
In August 2020, Thomas A. Burke stepped down from his position as President and CEO. The Board of Directors
subsequently conducted a search for his successor and, effective December 1, 2020, appointed Neil D. Brinker as President
and CEO.
As a result of Mr. Burke's departure and in connection with the search for and transition to his successor, the Company
As a result of Mr. Burke's departure and in connection with the search for and transition to his successor, the Company
recorded costs totaling $6.7 million during fiscal 2021. These costs, which were recorded as selling, general and
recorded costs totaling $6.7 million during fiscal 2021. These costs, which were recorded as selling, general and
administrative (“SG&A”) expenses at Corporate, primarily consisted of severance and benefit-related expenses based upon the
administrative (“SG&A”) expenses at Corporate, primarily consisted of severance and benefit-related expenses based upon the
terms of Mr. Burke's transition and separation agreement and costs directly associated with the CEO search, partially offset by
terms of Mr. Burke's transition and separation agreement and costs directly associated with the CEO search, partially offset by
the impact of Mr. Burke's forfeited stock-based compensation awards.
the impact of Mr. Burke's forfeited stock-based compensation awards.
Sale of Facility in Germany
Sale of Facility in Germany
During fiscal 2020, the Company completed the sale of a previously-closed manufacturing facility in Germany for a selling
During fiscal 2020, the Company completed the sale of a previously-closed manufacturing facility in Germany for a selling
price of $6.0 million. As a result of this transaction, the Company recorded a gain of $0.8 million within the Automotive
price of $6.0 million. As a result of this transaction, the Company recorded a gain of $0.8 million within the Automotive
segment. The Company reported this gain within the gain on sale of assets line on the consolidated statements of operations.
segment. The Company reported this gain within the gain on sale of assets line on the consolidated statements of operations.
Sale of Nikkei Heat Exchanger Company, Ltd. (“NEX”)
Sale of Nikkei Heat Exchanger Company, Ltd. (“NEX”)
During fiscal 2020, the Company completed the sale of its 50 percent ownership interest in NEX for a selling price of $3.8
During fiscal 2020, the Company completed the sale of its 50 percent ownership interest in NEX for a selling price of $3.8
million. As a result of this sale, the Company recorded a gain of $0.1 million, which included the write-off of accumulated
million. As a result of this sale, the Company recorded a gain of $0.1 million, which included the write-off of accumulated
foreign currency translation gains of $0.6 million, within other income and expense on the consolidated statements of
foreign currency translation gains of $0.6 million, within other income and expense on the consolidated statements of
operations. Prior to its sale, the Company accounted for its investment in NEX using the equity method and reported its equity
operations. Prior to its sale, the Company accounted for its investment in NEX using the equity method and reported its equity
in earnings from NEX within other income and expense in the consolidated statements of operations. The Company’s share of
in earnings from NEX within other income and expense in the consolidated statements of operations. The Company’s share of
NEX’s earnings for fiscal 2020 and 2019 was $0.1 million and $0.7 million, respectively.
NEX’s earnings for fiscal 2020 and 2019 was $0.1 million and $0.7 million, respectively.
Sale of AIAC Air Conditioning South Africa (Pty) Ltd.
Sale of AIAC Air Conditioning South Africa (Pty) Ltd.
During fiscal 2019, the Company completed the sale of its AIAC Air Conditioning South Africa (Pty) Ltd. business, which
During fiscal 2019, the Company completed the sale of its AIAC Air Conditioning South Africa (Pty) Ltd. business, which
was reported within the Building HVAC Systems segment, for a selling price of $0.5 million. As a result of this transaction,
was reported within the Building HVAC Systems segment, for a selling price of $0.5 million. As a result of this transaction,
the Company recorded a loss of $1.7 million, which included the write-off of accumulated foreign currency translation losses
the Company recorded a loss of $1.7 million, which included the write-off of accumulated foreign currency translation losses
of $0.8 million. The Company reported this loss within the loss on sale of assets line on the consolidated statements of
of $0.8 million. The Company reported this loss within the loss on sale of assets line on the consolidated statements of
operations. Annual net sales attributable to this disposed business were less than $2.0 million.
operations. Annual net sales attributable to this disposed business were less than $2.0 million.
49
49
49
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Basis of Presentation
Basis of Presentation
The Company prepares its consolidated financial statements in conformity with generally accepted accounting principles
The Company prepares its consolidated financial statements in conformity with generally accepted accounting principles
(“GAAP”) in the United States. These principles require management to make certain estimates and assumptions in
(“GAAP”) in the United States. These principles require management to make certain estimates and assumptions in
determining assets, liabilities, revenue, expenses and related disclosures. Actual amounts could differ materially from those
determining assets, liabilities, revenue, expenses and related disclosures. Actual amounts could differ materially from those
estimates.
estimates.
Consolidation Principles
Consolidation Principles
The consolidated financial statements include the accounts of Modine Manufacturing Company and its majority-owned or
The consolidated financial statements include the accounts of Modine Manufacturing Company and its majority-owned or
Modine-controlled subsidiaries. The Company eliminates intercompany transactions and balances in consolidation.
Modine-controlled subsidiaries. The Company eliminates intercompany transactions and balances in consolidation.
Revenue Recognition
Revenue Recognition
The Company recognizes revenue based upon consideration specified in a contract and as it satisfies performance obligations
The Company recognizes revenue based upon consideration specified in a contract and as it satisfies performance obligations
by transferring control over its products to its customers, which may be at a point in time or over time. The majority of the
by transferring control over its products to its customers, which may be at a point in time or over time. The majority of the
Company’s revenue is recognized at a point in time, based upon shipment terms. A portion of the Company’s revenue is
Company’s revenue is recognized at a point in time, based upon shipment terms. A portion of the Company’s revenue is
recognized over time, based upon estimated progress towards satisfaction of the contractual performance obligations. See
recognized over time, based upon estimated progress towards satisfaction of the contractual performance obligations. See
Note 3 for additional information.
Note 3 for additional information.
Shipping and Handling Costs
The Company records shipping and handling costs incurred upon the shipment of products to its customers in cost of sales,
and related amounts billed to these customers in net sales.
Shipping and Handling Costs
The Company records shipping and handling costs incurred upon the shipment of products to its customers in cost of sales,
and related amounts billed to these customers in net sales.
Trade Accounts Receivable
The Company records trade receivables at the invoiced amount. Trade receivables do not bear interest if paid according to the
original terms. The Company maintains an allowance for credit losses, representing its estimate of expected losses associated
with its trade accounts receivable. The Company bases its estimate using historical loss experience and considers the aging of
the receivables and risks specific to customers where appropriate. At March 31, 2021 and 2020, the allowance for credit losses
was $1.3 million and $1.9 million, respectively.
Trade Accounts Receivable
The Company records trade receivables at the invoiced amount. Trade receivables do not bear interest if paid according to the
original terms. The Company maintains an allowance for credit losses, representing its estimate of expected losses associated
with its trade accounts receivable. The Company bases its estimate using historical loss experience and considers the aging of
the receivables and risks specific to customers where appropriate. At March 31, 2021 and 2020, the allowance for credit losses
was $1.3 million and $1.9 million, respectively.
The Company enters into supply chain financing programs from time to time to sell accounts receivable, without recourse, to
The Company enters into supply chain financing programs from time to time to sell accounts receivable, without recourse, to
third-party financial institutions. Sales of accounts receivable are reflected as a reduction of accounts receivable on the
third-party financial institutions. Sales of accounts receivable are reflected as a reduction of accounts receivable on the
consolidated balance sheets and the proceeds are included in cash flows from operating activities in the consolidated
consolidated balance sheets and the proceeds are included in cash flows from operating activities in the consolidated
statements of cash flows. During fiscal 2021, 2020, and 2019, the Company sold $88.7 million, $75.4 million, and $85.1
statements of cash flows. During fiscal 2021, 2020, and 2019, the Company sold $88.7 million, $75.4 million, and $85.1
million, respectively, of accounts receivable to accelerate cash receipts. During fiscal 2021, 2020, and 2019, the Company
million, respectively, of accounts receivable to accelerate cash receipts. During fiscal 2021, 2020, and 2019, the Company
recorded a loss on the sale of accounts receivable of $0.2 million, $0.5 million, and $0.6 million, respectively, in the
recorded a loss on the sale of accounts receivable of $0.2 million, $0.5 million, and $0.6 million, respectively, in the
consolidated statements of operations.
consolidated statements of operations.
Warranty
Warranty
The Company provides product warranties for specific product lines and accrues for estimated future warranty costs in the
The Company provides product warranties for specific product lines and accrues for estimated future warranty costs in the
period in which the sale is recorded. The Company records warranty expense, within cost of sales, based upon historical and
period in which the sale is recorded. The Company records warranty expense, within cost of sales, based upon historical and
current claims data or based upon estimated future claims. Accrual balances, which are recorded within other current
current claims data or based upon estimated future claims. Accrual balances, which are recorded within other current
liabilities, are monitored and adjusted if it is probable that expected claims will differ from previous estimates. See Note 15
liabilities, are monitored and adjusted if it is probable that expected claims will differ from previous estimates. See Note 15
for additional information.
for additional information.
Tooling
Tooling
The Company accounts for production tooling costs as a component of property, plant and equipment when it owns title to the
The Company accounts for production tooling costs as a component of property, plant and equipment when it owns title to the
tooling and amortizes the capitalized cost to cost of sales over the estimated life of the asset, which is generally three years. At
tooling and amortizes the capitalized cost to cost of sales over the estimated life of the asset, which is generally three years. At
March 31, 2021 and 2020, Company-owned tooling totaled $14.1 million and $23.3 million, respectively. The decrease in
March 31, 2021 and 2020, Company-owned tooling totaled $14.1 million and $23.3 million, respectively. The decrease in
Company-owned tooling during fiscal 2021 was primarily due to asset impairment charges recorded within the Automotive
Company-owned tooling during fiscal 2021 was primarily due to asset impairment charges recorded within the Automotive
segment upon classification of the liquid- and air-cooled automotive businesses as held for sale. See Note 2 for additional
segment upon classification of the liquid- and air-cooled automotive businesses as held for sale. See Note 2 for additional
information.
information.
In certain instances, tooling is customer-owned. At the time customer-owned tooling is completed and customer acceptance is
In certain instances, tooling is customer-owned. At the time customer-owned tooling is completed and customer acceptance is
obtained, the Company records tooling revenue and related production costs within net sales and cost of sales, respectively, in
obtained, the Company records tooling revenue and related production costs within net sales and cost of sales, respectively, in
the consolidated statements of operations. If the customer has agreed to reimburse the Company, unbilled customer-owned
the consolidated statements of operations. If the customer has agreed to reimburse the Company, unbilled customer-owned
tooling costs are recorded as a receivable within other current assets. No significant arrangements exist where customer-
tooling costs are recorded as a receivable within other current assets. No significant arrangements exist where customer-
owned tooling costs were not accompanied by guaranteed reimbursement. At March 31, 2021 and 2020, customer-owned
owned tooling costs were not accompanied by guaranteed reimbursement. At March 31, 2021 and 2020, customer-owned
tooling receivables totaled $8.1 million and $7.8 million, respectively. Of the $8.1 million, $5.6 million was included within
tooling receivables totaled $8.1 million and $7.8 million, respectively. Of the $8.1 million, $5.6 million was included within
assets held for sale on the March 31, 2021 consolidated balance sheet.
assets held for sale on the March 31, 2021 consolidated balance sheet.
50
50
50
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Stock-based Compensation
Stock-based Compensation
The Company recognizes stock-based compensation using the fair value method. Accordingly, compensation expense for
The Company recognizes stock-based compensation using the fair value method. Accordingly, compensation expense for
stock options, restricted stock and performance-based stock awards is calculated based upon the fair value of the instruments at
stock options, restricted stock and performance-based stock awards is calculated based upon the fair value of the instruments at
the time of grant and is recognized as expense over the respective vesting periods. See Note 5 for additional information.
the time of grant and is recognized as expense over the respective vesting periods. See Note 5 for additional information.
Research and Development
The Company expenses research and development costs as incurred within SG&A expenses. During fiscal 2021, 2020, and
2019, research and development costs totaled $46.3 million, $59.5 million, and $69.8 million, respectively.
Research and Development
The Company expenses research and development costs as incurred within SG&A expenses. During fiscal 2021, 2020, and
2019, research and development costs totaled $46.3 million, $59.5 million, and $69.8 million, respectively.
Translation of Foreign Currencies
Translation of Foreign Currencies
The Company translates assets and liabilities of foreign subsidiaries and equity investments into U.S. dollars at the period-end
The Company translates assets and liabilities of foreign subsidiaries and equity investments into U.S. dollars at the period-end
exchange rates and translates income and expense items at the monthly average exchange rate for the period in which the
exchange rates and translates income and expense items at the monthly average exchange rate for the period in which the
transactions occur. The Company reports resulting translation adjustments within accumulated other comprehensive income
transactions occur. The Company reports resulting translation adjustments within accumulated other comprehensive income
(loss) within shareholders' equity. The Company includes foreign currency transaction gains or losses in the statement of
(loss) within shareholders' equity. The Company includes foreign currency transaction gains or losses in the statement of
operations within other income and expense.
operations within other income and expense.
Derivative Instruments
Derivative Instruments
The Company enters into derivative financial instruments from time to time to manage certain financial risks. The Company
The Company enters into derivative financial instruments from time to time to manage certain financial risks. The Company
enters into forward contracts to reduce exposure to changing future purchase prices for aluminum and copper and into foreign
enters into forward contracts to reduce exposure to changing future purchase prices for aluminum and copper and into foreign
currency exchange contracts to hedge specific foreign currency-denominated assets and liabilities as well as forecasted
currency exchange contracts to hedge specific foreign currency-denominated assets and liabilities as well as forecasted
transactions. The Company designates certain derivative financial instruments as cash flow hedges for accounting purposes.
transactions. The Company designates certain derivative financial instruments as cash flow hedges for accounting purposes.
These instruments are used to manage financial risks and are not speculative. See Note 19 for additional information.
These instruments are used to manage financial risks and are not speculative. See Note 19 for additional information.
Income Taxes
Income Taxes
The Company determines deferred tax assets and liabilities based upon the difference between the amounts reported in the
The Company determines deferred tax assets and liabilities based upon the difference between the amounts reported in the
financial statements and the tax basis of assets and liabilities, using enacted tax rates in effect in the years in which the
financial statements and the tax basis of assets and liabilities, using enacted tax rates in effect in the years in which the
differences are expected to reverse. The Company establishes a valuation allowance if it is more likely than not that a deferred
differences are expected to reverse. The Company establishes a valuation allowance if it is more likely than not that a deferred
tax asset, or portion thereof, will not be realized. The Company records the tax effects of global intangible low-taxed income
tax asset, or portion thereof, will not be realized. The Company records the tax effects of global intangible low-taxed income
(“GILTI”) as a period expense in the applicable tax year. The Company uses the portfolio approach for releasing income tax
(“GILTI”) as a period expense in the applicable tax year. The Company uses the portfolio approach for releasing income tax
effects from accumulated other comprehensive income (loss). See Note 8 for additional information.
effects from accumulated other comprehensive income (loss). See Note 8 for additional information.
Earnings per Share
Earnings per Share
The Company calculates basic earnings per share based upon the weighted-average number of common shares outstanding
The Company calculates basic earnings per share based upon the weighted-average number of common shares outstanding
during the period, while the calculation of diluted earnings per share includes the dilutive effect of potential common shares
during the period, while the calculation of diluted earnings per share includes the dilutive effect of potential common shares
outstanding during the period. The calculation of diluted earnings per share excludes potential common shares if their
outstanding during the period. The calculation of diluted earnings per share excludes potential common shares if their
inclusion would have an anti-dilutive effect. In prior years, certain restricted stock awards provided recipients with a non-
inclusion would have an anti-dilutive effect. In prior years, certain restricted stock awards provided recipients with a non-
forfeitable right to receive dividends declared by the Company. These restricted stock awards have been included in
forfeitable right to receive dividends declared by the Company. These restricted stock awards have been included in
computing earnings per share pursuant to the two-class method. See Note 9 for additional information.
computing earnings per share pursuant to the two-class method. See Note 9 for additional information.
Cash and Cash Equivalents
Cash and Cash Equivalents
The Company considers all highly-liquid investments with original maturities of three months or less to be cash equivalents.
The Company considers all highly-liquid investments with original maturities of three months or less to be cash equivalents.
Under the Company’s cash management system, cash balances at certain banks are funded when checks are presented for
Under the Company’s cash management system, cash balances at certain banks are funded when checks are presented for
payment. To the extent checks issued, but not yet presented for payment, exceed the balance on hand at the specific bank
payment. To the extent checks issued, but not yet presented for payment, exceed the balance on hand at the specific bank
against which they were written, the Company reports the amount of those checks within accounts payable in the consolidated
against which they were written, the Company reports the amount of those checks within accounts payable in the consolidated
balance sheets.
balance sheets.
Short-term Investments
Short-term Investments
The Company invests in time deposits with original maturities of more than three months but not more than one year. The
The Company invests in time deposits with original maturities of more than three months but not more than one year. The
Company records these short-term investments at cost, which approximates fair value, within other current assets in the
Company records these short-term investments at cost, which approximates fair value, within other current assets in the
consolidated balance sheets. As of March 31, 2021 and 2020, the Company’s short-term investments totaled $3.7 million and
consolidated balance sheets. As of March 31, 2021 and 2020, the Company’s short-term investments totaled $3.7 million and
$3.2 million, respectively.
$3.2 million, respectively.
Inventories
The Company values inventories using a first-in, first-out or weighted-average basis, at the lower of cost and net realizable
value.
Inventories
The Company values inventories using a first-in, first-out or weighted-average basis, at the lower of cost and net realizable
value.
51
51
51
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Property, Plant and Equipment
Property, Plant and Equipment
The Company records property, plant and equipment at cost. For financial reporting purposes, the Company computes
The Company records property, plant and equipment at cost. For financial reporting purposes, the Company computes
depreciation using the straight-line method over the expected useful lives of the assets. The Company expenses maintenance
depreciation using the straight-line method over the expected useful lives of the assets. The Company expenses maintenance
and repair costs as incurred. The Company capitalizes costs of improvements. Upon the sale or other disposition of an asset,
and repair costs as incurred. The Company capitalizes costs of improvements. Upon the sale or other disposition of an asset,
the Company removes the cost and related accumulated depreciation from the accounts and includes the gain or loss in the
the Company removes the cost and related accumulated depreciation from the accounts and includes the gain or loss in the
consolidated statements of operations. Capital expenditures of $7.9 million, $8.7 million and $17.9 million were accrued at
consolidated statements of operations. Capital expenditures of $7.9 million, $8.7 million and $17.9 million were accrued at
March 31, 2021, 2020 and 2019, respectively. Of the $7.9 million, $2.7 million was included within liabilities held for sale on
March 31, 2021, 2020 and 2019, respectively. Of the $7.9 million, $2.7 million was included within liabilities held for sale on
the March 31, 2021 consolidated balance sheet. All of the other accrued capital expenditure amounts are presented within
the March 31, 2021 consolidated balance sheet. All of the other accrued capital expenditure amounts are presented within
accounts payable.
accounts payable.
Leases
Leases
The Company’s most significant leases represent leases of real estate, such as manufacturing facilities, warehouses, and office
The Company’s most significant leases represent leases of real estate, such as manufacturing facilities, warehouses, and office
buildings. The Company also leases certain manufacturing and IT equipment and vehicles. The Company recognizes right-of-
buildings. The Company also leases certain manufacturing and IT equipment and vehicles. The Company recognizes right-of-
use (“ROU”) assets and lease liabilities at the commencement date, based upon the present value of lease payments over the
use (“ROU”) assets and lease liabilities at the commencement date, based upon the present value of lease payments over the
lease term. See Note 16 for additional information.
lease term. See Note 16 for additional information.
Goodwill
Goodwill
The Company does not amortize goodwill; rather, it tests for impairment annually unless conditions exist that would require a
The Company does not amortize goodwill; rather, it tests for impairment annually unless conditions exist that would require a
more frequent evaluation. The Company performs an assessment of the fair value of its reporting units for goodwill
more frequent evaluation. The Company performs an assessment of the fair value of its reporting units for goodwill
impairment testing based upon, among other things, the present value of expected future cash flows. The Company performed
impairment testing based upon, among other things, the present value of expected future cash flows. The Company performed
its goodwill impairment test as of March 31, 2021 and determined the fair value of each of its reporting units exceeded the
its goodwill impairment test as of March 31, 2021 and determined the fair value of each of its reporting units exceeded the
respective book value. See Note 14 for additional information.
respective book value. See Note 14 for additional information.
Impairment of Held and Used Long-lived Assets
Impairment of Held and Used Long-lived Assets
The Company reviews held and used long-lived assets, including property, plant and equipment and intangible assets, for
The Company reviews held and used long-lived assets, including property, plant and equipment and intangible assets, for
impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully
impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully
recoverable. In these instances, the Company compares the undiscounted future cash flows expected to be generated from the
recoverable. In these instances, the Company compares the undiscounted future cash flows expected to be generated from the
asset with its carrying value. If the asset’s carrying value exceeds expected future cash flows, the Company measures and
asset with its carrying value. If the asset’s carrying value exceeds expected future cash flows, the Company measures and
records an impairment loss, if any, as the amount by which the carrying value of the asset exceeds its fair value. The
records an impairment loss, if any, as the amount by which the carrying value of the asset exceeds its fair value. The
Company estimates fair value using a variety of valuation techniques, including discounted cash flows, market values and
Company estimates fair value using a variety of valuation techniques, including discounted cash flows, market values and
comparison values for similar assets.
comparison values for similar assets.
Assets Held for Sale
Assets Held for Sale
The Company considers assets to be held for sale when management approves and commits to a formal plan to actively market
The Company considers assets to be held for sale when management approves and commits to a formal plan to actively market
the asset for sale at a reasonable price in relation to its fair value, the asset is available for immediate sale in its present
the asset for sale at a reasonable price in relation to its fair value, the asset is available for immediate sale in its present
condition, an active program to locate a buyer and other actions required to complete the sale have been initiated, the sale of
condition, an active program to locate a buyer and other actions required to complete the sale have been initiated, the sale of
the asset is expected to be completed within one year and it is unlikely that significant changes will be made to the plan. Upon
the asset is expected to be completed within one year and it is unlikely that significant changes will be made to the plan. Upon
designation as held for sale, the Company records the carrying value of the assets at the lower of its carrying value or its
designation as held for sale, the Company records the carrying value of the assets at the lower of its carrying value or its
estimated fair value, less costs to sell. The Company ceases to record depreciation expense at the time of designation as held
estimated fair value, less costs to sell. The Company ceases to record depreciation expense at the time of designation as held
for sale. During fiscal 2021, the Company classified the liquid- and air-cooled automotive businesses as held for sale and
for sale. During fiscal 2021, the Company classified the liquid- and air-cooled automotive businesses as held for sale and
recorded impairment charges totaling $166.8 million within the Automotive segment. See Note 2 for additional information.
recorded impairment charges totaling $166.8 million within the Automotive segment. See Note 2 for additional information.
Deferred Compensation Trusts
Deferred Compensation Trusts
The Company maintains deferred compensation trusts to fund future obligations under its non-qualified deferred compensation
The Company maintains deferred compensation trusts to fund future obligations under its non-qualified deferred compensation
plans. The trusts’ investments in third-party debt and equity securities are presented within other noncurrent assets in the
plans. The trusts’ investments in third-party debt and equity securities are presented within other noncurrent assets in the
consolidated balance sheets.
consolidated balance sheets.
Self-insurance Reserves
Self-insurance Reserves
The Company retains a portion of the financial risk for certain insurance coverage, including property, general liability,
The Company retains a portion of the financial risk for certain insurance coverage, including property, general liability,
workers compensation, and employee healthcare, and therefore maintains reserves that estimate the impact of unreported and
workers compensation, and employee healthcare, and therefore maintains reserves that estimate the impact of unreported and
under-reported claims that fall below various stop-loss limits and deductibles under its insurance policies. The Company
under-reported claims that fall below various stop-loss limits and deductibles under its insurance policies. The Company
maintains reserves for the estimated settlement cost of known claims, as well as estimates of incurred but not reported claims.
maintains reserves for the estimated settlement cost of known claims, as well as estimates of incurred but not reported claims.
The Company charges costs of claims, including the impact of changes in reserves due to claim experience and severity, to
The Company charges costs of claims, including the impact of changes in reserves due to claim experience and severity, to
operations. The Company reviews and updates the amount of its insurance-related reserves on a quarterly basis.
operations. The Company reviews and updates the amount of its insurance-related reserves on a quarterly basis.
Environmental Liabilities
Environmental Liabilities
The Company records liabilities for environmental assessments and remediation activities in the period in which its
The Company records liabilities for environmental assessments and remediation activities in the period in which its
responsibility is probable and the costs can be reasonably estimated. The Company records environmental indemnification
responsibility is probable and the costs can be reasonably estimated. The Company records environmental indemnification
assets from third parties, including prior owners, when recovery is probable. To the extent that the required remediation
assets from third parties, including prior owners, when recovery is probable. To the extent that the required remediation
52
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
procedures change, or additional contamination is identified, the Company’s estimated environmental liabilities may also
change. See Note 20 for additional information.
procedures change, or additional contamination is identified, the Company’s estimated environmental liabilities may also
change. See Note 20 for additional information.
Supplemental Cash Flow Information
Supplemental Cash Flow Information
Interest paid
Interest paid
Interest paid
Income taxes paid
Income taxes paid
Income taxes paid
Years ended March 31,
Years ended March 31,
Years ended March 31,
2019
2019
2020
2020
2021
2021
22.3
21.4
17.9
22.3
21.4
17.9
$
$
$
18.8
19.7
22.2
22.2
18.8
19.7
$
$
$
See Note 16 for supplemental cash flow information related to the Company’s leases.
See Note 16 for supplemental cash flow information related to the Company’s leases.
New Accounting Guidance Adopted in Fiscal 2021
New Accounting Guidance Adopted in Fiscal 2021
Credit Losses
Credit Losses
In June 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance related to the accounting for credit
In June 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance related to the accounting for credit
losses for certain financial assets, including trade accounts receivable and contract assets. The new guidance modifies the
losses for certain financial assets, including trade accounts receivable and contract assets. The new guidance modifies the
credit loss model to measure and recognize credit losses based upon expected losses rather than incurred losses. The Company
credit loss model to measure and recognize credit losses based upon expected losses rather than incurred losses. The Company
adopted this guidance as of April 1, 2020. The adoption did not have a material impact on the Company’s consolidated
adopted this guidance as of April 1, 2020. The adoption did not have a material impact on the Company’s consolidated
balance sheets, statements of operations or statements of cash flows.
balance sheets, statements of operations or statements of cash flows.
New Accounting Guidance Adopted in Fiscal 2020
New Accounting Guidance Adopted in Fiscal 2020
Leases
Leases
In February 2016, the FASB issued new comprehensive lease accounting guidance that requires balance sheet recognition for
In February 2016, the FASB issued new comprehensive lease accounting guidance that requires balance sheet recognition for
most leases. The Company adopted this guidance effective April 1, 2019 using a modified-retrospective transition method,
most leases. The Company adopted this guidance effective April 1, 2019 using a modified-retrospective transition method,
under which it elected not to adjust comparative periods. The Company elected the package of practical expedients permitted
under which it elected not to adjust comparative periods. The Company elected the package of practical expedients permitted
under the new guidance, and, as a result, the Company did not reassess the classification of existing leases or initial direct
under the new guidance, and, as a result, the Company did not reassess the classification of existing leases or initial direct
costs thereof, or whether existing contracts contain leases. In addition, the Company elected accounting policies to not record
costs thereof, or whether existing contracts contain leases. In addition, the Company elected accounting policies to not record
short-term leases on the balance sheet and to not separate lease and non-lease components. The Company did not elect the
short-term leases on the balance sheet and to not separate lease and non-lease components. The Company did not elect the
hindsight practical expedient.
hindsight practical expedient.
Upon adoption of this new guidance on April 1, 2019, the Company recognized right-of-use assets for operating leases totaling
Upon adoption of this new guidance on April 1, 2019, the Company recognized right-of-use assets for operating leases totaling
$61.3 million and corresponding current and noncurrent operating lease liabilities of $12.4 million and $48.9 million,
$61.3 million and corresponding current and noncurrent operating lease liabilities of $12.4 million and $48.9 million,
respectively. In addition, the Company assessed two existing build-to-suit arrangements, for which it had recorded property,
respectively. In addition, the Company assessed two existing build-to-suit arrangements, for which it had recorded property,
plant and equipment and long-term debt on its consolidated balance sheet as of March 31, 2019. The Company determined
plant and equipment and long-term debt on its consolidated balance sheet as of March 31, 2019. The Company determined
these arrangements represent operating leases under the new accounting guidance. As a result, the Company derecognized the
these arrangements represent operating leases under the new accounting guidance. As a result, the Company derecognized the
previously-recorded balances and recorded $5.2 million of operating lease right-of-use assets and corresponding lease
previously-recorded balances and recorded $5.2 million of operating lease right-of-use assets and corresponding lease
liabilities. As a result of adopting the new guidance, there was not a significant impact on the Company’s accounting for its
liabilities. As a result of adopting the new guidance, there was not a significant impact on the Company’s accounting for its
previously-recorded capital leases, which are now classified as finance leases under the new guidance. In addition, there was
previously-recorded capital leases, which are now classified as finance leases under the new guidance. In addition, there was
no impact to retained earnings. Also, the adoption did not have a material impact on the Company’s consolidated statement of
no impact to retained earnings. Also, the adoption did not have a material impact on the Company’s consolidated statement of
operations or consolidated statement of cash flows. See Note 16 for additional information regarding the Company’s leases.
operations or consolidated statement of cash flows. See Note 16 for additional information regarding the Company’s leases.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
In February 2018, the FASB issued new guidance related to the accounting for certain stranded income tax effects in
In February 2018, the FASB issued new guidance related to the accounting for certain stranded income tax effects in
accumulated other comprehensive income (loss) resulting from tax reform legislation that was enacted in the U.S. in December
accumulated other comprehensive income (loss) resulting from tax reform legislation that was enacted in the U.S. in December
2017. This guidance provided companies the option to reclassify stranded income tax effects to retained earnings. The
2017. This guidance provided companies the option to reclassify stranded income tax effects to retained earnings. The
Company adopted this guidance as of April 1, 2019 and chose not to reclassify stranded income tax effects; therefore, the
Company adopted this guidance as of April 1, 2019 and chose not to reclassify stranded income tax effects; therefore, the
adoption of this guidance did not impact the Company’s consolidated financial statements.
adoption of this guidance did not impact the Company’s consolidated financial statements.
New Accounting Guidance Adopted in Fiscal 2019
New Accounting Guidance Adopted in Fiscal 2019
Revenue Recognition
Revenue Recognition
In May 2014, the FASB issued new guidance that outlines a comprehensive model for entities to use in accounting for revenue
In May 2014, the FASB issued new guidance that outlines a comprehensive model for entities to use in accounting for revenue
arising from contracts with customers. The core principle of the new guidance is that companies are to recognize revenue to
arising from contracts with customers. The core principle of the new guidance is that companies are to recognize revenue to
depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to
depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to
be entitled in exchange for those goods or services. The Company adopted this new guidance for fiscal 2019 using the
be entitled in exchange for those goods or services. The Company adopted this new guidance for fiscal 2019 using the
modified-retrospective transition method. As a result of its adoption of the new guidance, the Company recorded an increase
modified-retrospective transition method. As a result of its adoption of the new guidance, the Company recorded an increase
53
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
of $0.7 million to retained earnings as of April 1, 2018, along with related balance sheet reclassifications. See Note 3 for
additional information regarding revenue recognition.
of $0.7 million to retained earnings as of April 1, 2018, along with related balance sheet reclassifications. See Note 3 for
additional information regarding revenue recognition.
Income Taxes: Intra-Entity Transfers of Assets Other than Inventory
Income Taxes: Intra-Entity Transfers of Assets Other than Inventory
In October 2016, the FASB issued new guidance related to income tax accounting for intercompany asset transfers. This new
In October 2016, the FASB issued new guidance related to income tax accounting for intercompany asset transfers. This new
guidance requires companies to recognize the income tax effects of intercompany asset transfers other than inventory at the
guidance requires companies to recognize the income tax effects of intercompany asset transfers other than inventory at the
transaction date. The income tax effects of these transfers were previously deferred. The Company adopted this new guidance
transaction date. The income tax effects of these transfers were previously deferred. The Company adopted this new guidance
for fiscal 2019 using the modified-retrospective transition method. Upon adoption, the Company recorded a decrease to
for fiscal 2019 using the modified-retrospective transition method. Upon adoption, the Company recorded a decrease to
retained earnings of $8.3 million as of April 1, 2018.
retained earnings of $8.3 million as of April 1, 2018.
Note 2: Assets Held for Sale
Note 2: Assets Held for Sale
On November 2, 2020, the Company signed a definitive agreement to sell its liquid-cooled automotive business to Dana
On November 2, 2020, the Company signed a definitive agreement to sell its liquid-cooled automotive business to Dana
Incorporated, subject to the receipt of governmental and third-party approvals and satisfaction of other closing conditions. As
Incorporated, subject to the receipt of governmental and third-party approvals and satisfaction of other closing conditions. As
of March 31, 2021, the Company anticipated the transaction would close during the first quarter of fiscal 2022. However, the
of March 31, 2021, the Company anticipated the transaction would close during the first quarter of fiscal 2022. However, the
Company and the buyer are currently working together through the regulatory approval process. At this time, the Company is
Company and the buyer are currently working together through the regulatory approval process. At this time, the Company is
not able to estimate the ultimate impact of the regulatory approval process or the closing date for this transaction. The
not able to estimate the ultimate impact of the regulatory approval process or the closing date for this transaction. The
Company does not expect significant net cash proceeds from this transaction based upon the one dollar selling price and
Company does not expect significant net cash proceeds from this transaction based upon the one dollar selling price and
adjustments for cash, debt, and working capital, as defined within the definitive agreement. The Company evaluated this
adjustments for cash, debt, and working capital, as defined within the definitive agreement. The Company evaluated this
disposal group and determined that it does not qualify as a discontinued operation for reporting under U.S. GAAP. As part of
disposal group and determined that it does not qualify as a discontinued operation for reporting under U.S. GAAP. As part of
its discontinued operations assessment, the Company considered anticipated future sales to automotive and light vehicle
its discontinued operations assessment, the Company considered anticipated future sales to automotive and light vehicle
customers as well as sales to other vehicular customers with similar product offerings and using similar heat-transfer
customers as well as sales to other vehicular customers with similar product offerings and using similar heat-transfer
technology within the Heavy Duty Equipment and Automotive segments. In addition, the Company will continue to operate in
technology within the Heavy Duty Equipment and Automotive segments. In addition, the Company will continue to operate in
the same major geographical areas as it does today.
the same major geographical areas as it does today.
On February 19, 2021, the Company signed a definitive agreement to sell its air-cooled automotive business to Schmid Metall
On February 19, 2021, the Company signed a definitive agreement to sell its air-cooled automotive business to Schmid Metall
GmbH. This transaction closed on April 30, 2021. Based upon its preliminary accounting, the Company expects to record a
GmbH. This transaction closed on April 30, 2021. Based upon its preliminary accounting, the Company expects to record a
loss on sale of approximately $6.0 million during the first quarter of fiscal 2022. The estimated loss on sale includes
loss on sale of approximately $6.0 million during the first quarter of fiscal 2022. The estimated loss on sale includes
adjustments for cash, debt, and working capital, as defined within the definitive agreement. The Company evaluated this
adjustments for cash, debt, and working capital, as defined within the definitive agreement. The Company evaluated this
transaction in relation to the pending sale of the liquid-cooled automotive business, described above, and concluded each
transaction in relation to the pending sale of the liquid-cooled automotive business, described above, and concluded each
represents a separate disposal group for purposes of assessing discontinued operations. The Company determined that the air-
represents a separate disposal group for purposes of assessing discontinued operations. The Company determined that the air-
cooled disposal group did not qualify as a discontinued operation.
cooled disposal group did not qualify as a discontinued operation.
The Company reports financial results of both the liquid- and air-cooled automotive businesses within its Automotive
The Company reports financial results of both the liquid- and air-cooled automotive businesses within its Automotive
segment. Once the Company entered into the sale agreements with Board of Director approval, it classified the businesses as
segment. Once the Company entered into the sale agreements with Board of Director approval, it classified the businesses as
held for sale beginning on November 2, 2020 and February 19, 2021, respectively, and ceased depreciating the long-lived
held for sale beginning on November 2, 2020 and February 19, 2021, respectively, and ceased depreciating the long-lived
assets within the disposal groups.
assets within the disposal groups.
Upon classification as held for sale, the Company compared each disposal group’s carrying value with its fair value, less costs
Upon classification as held for sale, the Company compared each disposal group’s carrying value with its fair value, less costs
to sell. Based upon the selling prices for each transaction, the Company estimated implied losses in excess of the respective
to sell. Based upon the selling prices for each transaction, the Company estimated implied losses in excess of the respective
carrying value of each disposal group’s long-lived assets. The disposal groups’ long-lived assets consist entirely of property,
carrying value of each disposal group’s long-lived assets. The disposal groups’ long-lived assets consist entirely of property,
plant and equipment and right-of-use lease assets. As a result, the Company recorded non-cash impairment charges totaling
plant and equipment and right-of-use lease assets. As a result, the Company recorded non-cash impairment charges totaling
$165.1 million during fiscal 2021 to reduce the net carrying value of the disposal groups’ long-lived assets to zero. The
$165.1 million during fiscal 2021 to reduce the net carrying value of the disposal groups’ long-lived assets to zero. The
impairment charges related to the liquid- and air-cooled automotive businesses totaled $138.3 million and $26.8 million,
impairment charges related to the liquid- and air-cooled automotive businesses totaled $138.3 million and $26.8 million,
respectively. Also during fiscal 2021, the Company recorded an impairment charge of $1.7 million within the Automotive
respectively. Also during fiscal 2021, the Company recorded an impairment charge of $1.7 million within the Automotive
segment related to equipment that will not convey as part of the sale transactions and is not expected to be used within the
segment related to equipment that will not convey as part of the sale transactions and is not expected to be used within the
Company’s other businesses. These charges are reported within the impairment charges line on the consolidated statements of
Company’s other businesses. These charges are reported within the impairment charges line on the consolidated statements of
operations.
operations.
54
54
54
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
The Company classified the assets and liabilities of the liquid- and air-cooled automotive businesses as held for sale on the
The Company classified the assets and liabilities of the liquid- and air-cooled automotive businesses as held for sale on the
March 31, 2021 consolidated balance sheet. The major classes of assets and liabilities held for sale were as follows:
March 31, 2021 consolidated balance sheet. The major classes of assets and liabilities held for sale were as follows:
March 31, 2021
March 31, 2021
ASSETS
ASSETS
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents
Trade accounts receivables - net
Trade accounts receivables - net
Trade accounts receivables - net
Inventories
Inventories
Inventories
Other current assets
Other current assets
Other current assets
Property, plant and equipment - net
Property, plant and equipment - net
Property, plant and equipment - net
Other noncurrent assets
Other noncurrent assets
Other noncurrent assets
Impairment of carrying value
Impairment of carrying value
Impairment of carrying value
Total assets held for sale
Total assets held for sale
Total assets held for sale
LIABILITIES
LIABILITIES
Short-term debt
Short-term debt
Short-term debt
Accounts payable
Accounts payable
Accounts payable
Accrued compensation and employee benefits
Accrued compensation and employee benefits
Accrued compensation and employee benefits
Other current liabilities
Other current liabilities
Other current liabilities
Pensions
Pensions
Pensions
Other noncurrent liabilities
Other noncurrent liabilities
Other noncurrent liabilities
Total liabilities held for sale
Total liabilities held for sale
Total liabilities held for sale
$
8.0
$
8.0
54.4
54.4
24.7
24.7
12.8
12.8
164.0
164.0
8.8
8.8
(165.1)
(165.1)
107.6
107.6
$
$
$
5.0
5.0
$
46.3
46.3
15.5
15.5
12.2
12.2
17.8
17.8
6.5
6.5
103.3
103.3
$
$
The Company will reassess the liquid-cooled disposal group’s fair value less costs to sell at each reporting period that it is held
The Company will reassess the liquid-cooled disposal group’s fair value less costs to sell at each reporting period that it is held
for sale until the transaction is completed. The Company expects to record a loss on sale of approximately $20.0 million to
for sale until the transaction is completed. The Company expects to record a loss on sale of approximately $20.0 million to
$30.0 million upon transaction completion. The loss on sale recorded will be impacted by changes in working capital, costs to
$30.0 million upon transaction completion. The loss on sale recorded will be impacted by changes in working capital, costs to
sell, net actuarial losses in accumulated other comprehensive loss related to the disposal group’s pension plans, and cumulative
sell, net actuarial losses in accumulated other comprehensive loss related to the disposal group’s pension plans, and cumulative
translation adjustments. It is possible that the loss on sale recorded could differ materially from the Company’s estimate.
translation adjustments. It is possible that the loss on sale recorded could differ materially from the Company’s estimate.
Note 3: Revenue Recognition
Note 3: Revenue Recognition
The Company generates revenue from selling innovative thermal management products and solutions to diversified global
The Company generates revenue from selling innovative thermal management products and solutions to diversified global
markets and customers. The Company recognizes revenue based upon consideration specified in a contract and as it satisfies
markets and customers. The Company recognizes revenue based upon consideration specified in a contract and as it satisfies
performance obligations by transferring control over its products to its customers, which may be at a point in time or over
performance obligations by transferring control over its products to its customers, which may be at a point in time or over
time. The majority of the Company’s revenue is recognized at a point in time, based upon shipment terms. The Company
time. The majority of the Company’s revenue is recognized at a point in time, based upon shipment terms. The Company
records an allowance for credit losses and accrues for estimated warranty costs at the time of sale. These estimates are based
records an allowance for credit losses and accrues for estimated warranty costs at the time of sale. These estimates are based
upon historical experience, current business trends, and current economic conditions. The Company accounts for shipping and
upon historical experience, current business trends, and current economic conditions. The Company accounts for shipping and
handling activities as fulfilment costs rather than separate performance obligations, and records shipping and handling costs in
handling activities as fulfilment costs rather than separate performance obligations, and records shipping and handling costs in
cost of sales and related amounts billed to customers in net sales. The Company establishes payment terms with its customers
cost of sales and related amounts billed to customers in net sales. The Company establishes payment terms with its customers
based upon industry and regional practices, which typically do not exceed 90 days. As the Company expects to receive
based upon industry and regional practices, which typically do not exceed 90 days. As the Company expects to receive
payment from its customers within one year from the time of sale, it disregards the effects of the time value of money in its
payment from its customers within one year from the time of sale, it disregards the effects of the time value of money in its
determination of the transaction price. The Company has not disclosed the value of unsatisfied performance obligations
determination of the transaction price. The Company has not disclosed the value of unsatisfied performance obligations
because the revenue associated with customer contracts for which the original expected performance period is greater than one
because the revenue associated with customer contracts for which the original expected performance period is greater than one
year is immaterial.
year is immaterial.
The following is a description of the Company’s principal revenue-generating activities:
The following is a description of the Company’s principal revenue-generating activities:
Building HVAC Systems (“BHVAC”)
Building HVAC Systems (“BHVAC”)
The BHVAC segment principally generates revenue from providing a variety of heating, ventilating, and air conditioning
The BHVAC segment principally generates revenue from providing a variety of heating, ventilating, and air conditioning
products, primarily for commercial buildings and data centers in North America and the U.K., as well as mainland Europe and
products, primarily for commercial buildings and data centers in North America and the U.K., as well as mainland Europe and
the Middle East.
the Middle East.
Heating products are manufactured in the U.S. and are largely sold to independent distributors, who in turn market the heating
Heating products are manufactured in the U.S. and are largely sold to independent distributors, who in turn market the heating
products to end customers. Because these products are sold to many different customers without contractual or practical
products to end customers. Because these products are sold to many different customers without contractual or practical
55
55
55
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
limitations, the BHVAC segment recognizes revenue at the time control is transferred to the customer, generally the
independent distributor, based upon shipping terms, which is generally upon shipment.
limitations, the BHVAC segment recognizes revenue at the time control is transferred to the customer, generally the
independent distributor, based upon shipping terms, which is generally upon shipment.
Ventilation and air conditioning products are highly-specified to a customer’s needs; however, the underlying sales contracts
Ventilation and air conditioning products are highly-specified to a customer’s needs; however, the underlying sales contracts
do not provide the Company with an enforceable right to payment for performance completed to date. As a result, the
do not provide the Company with an enforceable right to payment for performance completed to date. As a result, the
BHVAC segment recognizes revenue for these products at the time control is transferred to the customer based upon shipping
BHVAC segment recognizes revenue for these products at the time control is transferred to the customer based upon shipping
terms, which is generally upon shipment.
terms, which is generally upon shipment.
Commercial and Industrial Solutions (“CIS”)
Commercial and Industrial Solutions (“CIS”)
The CIS segment principally generates revenue from providing thermal management products, including customized coils and
The CIS segment principally generates revenue from providing thermal management products, including customized coils and
coolers, to the heating, ventilating, air conditioning, and refrigeration (“HVAC&R”) markets in North America, Europe, and
coolers, to the heating, ventilating, air conditioning, and refrigeration (“HVAC&R”) markets in North America, Europe, and
Asia. In addition, the segment applies corrosion protection solutions, which are referred to as coatings, to heat-transfer
Asia. In addition, the segment applies corrosion protection solutions, which are referred to as coatings, to heat-transfer
equipment.
equipment.
For the sale of coils and coolers, individual customer purchase orders generally represent the Company’s contract with its
For the sale of coils and coolers, individual customer purchase orders generally represent the Company’s contract with its
customers. With the exception of a small number of customers, the applicable customer contracts do not provide the Company
customers. With the exception of a small number of customers, the applicable customer contracts do not provide the Company
with an enforceable right to payment for performance completed to date. As a result, the CIS segment recognizes revenue for
with an enforceable right to payment for performance completed to date. As a result, the CIS segment recognizes revenue for
its sale of coils and coolers primarily at the time control is transferred to the customer based upon shipping terms, which is
its sale of coils and coolers primarily at the time control is transferred to the customer based upon shipping terms, which is
generally upon shipment.
generally upon shipment.
For both sales to customers whose contract cancellation terms provide an enforceable right to payment and sales from the
For both sales to customers whose contract cancellation terms provide an enforceable right to payment and sales from the
coatings businesses, in which the customers control the heat-transfer equipment being enhanced by the coating application, the
coatings businesses, in which the customers control the heat-transfer equipment being enhanced by the coating application, the
CIS segment recognizes revenue over time based upon its estimated progress towards satisfaction of the performance
CIS segment recognizes revenue over time based upon its estimated progress towards satisfaction of the performance
obligations. The segment measures progress by evaluating the production status towards completion of ordered products or
obligations. The segment measures progress by evaluating the production status towards completion of ordered products or
services not yet shipped to its customers.
services not yet shipped to its customers.
Heavy Duty Equipment (“HDE”) and Automotive
Heavy Duty Equipment (“HDE”) and Automotive
The HDE and Automotive segments principally generate revenue from providing engineered heat transfer systems and
The HDE and Automotive segments principally generate revenue from providing engineered heat transfer systems and
components for use in on- and off-highway original equipment. These segments provide powertrain and engine cooling
components for use in on- and off-highway original equipment. These segments provide powertrain and engine cooling
products, including, but not limited to, radiators, charge air coolers, condensers, oil coolers, EGR coolers, and fuel coolers, to
products, including, but not limited to, radiators, charge air coolers, condensers, oil coolers, EGR coolers, and fuel coolers, to
original equipment manufacturers (“OEMs”) in the commercial vehicle, off-highway and automotive and light vehicle markets
original equipment manufacturers (“OEMs”) in the commercial vehicle, off-highway and automotive and light vehicle markets
in the Americas, Europe, and Asia regions. In addition, the segments design customer-owned tooling for OEMs. The HDE
in the Americas, Europe, and Asia regions. In addition, the segments design customer-owned tooling for OEMs. The HDE
segment also serves Brazil’s commercial vehicle and automotive aftermarkets.
segment also serves Brazil’s commercial vehicle and automotive aftermarkets.
While the segments provide customized production and service parts to customers under multi-year programs, these programs
While the segments provide customized production and service parts to customers under multi-year programs, these programs
typically do not contain contractually-guaranteed volumes to be purchased by the customer. As a result, individual purchase
typically do not contain contractually-guaranteed volumes to be purchased by the customer. As a result, individual purchase
orders typically represent the quantities ordered by the customer. With the exception of a small number of HDE customers,
orders typically represent the quantities ordered by the customer. With the exception of a small number of HDE customers,
the terms within the customer agreement, purchase order, or customer-owned tooling contract do not provide the Company
the terms within the customer agreement, purchase order, or customer-owned tooling contract do not provide the Company
with an enforceable right to payment for performance completed to date. As a result, both the HDE and Automotive segments
with an enforceable right to payment for performance completed to date. As a result, both the HDE and Automotive segments
recognize revenue primarily at the time control is transferred to the customer based upon shipping terms, which is generally
recognize revenue primarily at the time control is transferred to the customer based upon shipping terms, which is generally
upon shipment.
upon shipment.
In regard to the HDE customers with contractual cancellation terms that provide an enforceable right to payment for
In regard to the HDE customers with contractual cancellation terms that provide an enforceable right to payment for
performance completed to date, the Company recognizes revenue over time based upon its estimated progress towards
performance completed to date, the Company recognizes revenue over time based upon its estimated progress towards
satisfaction of the performance obligations. The HDE segment measures progress by evaluating the production status of
satisfaction of the performance obligations. The HDE segment measures progress by evaluating the production status of
ordered products not yet shipped to the customer.
ordered products not yet shipped to the customer.
For certain customer programs, the Company agrees to provide annual price reductions based upon contract terms. For these
scheduled price reductions, the Company evaluates whether the provisions represent a material right to the customer, and if so,
defers associated revenue as a result.
For certain customer programs, the Company agrees to provide annual price reductions based upon contract terms. For these
scheduled price reductions, the Company evaluates whether the provisions represent a material right to the customer, and if so,
defers associated revenue as a result.
At times, the Company makes up-front incentive payments to certain customers related to future sales under multi-year
At times, the Company makes up-front incentive payments to certain customers related to future sales under multi-year
programs. The Company capitalizes these incentive payments, which it expects to recover through future sales, and amortizes
programs. The Company capitalizes these incentive payments, which it expects to recover through future sales, and amortizes
the assets as a reduction to revenue when the related products are sold to customers.
the assets as a reduction to revenue when the related products are sold to customers.
56
56
56
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
(In millions, except per share amounts)
Disaggregation of Revenue
Disaggregation of Revenue
The tables below present revenue to external customers for each of the Company’s business segments by primary end market,
The tables below present revenue to external customers for each of the Company’s business segments by primary end market,
geographic location, and based upon the timing of revenue recognition:
geographic location, and based upon the timing of revenue recognition:
Disaggregation of Revenue
Disaggregation of Revenue
The tables below present revenue to external customers for each of the Company’s business segments by primary end market,
The tables below present revenue to external customers for each of the Company’s business segments by primary end market,
geographic location, and based upon the timing of revenue recognition:
geographic location, and based upon the timing of revenue recognition:
Year ended March 31, 2021
Year ended March 31, 2021
Year ended March 31, 2021
Year ended March 31, 2021
BHVAC
BHVAC
BHVAC
BHVAC
CIS
CIS
CIS
CIS
HDE
HDE
HDE
HDE
Automotive
Automotive
Automotive
Automotive
Segment Total
Segment Total
Segment Total
Segment Total
Primary end market:
Primary end market:
Primary end market:
Primary end market:
Commercial HVAC&R
Commercial HVAC&R
Commercial HVAC&R
Commercial HVAC&R
Data center cooling
Data center cooling
Data center cooling
Data center cooling
Industrial cooling
Industrial cooling
Industrial cooling
Industrial cooling
Commercial vehicle
Commercial vehicle
Commercial vehicle
Commercial vehicle
Off-highway
Off-highway
Off-highway
Off-highway
Automotive and light vehicle
Automotive and light vehicle
Automotive and light vehicle
Automotive and light vehicle
Other
Other
Other
Other
Net sales
Net sales
Net sales
Net sales
Geographic location:
Geographic location:
Geographic location:
Geographic location:
Americas
Americas
Americas
Americas
Europe
Europe
Europe
Europe
Asia
Asia
Asia
Asia
Net sales
Net sales
Net sales
Net sales
Timing of revenue recognition:
Timing of revenue recognition:
Timing of revenue recognition:
Timing of revenue recognition:
Products transferred at a point in time
Products transferred at a point in time
Products transferred at a point in time
Products transferred at a point in time
Products transferred over time
Products transferred over time
Products transferred over time
Products transferred over time
Net sales
Net sales
Net sales
Net sales
Primary end market:
Primary end market:
Primary end market:
Primary end market:
Commercial HVAC&R
Commercial HVAC&R
Commercial HVAC&R
Commercial HVAC&R
Data center cooling
Data center cooling
Data center cooling
Data center cooling
Industrial cooling
Industrial cooling
Industrial cooling
Industrial cooling
Commercial vehicle
Commercial vehicle
Commercial vehicle
Commercial vehicle
Off-highway
Off-highway
Off-highway
Off-highway
Automotive and light vehicle
Automotive and light vehicle
Automotive and light vehicle
Automotive and light vehicle
Other
Other
Other
Other
Net sales
Net sales
Net sales
Net sales
Geographic location:
Geographic location:
Geographic location:
Geographic location:
Americas
Americas
Americas
Americas
Europe
Europe
Europe
Europe
Asia
Asia
Asia
Asia
Net sales
Net sales
Net sales
Net sales
Timing of revenue recognition:
Timing of revenue recognition:
Timing of revenue recognition:
Timing of revenue recognition:
Products transferred at a point in time
Products transferred at a point in time
Products transferred at a point in time
Products transferred at a point in time
Products transferred over time
Products transferred over time
Products transferred over time
Products transferred over time
Net sales
Net sales
Net sales
Net sales
$
$
$
$
$
$
$
$
$
$
$
$
181.6
181.6
181.6
181.6
58.7
58.7
58.7
58.7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.3
0.3
0.3
0.3
240.6
240.6
240.6
240.6
420.6
420.6
420.6
420.6
47.3
47.3
47.3
47.3
55.4
55.4
55.4
55.4
-
-
-
-
-
-
-
-
-
-
-
-
8.7
8.7
8.7
8.7
532.0
532.0
532.0
532.0
$
-
$
-
-
-
-
-
$
-
$
-
-
-
-
-
250.4
250.4
260.7
260.7
97.9
97.9
73.1
73.1
682.1
682.1
250.4
250.4
260.7
260.7
97.9
97.9
73.1
73.1
682.1
682.1
$
$
$
$
$
-
$
-
$
-
$
-
-
-
-
-
-
-
-
-
14.4
14.4
14.4
14.4
3.4
3.4
3.4
3.4
357.8
357.8
357.8
357.8
22.7
22.7
22.7
22.7
398.3
398.3
398.3
398.3
$
$
$
$
602.2
602.2
106.0
106.0
55.4
55.4
264.8
264.8
264.1
264.1
455.7
455.7
104.8
104.8
1,853.0
1,853.0
602.2
602.2
106.0
106.0
55.4
55.4
264.8
264.8
264.1
264.1
455.7
455.7
104.8
104.8
1,853.0
1,853.0
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
144.2
144.2
144.2
144.2
96.4
96.4
96.4
96.4
-
-
-
-
$
240.6
240.6
$
240.6
240.6
$
$
$
$
$
240.6
240.6
240.6
$
240.6
-
-
-
-
$
240.6
240.6
$
240.6
240.6
$
$
267.7
267.7
219.8
219.8
44.5
44.5
532.0
532.0
267.7
267.7
219.8
219.8
44.5
44.5
532.0
532.0
486.3
486.3
45.7
45.7
532.0
532.0
486.3
486.3
45.7
45.7
532.0
532.0
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
388.2
388.2
133.2
133.2
160.7
160.7
682.1
682.1
388.2
388.2
133.2
133.2
160.7
160.7
682.1
682.1
$
$
$
51.0
$
51.0
282.0
282.0
65.3
65.3
398.3
398.3
51.0
51.0
282.0
282.0
65.3
65.3
398.3
398.3
$
$
$
$
$
$
$
$
851.1
851.1
731.4
731.4
270.5
270.5
1,853.0
1,853.0
851.1
851.1
731.4
731.4
270.5
270.5
1,853.0
1,853.0
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
655.2
655.2
26.9
26.9
682.1
682.1
655.2
655.2
26.9
26.9
682.1
682.1
$
$
$
398.3
398.3
398.3
$
398.3
-
-
-
-
$
398.3
398.3
$
398.3
398.3
$
$
$
$
$
$
1,780.4
1,780.4
1,780.4
1,780.4
72.6
72.6
72.6
72.6
1,853.0
1,853.0
1,853.0
1,853.0
$
$
$
$
Year ended March 31, 2020
Year ended March 31, 2020
Year ended March 31, 2020
Year ended March 31, 2020
BHVAC
BHVAC
BHVAC
BHVAC
CIS
CIS
CIS
CIS
HDE
HDE
HDE
HDE
Automotive
Automotive
Automotive
Automotive
Segment Total
Segment Total
Segment Total
Segment Total
$
$
$
$
$
$
$
$
$
$
$
$
176.6
176.6
176.6
176.6
42.7
42.7
42.7
42.7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.8
1.8
1.8
1.8
221.1
221.1
221.1
221.1
463.1
463.1
463.1
463.1
107.5
107.5
107.5
107.5
43.5
43.5
43.5
43.5
-
-
-
-
-
-
-
-
-
-
-
-
9.8
9.8
9.8
9.8
623.9
623.9
623.9
623.9
-
$
$
-
$
-
-
$
-
-
-
-
-
-
-
-
302.1
302.1
302.1
302.1
240.8
240.8
240.8
240.8
108.4
108.4
108.4
108.4
94.6
94.6
94.6
94.6
745.9
745.9
745.9
745.9
$
$
$
$
-
$
$
-
$
-
-
$
-
-
-
-
-
-
-
-
21.6
21.6
21.6
21.6
13.1
13.1
13.1
13.1
400.4
400.4
400.4
400.4
9.8
9.8
9.8
9.8
444.9
444.9
444.9
444.9
$
$
$
$
639.7
639.7
150.2
150.2
43.5
43.5
323.7
323.7
253.9
253.9
508.8
508.8
116.0
116.0
2,035.8
2,035.8
639.7
639.7
150.2
150.2
43.5
43.5
323.7
323.7
253.9
253.9
508.8
508.8
116.0
116.0
2,035.8
2,035.8
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
139.1
139.1
139.1
139.1
82.0
82.0
82.0
82.0
-
-
-
-
$
221.1
221.1
$
221.1
221.1
$
$
$
$
$
221.1
221.1
221.1
$
221.1
-
-
-
-
$
221.1
221.1
$
221.1
221.1
$
$
345.9
345.9
232.6
232.6
45.4
45.4
623.9
623.9
345.9
345.9
232.6
232.6
45.4
45.4
623.9
623.9
518.2
518.2
105.7
105.7
623.9
623.9
518.2
518.2
105.7
105.7
623.9
623.9
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
484.5
484.5
141.2
141.2
120.2
120.2
745.9
745.9
484.5
484.5
141.2
141.2
120.2
120.2
745.9
745.9
$
$
$
70.3
$
70.3
321.0
321.0
53.6
53.6
444.9
444.9
70.3
70.3
321.0
321.0
53.6
53.6
444.9
444.9
$
$
$
$
$
$
$
$
1,039.8
1,039.8
776.8
776.8
219.2
219.2
2,035.8
2,035.8
1,039.8
1,039.8
776.8
776.8
219.2
219.2
2,035.8
2,035.8
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
715.1
715.1
30.8
30.8
745.9
745.9
715.1
715.1
30.8
30.8
745.9
745.9
$
$
$
444.9
444.9
444.9
$
444.9
-
-
-
-
$
444.9
444.9
$
444.9
444.9
$
$
$
$
$
$
1,899.3
1,899.3
136.5
136.5
2,035.8
2,035.8
1,899.3
1,899.3
136.5
136.5
2,035.8
2,035.8
$
$
$
$
57
57
57
57
57
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
(In millions, except per share amounts)
Year ended March 31, 2019
Year ended March 31, 2019
Year ended March 31, 2019
Year ended March 31, 2019
BHVAC
BHVAC
BHVAC
BHVAC
CIS
CIS
CIS
CIS
HDE
HDE
HDE
HDE
Automotive
Automotive
Automotive
Automotive
Segment Total
Segment Total
Segment Total
Segment Total
Primary end market:
Primary end market:
Primary end market:
Primary end market:
Commercial HVAC&R
Commercial HVAC&R
Commercial HVAC&R
Commercial HVAC&R
Data center cooling
Data center cooling
Data center cooling
Data center cooling
Industrial cooling
Industrial cooling
Industrial cooling
Industrial cooling
Commercial vehicle
Commercial vehicle
Commercial vehicle
Commercial vehicle
Off-highway
Off-highway
Off-highway
Off-highway
Automotive and light vehicle
Automotive and light vehicle
Automotive and light vehicle
Automotive and light vehicle
Other
Other
Other
Other
Net sales
Net sales
Net sales
Net sales
Geographic location:
Geographic location:
Geographic location:
Geographic location:
Americas
Americas
Americas
Americas
Europe
Europe
Europe
Europe
Asia
Asia
Asia
Asia
Net sales
Net sales
Net sales
Net sales
Timing of revenue recognition:
Timing of revenue recognition:
Timing of revenue recognition:
Timing of revenue recognition:
Products transferred at a point in time
Products transferred at a point in time
Products transferred at a point in time
Products transferred at a point in time
Products transferred over time
Products transferred over time
Products transferred over time
Products transferred over time
Net sales
Net sales
Net sales
Net sales
$
$
$
$
$
$
$
$
$
$
$
$
167.7
167.7
167.7
167.7
41.3
41.3
41.3
41.3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3.4
3.4
3.4
3.4
212.4
212.4
212.4
212.4
506.3
506.3
506.3
506.3
145.7
145.7
145.7
145.7
47.8
47.8
47.8
47.8
-
-
-
-
-
-
-
-
-
-
-
-
7.8
7.8
7.8
7.8
707.6
707.6
707.6
707.6
$
-
$
-
$
-
$
-
-
-
-
-
-
-
-
-
352.6
352.6
352.6
352.6
298.1
298.1
298.1
298.1
116.7
116.7
116.7
116.7
104.9
104.9
104.9
104.9
872.3
872.3
872.3
872.3
$
$
$
$
$
-
$
-
$
-
$
-
-
-
-
-
-
-
-
-
35.0
35.0
35.0
35.0
16.0
16.0
16.0
16.0
426.1
426.1
426.1
426.1
11.8
11.8
11.8
11.8
488.9
488.9
488.9
488.9
$
$
$
$
674.0
674.0
674.0
674.0
187.0
187.0
187.0
187.0
47.8
47.8
47.8
47.8
387.6
387.6
387.6
387.6
314.1
314.1
314.1
314.1
542.8
542.8
542.8
542.8
127.9
127.9
127.9
127.9
2,281.2
2,281.2
2,281.2
2,281.2
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
124.9
124.9
124.9
124.9
87.5
87.5
87.5
87.5
-
-
-
-
$
212.4
212.4
$
212.4
212.4
$
$
$
$
$
212.4
212.4
212.4
$
212.4
-
-
-
-
$
212.4
212.4
$
212.4
212.4
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
413.6
413.6
413.6
413.6
244.8
244.8
244.8
244.8
49.2
49.2
49.2
49.2
707.6
707.6
707.6
707.6
571.1
571.1
136.5
136.5
707.6
707.6
571.1
571.1
136.5
136.5
707.6
707.6
543.0
543.0
177.4
177.4
151.9
151.9
872.3
872.3
543.0
543.0
177.4
177.4
151.9
151.9
872.3
872.3
829.1
829.1
829.1
829.1
43.2
43.2
43.2
43.2
872.3
872.3
872.3
872.3
$
$
$
71.0
71.0
71.0
$
71.0
369.4
369.4
369.4
369.4
48.5
48.5
48.5
48.5
488.9
488.9
488.9
488.9
$
$
$
$
$
$
$
488.9
488.9
488.9
$
488.9
-
-
-
-
$
488.9
488.9
$
488.9
488.9
$
$
$
$
$
$
1,152.5
1,152.5
1,152.5
1,152.5
879.1
879.1
879.1
879.1
249.6
249.6
249.6
249.6
2,281.2
2,281.2
2,281.2
2,281.2
$
$
$
$
$
$
$
$
2,101.5
2,101.5
2,101.5
2,101.5
179.7
179.7
179.7
179.7
2,281.2
2,281.2
2,281.2
2,281.2
$
$
$
$
Contract Balances
Contract Balances
Contract assets and contract liabilities from contracts with customers were as follows:
Contract assets and contract liabilities from contracts with customers were as follows:
Contract Balances
Contract Balances
Contract assets and contract liabilities from contracts with customers were as follows:
Contract assets and contract liabilities from contracts with customers were as follows:
Contract assets
Contract assets
Contract assets
Contract assets
Contract assets
Contract liabilities
Contract liabilities
Contract liabilities
Contract liabilities
Contract liabilities
March 31, 2021
March 31, 2021
March 31, 2021
March 31, 2021
$
5.7
5.7
$
5.7
$
5.7
$
5.6
5.6
5.6
5.6
March 31, 2020
March 31, 2020
March 31, 2020
March 31, 2020
$
21.7
21.7
$
21.7
$
21.7
$
5.6
5.6
5.6
5.6
At March 31, 2021, contract assets and contract liabilities exclude amounts classified as held for sale. See Note 2 for additional
At March 31, 2021, contract assets and contract liabilities exclude amounts classified as held for sale. See Note 2 for additional
information.
information.
At March 31, 2021, contract assets and contract liabilities exclude amounts classified as held for sale. See Note 2 for additional
At March 31, 2021, contract assets and contract liabilities exclude amounts classified as held for sale. See Note 2 for additional
information.
information.
Contract assets, included within other current assets in the consolidated balance sheets, primarily consist of capitalized costs
Contract assets, included within other current assets in the consolidated balance sheets, primarily consist of capitalized costs
Contract assets, included within other current assets in the consolidated balance sheets, primarily consist of capitalized costs
Contract assets, included within other current assets in the consolidated balance sheets, primarily consist of capitalized costs
related to customer-owned tooling contracts, wherein the customer has guaranteed reimbursement, and assets recorded for
related to customer-owned tooling contracts, wherein the customer has guaranteed reimbursement, and assets recorded for
related to customer-owned tooling contracts, wherein the customer has guaranteed reimbursement, and assets recorded for
related to customer-owned tooling contracts, wherein the customer has guaranteed reimbursement, and assets recorded for
revenue recognized over time, which represent the Company’s rights to consideration for work completed but not yet billed.
revenue recognized over time, which represent the Company’s rights to consideration for work completed but not yet billed.
revenue recognized over time, which represent the Company’s rights to consideration for work completed but not yet billed.
revenue recognized over time, which represent the Company’s rights to consideration for work completed but not yet billed.
The $16.0 million decrease in contract assets during fiscal 2021 primarily resulted from a decrease in contract assets for
The $16.0 million decrease in contract assets during fiscal 2021 primarily resulted from a decrease in contract assets for
The $16.0 million decrease in contract assets during fiscal 2021 primarily resulted from a decrease in contract assets for
The $16.0 million decrease in contract assets during fiscal 2021 primarily resulted from a decrease in contract assets for
revenue recognized over time and $7.1 million of contract assets within the liquid- and air-cooled automotive businesses that
revenue recognized over time and $7.1 million of contract assets within the liquid- and air-cooled automotive businesses that
revenue recognized over time and $7.1 million of contract assets within the liquid- and air-cooled automotive businesses that
revenue recognized over time and $7.1 million of contract assets within the liquid- and air-cooled automotive businesses that
have been classified as held for sale on the March 31, 2021 consolidated balance sheet.
have been classified as held for sale on the March 31, 2021 consolidated balance sheet.
have been classified as held for sale on the March 31, 2021 consolidated balance sheet.
have been classified as held for sale on the March 31, 2021 consolidated balance sheet.
Contract liabilities, included within other current liabilities in the consolidated balance sheets, consist of payments received in
Contract liabilities, included within other current liabilities in the consolidated balance sheets, consist of payments received in
Contract liabilities, included within other current liabilities in the consolidated balance sheets, consist of payments received in
Contract liabilities, included within other current liabilities in the consolidated balance sheets, consist of payments received in
advance of satisfying performance obligations under customer contracts, including contracts for customer-owned tooling.
advance of satisfying performance obligations under customer contracts, including contracts for customer-owned tooling.
advance of satisfying performance obligations under customer contracts, including contracts for customer-owned tooling.
advance of satisfying performance obligations under customer contracts, including contracts for customer-owned tooling.
During fiscal 2021, increases related to customer contracts for which payment was received in advance of the Company’s
During fiscal 2021, increases related to customer contracts for which payment was received in advance of the Company’s
During fiscal 2021, increases related to customer contracts for which payment was received in advance of the Company’s
During fiscal 2021, increases related to customer contracts for which payment was received in advance of the Company’s
satisfaction of performance obligations was offset by $2.9 million of contract liabilities within the liquid- and air-cooled
satisfaction of performance obligations was offset by $2.9 million of contract liabilities within the liquid- and air-cooled
satisfaction of performance obligations was offset by $2.9 million of contract liabilities within the liquid- and air-cooled
satisfaction of performance obligations was offset by $2.9 million of contract liabilities within the liquid- and air-cooled
automotive businesses that have been classified as held for sale on the March 31, 2021 consolidated balance sheet.
automotive businesses that have been classified as held for sale on the March 31, 2021 consolidated balance sheet.
automotive businesses that have been classified as held for sale on the March 31, 2021 consolidated balance sheet.
automotive businesses that have been classified as held for sale on the March 31, 2021 consolidated balance sheet.
Note 4: Fair Value Measurements
Note 4: Fair Value Measurements
Note 4: Fair Value Measurements
Note 4: Fair Value Measurements
Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principal or most
Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principal or most
Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principal or most
Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants. Fair value measurements
advantageous market for the asset or liability in an orderly transaction between market participants. Fair value measurements
advantageous market for the asset or liability in an orderly transaction between market participants. Fair value measurements
advantageous market for the asset or liability in an orderly transaction between market participants. Fair value measurements
are classified under the following hierarchy:
are classified under the following hierarchy:
are classified under the following hierarchy:
are classified under the following hierarchy:
Level 1 – Quoted prices for identical instruments in active markets.
Level 1 – Quoted prices for identical instruments in active markets.
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in
markets that are not active; and model-derived valuations in which all significant inputs are observable in active
markets that are not active; and model-derived valuations in which all significant inputs are observable in active
markets.
markets.
Level 1 – Quoted prices for identical instruments in active markets.
Level 1 – Quoted prices for identical instruments in active markets.
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in
markets that are not active; and model-derived valuations in which all significant inputs are observable in active
markets that are not active; and model-derived valuations in which all significant inputs are observable in active
markets.
markets.
Level 3 – Model-derived valuations in which one or more significant inputs are not observable.
Level 3 – Model-derived valuations in which one or more significant inputs are not observable.
Level 3 – Model-derived valuations in which one or more significant inputs are not observable.
Level 3 – Model-derived valuations in which one or more significant inputs are not observable.
58
58
58
58
58
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
When available, the Company uses quoted market prices to determine fair value and classifies such measurements as Level 1.
In some cases, where market prices are not available, the Company uses observable market-based inputs to calculate fair value,
in which case the measurements are classified as Level 2. If quoted or observable market prices are not available, the
Company determines fair value based upon valuation models that use, where possible, market-based data such as interest rates,
yield curves or currency rates. These measurements are classified as Level 3.
When available, the Company uses quoted market prices to determine fair value and classifies such measurements as Level 1.
In some cases, where market prices are not available, the Company uses observable market-based inputs to calculate fair value,
in which case the measurements are classified as Level 2. If quoted or observable market prices are not available, the
Company determines fair value based upon valuation models that use, where possible, market-based data such as interest rates,
yield curves or currency rates. These measurements are classified as Level 3.
The carrying values of cash, cash equivalents, restricted cash, short-term investments, trade accounts receivable, accounts
The carrying values of cash, cash equivalents, restricted cash, short-term investments, trade accounts receivable, accounts
payable, and short-term debt approximate fair value due to the short-term nature of these instruments. In addition, the
payable, and short-term debt approximate fair value due to the short-term nature of these instruments. In addition, the
Company assesses the fair value of a disposal group for each reporting period it is held for sale. See Note 2 for additional
Company assesses the fair value of a disposal group for each reporting period it is held for sale. See Note 2 for additional
information regarding assets and liabilities held for sale. The fair value of the Company’s long-term debt is disclosed in Note
information regarding assets and liabilities held for sale. The fair value of the Company’s long-term debt is disclosed in Note
17.
17.
Note 17.
The Company holds investments in deferred compensation trusts to fund obligations under certain non-qualified deferred
The Company holds investments in deferred compensation trusts to fund obligations under certain non-qualified deferred
compensation plans. The Company records the fair value of these investments within other noncurrent assets on its
compensation plans. The Company records the fair value of these investments within other noncurrent assets on its
consolidated balance sheets. The Company classifies money market investments held by the trusts within Level 2 of the
consolidated balance sheets. The Company classifies money market investments held by the trusts within Level 2 of the
valuation hierarchy. The Company classifies all other investments held by the trusts within Level 1 of the valuation hierarchy,
valuation hierarchy. The Company classifies all other investments held by the trusts within Level 1 of the valuation hierarchy,
as it uses quoted market prices to determine the investments’ fair value. The Company’s deferred compensation obligations,
as it uses quoted market prices to determine the investments’ fair value. The Company’s deferred compensation obligations,
which are recorded as other noncurrent liabilities, are recorded at the fair values of the investments held by the trust. At March
which are recorded as other noncurrent liabilities, are recorded at the fair values of the investments held by the trust. At March
31, 2021 and 2020, the fair values of the investments and obligations for the Company’s deferred compensation plans each
31, 2021 and 2020, the fair values of the investments and obligations for the Company’s deferred compensation plans each
totaled $2.8 million and $3.8 million, respectively. The $1.0 million decrease in the fair value of the investments since March
totaled $2.8 million and $3.8 million, respectively. The $1.0 million decrease in the fair value of the investments since March
31, 2020 was primarily due to participant withdrawals during fiscal 2021.
31, 2020 was primarily due to participant withdrawals during fiscal 2021.
Plan assets related to the Company’s pension plans were classified as follows:
Plan assets related to the Company’s pension plans were classified as follows:
March 31, 2021
March 31, 2021
March 31, 2021
Level 2
Level 2
Level 2
Level 1
Level 1
Level 1
Total
Total
Total
Money market investments
Money market investments
Money market investments
Fixed income securities
Fixed income securities
Fixed income securities
Pooled equity funds
Pooled equity funds
Pooled equity funds
U.S. government and agency securities
U.S. government and agency securities
U.S. government and agency securities
Other
Other
Other
Fair value excluding investments measured at net asset value
Fair value excluding investments measured at net asset value
Investments measured at net asset value
Investments measured at net asset value
Total fair value
Total fair value
Fair value excluding investments measured at net asset value
Investments measured at net asset value
Total fair value
-
$
-
37.3
-
0.1
37.4
-
$
-
37.3
-
0.1
37.4
$
$
2.5
8.9
-
14.5
1.0
26.9
2.5
8.9
-
14.5
1.0
26.9
$
$
2.5
8.9
37.3
14.5
1.1
64.3
119.0
$
183.3
2.5
8.9
37.3
14.5
1.1
64.3
119.0
183.3
$
March 31, 2020
March 31, 2020
March 31, 2020
Level 2
Level 2
Level 2
Level 1
Level 1
Level 1
Total
Total
Total
Money market investments
Money market investments
Money market investments
Fixed income securities
Fixed income securities
Fixed income securities
Pooled equity funds
Pooled equity funds
Pooled equity funds
U.S. government and agency securities
U.S. government and agency securities
U.S. government and agency securities
Other
Other
Other
Fair value excluding investments measured at net asset value
Fair value excluding investment measured at net asset value
Investments measured at net asset value
Investments measured at net asset value
Total fair value
Total fair value
Fair value excluding investment measured at net asset value
Investments measured at net asset value
Total fair value
$
-
-
17.9
-
0.1
18.0
$
-
-
17.9
-
0.1
18.0
$
$
2.4
8.7
-
13.1
0.7
24.9
2.4
8.7
-
13.1
0.7
24.9
$
$
2.4
8.7
17.9
13.1
0.8
42.9
88.2
$
131.1
2.4
8.7
17.9
13.1
0.8
42.9
88.2
131.1
$
The Company determined the fair value of money market investments to approximate their net asset values, without discounts
The Company determined the fair value of money market investments to approximate their net asset values, without discounts
for credit quality or liquidity restrictions, and classified them within Level 2 of the valuation hierarchy. The Company
for credit quality or liquidity restrictions, and classified them within Level 2 of the valuation hierarchy. The Company
determined the fair value of pooled equity funds based upon quoted prices from active markets and classified them within
determined the fair value of pooled equity funds based upon quoted prices from active markets and classified them within
Level 1 of the valuation hierarchy. The Company determined the fair value of fixed income securities and U.S. government
Level 1 of the valuation hierarchy. The Company determined the fair value of fixed income securities and U.S. government
and agency securities based upon recent bid prices or the average of recent bid and asking prices when available and, if not
and agency securities based upon recent bid prices or the average of recent bid and asking prices when available and, if not
available, the Company valued them through matrix pricing models developed by sources considered by management to be
available, the Company valued them through matrix pricing models developed by sources considered by management to be
reliable. The Company classified these assets within Level 2 of the valuation hierarchy. As of March 31, 2021 and 2020, the
reliable. The Company classified these assets within Level 2 of the valuation hierarchy. As of March 31, 2021 and 2020, the
Company held no Level 3 assets within its pension plans.
Company held no Level 3 assets within its pension plans.
59
59
59
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
As a practical expedient, the Company valued certain investments, including pooled equity, fixed income and a real estate
As a practical expedient, the Company valued certain investments, including pooled equity, fixed income and a real estate
fund, using their net asset value (“NAV”) per unit, and therefore, has not classified these investments within the fair value
fund, using their net asset value (“NAV”) per unit, and therefore, has not classified these investments within the fair value
hierarchy. The terms and conditions for redemptions vary for the investments valued at NAV. The real estate and fixed
hierarchy. The terms and conditions for redemptions vary for the investments valued at NAV. The real estate and fixed
income investment funds may be redeemed quarterly and monthly, respectively, with a 90-day and 60-day notice period,
income investment funds may be redeemed quarterly and monthly, respectively, with a 90-day and 60-day notice period,
respectively. Other investments valued at NAV do not have significantly-restrictive redemption frequency or notice period
respectively. Other investments valued at NAV do not have significantly-restrictive redemption frequency or notice period
requirements. The Company does not intend to sell or otherwise dispose of these investments at prices different than the NAV
requirements. The Company does not intend to sell or otherwise dispose of these investments at prices different than the NAV
per unit.
per unit.
Note 5: Stock-Based Compensation
Note 5: Stock-Based Compensation
The Company’s stock-based incentive programs consist of the following: (1) a long-term incentive plan (“LTIP”) for officers
The Company’s stock-based incentive programs consist of the following: (1) a long-term incentive plan (“LTIP”) for officers
and other executives that consists of stock awards, stock options, and performance-based stock awards granted for retention
and other executives that consists of stock awards, stock options, and performance-based stock awards granted for retention
and performance, (2) a discretionary equity program for other management and key employees, and (3) stock awards for non-
and performance, (2) a discretionary equity program for other management and key employees, and (3) stock awards for non-
employee directors. The Company’s Board of Directors and the Human Capital and Compensation Committee, as applicable,
employee directors. The Company’s Board of Directors and the Human Capital and Compensation Committee, as applicable,
have discretionary authority to set the terms of the stock-based awards. Grants to employees during fiscal 2021 were issued
have discretionary authority to set the terms of the stock-based awards. Grants to employees during fiscal 2021 were issued
under the Company’s 2020 Incentive Compensation Plan. In lieu of performance-based stock awards, the Company granted
under the Company’s 2020 Incentive Compensation Plan. In lieu of performance-based stock awards, the Company granted
performance cash awards to the LTIP participants in fiscal 2021. At present, the Company accomplishes the fulfillment of
performance cash awards to the LTIP participants in fiscal 2021. At present, the Company accomplishes the fulfillment of
equity-based grants through the issuance of new common shares. As of March 31, 2021, approximately 1.7 million shares
equity-based grants through the issuance of new common shares. As of March 31, 2021, approximately 1.7 million shares
authorized under the 2020 Incentive Compensation Plan remain available for future grants. Employee participants have the
authorized under the 2020 Incentive Compensation Plan remain available for future grants. Employee participants have the
opportunity to deliver back to the Company the number of shares from the vesting of stock awards sufficient to satisfy the
opportunity to deliver back to the Company the number of shares from the vesting of stock awards sufficient to satisfy the
individual’s minimum tax withholding obligations. These shares are held as treasury shares. The Company recorded stock-
individual’s minimum tax withholding obligations. These shares are held as treasury shares. The Company recorded stock-
based compensation expense of $6.3 million, $6.6 million, and $7.9 million in fiscal 2021, 2020, and 2019, respectively.
based compensation expense of $6.3 million, $6.6 million, and $7.9 million in fiscal 2021, 2020, and 2019, respectively.
Stock Options
Stock Options
The Company recorded $0.9 million, $1.3 million, and $1.2 million of compensation expense related to stock options in fiscal
The Company recorded $0.9 million, $1.3 million, and $1.2 million of compensation expense related to stock options in fiscal
2021, 2020, and 2019, respectively. The fair value of stock options that vested during fiscal 2021, 2020, and 2019, was $1.3
2021, 2020, and 2019, respectively. The fair value of stock options that vested during fiscal 2021, 2020, and 2019, was $1.3
million, $1.2 million, and $1.2 million, respectively. As of March 31, 2021, the total compensation expense not yet
million, $1.2 million, and $1.2 million, respectively. As of March 31, 2021, the total compensation expense not yet
recognized related to non-vested stock options was $1.8 million and the weighted-average period in which the remaining
recognized related to non-vested stock options was $1.8 million and the weighted-average period in which the remaining
expense is expected to be recognized was 2.8 years.
expense is expected to be recognized was 2.8 years.
The Company estimated the fair value of option awards on the date of grant using the Black-Scholes option valuation model
and the following assumptions:
The Company estimated the fair value of option awards on the date of grant using the Black-Scholes option valuation model
and the following assumptions:
Fair value of options
Fair value of options
Fair value of options
Years ended March 31,
Years ended March 31,
Years ended March 31,
2020
$
5.56
2020
5.56
2021
3.46
$
2019
$
7.81
2019
7.81
$
2021
$
3.46
$
Risk-free interest rate
Expected life of awards in years
Expected life of awards in years
Expected life of awards in years
Risk-free interest rate
Risk-free interest rate
Expected volatility of the Company’s stock
Expected volatility of the Company's stock
Expected dividend yield on the Company’s stock
Expected dividend yield on the Company's stock
Expected dividend yield on the Company's stock
Expected volatility of the Company's stock
6.1
6.1
0.4%
0.4%
6.3
6.3
2.2%
2.2%
6.3
6.3
2.8%
2.8%
54.1%
54.1%
39.2%
39.2%
39.7%
39.7%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Stock options expire no later than 10 years after the grant date and have an exercise price equal to the fair market value of
Stock options expire no later than 10 years after the grant date and have an exercise price equal to the fair market value of
Modine’s common stock on the date of grant. The risk-free interest rate was based upon yields of U.S. Treasury zero-coupon
Modine’s common stock on the date of grant. The risk-free interest rate was based upon yields of U.S. Treasury zero-coupon
issues with a term corresponding to the expected life of the options. The expected volatility assumption was based upon
issues with a term corresponding to the expected life of the options. The expected volatility assumption was based upon
changes in the Company’s historical common stock prices over the same time period as the expected life of the awards. The
changes in the Company’s historical common stock prices over the same time period as the expected life of the awards. The
expected dividend yield is zero, as the Company currently does not anticipate paying dividends over the expected life of the
expected dividend yield is zero, as the Company currently does not anticipate paying dividends over the expected life of the
options. The expected lives of the awards are based upon historical patterns and the terms of the options. Outstanding options
options. The expected lives of the awards are based upon historical patterns and the terms of the options. Outstanding options
granted vest 25 percent annually for four years.
granted vest 25 percent annually for four years.
60
60
60
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
A summary of stock option activity for fiscal 2021 was as follows:
A summary of stock option activity for fiscal 2021 was as follows:
Weighted-average
Weighted-average
Weighted-average
exercise price
exercise price
exercise price
Weighted-average
Weighted-average
Weighted-average
remaining contractual
remaining contractual
remaining contractual
term (years)
term (years)
term (years)
Aggregate
intrinsic value
Aggregate
Aggregate
intrinsic value
intrinsic value
Outstanding, beginning
Outstanding, beginning
Outstanding, beginning
Granted
Granted
Granted
Exercised
Exercised
Exercised
Forfeited or expired
Forfeited or expired
Outstanding, ending
Outstanding, ending
Forfeited or expired
Outstanding, ending
Shares
Shares
Shares
1.4
1.4
$
$
12.49
12.49
6.88
6.88
10.56
10.56
10.94
$
11.63
$
10.94
11.63
0.4
0.4
(0.4)
(0.4)
(0.3)
1.1
(0.3)
1.1
Exercisable, March 31, 2021
Exercisable, March 31, 2021
Exercisable, March 31, 2021
0.5
0.5
$
$
13.80
13.80
7.1
7.1
5.1
5.1
$
$
3.9
3.9
$
$
0.9
0.9
The aggregate intrinsic value represents the difference between the closing price of Modine’s common shares on the last
The aggregate intrinsic value represents the difference between the closing price of Modine’s common shares on the last
trading day of fiscal 2021 over the exercise price of the stock options, multiplied by the number of options outstanding or
trading day of fiscal 2021 over the exercise price of the stock options, multiplied by the number of options outstanding or
exercisable. The aggregate intrinsic value is not recorded for financial statement purposes, and this value will change based
exercisable. The aggregate intrinsic value is not recorded for financial statement purposes, and this value will change based
upon daily changes in the price of Modine’s common shares.
upon daily changes in the price of Modine’s common shares.
Additional information related to stock options exercised is as follows:
Additional information related to stock options exercised is as follows:
Intrinsic value of stock options exercised
Intrinsic value of stock options exercised
Intrinsic value of stock options exercised
Proceeds from stock options exercised
Proceeds from stock options exercised
Proceeds from stock options exercised
Years ended March 31,
Years ended March 31,
Years ended March 31,
2020
$
0.1
2020
0.1
2021
1.4
$
2021
$
1.4
$
2019
$
0.7
2019
0.7
$
4.1
4.1
0.1
0.1
1.1
1.1
Restricted Stock
Restricted Stock
The Company recorded $4.3 million, $4.5 million, and $4.3 million of compensation expense related to restricted stock in
The Company recorded $4.3 million, $4.5 million, and $4.3 million of compensation expense related to restricted stock in
fiscal 2021, 2020, and 2019, respectively. The fair value of restricted stock awards that vested during fiscal 2021, 2020, and
fiscal 2021, 2020, and 2019, respectively. The fair value of restricted stock awards that vested during fiscal 2021, 2020, and
2019 was $4.5 million, $4.4 million, and $4.3 million, respectively. At March 31, 2021, the Company had $6.1 million of
2019 was $4.5 million, $4.4 million, and $4.3 million, respectively. At March 31, 2021, the Company had $6.1 million of
unrecognized compensation expense related to non-vested restricted stock, which it expects to recognize over a weighted-
unrecognized compensation expense related to non-vested restricted stock, which it expects to recognize over a weighted-
average period of 2.7 years. The Company values restricted stock awards using the closing market price of its common shares
average period of 2.7 years. The Company values restricted stock awards using the closing market price of its common shares
on the date of grant. The restricted stock awards granted annually vest 25 percent per year for four years, with the exception of
on the date of grant. The restricted stock awards granted annually vest 25 percent per year for four years, with the exception of
awards to non-employee directors, which fully vest upon grant.
awards to non-employee directors, which fully vest upon grant.
A summary of restricted stock activity for fiscal 2021 was as follows:
A summary of restricted stock activity for fiscal 2021 was as follows:
Vested
Granted
Non-vested balance, beginning
Non-vested balance, beginning
Non-vested balance, beginning
Granted
Granted
Vested
Vested
Forfeited
Forfeited
Non-vested balance, ending
Non-vested balance, ending
Forfeited
Non-vested balance, ending
Shares
Shares
Shares
0.5
0.5
Weighted-average
Weighted-average
Weighted-average
price
price
price
$
$
14.48
14.48
0.8
0.8
(0.5)
(0.5)
7.53
7.53
9.64
9.64
(0.1)
0.7
(0.1)
0.7
13.40
$
10.05
$
13.40
10.05
Restricted Stock – Performance-Based Shares
Restricted Stock – Performance-Based Shares
The Company recorded $1.1 million, $0.8 million, and $2.4 million of compensation expense related to performance-based
The Company recorded $1.1 million, $0.8 million, and $2.4 million of compensation expense related to performance-based
stock awards in fiscal 2021, 2020, and 2019, respectively. At March 31, 2021, the Company had $0.5 million of unrecognized
stock awards in fiscal 2021, 2020, and 2019, respectively. At March 31, 2021, the Company had $0.5 million of unrecognized
compensation expense related to non-vested performance-based stock awards, which is expected to be recognized over one
compensation expense related to non-vested performance-based stock awards, which is expected to be recognized over one
year. The Company values performance-based stock awards using the closing market price of its common shares on the date
year. The Company values performance-based stock awards using the closing market price of its common shares on the date
of grant.
of grant.
Shares are earned under the performance portion of the restricted stock award program based upon the attainment of certain
Shares are earned under the performance portion of the restricted stock award program based upon the attainment of certain
financial goals over a three-year period and are awarded after the end of that three-year performance period, if the performance
financial goals over a three-year period and are awarded after the end of that three-year performance period, if the performance
targets have been achieved. The performance metrics for the performance-based stock awards granted in fiscal 2020 and 2019
targets have been achieved. The performance metrics for the performance-based stock awards granted in fiscal 2020 and 2019
61
61
61
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
are based upon both a target three-year average consolidated cash flow return on invested capital and a target three-year
are based upon both a target three-year average consolidated cash flow return on invested capital and a target three-year
average annual revenue growth at the end of a three-year performance period, commencing with the fiscal year of grant. As
average annual revenue growth at the end of a three-year performance period, commencing with the fiscal year of grant. As
noted above, the Company granted performance cash awards in fiscal 2021 in lieu of performance-based stock awards. The
noted above, the Company granted performance cash awards in fiscal 2021 in lieu of performance-based stock awards. The
performance metrics for these cash awards are the same as the metrics for the fiscal 2020 and 2019 performance-based stock
performance metrics for these cash awards are the same as the metrics for the fiscal 2020 and 2019 performance-based stock
awards.
awards.
Note 6: Restructuring Activities
Note 6: Restructuring Activities
During fiscal 2021, restructuring actions consisted primarily of targeted headcount reductions and plant consolidation
During fiscal 2021, restructuring actions consisted primarily of targeted headcount reductions and plant consolidation
activities. The targeted headcount reductions were primarily in Europe within the Automotive segment and in the Americas
activities. The targeted headcount reductions were primarily in Europe within the Automotive segment and in the Americas
within the HDE segment. In addition, the Company eliminated the Vice President, CIS and Chief Operating Officer senior
within the HDE segment. In addition, the Company eliminated the Vice President, CIS and Chief Operating Officer senior
executive position and, as a result, recorded $1.3 million of severance-related expenses. These headcount reductions support
executive position and, as a result, recorded $1.3 million of severance-related expenses. These headcount reductions support
the Company’s objective of reducing operational and SG&A cost structures.
the Company’s objective of reducing operational and SG&A cost structures.
Also during fiscal 2021, the Company transferred production from its manufacturing facility in Zhongshan, China to another
Also during fiscal 2021, the Company transferred production from its manufacturing facility in Zhongshan, China to another
CIS segment manufacturing facility in China. As a result of this plant consolidation, the Company recorded $3.7 million of
CIS segment manufacturing facility in China. As a result of this plant consolidation, the Company recorded $3.7 million of
severance expenses during fiscal 2021. The Company is also in the process of transferring product lines to its CIS
severance expenses during fiscal 2021. The Company is also in the process of transferring product lines to its CIS
manufacturing facility in Mexico. These plant consolidation activities support the Company’s objective of achieving
manufacturing facility in Mexico. These plant consolidation activities support the Company’s objective of achieving
operational improvements and organizational efficiencies.
operational improvements and organizational efficiencies.
During fiscal 2020 and 2019, restructuring actions consisted primarily of targeted headcount reductions and plant
During fiscal 2020 and 2019, restructuring actions consisted primarily of targeted headcount reductions and plant
consolidation activities. The headcount reductions were primarily in Europe within the Automotive segment and in the
consolidation activities. The headcount reductions were primarily in Europe within the Automotive segment and in the
Americas within the HDE segment. The plant consolidation activities included transferring product lines to the Company’s
Americas within the HDE segment. The plant consolidation activities included transferring product lines to the Company’s
CIS manufacturing facility in Mexico.
CIS manufacturing facility in Mexico.
Restructuring and repositioning expenses were as follows:
Restructuring and repositioning expenses were as follows:
Years ended March 31,
Years ended March 31,
Years ended March 31,
2021
2021
2020
2020
2019
2019
Employee severance and related benefits
Employee severance and related benefits
Employee severance and related benefits
Other restructuring and repositioning expenses
Other restructuring and repositioning expenses
Other restructuring and repositioning expenses
Total
Total
Total
$
$
11.7
11.7
$
$
10.2
10.2
$
$
8.7
8.7
1.7
$
13.4
1.7
13.4
$
2.0
$
12.2
2.0
12.2
$
0.9
$
9.6
0.9
9.6
$
Other restructuring and repositioning expenses primarily consist of equipment transfer and plant consolidation costs.
Other restructuring and repositioning expenses primarily consist of equipment transfer and plant consolidation costs.
The Company accrues severance in accordance with its written plans, procedures, and relevant statutory requirements.
Changes in accrued severance were as follows:
The Company accrues severance in accordance with its written plans, procedures, and relevant statutory requirements.
Changes in accrued severance were as follows:
Beginning balance
Beginning balance
Beginning balance
Additions
Additions
Payments
Payments
Reclassified as held for sale
Reclassified as held for sale
Effect of exchange rate changes
Effect of exchange rate changes
Ending balance
Ending balance
Additions
Payments
Reclassified as held for sale
Effect of exchange rate changes
Ending balance
$
Years ended March 31,
Years ended March 31,
Years ended March 31,
2021
2020
2021
10.0
$
5.0
5.0
10.2
11.7
11.7
(15.1)
(10.5)
(10.5)
2020
$
10.0
10.2
(15.1)
$
(2.5)
0.3
$
4.0
(2.5)
0.3
4.0
$
-
(0.1)
$
5.0
-
(0.1)
5.0
$
During fiscal 2021, the Company recorded asset impairment charges totaling $166.8 million within its Automotive segment.
See Note 2 for additional information.
During fiscal 2021, the Company recorded asset impairment charges totaling $166.8 million within its Automotive segment.
See Note 2 for additional information.
During fiscal 2020, the Company recorded asset impairment charges totaling $7.5 million within its Automotive segment to
write down property and equipment assets in Austria and Germany to estimated fair value.
During fiscal 2020, the Company recorded asset impairment charges totaling $7.5 million within its Automotive segment to
write down property and equipment assets in Austria and Germany to estimated fair value.
Also during fiscal 2020, the Company recorded a $0.6 million impairment charge to reduce the carrying value of the
previously-closed CIS Austrian facility to its estimated fair value, less costs to sell. During fiscal 2019, the Company recorded
asset impairment charges of $0.4 million related to this closed facility.
Also during fiscal 2020, the Company recorded a $0.6 million impairment charge to reduce the carrying value of the
previously-closed CIS Austrian facility to its estimated fair value, less costs to sell. During fiscal 2019, the Company recorded
asset impairment charges of $0.4 million related to this closed facility.
62
62
62
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Note 7: Other Income and Expense
Note 7: Other Income and Expense
Other income and expense consisted of the following:
Other income and expense consisted of the following:
Interest income
Interest income
Foreign currency transactions (a)
Foreign currency transactions (a)
Net periodic benefit cost (b)
Net periodic benefit cost (b)
Equity in earnings of non-consolidated affiliate (c)
Equity in earnings of non-consolidated affiliate (c)
Total other expense - net
Total other expense - net
Years ended March 31,
Years ended March 31,
Years ended March 31,
2020
2020
2021
2021
2019
2019
$
0.5
$
0.5
$
0.4
$
0.4
$
0.4
$
0.4
0.6
0.6
(3.3)
(3.3)
-
-
(2.4)
(2.4)
(3.0)
(3.0)
0.2
0.2
(2.3)
(2.3)
(2.9)
(2.9)
0.7
0.7
$
(2.2)
$
(2.2)
$
(4.8)
$
(4.8)
$
(4.1)
$
(4.1)
(a) Foreign currency transactions primarily consist of foreign currency transaction gains and losses on the re-
measurement or settlement of foreign currency-denominated assets and liabilities, including intercompany loans and
transactions denominated in a foreign currency, along with gains and losses on foreign currency exchange contracts.
(a) Foreign currency transactions primarily consist of foreign currency transaction gains and losses on the re-
measurement or settlement of foreign currency-denominated assets and liabilities, including intercompany loans and
transactions denominated in a foreign currency, along with gains and losses on foreign currency exchange contracts.
(b) Net periodic benefit cost for the Company’s pension and postretirement plans is exclusive of service cost.
(b) Net periodic benefit cost for the Company’s pension and postretirement plans is exclusive of service cost.
(c) During fiscal 2020, the Company sold its ownership interest in Nikkei Heat Exchanger Company, Ltd. As a result of
(c) During fiscal 2020, the Company sold its ownership interest in Nikkei Heat Exchanger Company, Ltd. As a result of
the sale, the Company recorded a gain of $0.1 million, which is included within the fiscal 2020 amount. See Note 1
the sale, the Company recorded a gain of $0.1 million, which is included within the fiscal 2020 amount. See Note 1
for additional information.
for additional information.
Note 8: Income Taxes
Note 8: Income Taxes
The U.S. and foreign components of loss or earnings before income taxes and the provision or benefit for income taxes
consisted of the following:
The U.S. and foreign components of loss or earnings before income taxes and the provision or benefit for income taxes
consisted of the following:
Years ended March 31,
2021
2020
Years ended March 31,
Years ended March 31,
2020
2021
2019
2019
Components of (loss) earnings before income taxes:
Components of (loss) earnings before income taxes:
Components of (loss) earnings before income taxes:
United States
United States
United States
Foreign
Foreign
Foreign
Total (loss) earnings before income taxes
Total (loss) earnings before income taxes
Total (loss) earnings before income taxes
State:
Income tax provision (benefit):
Income tax provision (benefit):
Income tax provision (benefit):
Federal:
Federal:
Federal:
Current
Current
Current
Deferred
Deferred
Deferred
State:
State:
Current
Current
Current
Deferred
Deferred
Deferred
Foreign:
Foreign:
Foreign:
Current
Current
Current
Deferred
Deferred
Deferred
Total income tax provision (benefit)
Total income tax provision (benefit)
Total income tax provision (benefit)
$
$
(48.7)
(70.6)
(119.3)
$
(48.7)
(70.6)
(119.3)
$
(26.1)
$
36.5
10.4
$
(26.1)
36.5
10.4
$
22.4
$
58.4
80.8
$
22.4
58.4
80.8
$
$
$
$
(0.1)
$
58.3
(0.1)
58.3
$
(3.4)
$
(1.7)
(3.4)
(1.7)
$
$
(20.4)
(4.2)
(20.4)
(4.2)
0.4
9.2
0.4
9.2
(0.1)
(2.3)
(0.1)
(2.3)
0.7
1.9
0.7
1.9
22.0
0.4
90.2
$
22.0
0.4
90.2
$
14.9
5.0
12.4
$
14.9
5.0
12.4
$
19.0
(2.1)
(5.1)
$
19.0
(2.1)
(5.1)
$
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Act.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Act.
The Tax Act included a new provision designed to tax global intangible low taxed income (“GILTI”) starting in fiscal 2019.
The Tax Act included a new provision designed to tax global intangible low taxed income (“GILTI”) starting in fiscal 2019.
The Company elected to record the tax effects of the GILTI provision as a period expense in the applicable tax year. To
The Company elected to record the tax effects of the GILTI provision as a period expense in the applicable tax year. To
determine whether its net operating loss carryforward deferred tax assets are expected to be realized, the Company considers
determine whether its net operating loss carryforward deferred tax assets are expected to be realized, the Company considers
the applicable tax law ordering. Based upon this approach, net operating loss carryforwards are deemed to be realizable if they
the applicable tax law ordering. Based upon this approach, net operating loss carryforwards are deemed to be realizable if they
will reduce the expected tax liability when utilized, regardless of whether the 50% GILTI deduction or applicable tax credits
will reduce the expected tax liability when utilized, regardless of whether the 50% GILTI deduction or applicable tax credits
may have been available.
may have been available.
The Company’s accounting policy is to allocate the income tax provision between net earnings and other comprehensive
income. The Company applies its accounting for income taxes by tax jurisdiction, and in periods in which there is a loss
The Company’s accounting policy is to allocate the income tax provision between net earnings and other comprehensive
income. The Company applies its accounting for income taxes by tax jurisdiction, and in periods in which there is a loss
63
63
63
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
before income taxes and pre-tax income in other comprehensive income, it first allocates the income tax provision to other
comprehensive income, and then records a related tax benefit in the income tax provision.
before income taxes and pre-tax income in other comprehensive income, it first allocates the income tax provision to other
comprehensive income, and then records a related tax benefit in the income tax provision.
The reconciliation between the U.S. federal statutory rate and the Company’s effective tax rate was as follows:
The reconciliation between the U.S. federal statutory rate and the Company’s effective tax rate was as follows:
Tax credits
Compensation
Statutory federal tax
Valuation allowances
State taxes, net of federal benefit
Taxes on non-U.S. earnings and losses
Statutory federal tax
Statutory federal tax
State taxes, net of federal benefit
State taxes, net of federal benefit
Taxes on non-U.S. earnings and losses
Taxes on non-U.S. earnings and losses
Valuation allowances
Valuation allowances
Tax credits
Tax credits
Compensation
Compensation
Tax rate or law changes
Tax rate or law changes
Uncertain tax positions, net of settlements
Uncertain tax positions, net of settlements
Notional interest deductions
Notional interest deductions
Dividends and taxable foreign inclusions
Dividends and taxable foreign inclusions
Other
Other
Effective tax rate
Effective tax rate
Uncertain tax positions, net of settlements
Notional interest deductions
Dividends and taxable foreign inclusions
Other
Effective tax rate
Tax rate or law changes
Years ended March 31,
Years ended March 31,
Years ended March 31,
2021
2021
21.0%
21.0%
0.9
0.9
2020
21.0%
(12.0)
2020
21.0%
(12.0)
2019
2019
21.0%
21.0%
3.6
3.6
(9.1)
(9.1)
32.9
32.9
(92.9)
(92.9)
156.9
156.9
3.9
3.9
4.0
4.0
(36.7)
(36.7)
(26.1)
(26.1)
2.2
2.2
(1.3)
(1.3)
(0.2)
(0.2)
0.1
0.1
1.3
3.0
1.3
3.0
4.0
4.0
3.6
3.6
(37.9)
(37.9)
(12.5)
(11.0)
(12.5)
(11.0)
(0.1)
(0.1)
(12.0)
(12.0)
0.4
0.4
(2.5)
1.6
(2.5)
1.6
(0.1)
(0.1)
(0.6)
(0.6)
10.9
10.9
(75.6%)
(75.6%)
119.2%
119.2%
(6.3%)
(6.3%)
During fiscal 2021, the Company’s effective tax rate was largely driven by both significant impairment charges and income
During fiscal 2021, the Company’s effective tax rate was largely driven by both significant impairment charges and income
tax charges related to valuation allowances. See Note 2 for information regarding the impairment charges recorded during
tax charges related to valuation allowances. See Note 2 for information regarding the impairment charges recorded during
fiscal 2021. The income tax benefits associated with these impairment charges totaled $24.4 million and $13.3 million in the
fiscal 2021. The income tax benefits associated with these impairment charges totaled $24.4 million and $13.3 million in the
U.S. and in certain foreign jurisdictions, respectively, and increased the deferred tax assets in the applicable jurisdictions. The
U.S. and in certain foreign jurisdictions, respectively, and increased the deferred tax assets in the applicable jurisdictions. The
deferred tax assets, in turn, were evaluated for realizability, as further described below.
deferred tax assets, in turn, were evaluated for realizability, as further described below.
The Company records valuation allowances against its net deferred tax assets to the extent it determines it is more likely than
The Company records valuation allowances against its net deferred tax assets to the extent it determines it is more likely than
not that such assets will not be realized in the future. Each quarter, the Company evaluates the probability that its deferred tax
not that such assets will not be realized in the future. Each quarter, the Company evaluates the probability that its deferred tax
assets will be realized and determines whether valuation allowances or adjustments thereto are needed. This determination
assets will be realized and determines whether valuation allowances or adjustments thereto are needed. This determination
involves judgement and the use of significant estimates and assumptions, including expectations of future taxable income and
involves judgement and the use of significant estimates and assumptions, including expectations of future taxable income and
tax planning strategies. In addition, the Company considers the duration of statutory carryforward periods and historical
tax planning strategies. In addition, the Company considers the duration of statutory carryforward periods and historical
financial results.
financial results.
Based upon its analyses during fiscal 2021, the Company determined it was more likely than not that its deferred tax assets in
Based upon its analyses during fiscal 2021, the Company determined it was more likely than not that its deferred tax assets in
the U.S. and in certain foreign jurisdictions will not be realized in the future. As a result, the Company recorded income tax
the U.S. and in certain foreign jurisdictions will not be realized in the future. As a result, the Company recorded income tax
charges totaling $116.5 million to increase the valuation allowance on deferred tax assets in the U.S. ($103.3 million) and in
charges totaling $116.5 million to increase the valuation allowance on deferred tax assets in the U.S. ($103.3 million) and in
certain foreign jurisdictions ($13.2 million). The majority of the U.S. tax charge was recorded in the third quarter of fiscal
certain foreign jurisdictions ($13.2 million). The majority of the U.S. tax charge was recorded in the third quarter of fiscal
2021, which established a full valuation on the U.S. deferred tax assets. The Company’s analyses in the third quarter of fiscal
2021, which established a full valuation on the U.S. deferred tax assets. The Company’s analyses in the third quarter of fiscal
2021 included consideration of the impairment charges recorded in connection with the pending sale of the liquid-cooled
2021 included consideration of the impairment charges recorded in connection with the pending sale of the liquid-cooled
automotive business; see Note 2 for additional information. These impairment charges contributed to the Company entering
automotive business; see Note 2 for additional information. These impairment charges contributed to the Company entering
into a three-year cumulative loss position in the U.S. and in certain foreign jurisdictions as of December 31, 2020. The
into a three-year cumulative loss position in the U.S. and in certain foreign jurisdictions as of December 31, 2020. The
Company’s analyses as of December 31, 2020 also considered year-to-date taxable income, which had been negatively
Company’s analyses as of December 31, 2020 also considered year-to-date taxable income, which had been negatively
impacted by the COVID-19 pandemic and lower sales to data center cooling customers, and future projections of taxable
impacted by the COVID-19 pandemic and lower sales to data center cooling customers, and future projections of taxable
income in the relevant jurisdictions. After considering both the positive and negative evidence, the Company determined it is
income in the relevant jurisdictions. After considering both the positive and negative evidence, the Company determined it is
more likely than not that these deferred tax assets will not be realized. Also during fiscal 2021, the Company recorded a net
more likely than not that these deferred tax assets will not be realized. Also during fiscal 2021, the Company recorded a net
increase of deferred tax asset valuation allowances totaling $22.0 million and recorded a $9.3 million income tax benefit
increase of deferred tax asset valuation allowances totaling $22.0 million and recorded a $9.3 million income tax benefit
resulting from the allocation of the income tax provision between net earnings and other comprehensive income, in accordance
resulting from the allocation of the income tax provision between net earnings and other comprehensive income, in accordance
with the Company’s accounting policy described above.
with the Company’s accounting policy described above.
During fiscal 2020, the Company recorded net income tax charges totaling $2.9 million as a result of legal entity restructuring
During fiscal 2020, the Company recorded net income tax charges totaling $2.9 million as a result of legal entity restructuring
completed in preparation of a potential sale of the liquid-cooled automotive business and a $1.4 million income tax benefit
completed in preparation of a potential sale of the liquid-cooled automotive business and a $1.4 million income tax benefit
resulting from the recognition of a tax incentive in Italy. Also in fiscal 2020, the Company changed its determination of
resulting from the recognition of a tax incentive in Italy. Also in fiscal 2020, the Company changed its determination of
whether it was more likely than not certain deferred tax assets in the U.S. and in a foreign jurisdiction would be realized and,
whether it was more likely than not certain deferred tax assets in the U.S. and in a foreign jurisdiction would be realized and,
as a result, adjusted the respective valuation allowances and recorded an income tax charge of $8.4 million and an income tax
as a result, adjusted the respective valuation allowances and recorded an income tax charge of $8.4 million and an income tax
64
64
64
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
benefit of $1.3 million, respectively. In addition, the Company recorded a net increase of deferred tax asset valuation
benefit of $1.3 million, respectively. In addition, the Company recorded a net increase of deferred tax asset valuation
allowances totaling $9.2 million and recorded a $4.5 million income tax benefit associated with the reduction in unrecognized
allowances totaling $9.2 million and recorded a $4.5 million income tax benefit associated with the reduction in unrecognized
tax benefits resulting from a lapse in statutes of limitations and settlements.
tax benefits resulting from a lapse in statutes of limitations and settlements.
During fiscal 2019, the Company recorded income tax benefits totaling $14.5 million as a result of amending previous-year tax
During fiscal 2019, the Company recorded income tax benefits totaling $14.5 million as a result of amending previous-year tax
returns to recognize foreign tax credits that were expected to be realized based upon future sources of income and recorded a
returns to recognize foreign tax credits that were expected to be realized based upon future sources of income and recorded a
$2.5 million income tax benefit related to a manufacturing deduction in the United States. Shortly after the Tax Act was
$2.5 million income tax benefit related to a manufacturing deduction in the United States. Shortly after the Tax Act was
enacted, the SEC issued accounting guidance which provided a one-year measurement period during which a company could
enacted, the SEC issued accounting guidance which provided a one-year measurement period during which a company could
complete its accounting for the impacts of the Tax Act. During fiscal 2019, the Company completed its accounting for the Tax
complete its accounting for the impacts of the Tax Act. During fiscal 2019, the Company completed its accounting for the Tax
Act, which resulted in an income tax benefit totaling $7.7 million. The Company utilized its deferred tax attributes against the
Act, which resulted in an income tax benefit totaling $7.7 million. The Company utilized its deferred tax attributes against the
transition tax and finalized its fiscal 2018 U.S. federal income tax return. As a result, the Company decreased the provisional
transition tax and finalized its fiscal 2018 U.S. federal income tax return. As a result, the Company decreased the provisional
charge recorded for the reduction in the U.S. federal corporate tax rate by $9.3 million, since more deferred tax assets were
charge recorded for the reduction in the U.S. federal corporate tax rate by $9.3 million, since more deferred tax assets were
utilized to offset taxable income at a higher fiscal 2018 U.S. federal corporate tax rate. The Company also decreased the
utilized to offset taxable income at a higher fiscal 2018 U.S. federal corporate tax rate. The Company also decreased the
transition tax liability to $18.9 million, a reduction of $0.1 million. In addition, the Company recorded a charge of $1.7
transition tax liability to $18.9 million, a reduction of $0.1 million. In addition, the Company recorded a charge of $1.7
million for a reduction to state deferred tax assets. Also in fiscal 2019, the Company changed its determination of whether it
million for a reduction to state deferred tax assets. Also in fiscal 2019, the Company changed its determination of whether it
was more likely than not certain deferred tax assets of two separate subsidiaries in a foreign jurisdiction would be realized and,
was more likely than not certain deferred tax assets of two separate subsidiaries in a foreign jurisdiction would be realized and,
as a result, adjusted the respective valuation allowances and recorded an income tax benefit totaling $1.0 million. In addition,
as a result, adjusted the respective valuation allowances and recorded an income tax benefit totaling $1.0 million. In addition,
the Company recorded a net increase of deferred tax asset valuation allowances totaling $4.3 million and recorded a $2.2
the Company recorded a net increase of deferred tax asset valuation allowances totaling $4.3 million and recorded a $2.2
million income tax benefit associated with the reduction in unrecognized tax benefits resulting from a lapse in statutes of
million income tax benefit associated with the reduction in unrecognized tax benefits resulting from a lapse in statutes of
limitations.
limitations.
The Company has recorded valuation allowances against its net deferred tax assets to the extent it has determined it is more
The Company has recorded valuation allowances against its net deferred tax assets to the extent it has determined it is more
likely than not that such assets will not be realized in the future. The Company will maintain the valuation allowances in each
likely than not that such assets will not be realized in the future. The Company will maintain the valuation allowances in each
applicable tax jurisdiction until it determines it is more likely than not the deferred tax assets will be realized, thereby
applicable tax jurisdiction until it determines it is more likely than not the deferred tax assets will be realized, thereby
eliminating the need for a valuation allowance. As further discussed in Note 20, the COVID-19 pandemic has resulted in risks
eliminating the need for a valuation allowance. As further discussed in Note 20, the COVID-19 pandemic has resulted in risks
and uncertainties for the Company. Future events or circumstances, such as lower taxable income or unfavorable changes in
and uncertainties for the Company. Future events or circumstances, such as lower taxable income or unfavorable changes in
the financial outlook of the Company’s operations in certain foreign jurisdictions, could necessitate the establishment of
the financial outlook of the Company’s operations in certain foreign jurisdictions, could necessitate the establishment of
further valuation allowances.
further valuation allowances.
The tax effects of temporary differences that gave rise to deferred tax assets and liabilities were as follows:
The tax effects of temporary differences that gave rise to deferred tax assets and liabilities were as follows:
March 31,
March 31,
March 31,
2021
2021
2020
2020
Deferred tax assets:
Deferred tax assets:
Deferred tax assets:
Accounts receivable
Accounts receivable
Accounts receivable
Inventories
Inventories
Inventories
Plant and equipment
Plant and equipment
Plant and equipment
Lease liabilities
Lease liabilities
Lease liabilities
Pension and employee benefits
Pension and employee benefits
Pension and employee benefits
Net operating and capital losses
Net operating and capital losses
Net operating and capital losses
Credit carryforwards
Credit carryforwards
Credit carryforwards
Other, principally accrued liabilities
Other, principally accrued liabilities
Other, principally accrued liabilities
Total gross deferred tax assets
Total gross deferred tax assets
Total gross deferred tax assets
Less: valuation allowances
Less: valuation allowances
Less: valuation allowances
Net deferred tax assets
Net deferred tax assets
Net deferred tax assets
Deferred tax liabilities:
Deferred tax liabilities:
Deferred tax liabilities:
Plant and equipment
Plant and equipment
Plant and equipment
Lease assets
Lease assets
Lease assets
Goodwill
Goodwill
Intangible assets
Intangible assets
Intangible assets
Other
Other
Other
Goodwill
Total gross deferred tax liabilities
Net deferred tax assets
Total gross deferred tax liabilities
Total gross deferred tax liabilities
Net deferred tax assets
Net deferred tax assets
$
0.3
0.3
$
4.5
4.5
7.5
7.5
14.0
14.0
24.0
24.0
52.7
52.7
51.8
51.8
8.9
8.9
163.7
163.7
(90.7)
(90.7)
73.0
73.0
$
0.3
0.3
$
4.5
4.5
4.7
4.7
15.7
15.7
45.1
45.1
70.2
70.2
56.8
56.8
8.1
8.1
205.4
205.4
(46.9)
(46.9)
158.5
158.5
9.8
13.8
5.1
25.1
0.6
54.4
18.6
$
9.8
13.8
5.1
25.1
0.6
54.4
18.6
$
13.1
15.6
4.8
26.4
1.9
61.8
96.7
$
13.1
15.6
4.8
26.4
1.9
61.8
96.7
$
At March 31, 2021, the net deferred tax assets presented in the table above exclude deferred tax assets and liabilities classified
At March 31, 2021, the net deferred tax assets presented in the table above exclude deferred tax assets and liabilities classified
as held for sale. At March 31, 2021, the Company recorded a full valuation allowance for the net deferred tax assets of the
as held for sale. At March 31, 2021, the Company recorded a full valuation allowance for the net deferred tax assets of the
held for sale businesses. See Note 2 for additional information regarding the businesses held for sale.
held for sale businesses. See Note 2 for additional information regarding the businesses held for sale.
65
65
65
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Unrecognized tax benefits were as follows:
Unrecognized tax benefits were as follows:
Beginning balance
Gross increases - tax positions in prior period
Gross decreases - tax positions in prior period
Gross increases - tax positions in current period
Settlements
Lapse of statute of limitations
Ending balance
Beginning balance
Beginning balance
Gross increases - tax positions in prior period
Gross increases - tax positions in prior period
Gross decreases - tax positions in prior period
Gross decreases - tax positions in prior period
Gross increases - tax positions in current period
Gross increases - tax positions in current period
Settlements
Settlements
Lapse of statute of limitations
Lapse of statute of limitations
Ending balance
Ending balance
$
Years ended March 31,
Years ended March 31,
Years ended March 31,
2021
2020
2020
2021
13.8
9.7
$
$
13.8
9.7
$
0.3
0.1
0.3
0.1
(1.0)
(0.6)
(1.0)
(0.6)
1.1
0.9
1.1
0.9
(2.1)
-
(2.1)
-
(2.4)
(0.5)
(2.4)
(0.5)
$
9.7
$
9.6
9.7
9.6
$
$
The Company’s liability for unrecognized tax benefits as of March 31, 2021 was $9.6 million and, if recognized, $1.5 million
would have an effective tax rate impact. The Company estimates a $2.4 million decrease in unrecognized tax benefits during
fiscal 2022 due to lapses in statutes of limitations and settlements. If recognized, these reductions would not have a significant
impact on the Company’s effective tax rate.
The Company’s liability for unrecognized tax benefits as of March 31, 2021 was $9.6 million and, if recognized, $1.5 million
would have an effective tax rate impact. The Company estimates a $2.4 million decrease in unrecognized tax benefits during
fiscal 2022 due to lapses in statutes of limitations and settlements. If recognized, these reductions would not have a significant
impact on the Company’s effective tax rate.
The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.
During fiscal 2021 and 2020, interest and penalties included within income tax expense were not significant. At March 31,
2021 and 2020, accrued interest and penalties totaled $0.6 million and $0.5 million, respectively.
The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.
During fiscal 2021 and 2020, interest and penalties included within income tax expense were not significant. At March 31,
2021 and 2020, accrued interest and penalties totaled $0.6 million and $0.5 million, respectively.
The Company files income tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout
the world. At March 31, 2021, the Company was under income tax examination in a number of jurisdictions. The following
tax years remain subject to examination for the Company’s major tax jurisdictions:
The Company files income tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout
the world. At March 31, 2021, the Company was under income tax examination in a number of jurisdictions. The following
tax years remain subject to examination for the Company’s major tax jurisdictions:
Germany
Germany
Italy
Italy
United States
United States
Fiscal 2015 - Fiscal 2020
Fiscal 2016 - Fiscal 2020
Fiscal 2017 - Fiscal 2020
Fiscal 2015 - Fiscal 2020
Fiscal 2016 - Fiscal 2020
Fiscal 2017 - Fiscal 2020
At March 31, 2021, the Company had federal and state tax credits of $60.5 million that, if not utilized against U.S. taxes, will
At March 31, 2021, the Company had federal and state tax credits of $60.5 million that, if not utilized against U.S. taxes, will
expire between fiscal 2022 and 2041. The Company also had state and local tax loss carryforwards totaling $135.8 million
expire between fiscal 2022 and 2041. The Company also had state and local tax loss carryforwards totaling $135.8 million
that, if not utilized against state apportioned taxable income, will expire between fiscal 2022 and 2041. In addition, the
that, if not utilized against state apportioned taxable income, will expire between fiscal 2022 and 2041. In addition, the
Company had tax loss and foreign attribute carryforwards totaling $211.4 million in various tax jurisdictions throughout the
Company had tax loss and foreign attribute carryforwards totaling $211.4 million in various tax jurisdictions throughout the
world. Carryforwards in the U.S. and in certain foreign jurisdictions are offset by valuation allowances. If not utilized against
world. Carryforwards in the U.S. and in certain foreign jurisdictions are offset by valuation allowances. If not utilized against
taxable income, $6.8 million of these carryforwards will expire between fiscal 2022 and 2034, and $204.6 million, mainly
taxable income, $6.8 million of these carryforwards will expire between fiscal 2022 and 2034, and $204.6 million, mainly
related to the U.S, Germany and Italy, will not expire due to an unlimited carryforward period.
related to the U.S, Germany and Italy, will not expire due to an unlimited carryforward period.
The Company’s practice and intention is to reinvest, with certain insignificant exceptions, the earnings of its non-U.S.
The Company’s practice and intention is to reinvest, with certain insignificant exceptions, the earnings of its non-U.S.
subsidiaries outside of the U.S., and therefore, the Company has not recorded foreign withholding taxes or deferred income
subsidiaries outside of the U.S., and therefore, the Company has not recorded foreign withholding taxes or deferred income
taxes for these earnings. The Company has estimated the net amount of unrecognized foreign withholding tax and deferred tax
taxes for these earnings. The Company has estimated the net amount of unrecognized foreign withholding tax and deferred tax
liabilities would total approximately $10.0 million if the accumulated foreign earnings were distributed; however, the actual
liabilities would total approximately $10.0 million if the accumulated foreign earnings were distributed; however, the actual
tax cost would be dependent on circumstances existing when remittance occurs.
tax cost would be dependent on circumstances existing when remittance occurs.
66
66
66
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Note 9: Earnings Per Share
Note 9: Earnings Per Share
The components of basic and diluted earnings per share were as follows:
The components of basic and diluted earnings per share were as follows:
Years ended March 31,
2021
Years ended March 31,
Years ended March 31,
2020
2020
2021
2019
2019
Basic Earnings Per Share:
Net (loss) earnings attributable to Modine
Less: Undistributed earnings attributable to unvested shares
Basic Earnings Per Share:
Net (loss) earnings attributable to Modine
Less: Undistributed earnings attributable to unvested shares
Net (loss) earnings available to Modine shareholders
Net (loss) earnings available to Modine shareholders
$ (210.7)
-
$ (210.7)
-
$ (2.2)
-
$ (2.2)
-
$ (210.7)
$ (210.7)
$ (2.2)
$ (2.2)
$ 84.8
$ 84.8
(0.4)
$ 84.4
(0.4)
$ 84.4
Weighted-average shares outstanding - basic
Weighted-average shares outstanding - basic
51.3
51.3
50.8
50.8
50.5
50.5
Net (loss) earnings per share - basic
Net (loss) earnings per share - basic
$ (4.11)
$ (4.11)
$ (0.04)
$ (0.04)
$ 1.67
$ 1.67
Diluted Earnings Per Share:
Net (loss) earnings attributable to Modine
Less: Undistributed earnings attributable to unvested shares
Net (loss) earnings available to Modine shareholders
Diluted Earnings Per Share:
Net (loss) earnings attributable to Modine
Less: Undistributed earnings attributable to unvested shares
Net (loss) earnings available to Modine shareholders
Weighted-average shares outstanding - basic
Effect of dilutive securities
Weighted-average shares outstanding - diluted
Weighted-average shares outstanding - basic
Effect of dilutive securities
Weighted-average shares outstanding - diluted
$ (210.7)
-
$ (210.7)
-
$ (2.2)
-
$ (2.2)
-
$ 84.8
(0.2)
$ 84.8
(0.2)
$ (210.7)
$ (210.7)
$ (2.2)
$ (2.2)
$ 84.6
$ 84.6
51.3
-
51.3
-
50.8
-
50.8
-
50.5
0.8
50.5
0.8
51.3
51.3
50.8
50.8
51.3
51.3
Net (loss) earnings per share - diluted
Net (loss) earnings per share - diluted
$ (4.11)
$ (4.11)
$ (0.04)
$ (0.04)
$ 1.65
$ 1.65
For fiscal 2021, 2020 and 2019, the calculation of diluted earnings per share excluded 1.0 million, 1.1 million, and 0.4 million
For fiscal 2021, 2020 and 2019, the calculation of diluted earnings per share excluded 1.0 million, 1.1 million, and 0.4 million
stock options, respectively, because they were anti-dilutive. For fiscal 2021, 2020 and 2019, the calculation of diluted
stock options, respectively, because they were anti-dilutive. For fiscal 2021, 2020 and 2019, the calculation of diluted
earnings per share excluded 0.4 million, 0.5 million, and 0.3 million restricted stock awards, respectively, because they were
earnings per share excluded 0.4 million, 0.5 million, and 0.3 million restricted stock awards, respectively, because they were
anti-dilutive. For fiscal 2021 and 2020, the total number of potentially-dilutive securities was 0.2 million and 0.3 million,
anti-dilutive. For fiscal 2021 and 2020, the total number of potentially-dilutive securities was 0.2 million and 0.3 million,
respectively. However, these securities were not included in the computation of diluted net loss per share since to do so would
respectively. However, these securities were not included in the computation of diluted net loss per share since to do so would
have decreased the loss per share.
have decreased the loss per share.
Note 10: Cash, Cash Equivalents and Restricted Cash
Note 10: Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash consisted of the following:
Cash, cash equivalents and restricted cash consisted of the following:
Restricted cash
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents
Restricted cash
Restricted cash
Cash and restricted cash held for sale
Cash and restricted cash held for sale
Total cash, cash equivalents, restricted cash and cash held for sale
Total cash, cash equivalents, restricted cash and cash held for sale
Cash and restricted cash held for sale
Total cash, cash equivalents, restricted cash and cash held for sale
March 31,
March 31,
2021
2021
37.8
$
37.8
2020
70.9
$
2020
70.9
$
$
0.1
0.1
0.4
0.4
8.2
46.1
$
8.2
46.1
$
-
71.3
$
-
71.3
$
Restricted cash, which is reported within other current assets and other noncurrent assets in the consolidated balance sheets,
Restricted cash, which is reported within other current assets and other noncurrent assets in the consolidated balance sheets,
consists primarily of deposits for contractual guarantees or commitments required for rents, import and export duties, and
consists primarily of deposits for contractual guarantees or commitments required for rents, import and export duties, and
commercial agreements.
commercial agreements.
67
67
67
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Note 11: Inventories
Note 11: Inventories
Inventories consisted of the following:
Inventories consisted of the following:
Raw materials
Raw materials
Raw materials
Work in process
Work in process
Work in process
Finished goods
Finished goods
Finished goods
Total inventories
Total inventories
Total inventories
March 31,
March 31,
2021
2021
2020
2020
$ 117.1
$ 117.1
$ 123.6
$ 123.6
38.5
38.5
34.6
34.6
40.0
40.0
49.2
49.2
$ 195.6
$ 195.6
$ 207.4
$ 207.4
At March 31, 2021, inventories excluded amounts classified as held for sale. See Note 2 for additional information.
At March 31, 2021, inventories excluded amounts classified as held for sale. See Note 2 for additional information.
Note 12: Property, Plant and Equipment
Note 12: Property, Plant and Equipment
Property, plant and equipment, including depreciable lives, consisted of the following:
Property, plant and equipment, including depreciable lives, consisted of the following:
March 31,
March 31,
2021
2021
2020
2020
Land
Buildings and improvements (10-40 years)
Land
Land
Buildings and improvements (10-40 years)
Buildings and improvements (10-40 years)
Machinery and equipment (3-15 years)
Machinery and equipment (3-15 years)
Machinery and equipment (3-15 years)
Office equipment (3-10 years)
Office equipment (3-10 years)
Office equipment (3-10 years)
Construction in progress
Construction in progress
Construction in progress
Less: accumulated depreciation
Less: accumulated depreciation
Less: accumulated depreciation
Net property, plant and equipment
Net property, plant and equipment
Net property, plant and equipment
$
$
16.4
203.5
16.4
203.5
$
$
19.7
276.7
19.7
276.7
623.2
81.3
623.2
81.3
19.0
943.4
19.0
943.4
870.3
95.2
870.3
95.2
40.5
40.5
1,302.4
1,302.4
(673.5)
$
269.9
(673.5)
269.9
$
(854.4)
$
448.0
(854.4)
448.0
$
At March 31, 2021, property, plant and equipment excluded amounts classified as held for sale. In addition, upon classifying
At March 31, 2021, property, plant and equipment excluded amounts classified as held for sale. In addition, upon classifying
the liquid- and air-cooled automotive businesses as held for sale, the Company ceased depreciating the property, plant and
the liquid- and air-cooled automotive businesses as held for sale, the Company ceased depreciating the property, plant and
equipment within the disposal groups. See Note 2 for additional information.
equipment within the disposal groups. See Note 2 for additional information.
Depreciation expense totaled $60.1 million, $68.2 million, and $67.9 million for fiscal 2021, 2020, and 2019, respectively.
Depreciation expense totaled $60.1 million, $68.2 million, and $67.9 million for fiscal 2021, 2020, and 2019, respectively.
Gains and losses related to the disposal of property, plant and equipment are recorded within SG&A expenses. For fiscal
Gains and losses related to the disposal of property, plant and equipment are recorded within SG&A expenses. For fiscal
2021, 2020, and 2019, losses related to the disposal of property, plant and equipment totaled $0.7 million, $0.6 million, and
2021, 2020, and 2019, losses related to the disposal of property, plant and equipment totaled $0.7 million, $0.6 million, and
$0.9 million, respectively.
$0.9 million, respectively.
Note 13: Intangible Assets
Note 13: Intangible Assets
Intangible assets consisted of the following:
Intangible assets consisted of the following:
March 31, 2021
March 31, 2021
March 31, 2020
March 31, 2020
Gross
Carrying
Gross
Carrying
Accumulated
Accumulated
Net
Net
Intangible
Intangible
Gross
Carrying
Gross
Carrying
Accumulated
Accumulated
Net
Net
Intangible
Intangible
Value
Value
Amortization
Amortization
Assets
Assets
Value
Value
Amortization
Amortization
Assets
Assets
Customer relationships
Customer relationships
Customer relationships
Trade names
Trade names
Trade names
Acquired technology
Acquired technology
Acquired technology
Total intangible assets
Total intangible assets
Total intangible assets
$
$
62.8
62.8
$
$
(16.9)
(16.9)
$
$
45.9
45.9
$
$
60.8
60.8
$
$
(12.6)
(12.6)
$
$
48.2
48.2
51.5
51.5
(11.4)
(11.4)
40.1
40.1
58.3
58.3
(16.2)
(16.2)
42.1
42.1
23.6
$
142.7
23.6
142.7
(7.6)
$
(36.4)
(7.6)
(36.4)
$
$
16.0
$
106.3
16.0
106.3
$
23.9
$
138.2
23.9
138.2
(9.3)
$
(37.6)
(9.3)
(37.6)
$
$
14.6
$
100.6
14.6
100.6
$
68
68
68
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
The Company recorded $8.5 million, $8.9 million, and $9.0 million of amortization expense during fiscal 2021, 2020, and
The Company recorded $8.5 million, $8.9 million, and $9.0 million of amortization expense during fiscal 2021, 2020, and
2019, respectively. The Company estimates that it will record $8.4 million of amortization expense in fiscal 2022 and
2019, respectively. The Company estimates that it will record $8.4 million of amortization expense in fiscal 2022 and
approximately $8.0 million of annual amortization expense in fiscal 2023 through 2026.
approximately $8.0 million of annual amortization expense in fiscal 2023 through 2026.
Note 14: Goodwill
Note 14: Goodwill
Changes in the carrying amount of goodwill, by segment and in the aggregate, were as follows:
Changes in the carrying amount of goodwill, by segment and in the aggregate, were as follows:
Balance, March 31, 2019
Balance, March 31, 2019
Balance, March 31, 2019
Impairment charge
Impairment charge
Impairment charge
Effect of exchange rate changes
Effect of exchange rate changes
Effect of exchange rate changes
Balance, March 31, 2020
Balance, March 31, 2020
Balance, March 31, 2020
Effect of exchange rate changes
Effect of exchange rate changes
Effect of exchange rate changes
Balance, March 31, 2021
Balance, March 31, 2021
Balance, March 31, 2021
BHVAC
BHVAC
14.1
$
14.1
$
-
-
(0.6)
(0.6)
13.5
13.5
1.3
1.3
$
14.8
14.8
$
$
CIS
CIS
153.9
$
153.9
-
-
(1.3)
(1.3)
152.6
152.6
3.3
3.3
155.9
155.9
$
Automotive
Automotive
0.5
$
0.5
$
(0.5)
(0.5)
-
-
-
-
-
-
$
-
$
-
Total
$
$
Total
168.5
168.5
(0.5)
(0.5)
(1.9)
(1.9)
166.1
166.1
4.6
4.6
170.7
170.7
$
$
$
The Company tests goodwill for impairment annually, as of March 31, or more frequently if events or circumstances change
The Company tests goodwill for impairment annually, as of March 31, or more frequently if events or circumstances change
that would, more likely than not, reduce the fair value of a reporting unit below its carrying value. To test goodwill for
that would, more likely than not, reduce the fair value of a reporting unit below its carrying value. To test goodwill for
impairment, the Company determines the fair value of each reporting unit based upon the present value of estimated future
impairment, the Company determines the fair value of each reporting unit based upon the present value of estimated future
cash flows and compares the fair value of each reporting unit with its carrying value. The Company’s determination of fair
cash flows and compares the fair value of each reporting unit with its carrying value. The Company’s determination of fair
value involves judgment and the use of significant estimates and assumptions, including assumptions regarding the revenue
value involves judgment and the use of significant estimates and assumptions, including assumptions regarding the revenue
growth rates and operating profit margins used to calculate estimated future cash flows, risk-adjusted discount rates, business
growth rates and operating profit margins used to calculate estimated future cash flows, risk-adjusted discount rates, business
trends and market conditions.
trends and market conditions.
As a result of its annual goodwill impairment tests performed as of March 31, 2021, the Company determined that the fair
As a result of its annual goodwill impairment tests performed as of March 31, 2021, the Company determined that the fair
value of each of the reporting units within its BHVAC and CIS segments exceeded their respective book values.
value of each of the reporting units within its BHVAC and CIS segments exceeded their respective book values.
In fiscal 2020, the Company determined that the goodwill recorded within its Automotive segment was fully impaired and
recorded a $0.5 million impairment charge as a result.
In fiscal 2020, the Company determined that the goodwill recorded within its Automotive segment was fully impaired and
recorded a $0.5 million impairment charge as a result.
At both March 31, 2021 and 2020, accumulated goodwill impairment losses totaled $31.6 million and $9.2 million, within the
HDE and Automotive segments, respectively.
At both March 31, 2021 and 2020, accumulated goodwill impairment losses totaled $31.6 million and $9.2 million, within the
HDE and Automotive segments, respectively.
Note 15: Product Warranties and Other Commitments
Note 15: Product Warranties and Other Commitments
Product Warranties
Product Warranties
Many of the Company’s products are covered under a warranty period ranging from one to five years. The Company records a
Many of the Company’s products are covered under a warranty period ranging from one to five years. The Company records a
liability for product warranty obligations at the time of sale and adjusts its warranty accruals if it becomes probable that
liability for product warranty obligations at the time of sale and adjusts its warranty accruals if it becomes probable that
expected claims will differ from previous estimates.
expected claims will differ from previous estimates.
Changes in accrued warranty costs were as follows:
Changes in accrued warranty costs were as follows:
Years ended March 31,
2021
Years ended March 31,
Years ended March 31,
2020
2021
2020
Beginning balance
Warranties recorded at time of sale
Beginning balance
Warranties recorded at time of sale
Adjustments to pre-existing warranties
Settlements
Adjustments to pre-existing warranties
Settlements
Reclassified as held for sale
Reclassified as held for sale
Effect of exchange rate changes
Effect of exchange rate changes
Ending balance
Ending balance
$
7.9
$
5.5
7.9
5.5
$
9.2
$
5.3
9.2
5.3
(0.9)
(5.6)
(0.9)
(5.6)
(2.0)
0.3
(2.0)
0.3
(1.6)
(4.8)
(1.6)
(4.8)
-
(0.2)
-
(0.2)
$
7.9
$
7.9
$
5.2
$
5.2
69
69
69
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Indemnification Agreements
Indemnification Agreements
From time to time, the Company provides indemnification agreements related to the sale or purchase of an entity or facility.
From time to time, the Company provides indemnification agreements related to the sale or purchase of an entity or facility.
These indemnification agreements cover customary representations and warranties typically provided in conjunction with such
These indemnification agreements cover customary representations and warranties typically provided in conjunction with such
transactions, including income, sales, excise or other tax matters, environmental matters and other third-party claims. The
transactions, including income, sales, excise or other tax matters, environmental matters and other third-party claims. The
indemnification periods provided generally range from less than one year to fifteen years. In addition, standard
indemnification periods provided generally range from less than one year to fifteen years. In addition, standard
indemnification provisions reside in many commercial agreements to which the Company is a party and relate to responsibility
indemnification provisions reside in many commercial agreements to which the Company is a party and relate to responsibility
in the event of potential third-party claims. The fair value of the Company’s outstanding indemnification obligations at March
in the event of potential third-party claims. The fair value of the Company’s outstanding indemnification obligations at March
31, 2021 was not material.
31, 2021 was not material.
Commitments
Commitments
At March 31, 2021, the Company had capital expenditure commitments of $10.0 million, excluding commitments of the held
At March 31, 2021, the Company had capital expenditure commitments of $10.0 million, excluding commitments of the held
for sale liquid- and air-cooled automotive businesses. Significant commitments include tooling and equipment expenditures
for sale liquid- and air-cooled automotive businesses. Significant commitments include tooling and equipment expenditures
for new and renewal programs with vehicular customers. The Company utilizes inventory arrangements with certain vendors
for new and renewal programs with vehicular customers. The Company utilizes inventory arrangements with certain vendors
in the normal course of business under which the vendors maintain inventory stock at the Company’s facilities or at outside
in the normal course of business under which the vendors maintain inventory stock at the Company’s facilities or at outside
facilities. Title passes to the Company at the time goods are withdrawn for use in production. The Company has agreements
facilities. Title passes to the Company at the time goods are withdrawn for use in production. The Company has agreements
with the vendors to use the material within a specific period of time. In some cases, the Company bears the risk of loss for the
with the vendors to use the material within a specific period of time. In some cases, the Company bears the risk of loss for the
inventory because Modine is required to insure the inventory against damage and/or theft. This inventory is included within
inventory because Modine is required to insure the inventory against damage and/or theft. This inventory is included within
the Company’s consolidated balance sheets as raw materials inventory.
the Company’s consolidated balance sheets as raw materials inventory.
Note 16: Leases
Note 16: Leases
Effective April 1, 2019, the Company adopted new lease accounting guidance; see Note 1 for additional information.
Effective April 1, 2019, the Company adopted new lease accounting guidance; see Note 1 for additional information.
The Company determines if an arrangement is a lease at contract inception. The lease term begins upon lease commencement,
The Company determines if an arrangement is a lease at contract inception. The lease term begins upon lease commencement,
which is when the Company takes possession of the asset, and may include options to extend or terminate the lease when it is
which is when the Company takes possession of the asset, and may include options to extend or terminate the lease when it is
reasonably certain that such options will be exercised. The Company uses the lease term within its determination of the
reasonably certain that such options will be exercised. The Company uses the lease term within its determination of the
appropriate lease classification, either as an operating lease or as a finance lease, and to calculate straight-line lease expense
appropriate lease classification, either as an operating lease or as a finance lease, and to calculate straight-line lease expense
for its operating leases.
for its operating leases.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the
Company’s obligation to make lease payments arising from the lease. The Company recognizes ROU assets and lease
Company’s obligation to make lease payments arising from the lease. The Company recognizes ROU assets and lease
liabilities at the lease commencement date, based upon the present value of lease payments over the lease term. As its lease
liabilities at the lease commencement date, based upon the present value of lease payments over the lease term. As its lease
agreements typically do not provide an implicit interest rate, the Company primarily uses an incremental borrowing rate to
agreements typically do not provide an implicit interest rate, the Company primarily uses an incremental borrowing rate to
calculate the ROU asset and lease liability. In determining the incremental borrowing rate, the Company considers its current
calculate the ROU asset and lease liability. In determining the incremental borrowing rate, the Company considers its current
collateralized borrowing rate, the term of the lease, and the economic environment where the lease activity is concentrated.
collateralized borrowing rate, the term of the lease, and the economic environment where the lease activity is concentrated.
The Company believes this method effectively estimates a borrowing rate that it could obtain for a debt instrument with
The Company believes this method effectively estimates a borrowing rate that it could obtain for a debt instrument with
similar terms as the lease agreement.
similar terms as the lease agreement.
Based upon its accounting policy, the Company does not separate lease and non-lease components for any asset class. In
Based upon its accounting policy, the Company does not separate lease and non-lease components for any asset class. In
addition, the Company does not record short-term leases (i.e. leases with an initial term of 12 months or less) on its
addition, the Company does not record short-term leases (i.e. leases with an initial term of 12 months or less) on its
consolidated balance sheets.
consolidated balance sheets.
Certain leases require the Company to pay taxes, insurance, maintenance, and other operating expenses associated with the
Certain leases require the Company to pay taxes, insurance, maintenance, and other operating expenses associated with the
leased asset. Such amounts are not included in the measurement of the lease liability to the extent they are variable in nature.
leased asset. Such amounts are not included in the measurement of the lease liability to the extent they are variable in nature.
These variable lease costs are recognized as variable lease expense when incurred. The depreciable life of the ROU assets and
These variable lease costs are recognized as variable lease expense when incurred. The depreciable life of the ROU assets and
related leasehold improvements are limited by the expected lease term, unless the lease contains a provision to transfer title to
related leasehold improvements are limited by the expected lease term, unless the lease contains a provision to transfer title to
the Company or a purchase option that the Company expects to execute.
the Company or a purchase option that the Company expects to execute.
The Company’s most significant leases represent leases of real estate, such as manufacturing facilities, warehouses, and
The Company’s most significant leases represent leases of real estate, such as manufacturing facilities, warehouses, and
offices. In addition, the Company leases manufacturing and IT equipment and vehicles. The Company’s most significant
offices. In addition, the Company leases manufacturing and IT equipment and vehicles. The Company’s most significant
leases have remaining lease terms of 1 to 13 years. Certain leases contain renewal options for varying periods, which are at
leases have remaining lease terms of 1 to 13 years. Certain leases contain renewal options for varying periods, which are at
the Company’s discretion. If reasonably certain of exercise, the Company includes the renewal periods within the calculation
the Company’s discretion. If reasonably certain of exercise, the Company includes the renewal periods within the calculation
of ROU assets and lease liabilities. The Company’s lease agreements do not contain material residual value guarantees or
of ROU assets and lease liabilities. The Company’s lease agreements do not contain material residual value guarantees or
material restrictive covenants.
material restrictive covenants.
70
70
70
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Lease Assets and Liabilities
The following table provides a summary of leases recorded on the consolidated balance sheets. The March 31, 2021 amounts
exclude operating lease ROU assets and liabilities, which each totaled $6.1 million, that are classified as held for sale on the
Company’s consolidated balance sheet; see Note 2 for additional information.
Lease Assets and Liabilities
The following table provides a summary of leases recorded on the consolidated balance sheets. The March 31, 2021 amounts
exclude operating lease ROU assets and liabilities, which each totaled $6.1 million, that are classified as held for sale on the
Company’s consolidated balance sheet; see Note 2 for additional information.
Lease Assets
Lease Assets
Lease Assets
Balance Sheet Location
Balance Sheet Location
March 31, 2021 March 31, 2020
March 31, 2021 March 31, 2020
Operating lease ROU assets
Finance lease ROU assets (a) Property, plant and equipment - net
Other noncurrent assets
Operating lease ROU assets
Other noncurrent assets
Operating lease ROU assets
Finance lease ROU assets (a) Property, plant and equipment - net
Property, plant and equipment - net
Finance lease ROU assets (a)
Other noncurrent assets
$
$
54.1
8.3
54.1
8.3
$
$
61.4
8.5
61.4
8.5
Lease Liabilities
Lease Liabilities
Lease Liabilities
Operating lease liabilities
Operating lease liabilities
Finance lease liabilities
Finance lease liabilities
Operating lease liabilities
Operating lease liabilities
Operating lease liabilities
Operating lease liabilities
Finance lease liabilities
Finance lease liabilities
Finance lease liabilities
Finance lease liabilities
Other current liabilities
Other current liabilities
Other current liabilities
Other noncurrent liabilities
Other noncurrent liabilities
Other noncurrent liabilities
Long-term debt - current portion
Long-term debt - current portion
Long-term debt - current portion
Long-term debt
Long-term debt
Long-term debt
$
$
11.2
44.8
0.4
3.2
11.2
44.8
0.4
3.2
$
$
10.9
50.3
0.4
3.3
10.9
50.3
0.4
3.3
(a) Finance lease ROU assets were recorded net of accumulated amortization of $2.4 million and $1.8 million as of
(a) Finance lease ROU assets were recorded net of accumulated amortization of $2.4 million and $1.8 million as of
March 31, 2021 and 2020, respectively.
March 31, 2021 and 2020, respectively.
Components of Lease Expense
The Company records operating lease expense as either cost of sales or SG&A expenses within its consolidated statements of
operations, depending upon the nature and use of the ROU assets. The Company records finance lease expense as depreciation
expense within cost of sales or SG&A expenses, depending upon the nature and use of the ROU assets, and as interest expense
in its consolidated statements of operations.
Components of Lease Expense
The Company records operating lease expense as either cost of sales or SG&A expenses within its consolidated statements of
operations, depending upon the nature and use of the ROU assets. The Company records finance lease expense as depreciation
expense within cost of sales or SG&A expenses, depending upon the nature and use of the ROU assets, and as interest expense
in its consolidated statements of operations.
The components of lease expense were as follows:
The components of lease expense were as follows:
Operating lease expense (a)
Operating lease expense (a)
Operating lease expense (a)
Finance lease expense:
Finance lease expense:
Finance lease expense:
Depreciation of ROU assets
Depreciation of ROU assets
Depreciation of ROU assets
Interest on lease liabilities
Interest on lease liabilities
Interest on lease liabilities
Total lease expense
Total lease expense
Total lease expense
Years ended March 31,
2021
19.5
Years ended March 31,
Years ended March 31,
2020
$
21.2
2021
$
19.5
$
2020
21.2
$
0.5
0.2
$
20.2
0.5
0.2
20.2
$
0.5
0.2
$
21.9
0.5
0.2
21.9
$
(a) In fiscal 2021 and 2020, operating lease expense included short-term lease expense of $3.5 million and $4.1 million,
(a) In fiscal 2021 and 2020, operating lease expense included short-term lease expense of $3.5 million and $4.1 million,
respectively. Variable lease expense was not significant.
respectively. Variable lease expense was not significant.
Supplemental Cash Flow Information
Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of lease liabilities:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
Operating cash flows for operating leases
Financing cash flows for finance leases
Financing cash flows for finance leases
ROU assets obtained in exchange for lease liabilities
ROU assets obtained in exchange for lease liabilities
Operating leases
Operating leases
Finance leases
Finance leases
Years ended March 31,
Years ended March 31,
Years ended March 31,
2021
2021
2020
2020
$
$
14.2
14.2
$
$
14.7
14.7
0.6
0.6
0.5
0.5
$
$
9.8
0.1
9.8
0.1
$
$
9.0
0.2
9.0
0.2
71
71
71
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Lease Term and Discount Rates
Lease Term and Discount Rates
Weighted-average remaining lease term:
Weighted-average remaining lease term:
Weighted-average remaining lease term:
Operating leases
Operating leases
Operating leases
Finance leases
Finance leases
Finance leases
Weighted-average discount rate:
Weighted-average discount rate:
Weighted-average discount rate:
Operating leases
Operating leases
Operating leases
Finance leases
Finance leases
Finance leases
March 31, 2021 March 31, 2020
March 31, 2021 March 31, 2020
6.9 years
6.9 years
7.8 years
7.8 years
9.3 years
9.3 years
8.8 years
8.8 years
3.3%
3.3%
4.7%
4.7%
3.5%
3.5%
4.7%
4.7%
Maturity of Lease Liabilities
Future minimum rental payments for leases with initial non-cancellable lease terms in excess of one year were as follows at
March 31, 2021:
Maturity of Lease Liabilities
Future minimum rental payments for leases with initial non-cancellable lease terms in excess of one year were as follows at
March 31, 2021:
Fiscal Year
Fiscal Year
Fiscal Year
2022
2022
Operating Leases
Operating Leases
$
12.8
$
12.8
Finance Leases
$
Finance Leases
$
0.6
0.6
2023
2023
2024
2024
2025
2025
2026
2026
2027 and beyond
2027 and beyond
Total lease payments
Total lease payments
Total lease payments
Less: Interest
Less: Interest
Less: Interest
Present value of lease liabilities
Present value of lease liabilities
Present value of lease liabilities
10.9
10.9
8.1
8.1
6.7
6.7
6.1
6.1
18.5
18.5
63.1
63.1
0.6
0.6
0.6
0.6
0.6
0.6
0.5
0.5
1.4
1.4
4.3
4.3
(7.1)
$
56.0
$
(7.1)
56.0
(0.7)
$
3.6
$
(0.7)
3.6
The future minimum rental payments summarized above exclude payments for lease liabilities held for sale.
The future minimum rental payments summarized above exclude payments for lease liabilities held for sale.
Note 17: Indebtedness
Note 17: Indebtedness
Long-term debt consisted of the following:
Long-term debt consisted of the following:
Fiscal year
of maturity March 31, 2021 March 31, 2020
Fiscal year
of maturity March 31, 2021 March 31, 2020
Term loans
Term loans
Term loans
Revolving credit facility
Revolving credit facility
Revolving credit facility
5.9% Senior Notes
5.9% Senior Notes
5.9% Senior Notes
5.8% Senior Notes
5.8% Senior Notes
5.8% Senior Notes
Other (a)
Other (a)
Other (a)
2025
2025
2025
2025
2029
2029
2027
2027
Less: current portion
Less: current portion
Less: current portion
Less: unamortized debt issuance costs
Less: unamortized debt issuance costs
Total long-term debt
Total long-term debt
Less: unamortized debt issuance costs
Total long-term debt
$
$
178.9
178.9
$
$
189.4
189.4
4.8
4.8
100.0
100.0
50.0
50.0
3.6
3.6
337.3
337.3
(21.9)
(21.9)
127.2
127.2
100.0
100.0
50.0
50.0
6.0
6.0
472.6
472.6
(15.6)
(15.6)
(4.2)
$
311.2
(4.2)
311.2
$
(5.0)
$
452.0
(5.0)
452.0
$
(a) Other long-term debt primarily includes finance lease obligations and borrowings by foreign subsidiaries.
(a) Other long-term debt primarily includes finance lease obligations and borrowings by foreign subsidiaries.
72
72
72
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Long-term debt matures as follows:
Long-term debt matures as follows:
Fiscal Year
Fiscal Year
Fiscal Year
2022
2022
2023
2023
2024
2024
2025
2025
2026
2026
2027 and beyond
2027 and beyond
Total
Total
$ 21.9
21.9
21.9
153.2
33.8
84.6
$ 337.3
$ 21.9
21.9
21.9
153.2
33.8
84.6
$ 337.3
The Company maintains a credit agreement with a syndicate of banks that provides for a multi-currency $250.0 million
The Company maintains a credit agreement with a syndicate of banks that provides for a multi-currency $250.0 million
revolving credit facility expiring in June 2024. In addition, this credit agreement provides for both U.S. dollar- and euro-
revolving credit facility expiring in June 2024. In addition, this credit agreement provides for both U.S. dollar- and euro-
denominated term loan facilities, with repayments continuing into fiscal 2025, and shorter-duration swingline loans.
denominated term loan facilities, with repayments continuing into fiscal 2025, and shorter-duration swingline loans.
Borrowings under the revolving credit, swingline and term loan facilities bear interest at a variable rate, based upon the
Borrowings under the revolving credit, swingline and term loan facilities bear interest at a variable rate, based upon the
applicable reference rate and including a margin percentage dependent upon the Company’s leverage ratio, as described
applicable reference rate and including a margin percentage dependent upon the Company’s leverage ratio, as described
below. At March 31, 2021, the weighted-average interest rates for these variable-rate borrowings was 2.5 percent. Based
below. At March 31, 2021, the weighted-average interest rates for these variable-rate borrowings was 2.5 percent. Based
upon the terms of the credit agreement, the Company classifies borrowings under its revolving credit and swingline facilities
upon the terms of the credit agreement, the Company classifies borrowings under its revolving credit and swingline facilities
as long-term and short-term debt, respectively, on its consolidated balance sheets.
as long-term and short-term debt, respectively, on its consolidated balance sheets.
At March 31, 2021, the Company’s borrowings under its revolving credit and swingline facilities totaled $4.8 million and $1.4
At March 31, 2021, the Company’s borrowings under its revolving credit and swingline facilities totaled $4.8 million and $1.4
million, respectively, and domestic letters of credit totaled $5.7 million. As a result, available borrowing capacity under the
million, respectively, and domestic letters of credit totaled $5.7 million. As a result, available borrowing capacity under the
Company’s revolving credit facility was $238.1 million as of March 31, 2021.
Company’s revolving credit facility was $238.1 million as of March 31, 2021.
The Company also maintains credit agreements for its foreign subsidiaries. The $5.0 million of outstanding short-term
The Company also maintains credit agreements for its foreign subsidiaries. The $5.0 million of outstanding short-term
borrowings related to these foreign credit agreements at March 31, 2021 were classified as held for sale; see Note 2 for
borrowings related to these foreign credit agreements at March 31, 2021 were classified as held for sale; see Note 2 for
additional information on businesses held for sale. The outstanding short-term borrowings at March 31, 2020 totaled $14.8
additional information on businesses held for sale. The outstanding short-term borrowings at March 31, 2020 totaled $14.8
million.
million.
Provisions in the Company’s credit agreement, Senior Note agreements, and various foreign credit agreements require the
Provisions in the Company’s credit agreement, Senior Note agreements, and various foreign credit agreements require the
Company to maintain compliance with various covenants and include certain cross-default clauses. Under its primary credit
Company to maintain compliance with various covenants and include certain cross-default clauses. Under its primary credit
agreements in the U.S., the Company has provided liens on substantially all domestic assets. Also, as specified in the credit
agreements in the U.S., the Company has provided liens on substantially all domestic assets. Also, as specified in the credit
agreement, the term loans may require prepayments in the event of certain asset sales. In addition, at the time of each
agreement, the term loans may require prepayments in the event of certain asset sales. In addition, at the time of each
incremental borrowing under the revolving credit facility, the Company is required to represent to the lenders that there has
incremental borrowing under the revolving credit facility, the Company is required to represent to the lenders that there has
been no material adverse effect, as defined in the credit agreement, on its business, property, or results of operations.
been no material adverse effect, as defined in the credit agreement, on its business, property, or results of operations.
In May 2020 and in response to risks and uncertainties introduced by the COVID-19 pandemic, the Company executed
In May 2020 and in response to risks and uncertainties introduced by the COVID-19 pandemic, the Company executed
amendments to its primary credit agreements in the U.S. to provide additional financial covenant flexibility. The amendments
amendments to its primary credit agreements in the U.S. to provide additional financial covenant flexibility. The amendments
temporarily raised the leverage ratio covenant limit during fiscal 2021 and 2022. In May 2021, based upon its outlook for
temporarily raised the leverage ratio covenant limit during fiscal 2021 and 2022. In May 2021, based upon its outlook for
fiscal 2022, the Company determined that such financial covenant flexibility was no longer necessary and amended the
fiscal 2022, the Company determined that such financial covenant flexibility was no longer necessary and amended the
primary agreements. The May 2021 amendments reinstated the 3.25 to 1 leverage ratio covenant limit.
primary agreements. The May 2021 amendments reinstated the 3.25 to 1 leverage ratio covenant limit.
The leverage ratio covenant requires the Company to limit the ratio of its consolidated indebtedness, less a portion of its cash
The leverage ratio covenant requires the Company to limit the ratio of its consolidated indebtedness, less a portion of its cash
balance, both as defined by the credit agreements, to its consolidated net earnings before interest, taxes, depreciation,
balance, both as defined by the credit agreements, to its consolidated net earnings before interest, taxes, depreciation,
amortization, and certain other adjustments (“Adjusted EBITDA”). The leverage ratio covenant limit for the fourth quarter of
amortization, and certain other adjustments (“Adjusted EBITDA”). The leverage ratio covenant limit for the fourth quarter of
fiscal 2021 was 5.75 to 1. The Company is also subject to an interest expense coverage ratio covenant, which requires the
fiscal 2021 was 5.75 to 1. The Company is also subject to an interest expense coverage ratio covenant, which requires the
Company to maintain Adjusted EBITDA of at least three times consolidated interest expense. As of March 31, 2021, the
Company to maintain Adjusted EBITDA of at least three times consolidated interest expense. As of March 31, 2021, the
Company was in compliance with its debt covenants; its leverage ratio and interest coverage ratio were 1.9 and 9.3,
Company was in compliance with its debt covenants; its leverage ratio and interest coverage ratio were 1.9 and 9.3,
respectively.
respectively.
The Company estimates the fair value of long-term debt using discounted future cash flows at rates offered to the Company for
The Company estimates the fair value of long-term debt using discounted future cash flows at rates offered to the Company for
similar debt instruments of comparable maturities. As of March 31, 2021 and 2020, the carrying value of the Company’s long-
similar debt instruments of comparable maturities. As of March 31, 2021 and 2020, the carrying value of the Company’s long-
term debt approximated fair value, with the exception of the Senior Notes, which had an aggregate fair value of approximately
term debt approximated fair value, with the exception of the Senior Notes, which had an aggregate fair value of approximately
$146.0 million and $131.3 million, respectively. The fair value of the Company’s long-term debt is categorized as Level 2
$146.0 million and $131.3 million, respectively. The fair value of the Company’s long-term debt is categorized as Level 2
within the fair value hierarchy. Refer to Note 4 for the definition of a Level 2 fair value measurement.
within the fair value hierarchy. Refer to Note 4 for the definition of a Level 2 fair value measurement.
73
73
73
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Note 18: Pension and Employee Benefit Plans
Note 18: Pension and Employee Benefit Plans
Defined Contribution Employee Benefit Plans
Defined Contribution Employee Benefit Plans
The Company maintains a domestic 401(k) plan that allows employees to contribute a portion of their salary to help them save
The Company maintains a domestic 401(k) plan that allows employees to contribute a portion of their salary to help them save
for retirement. The Company currently matches employee contributions up to 4.5 percent of their compensation. During
for retirement. The Company currently matches employee contributions up to 4.5 percent of their compensation. During
fiscal 2021, as part of its response to the negative impacts of the COVID-19 pandemic, the Company suspended matching
fiscal 2021, as part of its response to the negative impacts of the COVID-19 pandemic, the Company suspended matching
employee contributions for part of the year. The Company’s expense for defined contribution employee benefit plans during
employee contributions for part of the year. The Company’s expense for defined contribution employee benefit plans during
fiscal 2021, 2020, and 2019 was $3.0 million, $6.6 million, and $6.4 million, respectively.
fiscal 2021, 2020, and 2019 was $3.0 million, $6.6 million, and $6.4 million, respectively.
In addition, the Company maintains non-qualified deferred compensation plans for eligible employees, and various non-U.S.
In addition, the Company maintains non-qualified deferred compensation plans for eligible employees, and various non-U.S.
subsidiaries have government-required defined contribution plans in place, under which they contribute a percentage of
subsidiaries have government-required defined contribution plans in place, under which they contribute a percentage of
employee earnings into accounts, consistent with local laws.
employee earnings into accounts, consistent with local laws.
Statutory Termination Plans
Certain non-U.S. subsidiaries have statutory termination indemnity plans covering eligible employees. The benefits under
these plans are based upon years of service and final average compensation levels or a monthly retirement benefit amount.
These programs are substantially unfunded in accordance with local laws.
Statutory Termination Plans
Certain non-U.S. subsidiaries have statutory termination indemnity plans covering eligible employees. The benefits under
these plans are based upon years of service and final average compensation levels or a monthly retirement benefit amount.
These programs are substantially unfunded in accordance with local laws.
Pension Plans
Pension Plans
The Company maintains non-contributory defined benefit pension plans that cover eligible domestic employees. These plans
The Company maintains non-contributory defined benefit pension plans that cover eligible domestic employees. These plans
are closed to new participants. The primary domestic plans cover most domestic employees hired on or before December 31,
are closed to new participants. The primary domestic plans cover most domestic employees hired on or before December 31,
2003 and provide benefits based primarily upon years of service and average compensation for salaried and some hourly
2003 and provide benefits based primarily upon years of service and average compensation for salaried and some hourly
employees. Benefits for other hourly employees are based upon a monthly retirement benefit amount. Currently, the
employees. Benefits for other hourly employees are based upon a monthly retirement benefit amount. Currently, the
Company’s domestic pension plans do not include increases in annual earnings or future service in calculating the average
Company’s domestic pension plans do not include increases in annual earnings or future service in calculating the average
annual earnings and years of credited service under the pension plan benefit formula. Certain non-U.S. subsidiaries of the
annual earnings and years of credited service under the pension plan benefit formula. Certain non-U.S. subsidiaries of the
Company also have legacy defined benefit plans which cover a smaller number of active employees and are substantially
Company also have legacy defined benefit plans which cover a smaller number of active employees and are substantially
unfunded. The primary non-U.S. plans are maintained in Germany, Austria, and Italy and are closed to new participants.
unfunded. The primary non-U.S. plans are maintained in Germany, Austria, and Italy and are closed to new participants.
Liabilities associated with pension plans maintained in Austria and Germany have been classified as liabilities held for sale on
Liabilities associated with pension plans maintained in Austria and Germany have been classified as liabilities held for sale on
the March 31, 2021 consolidated balance sheet since the pension plans will convey to the buyers of the Company’s liquid- and
the March 31, 2021 consolidated balance sheet since the pension plans will convey to the buyers of the Company’s liquid- and
air-cooled automotive businesses. The held for sale pension liabilities totaled $17.8 million as of March 31, 2021. See Note 2
air-cooled automotive businesses. The held for sale pension liabilities totaled $17.8 million as of March 31, 2021. See Note 2
for additional information.
for additional information.
The Company contributed $19.3 million, $3.5 million, and $8.0 million to its U.S. pension plans during fiscal 2021, 2020, and
2019, respectively. In addition, the Company contributed $2.2 million, $2.3 million, and $5.9 million to its non-U.S. pension
plans during fiscal 2021, 2020, and 2019, respectively. These contributions are reported in the change in other liabilities in the
consolidated statements of cash flows.
The Company contributed $19.3 million, $3.5 million, and $8.0 million to its U.S. pension plans during fiscal 2021, 2020, and
2019, respectively. In addition, the Company contributed $2.2 million, $2.3 million, and $5.9 million to its non-U.S. pension
plans during fiscal 2021, 2020, and 2019, respectively. These contributions are reported in the change in other liabilities in the
consolidated statements of cash flows.
Postretirement Plans
The Company provides selected healthcare and life insurance benefits for eligible retired domestic employees. The Company
periodically amends these unfunded plans to change the contribution rate of retirees and the amounts and forms of coverage.
An annual limit on the Company’s cost is defined for the majority of these plans. The Company’s net periodic income for its
postretirement plans in each of fiscal 2021, 2020, and 2019 was $0.3 million.
Postretirement Plans
The Company provides selected healthcare and life insurance benefits for eligible retired domestic employees. The Company
periodically amends these unfunded plans to change the contribution rate of retirees and the amounts and forms of coverage.
An annual limit on the Company’s cost is defined for the majority of these plans. The Company’s net periodic income for its
postretirement plans in each of fiscal 2021, 2020, and 2019 was $0.3 million.
Measurement Date
The Company uses March 31 as the measurement date for its pension and postretirement plans.
Measurement Date
The Company uses March 31 as the measurement date for its pension and postretirement plans.
74
74
74
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Changes in benefit obligations and plan assets, as well as the funded status of the Company’s global pension plans, were as
follows:
Changes in benefit obligations and plan assets, as well as the funded status of the Company’s global pension plans, were as
follows:
Years ended March 31,
2021
2020
Years ended March 31,
Years ended March 31,
2020
2021
Change in benefit obligation:
Change in benefit obligation:
Benefit obligation at beginning of year
Benefit obligation at beginning of year
Service cost
Service cost
Interest cost
Interest cost
Actuarial loss
Actuarial loss
Benefits paid
Benefits paid
Curtailment gains (a)
Curtailment gains (a)
Effect of exchange rate changes
Effect of exchange rate changes
Benefit obligation at end of year
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Benefits paid
Employer contributions
Fair value of plan assets at end of year
Funded status at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Benefits paid
Employer contributions
Fair value of plan assets at end of year
Funded status at end of year
Amounts recognized in the consolidated balance sheets:
Amounts recognized in the consolidated balance sheets:
Current liability
Current liability
Noncurrent liability
Noncurrent liability
Liabilities held for sale
Liabilities held for sale
$
$
264.7
$
0.4
7.9
2.7
(17.1)
(0.1)
2.1
260.6
$
264.7
0.4
7.9
2.7
(17.1)
(0.1)
2.1
260.6
258.8
$
0.4
9.1
15.5
(18.2)
(0.3)
(0.6)
264.7
$
258.8
0.4
9.1
15.5
(18.2)
(0.3)
(0.6)
264.7
$
$
$
$
131.1
$
47.8
(17.1)
21.5
183.3
$
(77.3)
$
131.1
47.8
(17.1)
21.5
183.3
(77.3)
155.1
$
(11.6)
(18.2)
5.8
131.1
$
(133.6)
$
155.1
(11.6)
(18.2)
5.8
131.1
(133.6)
$
$
$
$
$
$
(0.9)
$
(58.6)
(17.8)
(77.3)
(0.9)
(58.6)
(17.8)
(77.3)
$
(2.7)
$
(2.7)
(130.9)
(130.9)
-
-
(133.6)
$
(133.6)
$
$
(a) The curtailment gains in fiscal 2021 and 2020 are associated with headcount reductions in Europe within the
(a) The curtailment gains in fiscal 2021 and 2020 are associated with headcount reductions in Europe within the
Automotive segment. The Company recognizes curtailment gains as a component of net periodic benefit cost in the
period headcount reductions occur. See Note 6 for additional information on the Company’s restructuring activities.
Automotive segment. The Company recognizes curtailment gains as a component of net periodic benefit cost in the
period headcount reductions occur. See Note 6 for additional information on the Company’s restructuring activities.
As of March 31, 2021, 2020, and 2019, the benefit obligation associated with the Company’s non-U.S. pension plans totaled
As of March 31, 2021, 2020, and 2019, the benefit obligation associated with the Company’s non-U.S. pension plans totaled
$36.4 million, $35.7 million, and $36.5 million respectively. The $0.7 million increase in the benefit obligation associated
$36.4 million, $35.7 million, and $36.5 million respectively. The $0.7 million increase in the benefit obligation associated
with non-U.S. pension plans as of March 31, 2021, compared with the prior year, was primarily due to a $2.2 million impact of
with non-U.S. pension plans as of March 31, 2021, compared with the prior year, was primarily due to a $2.2 million impact of
foreign currency exchange rate changes and service and interest cost totaling $0.7 million, partially offset by employer
foreign currency exchange rate changes and service and interest cost totaling $0.7 million, partially offset by employer
contributions of $2.2 million for benefits paid to plan participants during the year. In fiscal 2020, the $0.8 million decrease
contributions of $2.2 million for benefits paid to plan participants during the year. In fiscal 2020, the $0.8 million decrease
primarily resulted from employer contributions of $2.2 million for benefits paid to plan participants during the year, partially
primarily resulted from employer contributions of $2.2 million for benefits paid to plan participants during the year, partially
offset by service and interest cost totaling $0.9 million.
offset by service and interest cost totaling $0.9 million.
The accumulated benefit obligation for pension plans was $258.9 million and $263.1 million as of March 31, 2021 and 2020,
The accumulated benefit obligation for pension plans was $258.9 million and $263.1 million as of March 31, 2021 and 2020,
respectively. The net actuarial loss related to the pension plans recognized in accumulated other comprehensive loss was
respectively. The net actuarial loss related to the pension plans recognized in accumulated other comprehensive loss was
$151.1 million and $191.5 million as of March 31, 2021 and 2020, respectively.
$151.1 million and $191.5 million as of March 31, 2021 and 2020, respectively.
75
75
75
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Costs for the Company’s global pension plans included the following components:
Costs for the Company’s global pension plans included the following components:
Years ended March 31,
2021
Years ended March 31,
Years ended March 31,
2021
2020
2020
2019
2019
Components of net periodic benefit cost:
Components of net periodic benefit cost:
Components of net periodic benefit cost:
Service cost
Interest cost
Expected return on plan assets
Service cost
Service cost
Interest cost
Interest cost
Expected return on plan assets
Expected return on plan assets
Amortization of net actuarial loss
Amortization of net actuarial loss
Settlements (a)
Settlements (a)
Net periodic benefit cost
Net periodic benefit cost
Net periodic benefit cost
Amortization of net actuarial loss
Settlements (a)
$
0.4
$
0.4
$
0.4
$
0.4
$
0.5
$
0.5
7.9
7.9
9.1
9.1
9.6
9.6
(11.5)
(11.5)
(12.0)
(12.0)
(12.3)
(12.3)
6.9
0.2
3.9
$
6.9
0.2
3.9
6.0
0.2
3.7
$
6.0
0.2
3.7
5.6
0.2
3.6
$
5.6
0.2
3.6
$
$
$
Other changes in benefit obligation recognized in other comprehensive income (loss):
Other changes in benefit obligation recognized in other comprehensive income (loss):
Other changes in benefit obligation recognized in other comprehensive income (loss):
Net actuarial gain (loss)
Amortization of net actuarial loss
Net actuarial gain (loss)
Net actuarial gain (loss)
Amortization of net actuarial loss
Amortization of net actuarial loss
Total recognized in other comprehensive income (loss)
Total recognized in other comprehensive income (loss)
Total recognized in other comprehensive income (loss)
$
33.8
$
33.8
$
$
(38.7)
(38.7)
$
(7.7)
$
(7.7)
7.1
40.9
$
7.1
40.9
$
6.2
(32.5)
$
6.2
(32.5)
5.8
(1.9)
$
5.8
(1.9)
$
$
(a) The settlement charges resulted from activity associated with the Company’s non-U.S. pension plans.
(a) The settlement charges resulted from activity associated with the Company’s non-U.S. pension plans.
The Company amortized $7.1 million, $6.2 million, and $5.6 million of net actuarial loss in fiscal 2021, 2020, and 2019,
The Company amortized $7.1 million, $6.2 million, and $5.6 million of net actuarial loss in fiscal 2021, 2020, and 2019,
respectively. In each of these years, less than $1.0 million of the amortization was attributable to the Company’s non-U.S.
respectively. In each of these years, less than $1.0 million of the amortization was attributable to the Company’s non-U.S.
pension plans. The Company estimates $6.6 million of net actuarial loss for its pension plans will be amortized from
pension plans. The Company estimates $6.6 million of net actuarial loss for its pension plans will be amortized from
accumulated other comprehensive loss into net periodic benefit cost during fiscal 2022. The fiscal 2022 estimated
accumulated other comprehensive loss into net periodic benefit cost during fiscal 2022. The fiscal 2022 estimated
amortization includes less than $1.0 million related to the Company’s non-U.S. pension plans. In addition, the Company
amortization includes less than $1.0 million related to the Company’s non-U.S. pension plans. In addition, the Company
expects to recognize approximately $7.0 million of net actuarial losses in fiscal 2022 as part of the anticipated losses to be
expects to recognize approximately $7.0 million of net actuarial losses in fiscal 2022 as part of the anticipated losses to be
recorded upon sale of the liquid- and air-cooled automotive businesses.
recorded upon sale of the liquid- and air-cooled automotive businesses.
The Company used a discount rate of 3.2% and 3.4% as of March 31, 2021 and 2020, respectively, for determining its benefit
The Company used a discount rate of 3.2% and 3.4% as of March 31, 2021 and 2020, respectively, for determining its benefit
obligations under its U.S. pension plans. The Company used a weighted-average discount rate of 1.0% as of both March 31,
obligations under its U.S. pension plans. The Company used a weighted-average discount rate of 1.0% as of both March 31,
2021 and 2020, respectively, for determining its benefit obligations under its non-U.S. pension plans. The Company used a
2021 and 2020, respectively, for determining its benefit obligations under its non-U.S. pension plans. The Company used a
discount rate of 3.4%, 4.0%, and 4.0% to determine its costs under its U.S. pension plans for fiscal 2021, 2020, and 2019,
discount rate of 3.4%, 4.0%, and 4.0% to determine its costs under its U.S. pension plans for fiscal 2021, 2020, and 2019,
respectively. The Company used a weighted-average discount rate of 1.4%, 1.7%, and 1.9% to determine its costs under its
respectively. The Company used a weighted-average discount rate of 1.4%, 1.7%, and 1.9% to determine its costs under its
non-U.S. pension plans for fiscal 2021, 2020, and 2019, respectively. The Company determined the discount rates used for its
non-U.S. pension plans for fiscal 2021, 2020, and 2019, respectively. The Company determined the discount rates used for its
U.S. pension plans by modeling a portfolio of high-quality corporate bonds, with appropriate consideration given to expected
U.S. pension plans by modeling a portfolio of high-quality corporate bonds, with appropriate consideration given to expected
defined benefit payment terms and duration of the respective pension obligations. The Company used a similar process to
defined benefit payment terms and duration of the respective pension obligations. The Company used a similar process to
determine the discount rate for its non-U.S. pension obligations.
determine the discount rate for its non-U.S. pension obligations.
Plan assets in the Company’s U.S. pension plans comprise 100 percent of the Company’s world-wide pension plan assets. The
Company’s U.S. pension plan weighted-average asset allocations at the measurement dates of March 31, 2021 and 2020 were
as follows:
Plan assets in the Company’s U.S. pension plans comprise 100 percent of the Company’s world-wide pension plan assets. The
Company’s U.S. pension plan weighted-average asset allocations at the measurement dates of March 31, 2021 and 2020 were
as follows:
March 31, 2021
March 31, 2021
March 31, 2021
March 31, 2020
March 31, 2020
March 31, 2020
Equity securities
Equity securities
Equity securities
Debt securities
Debt securities
Debt securities
Real estate investments
Real estate investments
Real estate investments
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents
Target allocation
76%
18%
5%
1%
100%
Target allocation
76%
18%
5%
1%
100%
Plan assets
Plan assets
73%
17%
9%
1%
100%
73%
17%
9%
1%
100%
Target allocation
65%
21%
13%
1%
100%
Target allocation
65%
21%
13%
1%
100%
Plan assets
Plan assets
60%
22%
16%
2%
100%
60%
22%
16%
2%
100%
Due to market conditions and other factors, including timing of benefit payments and other transactions, actual asset allocation
Due to market conditions and other factors, including timing of benefit payments and other transactions, actual asset allocation
may vary from the target allocation outlined above. The Company periodically rebalances the assets to the target allocations.
may vary from the target allocation outlined above. The Company periodically rebalances the assets to the target allocations.
As of March 31, 2021 and 2020, the Company’s pension plans did not directly own shares of Modine common stock.
As of March 31, 2021 and 2020, the Company’s pension plans did not directly own shares of Modine common stock.
76
76
76
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
The Company employs a total return investment approach, whereby a mix of investments are used to maximize the long-term
The Company employs a total return investment approach, whereby a mix of investments are used to maximize the long-term
growth of principal, while avoiding excessive risk. The Company has established pension plan guidelines based upon an
growth of principal, while avoiding excessive risk. The Company has established pension plan guidelines based upon an
evaluation of market conditions, tolerance for risk and cash requirements for benefit payments. The Company measures and
evaluation of market conditions, tolerance for risk and cash requirements for benefit payments. The Company measures and
monitors investment risk on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements
monitors investment risk on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements
and periodic asset/liability studies.
and periodic asset/liability studies.
The expected rate of return on U.S. plan assets is based upon historical return experience and forward-looking return
expectations for major asset class categories. For fiscal 2021, 2020, and 2019 U.S. pension plan expense, the expected rate of
return on plan assets was 7.5 percent. For fiscal 2022 U.S. pension plan expense, the Company has assumed a rate of return on
plan assets of 7.5 percent.
The expected rate of return on U.S. plan assets is based upon historical return experience and forward-looking return
expectations for major asset class categories. For fiscal 2021, 2020, and 2019 U.S. pension plan expense, the expected rate of
return on plan assets was 7.5 percent. For fiscal 2022 U.S. pension plan expense, the Company has assumed a rate of return on
plan assets of 7.5 percent.
The Company’s funding policy for its U.S. pension plans is to contribute annually, at a minimum, the amount necessary on an
actuarial basis to provide for benefits in accordance with applicable laws and regulations. The Company expects to contribute
approximately $13.0 million to its U.S. plans during fiscal 2022.
The Company’s funding policy for its U.S. pension plans is to contribute annually, at a minimum, the amount necessary on an
actuarial basis to provide for benefits in accordance with applicable laws and regulations. The Company expects to contribute
approximately $13.0 million to its U.S. plans during fiscal 2022.
Estimated pension benefit payments, excluding payments for pension liabilities held for sale, for the next ten fiscal years are as
follows:
Estimated pension benefit payments, excluding payments for pension liabilities held for sale, for the next ten fiscal years are as
follows:
Fiscal Year
Fiscal Year
Fiscal Year
2022
2022
2023
2023
2024
2024
2025
2025
2026
2026
2027-2031
2027-2031
Estimated Pension
Estimated Pension
Estimated Pension
Benefit Payments
Benefit Payments
Benefit Payments
$
15.2
$
15.2
15.5
15.5
15.6
15.6
15.6
15.6
15.5
15.5
74.6
74.6
Note 19: Derivative Instruments
Note 19: Derivative Instruments
The Company uses derivative financial instruments from time to time as a tool to manage certain financial risks. The
The Company uses derivative financial instruments from time to time as a tool to manage certain financial risks. The
Company’s policy prohibits the use of leveraged derivatives. Accounting for derivatives and hedging activities requires
Company’s policy prohibits the use of leveraged derivatives. Accounting for derivatives and hedging activities requires
derivative financial instruments to be measured at fair value and recognized as assets or liabilities in the consolidated balance
derivative financial instruments to be measured at fair value and recognized as assets or liabilities in the consolidated balance
sheets. Accounting for the gain or loss resulting from the change in fair value of the derivative financial instruments depends
sheets. Accounting for the gain or loss resulting from the change in fair value of the derivative financial instruments depends
on whether it has been designated as a hedge, and, if so, on the nature of the hedging activity.
on whether it has been designated as a hedge, and, if so, on the nature of the hedging activity.
Commodity Derivatives
Commodity Derivatives
The Company periodically enters into over-the-counter forward contracts related to forecasted purchases of aluminum and
The Company periodically enters into over-the-counter forward contracts related to forecasted purchases of aluminum and
copper. The Company’s strategy in entering into these contracts is to reduce its exposure to changing market prices of these
copper. The Company’s strategy in entering into these contracts is to reduce its exposure to changing market prices of these
commodities. The Company designates certain commodity forward contracts as cash flow hedges for accounting purposes.
commodities. The Company designates certain commodity forward contracts as cash flow hedges for accounting purposes.
Accordingly, for these designated hedges, the Company records unrealized gains and losses related to the change in the fair
Accordingly, for these designated hedges, the Company records unrealized gains and losses related to the change in the fair
value of the contracts in accumulated other comprehensive income (loss) (“AOCI”) within shareholders’ equity and
value of the contracts in accumulated other comprehensive income (loss) (“AOCI”) within shareholders’ equity and
subsequently recognizes the gains and losses within cost of sales as the underlying inventory is sold.
subsequently recognizes the gains and losses within cost of sales as the underlying inventory is sold.
Foreign Exchange Contracts
Foreign Exchange Contracts
The Company’s foreign exchange risk management strategy uses derivative financial instruments to mitigate foreign currency
The Company’s foreign exchange risk management strategy uses derivative financial instruments to mitigate foreign currency
exchange risk. The Company periodically enters into foreign currency forward contracts to hedge specific foreign currency-
exchange risk. The Company periodically enters into foreign currency forward contracts to hedge specific foreign currency-
denominated assets and liabilities as well as forecasted transactions. The Company designates certain hedges of forecasted
denominated assets and liabilities as well as forecasted transactions. The Company designates certain hedges of forecasted
transactions as cash flow hedges for accounting purposes. Accordingly, for these designated hedges, the Company records
transactions as cash flow hedges for accounting purposes. Accordingly, for these designated hedges, the Company records
unrealized gains and losses related to the change in the fair value of the contracts in AOCI within shareholders’ equity and
unrealized gains and losses related to the change in the fair value of the contracts in AOCI within shareholders’ equity and
subsequently recognizes the gains and losses as a component of earnings at the same time and in the same financial statement
subsequently recognizes the gains and losses as a component of earnings at the same time and in the same financial statement
line that the underlying transactions impact earnings. The Company has not designated forward contracts related to foreign
line that the underlying transactions impact earnings. The Company has not designated forward contracts related to foreign
currency-denominated assets and liabilities as hedges. Accordingly, for these non-designated contracts, the Company records
currency-denominated assets and liabilities as hedges. Accordingly, for these non-designated contracts, the Company records
unrealized gains and losses related to changes in fair value in other income and expense. Gains and losses on these foreign
unrealized gains and losses related to changes in fair value in other income and expense. Gains and losses on these foreign
currency contracts are offset by foreign currency gains and losses associated with the related assets and liabilities.
currency contracts are offset by foreign currency gains and losses associated with the related assets and liabilities.
77
77
77
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
The fair value of the Company’s derivative financial instruments recorded in the consolidated balance sheets were as follows:
The fair value of the Company’s derivative financial instruments recorded in the consolidated balance sheets were as follows:
Balance Sheet Location
Balance Sheet Location
March 31, 2021 March 31, 2020
March 31, 2021 March 31, 2020
Derivatives designated as hedges:
Derivatives designated as hedges:
Derivatives designated as hedges:
Commodity derivatives
Commodity derivatives
Commodity derivatives
Commodity derivatives
Commodity derivatives
Commodity derivatives
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Other current assets
Other current assets
Other current assets
Other current liabilities
Other current liabilities
Other current liabilities
Other current assets
Other current assets
Other current assets
$
$
0.5
-
0.1
0.5
-
0.1
$
-
1.3
0.1
$
-
1.3
0.1
Derivatives not designated as hedges:
Derivatives not designated as hedges:
Derivatives not designated as hedges:
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Other current liabilities
Other current liabilities
Other current liabilities
$
-
$
-
$
-
$
-
The amounts associated with derivative financial instruments that the Company designated for hedge accounting during the
years ended March 31 were as follows:
The amounts associated with derivative financial instruments that the Company designated for hedge accounting during the
years ended March 31 were as follows:
Commodity derivatives
Commodity derivatives
Commodity derivatives
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Total gains (losses)
Total gains (losses)
Total gains (losses)
$
Gain (loss) recognized in
Gain (loss) recognized in
other comprehensive income
other comprehensive income
2020
$
(2.6)
(0.1)
0.2
$
(2.5)
2021
$
2.2
-
(0.1)
$
2.1
2021
2.2
-
(0.1)
2.1
2020
(2.6)
(0.1)
0.2
(2.5)
2019
$
(0.3)
(0.4)
1.0
$
0.3
$
$
$
$
2019
(0.3)
(0.4)
1.0
0.3
Statement of
Statement of
Operations
Operations
Location
Location
Cost of sales
Cost of sales
Net sales
Net sales
Cost of sales
Cost of sales
Gain (loss) reclassified
Gain (loss) reclassified
from AOCI
from AOCI
2020
2020
(0.8)
$
(0.8)
(0.1)
(0.1)
0.4
0.4
$
(0.5)
(0.5)
2021
2021
-
$
-
$
-
-
(0.1)
(0.1)
$
(0.1)
(0.1)
$
$
$
$
$
2019
$
(0.4)
(0.4)
0.6
$
(0.2)
2019
(0.4)
(0.4)
0.6
(0.2)
$
The amounts associated with derivative financial instruments that the Company did not designate for hedge accounting were as
follows:
The amounts associated with derivative financial instruments that the Company did not designate for hedge accounting were as
follows:
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Total gains (losses)
Total gains (losses)
Total gains (losses)
Statement of Operations
Location
Statement of Operations
Statement of Operations
Location
Location
Net sales
Other income (expense) - net
Net sales
Net sales
Other income (expense) - net
Other income (expense) - net
Years ended March 31,
Years ended March 31,
Years ended March 31,
2020
2021
2021
-
$
-
$
0.6
0.6
$
0.6
0.6
$
$
2020
$
(0.1)
(0.1)
$
(0.2)
(0.1)
(0.1)
(0.2)
$
$
2019
2019
$
(0.7)
(0.3)
$
(1.0)
(0.7)
(0.3)
(1.0)
$
Note 20: Risks, Uncertainties, Contingencies and Litigation
Note 20: Risks, Uncertainties, Contingencies and Litigation
COVID-19
COVID-19
In March 2020, the World Health Organization declared the outbreak of the novel coronavirus, COVID-19, a pandemic. The
In March 2020, the World Health Organization declared the outbreak of the novel coronavirus, COVID-19, a pandemic. The
spread of COVID-19 and the resulting work and travel restrictions, including international border closings, have disrupted, and
spread of COVID-19 and the resulting work and travel restrictions, including international border closings, have disrupted, and
may continue to disrupt, global supply chains and have negatively impacted the global economy. As a result of this pandemic,
may continue to disrupt, global supply chains and have negatively impacted the global economy. As a result of this pandemic,
the Company experienced significant impacts on its operations. Local government requirements or customer shutdowns
the Company experienced significant impacts on its operations. Local government requirements or customer shutdowns
caused the Company to suspend production at many of its manufacturing facilities in March and April 2020. All of the
caused the Company to suspend production at many of its manufacturing facilities in March and April 2020. All of the
temporarily-closed facilities reopened in the first or second quarter of fiscal 2021 and have generally returned to more normal
temporarily-closed facilities reopened in the first or second quarter of fiscal 2021 and have generally returned to more normal
production levels. However, since reopening, production at certain of our plants has been negatively affected at times by
production levels. However, since reopening, production at certain of our plants has been negatively affected at times by
employee absences due to COVID-19. The Company is continuing to focus on protecting the health and wellbeing of its
employee absences due to COVID-19. The Company is continuing to focus on protecting the health and wellbeing of its
employees and the communities in which it operates, while also ensuring the continuity of its business operations and timely
employees and the communities in which it operates, while also ensuring the continuity of its business operations and timely
delivery of quality products and services to its customers. Beginning largely in April 2020 and to mitigate the negative
delivery of quality products and services to its customers. Beginning largely in April 2020 and to mitigate the negative
impacts of COVID-19, the Company took actions including, but not limited to, production staffing adjustments, furloughs,
impacts of COVID-19, the Company took actions including, but not limited to, production staffing adjustments, furloughs,
shortened work weeks, and temporary salary reductions at all levels of the organization. While the Company withdrew most
shortened work weeks, and temporary salary reductions at all levels of the organization. While the Company withdrew most
of the cost-saving actions in the third quarter of fiscal 2021 as production returned to more normal levels as markets recovered,
of the cost-saving actions in the third quarter of fiscal 2021 as production returned to more normal levels as markets recovered,
it remains focused on controlling operating and administrative expenses.
it remains focused on controlling operating and administrative expenses.
The Company’s consolidated financial statements reflect estimates and assumptions made by management, including
The Company’s consolidated financial statements reflect estimates and assumptions made by management, including
assumptions regarding the future impacts of the COVID-19 pandemic, that affect the reported amounts of assets and liabilities
assumptions regarding the future impacts of the COVID-19 pandemic, that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of
revenue and expenses during the reporting periods presented. For example, the Company’s goodwill impairment review is
revenue and expenses during the reporting periods presented. For example, the Company’s goodwill impairment review is
78
78
78
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
particularly sensitive to assumptions that could be adversely impacted by the COVID-19 pandemic. While the Company
particularly sensitive to assumptions that could be adversely impacted by the COVID-19 pandemic. While the Company
believes it used appropriate estimates and assumptions to prepare the consolidated financial statements, actual amounts could
believes it used appropriate estimates and assumptions to prepare the consolidated financial statements, actual amounts could
differ materially and future events or circumstances could have a potential negative effect on the assumptions used. If the
differ materially and future events or circumstances could have a potential negative effect on the assumptions used. If the
Company, its suppliers, or its customers experience further shutdowns or other significant business disruptions associated with
Company, its suppliers, or its customers experience further shutdowns or other significant business disruptions associated with
the COVID-19 pandemic, its ability to conduct business in the manner and on the timelines presently planned could be
the COVID-19 pandemic, its ability to conduct business in the manner and on the timelines presently planned could be
materially and negatively impacted, which could have a material adverse effect on the Company’s business, financial position,
materially and negatively impacted, which could have a material adverse effect on the Company’s business, financial position,
results of operations and cash flows.
results of operations and cash flows.
Market Risk
Market Risk
The Company sells a broad range of products that provide thermal solutions to customers operating in diverse markets,
The Company sells a broad range of products that provide thermal solutions to customers operating in diverse markets,
including commercial, industrial, and building HVAC&R markets and vehicular markets, including commercial vehicle, off-
including commercial, industrial, and building HVAC&R markets and vehicular markets, including commercial vehicle, off-
highway and automotive and light vehicle. The COVID-19 pandemic negatively impacted many of these markets; while we
highway and automotive and light vehicle. The COVID-19 pandemic negatively impacted many of these markets; while we
expect the markets will continue to recover, risk and uncertainties remain present.
expect the markets will continue to recover, risk and uncertainties remain present.
Credit Risk
Credit Risk
The Company invests excess cash primarily in investment quality, short-term liquid debt instruments. Financial instruments
The Company invests excess cash primarily in investment quality, short-term liquid debt instruments. Financial instruments
that potentially subject the Company to significant concentrations of credit risk consist principally of accounts receivable. The
that potentially subject the Company to significant concentrations of credit risk consist principally of accounts receivable. The
Company sells a broad range of products that provide thermal solutions to customers operating throughout the world. In fiscal
Company sells a broad range of products that provide thermal solutions to customers operating throughout the world. In fiscal
2021 and 2020, one vehicular customer accounted for more than ten percent of the Company’s total sales. In fiscal 2019, two
2021 and 2020, one vehicular customer accounted for more than ten percent of the Company’s total sales. In fiscal 2019, two
vehicular customers each accounted for ten percent or more of the Company’s total sales. Sales to the Company’s top ten
vehicular customers each accounted for ten percent or more of the Company’s total sales. Sales to the Company’s top ten
customers were 43 percent, 45 percent, and 50 percent of total sales in fiscal 2021, 2020, and 2019, respectively. At March 31,
customers were 43 percent, 45 percent, and 50 percent of total sales in fiscal 2021, 2020, and 2019, respectively. At March 31,
2021 and 2020, 35 percent and 34 percent, respectively, of the Company's trade accounts receivable were due from the
2021 and 2020, 35 percent and 34 percent, respectively, of the Company's trade accounts receivable were due from the
Company's top ten customers. These customers operate primarily in the automotive, commercial vehicle, off-highway, data
Company's top ten customers. These customers operate primarily in the automotive, commercial vehicle, off-highway, data
center cooling and commercial air conditioning markets. The Company generally does not require collateral or advanced
center cooling and commercial air conditioning markets. The Company generally does not require collateral or advanced
payments from its customers. The Company has not experienced significant credit losses to customers in the markets served
payments from its customers. The Company has not experienced significant credit losses to customers in the markets served
nor has experienced a significant increase in credit losses in connection with the COVID-19 pandemic.
nor has experienced a significant increase in credit losses in connection with the COVID-19 pandemic.
The Company manages credit risk through its focus on the following:
The Company manages credit risk through its focus on the following:
condition and applicable business news;
Accounts receivable – performing periodic customer credit evaluations and actively monitoring their financial
Cash and investments – reviewing cash deposits and short-term investments to ensure banks have credit ratings
acceptable to the Company and that short-term investments are maintained in secured or guaranteed instruments;
Cash and investments – reviewing cash deposits and short-term investments to ensure banks have credit ratings
acceptable to the Company and that short-term investments are maintained in secured or guaranteed instruments;
Accounts receivable – performing periodic customer credit evaluations and actively monitoring their financial
condition and applicable business news;
Pension assets – ensuring that investments within pension plans provide appropriate diversification, monitoring of
investment teams, ensuring that portfolio managers adhere to the Company’s investment policies and directives, and
ensuring that exposure to high risk investments is limited; and
Insurance – ensuring that insurance providers maintain financial ratings that are acceptable to the Company.
investment teams, ensuring that portfolio managers adhere to the Company’s investment policies and directives, and
ensuring that exposure to high risk investments is limited; and
Insurance – ensuring that insurance providers maintain financial ratings that are acceptable to the Company.
Pension assets – ensuring that investments within pension plans provide appropriate diversification, monitoring of
Counterparty Risk
The Company manages counterparty risk through its focus on the following:
Counterparty Risk
The Company manages counterparty risk through its focus on the following:
internal credit committees;
Customers – performing thorough reviews of customer credit reports and accounts receivable aging reports by
Suppliers – maintaining a supplier risk management program and utilizing industry sources to identify and mitigate
Customers – performing thorough reviews of customer credit reports and accounts receivable aging reports by
internal credit committees;
Suppliers – maintaining a supplier risk management program and utilizing industry sources to identify and mitigate
high risk situations; and
Derivatives – ensuring that counterparties to derivative instruments maintain credit ratings that are acceptable to the
Company.
Derivatives – ensuring that counterparties to derivative instruments maintain credit ratings that are acceptable to the
high risk situations; and
Company.
Environmental
Environmental
The Company has recorded environmental investigation and remediation accruals related to soil and groundwater
The Company has recorded environmental investigation and remediation accruals related to soil and groundwater
contamination at manufacturing facilities in the U.S., one of which the Company currently owns and operates, and at its former
contamination at manufacturing facilities in the U.S., one of which the Company currently owns and operates, and at its former
manufacturing facility in the Netherlands, along with accruals for lesser environmental matters at certain other facilities in the
manufacturing facility in the Netherlands, along with accruals for lesser environmental matters at certain other facilities in the
U.S. These accruals generally relate to facilities where past operations followed practices and procedures that were considered
U.S. These accruals generally relate to facilities where past operations followed practices and procedures that were considered
acceptable under then-existing regulations, or where the Company is a successor to the obligations of prior owners, and current
acceptable under then-existing regulations, or where the Company is a successor to the obligations of prior owners, and current
laws and regulations require investigative and/or remedial work to ensure sufficient environmental compliance. The accruals
laws and regulations require investigative and/or remedial work to ensure sufficient environmental compliance. The accruals
for these environmental matters totaled $16.0 million and $18.2 million at March 31, 2021 and 2020, respectively. As
for these environmental matters totaled $16.0 million and $18.2 million at March 31, 2021 and 2020, respectively. As
additional information becomes available, the Company will re-assess the liabilities related to these matters and revise the
additional information becomes available, the Company will re-assess the liabilities related to these matters and revise the
estimated accruals, if necessary. Based upon currently available information, the Company believes the ultimate outcome of
estimated accruals, if necessary. Based upon currently available information, the Company believes the ultimate outcome of
79
79
79
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
these matters, individually and in the aggregate, will not have a material adverse effect on its financial position. However,
these matters are subject to inherent uncertainties, and unfavorable outcomes could occur, including significant monetary
damages.
these matters, individually and in the aggregate, will not have a material adverse effect on its financial position. However,
these matters are subject to inherent uncertainties, and unfavorable outcomes could occur, including significant monetary
damages.
Other Litigation
Other Litigation
In the normal course of business, the Company and its subsidiaries are named as defendants in various lawsuits and
In the normal course of business, the Company and its subsidiaries are named as defendants in various lawsuits and
enforcement proceedings by private parties, governmental agencies and/or others in which claims are asserted against Modine.
enforcement proceedings by private parties, governmental agencies and/or others in which claims are asserted against Modine.
The Company believes that any additional loss in excess of amounts already accrued would not have a material effect on the
The Company believes that any additional loss in excess of amounts already accrued would not have a material effect on the
Company’s consolidated balance sheet, results of operations, and cash flows. In addition, management expects that the
Company’s consolidated balance sheet, results of operations, and cash flows. In addition, management expects that the
liabilities which may ultimately result from such lawsuits or proceedings, if any, would not have a material adverse effect on
liabilities which may ultimately result from such lawsuits or proceedings, if any, would not have a material adverse effect on
the Company’s financial position.
the Company’s financial position.
Note 21: Accumulated Other Comprehensive Loss
Note 21: Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss were as follows:
Changes in accumulated other comprehensive loss were as follows:
Balance, March 31, 2020
Balance, March 31, 2020
Foreign
Foreign
Currency
Currency
Translation
Translation
$
(61.4)
$
(61.4)
Defined
Defined
Benefit Plans
Benefit Plans
$
(160.9)
$
(160.9)
Cash Flow
Cash Flow
Hedges
Hedges
$
(1.0)
$
(1.0)
Total
$
Total
(223.3)
(223.3)
$
Other comprehensive income before reclassifications
Other comprehensive income before reclassifications
30.4
30.4
33.8
33.8
2.1
2.1
66.3
66.3
Reclassifications:
Reclassifications:
Amortization of unrecognized net loss (a)
Amortization of unrecognized net loss (a)
Realized losses - net (b)
Realized losses - net (b)
Income taxes
Income taxes
Total other comprehensive income
Total other comprehensive income
Balance, March 31, 2021
Balance, March 31, 2021
Balance, March 31, 2019
Balance, March 31, 2019
Other comprehensive loss before reclassifications
Reclassifications:
Other comprehensive loss before reclassifications
Reclassifications:
Amortization of unrecognized net loss (a)
Amortization of unrecognized net loss (a)
Realized losses - net (b)
Foreign currency translation gains (c)
Realized losses - net (b)
Foreign currency translation gains (c)
Income taxes
Total other comprehensive loss
Income taxes
Total other comprehensive loss
Balance, March 31, 2020
Balance, March 31, 2020
-
-
-
-
-
-
30.4
30.4
6.7
6.7
-
-
(10.4)
(10.4)
30.1
30.1
-
-
0.1
0.1
(0.6)
(0.6)
1.6
1.6
6.7
6.7
0.1
0.1
(11.0)
(11.0)
62.1
62.1
$
$
(31.0)
(31.0)
$
$
(130.8)
(130.8)
Foreign
Foreign
Currency
Currency
Translation
Translation
$
(42.6)
$
(42.6)
Defined
Defined
Benefit Plans
Benefit Plans
$
(136.3)
$
(136.3)
$
0.6
$
0.6
Cash Flow
Cash Flow
Hedges
Hedges
$
0.5
$
0.5
$
$
(161.2)
(161.2)
Total
$
Total
(178.4)
(178.4)
$
(18.2)
(18.2)
(38.7)
(38.7)
(2.5)
(2.5)
(59.4)
(59.4)
-
-
-
-
(0.6)
(0.6)
-
-
(18.8)
(18.8)
5.8
5.8
-
-
8.3
(24.6)
-
-
8.3
(24.6)
-
-
0.5
-
0.5
(1.5)
0.5
-
0.5
(1.5)
5.8
5.8
0.5
(0.6)
8.8
(44.9)
0.5
(0.6)
8.8
(44.9)
$
$
(61.4)
(61.4)
$
$
(160.9)
(160.9)
$
(1.0)
$
(1.0)
$
$
(223.3)
(223.3)
(a) Amounts are included in the calculation of net periodic benefit cost for the Company’s defined benefit plans, which
(b) Amounts represent net gains and losses associated with cash flow hedges that were reclassified to net earnings. See
include pension and other postretirement plans. See Note 18 for additional information about the Company’s pension
plans.
(a) Amounts are included in the calculation of net periodic benefit cost for the Company’s defined benefit plans, which
include pension and other postretirement plans. See Note 18 for additional information about the Company’s pension
plans.
(b) Amounts represent net gains and losses associated with cash flow hedges that were reclassified to net earnings. See
Note 19 for additional information regarding derivative instruments.
(c) As a result of the sale of its investment in NEX during fiscal 2020, the Company wrote off $0.6 million of
accumulated foreign currency translation gains.
(c) As a result of the sale of its investment in NEX during fiscal 2020, the Company wrote off $0.6 million of
Note 19 for additional information regarding derivative instruments.
accumulated foreign currency translation gains.
80
80
80
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Note 22: Segment and Geographic Information
Note 22: Segment and Geographic Information
The Company’s product lines consist of heat-transfer components and systems. The Company serves commercial, industrial,
and building HVAC&R markets and vehicular markets.
The Company’s product lines consist of heat-transfer components and systems. The Company serves commercial, industrial,
and building HVAC&R markets and vehicular markets.
The Company’s BHVAC segment provides heating, ventilating and air conditioning products to customers throughout the
The Company’s BHVAC segment provides heating, ventilating and air conditioning products to customers throughout the
world. The Company’s CIS segment provides coils, coolers, and coating solutions to global customers. The Company’s HDE
world. The Company’s CIS segment provides coils, coolers, and coating solutions to global customers. The Company’s HDE
and Automotive segments represent its vehicular businesses and primarily serve the commercial vehicle, off-highway and
and Automotive segments represent its vehicular businesses and primarily serve the commercial vehicle, off-highway and
automotive and light vehicle markets. In addition, the HDE segment serves the commercial vehicle and automotive
automotive and light vehicle markets. In addition, the HDE segment serves the commercial vehicle and automotive
aftermarkets in Brazil.
aftermarkets in Brazil.
Each operating segment is managed by a vice president and has separate financial results reviewed by the Company’s chief
Each operating segment is managed by a vice president and has separate financial results reviewed by the Company’s chief
operating decision maker. These results are used by management in evaluating the performance of each segment and in
operating decision maker. These results are used by management in evaluating the performance of each segment and in
making decisions on the allocation of resources among the Company’s various businesses.
making decisions on the allocation of resources among the Company’s various businesses.
Effective April 1, 2020, the Company began managing its global automotive business separate from the other businesses
Effective April 1, 2020, the Company began managing its global automotive business separate from the other businesses
within the previously reported Vehicular Thermal Solutions (“VTS”) segment. The Company is managing the automotive
within the previously reported Vehicular Thermal Solutions (“VTS”) segment. The Company is managing the automotive
business as the Automotive segment as it progresses towards the sale or eventual exit of its underlying automotive business
business as the Automotive segment as it progresses towards the sale or eventual exit of its underlying automotive business
operations. The other businesses of the VTS segment, including the commercial vehicle and off-highway businesses, are
operations. The other businesses of the VTS segment, including the commercial vehicle and off-highway businesses, are
being managed as the HDE segment. The segment realignment had no impact on the CIS and BHVAC segments or on the
being managed as the HDE segment. The segment realignment had no impact on the CIS and BHVAC segments or on the
Company’s consolidated financial position, results of operations, and cash flows. Segment financial information for fiscal
Company’s consolidated financial position, results of operations, and cash flows. Segment financial information for fiscal
2020 and 2019 has been recast to conform to the fiscal 2021 presentation.
2020 and 2019 has been recast to conform to the fiscal 2021 presentation.
The following is a summary of net sales, gross profit, and operating income by segment. See Note 3 for additional information
regarding net sales by primary end market.
The following is a summary of net sales, gross profit, and operating income by segment. See Note 3 for additional information
regarding net sales by primary end market.
Net sales:
BHVAC
Net sales:
BHVAC
CIS
CIS
HDE
HDE
Automotive
Automotive
Segment total
Segment total
Corporate and eliminations
Corporate and eliminations
Net sales
Net sales
Net sales:
Net sales:
BHVAC
BHVAC
CIS
CIS
HDE
HDE
Automotive
Automotive
Segment total
Segment total
Corporate and eliminations
Corporate and eliminations
Net sales
Net sales
Year ended March 31, 2021
Year ended March 31, 2021
Year ended March 31, 2021
Inter-segment
Inter-segment
Inter-segment
Sales
Sales
Sales
Total
Total
External Sales
External Sales
External Sales
$
$
240.3
240.3
$
$
0.3
0.3
$
$
240.6
240.6
528.1
648.3
391.7
528.1
648.3
391.7
1,808.4
1,808.4
3.9
33.8
6.6
3.9
33.8
6.6
44.6
44.6
532.0
682.1
398.3
532.0
682.1
398.3
1,853.0
1,853.0
-
-
(44.6)
(44.6)
(44.6)
(44.6)
$
$
1,808.4
1,808.4
$
-
$
-
$
$
1,808.4
1,808.4
Year ended March 31, 2020
Year ended March 31, 2020
Year ended March 31, 2020
Inter-segment
Inter-segment
Inter-segment
Sales
Sales
Sales
Total
Total
External Sales
External Sales
External Sales
$
$
$
$
219.4
620.1
693.8
442.2
1,975.5
219.4
620.1
693.8
442.2
1,975.5
-
-
$
1.7
$
1.7
3.8
3.8
52.1
52.1
2.7
2.7
60.3
60.3
(60.3)
(60.3)
$
-
-
$
221.1
623.9
745.9
444.9
2,035.8
(60.3)
1,975.5
221.1
623.9
745.9
444.9
2,035.8
(60.3)
1,975.5
$
$
1,975.5
1,975.5
$
$
81
81
81
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Year ended March 31, 2019
Inter-segment
Sales
Year ended March 31, 2019
Year ended March 31, 2019
Inter-segment
Inter-segment
Sales
Sales
Total
Total
External Sales
External Sales
External Sales
Net sales:
Net sales:
Net sales:
BHVAC
BHVAC
BHVAC
CIS
CIS
CIS
HDE
HDE
HDE
Automotive
Automotive
Automotive
Segment total
Segment total
Segment total
Corporate and eliminations
Corporate and eliminations
Corporate and eliminations
Net sales
Net sales
Net sales
$
$
$
$
209.1
704.7
811.8
487.1
2,212.7
209.1
704.7
811.8
487.1
2,212.7
-
2,212.7
2,212.7
$
$
3.3
3.3
2.9
2.9
60.5
60.5
1.8
1.8
68.5
68.5
(68.5)
(68.5)
$
-
-
$
-
212.4
212.4
707.6
707.6
872.3
872.3
488.9
488.9
2,281.2
2,281.2
(68.5)
(68.5)
2,212.7
2,212.7
$
$
$
$
Inter-segment sales are accounted for based upon an established markup over production costs. Net sales for Corporate and
eliminations primarily represent the elimination of inter-segment sales.
Inter-segment sales are accounted for based upon an established markup over production costs. Net sales for Corporate and
eliminations primarily represent the elimination of inter-segment sales.
2021
2021
Years ended March 31,
2020
Years ended March 31,
Years ended March 31,
2020
2019
2019
Gross profit:
Gross profit:
Gross profit:
BHVAC
BHVAC
BHVAC
CIS
CIS
CIS
HDE
HDE
HDE
Automotive
Automotive
Automotive
Segment total
Segment total
Segment total
Corporate and eliminations
Corporate and eliminations
Corporate and eliminations
Gross profit
Gross profit
Gross profit
Operating income:
Operating income:
Operating income:
BHVAC
BHVAC
BHVAC
CIS
CIS
CIS
HDE
HDE
HDE
Automotive
Automotive
Automotive
Segment total
Segment total
Segment total
Corporate and eliminations (a)
Corporate and eliminations (a)
Corporate and eliminations (a)
Operating (loss) income
Operating (loss) income
Operating (loss) income
$'s
$'s
$
83.0
$
66.5
88.4
56.0
293.9
(0.5)
293.4
83.0
66.5
88.4
56.0
293.9
(0.5)
293.4
$
$
% of
% of
sales
sales
34.5%
34.5%
12.5%
12.5%
13.0%
13.0%
14.1%
14.1%
15.9%
15.9%
-
-
16.2%
16.2%
$'s
$'s
$
71.5
$
92.9
96.6
48.4
309.4
(1.9)
$
307.5
71.5
92.9
96.6
48.4
309.4
(1.9)
307.5
$
% of
% of
sales
sales
32.3%
32.3%
14.9%
14.9%
13.0%
13.0%
10.9%
10.9%
15.2%
15.2%
-
-
15.6%
15.6%
$'s
$'s
63.4
$
63.4
$
114.9
114.9
127.8
127.8
59.0
59.0
365.1
365.1
0.4
0.4
$
365.5
365.5
$
% of
% of
sales
sales
29.9%
29.9%
16.2%
16.2%
14.7%
14.7%
12.1%
12.1%
16.0%
16.0%
-
-
16.5%
16.5%
Years ended March 31,
2021
2021
$
47.2
47.2
Years ended March 31,
Years ended March 31,
2020
2020
$
36.4
36.4
$
2019
2019
$
26.9
26.9
$
$
8.2
8.2
36.8
36.8
(150.9)
(150.9)
(58.7)
(58.7)
(39.0)
(39.0)
32.9
32.9
37.8
37.8
(10.0)
(10.0)
97.1
97.1
53.4
53.4
65.0
65.0
(0.4)
(0.4)
144.9
144.9
(59.2)
(59.2)
(35.2)
(35.2)
$
$
(97.7)
(97.7)
$
$
37.9
37.9
$
$
109.7
109.7
(a) The operating loss for Corporate includes certain research and development costs, legal, finance and other general
(a) The operating loss for Corporate includes certain research and development costs, legal, finance and other general
corporate and central services expenses, and other costs that are either not directly attributable to an operating
corporate and central services expenses, and other costs that are either not directly attributable to an operating
segment or not considered when management evaluates segment performance. During fiscal 2021, 2020, and 2019,
segment or not considered when management evaluates segment performance. During fiscal 2021, 2020, and 2019,
the Company recorded $6.6 million, $39.2 million, and $7.1 million, respectively, of costs directly associated with its
the Company recorded $6.6 million, $39.2 million, and $7.1 million, respectively, of costs directly associated with its
review of strategic alternatives for the liquid- and air-cooled automotive businesses, including costs to separate and
review of strategic alternatives for the liquid- and air-cooled automotive businesses, including costs to separate and
prepare the underlying businesses for potential sale.
prepare the underlying businesses for potential sale.
82
82
82
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
The following is a summary of total assets by segment:
The following is a summary of total assets by segment:
March 31,
March 31,
March 31,
BHVAC
BHVAC
BHVAC
CIS
CIS
CIS
HDE
HDE
HDE
Automotive (a)
Automotive (a)
Automotive (a)
Corporate and eliminations (b)
Corporate and eliminations (b)
Total assets
Total assets
Corporate and eliminations (b)
Total assets
2021
110.8
$
2021
110.8
$
2020
102.3
$
2020
102.3
$
609.2
609.2
438.7
438.7
124.2
(6.2)
124.2
(6.2)
617.7
617.7
417.4
417.4
272.5
126.2
272.5
126.2
$
$
1,276.7
1,276.7
$
1,536.1
$
1,536.1
(a) During fiscal 2021, the Company recorded impairment charges totaling $166.8 million within the Automotive
segment, primarily related to the property, plant and equipment of the liquid- and air-cooled automotive businesses,
which are classified as held for sale as of March 31, 2021. See Note 2 for additional information.
(a) During fiscal 2021, the Company recorded impairment charges totaling $166.8 million within the Automotive
segment, primarily related to the property, plant and equipment of the liquid- and air-cooled automotive businesses,
which are classified as held for sale as of March 31, 2021. See Note 2 for additional information.
(b) At March 31, 2021, Corporate assets totaled $17.5 million and were more than offset by eliminations for
intercompany balances, including accounts receivable. During fiscal 2021, the Company recorded income tax
intercompany balances, including accounts receivable. During fiscal 2021, the Company recorded income tax
charges totaling $103.3 million, which established a full valuation allowance on deferred tax assets in the U.S that are
charges totaling $103.3 million, which established a full valuation allowance on deferred tax assets in the U.S that are
recorded at Corporate. See Note 8 for additional information.
recorded at Corporate. See Note 8 for additional information.
(b) At March 31, 2021, Corporate assets totaled $17.5 million and were more than offset by eliminations for
The following is a summary of capital expenditures and depreciation and amortization expense by segment:
The following is a summary of capital expenditures and depreciation and amortization expense by segment:
Capital expenditures:
Capital expenditures:
Capital expenditures:
BHVAC
BHVAC
BHVAC
CIS
CIS
HDE
HDE
CIS
HDE
Automotive
Corporate
Automotive
Automotive
Corporate
Corporate
Total capital expenditures
Total capital expenditures
Total capital expenditures
Depreciation and amortization expense:
Depreciation and amortization expense:
Depreciation and amortization expense:
BHVAC
BHVAC
BHVAC
CIS
CIS
CIS
HDE
HDE
HDE
Automotive (a)
Automotive (a)
Automotive (a)
Corporate
Corporate
Corporate
Total depreciation and amortization expense
Total depreciation and amortization expense
Total depreciation and amortization expense
2021
2021
1.5
$
1.5
$
Years ended March 31,
Years ended March 31,
Years ended March 31,
2020
2020
3.1
$
3.1
$
2019
2019
1.3
$
1.3
$
6.1
13.5
6.1
13.5
11.1
0.5
11.1
0.5
15.0
31.5
15.0
31.5
19.1
2.6
19.1
2.6
16.4
29.4
16.4
29.4
24.9
1.9
24.9
1.9
$
32.7
$
32.7
$
71.3
$
71.3
$
73.9
$
73.9
$
Years ended March 31,
Years ended March 31,
Years ended March 31,
2020
2020
3.4
$
3.4
$
24.0
24.0
25.4
25.4
22.3
22.3
2.0
2.0
2019
2019
3.5
$
3.5
$
23.9
23.9
26.3
26.3
21.2
21.2
2.0
2.0
2021
2021
3.1
$
3.1
25.0
25.0
25.5
25.5
13.2
13.2
1.8
1.8
$
$
68.6
68.6
$
$
77.1
77.1
$
$
76.9
76.9
(a) Upon classifying the liquid- and air-cooled automotive businesses as held for sale, the Company ceased depreciating
(a) Upon classifying the liquid- and air-cooled automotive businesses as held for sale, the Company ceased depreciating
the long-lived assets within the disposal groups. See Note 2 for additional information.
the long-lived assets within the disposal groups. See Note 2 for additional information.
83
83
83
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
The following is a summary of net sales by geographical area, based upon the location of the selling unit:
The following is a summary of net sales by geographical area, based upon the location of the selling unit:
Years ended March 31,
Years ended March 31,
United States
United States
United States
China
China
China
Italy
Italy
Italy
Hungary
Hungary
Hungary
United Kingdom
United Kingdom
United Kingdom
Germany
Germany
Germany
Austria
Austria
Austria
Other
Other
Other
Net Sales
Net sales
Net sales
$
$
$
$
2021
765.7
$
217.6
188.6
153.7
96.4
83.4
59.6
243.4
1,808.4
2021
765.7
217.6
188.6
153.7
96.4
83.4
59.6
243.4
1,808.4
$
2020
941.9
$
168.5
187.4
142.4
82.0
97.5
93.0
262.8
1,975.5
2020
941.9
168.5
187.4
142.4
82.0
97.5
93.0
262.8
1,975.5
$
2019
1,032.3
172.1
217.3
165.6
86.6
123.1
116.2
299.5
2,212.7
2019
1,032.3
172.1
217.3
165.6
86.6
123.1
116.2
299.5
2,212.7
$
$
$
$
The following is a summary of property, plant and equipment by geographical area:
The following is a summary of property, plant and equipment by geographical area:
United States
United States
United States
Mexico
Mexico
Mexico
China
China
China
Italy
Italy
Italy
Hungary
Hungary
Hungary
Germany
Germany
Germany
Austria
Austria
Austria
Other
Other
Other
Total property, plant and equipment (a)
Total property, plant and equipment (a)
Total property, plant and equipment (a)
March 31,
March 31,
2021
80.3
2020
$
114.6
2020
114.6
$
2021
$
80.3
$
43.5
31.3
30.0
27.6
1.8
-
55.4
43.5
31.3
30.0
27.6
1.8
-
55.4
50.0
56.8
49.8
55.4
27.0
26.0
68.4
50.0
56.8
49.8
55.4
27.0
26.0
68.4
$
$
269.9
269.9
$
$
448.0
448.0
(a) In connection with the pending sales of the liquid- and air-cooled automotive businesses within the Automotive
(a) In connection with the pending sales of the liquid- and air-cooled automotive businesses within the Automotive
segment, the Company wrote-down the carrying value of the disposal groups' property, plant and equipment to zero
segment, the Company wrote-down the carrying value of the disposal groups' property, plant and equipment to zero
as of March 31, 2021. The assets impaired were located in Hungary, Germany, Austria, China, the U.S., Italy, and
as of March 31, 2021. The assets impaired were located in Hungary, Germany, Austria, China, the U.S., Italy, and
the Netherlands. See Note 2 for additional information on the held for sale businesses and impairment charges
the Netherlands. See Note 2 for additional information on the held for sale businesses and impairment charges
recorded during fiscal 2021.
recorded during fiscal 2021.
84
84
84
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Modine Manufacturing Company
To the Board of Directors and Shareholders of Modine Manufacturing Company
Opinions on the Financial Statements and Internal Control over Financial Reporting
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the consolidated financial statements, including the related notes, as listed in the index appearing under
We have audited the consolidated financial statements, including the related notes, as listed in the index appearing under
Item 15(a)(1), and the financial statement schedule listed in the index appearing under Item 15(a)(2), of Modine
Item 15(a)(1), and the financial statement schedule listed in the index appearing under Item 15(a)(2), of Modine
Manufacturing Company and its subsidiaries (the “Company”) (collectively referred to as the “consolidated financial
Manufacturing Company and its subsidiaries (the “Company”) (collectively referred to as the “consolidated financial
statements”). We also have audited the Company's internal control over financial reporting as of March 31, 2021, based on
statements”). We also have audited the Company's internal control over financial reporting as of March 31, 2021, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of March 31, 2021 and 2020, and the results of its operations and its cash flows for each of the
position of the Company as of March 31, 2021 and 2020, and the results of its operations and its cash flows for each of the
three years in the period ended March 31, 2021 in conformity with accounting principles generally accepted in the United
three years in the period ended March 31, 2021 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of March 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013)
financial reporting as of March 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
issued by the COSO.
Changes in Accounting Principles
Changes in Accounting Principles
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for
leases in fiscal 2020.
leases in fiscal 2020.
Basis for Opinions
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our
included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our
responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal
responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal
control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company
control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained
in all material respects.
in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial
significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial
statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control
statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.
opinions.
Definition and Limitations of Internal Control over Financial Reporting
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
85
85
85
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective,
or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill Impairment Assessment – CIS Reporting Units
As described in Notes 1 and 14 to the consolidated financial statements, the Company’s consolidated goodwill balance was
$170.7 million as of March 31, 2021, and the goodwill associated with the CIS reporting units was $155.9 million.
Management assesses goodwill for impairment annually as of March 31 of each year, or more frequently if events or
circumstances change that would, more likely than not, reduce the fair value of a reporting unit below its carrying value.
Management determines the fair value of a reporting unit based upon the present value of estimated future cash flows.
Determining the fair value of a reporting unit involves judgment and the use of significant estimates and assumptions by
management, which include assumptions regarding the revenue growth rates and operating profit margins used to calculate
estimated future cash flows, the risk-adjusted discount rates, business trends and market conditions.
The principal considerations for our determination that performing procedures relating to the goodwill impairment
assessment of the CIS reporting units is a critical audit matter are (i) the significant judgment by management when
determining the fair value of the reporting units; (ii) a high degree of auditor judgment, subjectivity, and effort in
performing procedures and evaluating evidence relating to management’s estimated future cash flows and significant
assumptions related to revenue growth rates, operating profit margins, and the risk-adjusted discount rates; and (iii) the
audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to the goodwill impairment assessment, including controls over the estimated fair value of the CIS reporting units.
These procedures also included, among others, testing management’s process for developing the fair value estimates;
evaluating the appropriateness of the discounted cash flow model; testing the completeness, accuracy, and relevance of
underlying data used in the model; and evaluating the significant assumptions used by management related to revenue
growth rates, operating profit margins, and risk-adjusted discount rates. Evaluating management’s assumptions related to
revenue growth rates and operating profit margins involved evaluating whether the assumptions used were reasonable
considering (i) the current and past performance of the reporting units, (ii) the consistency with external market and
industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.
Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash
flow model and the risk-adjusted discount rates significant assumption.
/s/ PricewaterhouseCoopers LLP
Milwaukee, WI
May 27, 2021
We have served as the Company’s auditor since 1935.
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86
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES.
Conclusion Regarding Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report on Form 10-K, management of the Company, under the supervision,
and with the participation, of the Company's President and Chief Executive Officer and Executive Vice President, Chief
Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures, at a reasonable assurance
level, as defined in the Securities Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the President and
Chief Executive Officer and Executive Vice President, Chief Financial Officer have concluded that the Company's disclosure
controls and procedures were effective, at a reasonable assurance level, as of March 31, 2021.
Management’s Report on Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.
The Company’s internal control over financial reporting is a process designed by, or under the supervision of, the Company’s
President and Chief Executive Officer and Executive Vice President, Chief Financial Officer, and effected by the Company's
board of directors, management and other personnel to provide reasonable assurance regarding the reliability of its financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that
could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
Management, with the participation of the Company’s President and Chief Executive Officer and Executive Vice President,
Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of March 31,
2021. In making its assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in “Internal Control—Integrated Framework (2013).” Based upon this assessment, management
concluded that, as of March 31, 2021, the Company’s internal control over financial reporting was effective.
The effectiveness of the Company’s internal control over financial reporting as of March 31, 2021 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
Changes in Internal Control Over Financial Reporting
There have been no changes in internal control over financial reporting during the fourth quarter of fiscal 2021 that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
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87
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Directors
The Company incorporates by reference the information appearing in the Company's Proxy Statement for the 2021 Annual
Meeting of Shareholders to be held on July 22, 2021 (the “2021 Annual Meeting Proxy Statement”) under the caption “Election
of Directors.”
Executive Officers
The information in response to this Item appears under the caption "Information about our Executive Officers" in this Form
10-K.
Code of Conduct
The Company incorporates by reference the information appearing in the 2021 Annual Meeting Proxy Statement under the
caption “Corporate Governance – Code of Conduct.” The Company's Code of Conduct is included on its website,
www.modine.com (About Modine link). We intend to satisfy our disclosure requirements under Item 5.05 of Form 8-K
regarding amendments to, or waivers of, any provision of our Code of Conduct that applies to our principal executive, financial
and accounting officers and our directors by posting such information on our website.
Board Committee Charters
The Board of Directors has approved charters for its Audit Committee, Human Capital and Compensation Committee,
Corporate Governance and Nominating Committee and Technology Committee. These charters are included on the Company’s
website, www.modine.com (Investors link).
Audit Committee Financial Expert
The Company incorporates by reference the information appearing in the 2021 Annual Meeting Proxy Statement under the
caption “Committees of the Board of Directors – Audit Committee.”
Audit Committee Disclosure
The Company incorporates by reference the information appearing in the 2021 Annual Meeting Proxy Statement under the
captions “Committees of the Board of Directors – Audit Committee” and “Board Meetings and Committees.”
Guidelines on Corporate Governance
The Board of Directors has adopted Guidelines on Corporate Governance. The Company’s Guidelines on Corporate
Governance are included on its website, www.modine.com (Investors link).
Security Holder Recommendation of Board Nominees
The Company incorporates by reference the information appearing in the 2021 Annual Meeting Proxy Statement under the
caption “Shareholder Nominations and Recommendations of Director Candidates.”
Delinquent Section 16(a) Reports
The Company incorporates by reference the information appearing in the 2021 Annual Meeting Proxy Statement under the
caption “Delinquent Section 16(a) Reports.”
We do not intend to incorporate our internet website and the information contained therein or incorporated therein into this
annual report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
The information appearing in the 2021 Annual Meeting Proxy Statement under the captions “Compensation Discussion and
Analysis,” “Compensation of Directors,” “Committees of the Board of Directors – Human Capital and Compensation
Committee: Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report” is
incorporated herein by reference.
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88
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
Other than the information below, the information required by this Item 12 is incorporated by reference to the section under the
caption “Security Ownership of Certain Beneficial Owners and Management” in the 2021 Annual Meeting Proxy Statement.
Each of the Company’s equity compensation plans, listed below, has been approved by its shareholders:
Amended and Restated 2008 Incentive Compensation Plan;
2017 Incentive Compensation Plan; and
2020 Incentive Compensation Plan.
The following table sets forth required information about equity compensation plans as of March 31, 2021:
Plan Category
Equity Compensation Plans approved by security holders
Equity Compensation Plans not approved by security holders
Total
Number of shares to be
issued upon exercise of
outstanding options,
warrants or rights (a)
2,175,851
Weighted-average
exercise price of
outstanding options,
warrants and rights (b)
$ 11.63
Number of shares remaining
available for future issuance
(excluding securities
reflected in 1st column) (c)
1,739,787
-
-
-
2,175,851
$ 11.63
1,739,787
(a) Includes shares issuable under the following type of awards: options – 1,050,191 shares; restricted stock units –
904,980 shares; and performance stock assuming target performance – 220,680 shares, regardless of any potential
actual payout. The number of shares subject to options were granted under the following plans: 2008 Incentive Plan –
389,687 shares, 2017 Incentive Plan – 302,421 shares, 2020 Incentive Plan – 358,083 shares. Shares issuable under
performance stock awards and restricted stock unit awards were granted under the following plans: 2008 Incentive Plan
– 22,247 shares, 2017 Incentive Plan – 504,801 shares, 2020 Incentive Plan – 598,612 shares.
(b) The weighted average exercise price does not take into account awards of restricted stock units or performance stock
which do not have an exercise price.
(c) Includes the number of shares remaining available for future issuance under the 2020 Incentive Compensation Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The Company incorporates by reference the information contained in the 2021 Annual Meeting Proxy Statement under the
captions “Certain Relationships and Related Party Transactions” and “Director Independence.”
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The Company incorporates by reference the information contained in the 2021 Annual Meeting Proxy Statement under the
caption “Independent Auditor’s Fees for Fiscal 2021 and 2020.”
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PART IV
PART IV
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Documents Filed. The following documents are filed as part of this Report:
(a) Documents Filed. The following documents are filed as part of this Report:
(a) Documents Filed. The following documents are filed as part of this Report:
Page in Form 10-K
Page in Form 10-K
Page in Form 10-K
1. The consolidated financial statements of Modine Manufacturing Company and its subsidiaries filed
under Item 8:
1. The consolidated financial statements of Modine Manufacturing Company and its subsidiaries filed
1. The consolidated financial statements of Modine Manufacturing Company and its subsidiaries filed
under Item 8:
under Item 8:
Consolidated Statements of Operations for the years ended March 31, 2021, 2020 and 2019
Consolidated Statements of Operations for the years ended March 31, 2021, 2020 and 2019
Consolidated Statements of Operations for the years ended March 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Income for the years ended March 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Income for the years ended March 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Income for the years ended March 31, 2021, 2020 and 2019
Consolidated Balance Sheets at March 31, 2021 and 2020
Consolidated Balance Sheets at March 31, 2021 and 2020
Consolidated Balance Sheets at March 31, 2021 and 2020
Consolidated Statements of Cash Flows for the years ended March 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the years ended March 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the years ended March 31, 2021, 2020 and 2019
Consolidated Statements of Shareholders' Equity for the years ended March 31, 2021, 2020 and 2019
Consolidated Statements of Shareholders' Equity for the years ended March 31, 2021, 2020 and 2019
Consolidated Statements of Shareholders' Equity for the years ended March 31, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
44
45
46
47
48
49-84
85-86
44
44
45
45
46
46
47
47
48
48
49-84
49-84
85-86
85-86
2. Financial Statement Schedules
2. Financial Statement Schedules
2. Financial Statement Schedules
The following financial statement schedule should be read in conjunction with the consolidated
financial statements set forth in Item 8:
Schedule II -- Valuation and Qualifying Accounts for the years ended March 31, 2021, 2020 and 2019
The following financial statement schedule should be read in conjunction with the consolidated
The following financial statement schedule should be read in conjunction with the consolidated
financial statements set forth in Item 8:
financial statements set forth in Item 8:
Schedule II -- Valuation and Qualifying Accounts for the years ended March 31, 2021, 2020 and 2019
Schedule II -- Valuation and Qualifying Accounts for the years ended March 31, 2021, 2020 and 2019
91
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91
Schedules other than those listed above are omitted because they are not applicable, not required, or
because the required information is included in the consolidated financial statements and the notes
thereto.
Schedules other than those listed above are omitted because they are not applicable, not required, or
Schedules other than those listed above are omitted because they are not applicable, not required, or
because the required information is included in the consolidated financial statements and the notes
because the required information is included in the consolidated financial statements and the notes
thereto.
thereto.
3. Exhibits and Exhibit Index.
3. Exhibits and Exhibit Index.
3. Exhibits and Exhibit Index.
92-94
92-94
92-94
See the Exhibit Index included as the last part of this report, which is incorporated herein by reference.
Each management contract and compensatory plan or arrangement required to be filed as an exhibit to
this report is identified in the Exhibit Index by an asterisk following its exhibit number.
See the Exhibit Index included as the last part of this report, which is incorporated herein by reference.
See the Exhibit Index included as the last part of this report, which is incorporated herein by reference.
Each management contract and compensatory plan or arrangement required to be filed as an exhibit to
Each management contract and compensatory plan or arrangement required to be filed as an exhibit to
this report is identified in the Exhibit Index by an asterisk following its exhibit number.
this report is identified in the Exhibit Index by an asterisk following its exhibit number.
ITEM 16. FORM 10-K SUMMARY.
ITEM 16. FORM 10-K SUMMARY.
ITEM 16. FORM 10-K SUMMARY.
None.
None.
None.
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MODINE MANUFACTURING COMPANY AND SUBSIDIARIES
(A Wisconsin Corporation)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the years ended March 31, 2021, 2020 and 2019
(In millions)
Description
2021: Valuation Allowance for
Deferred Tax Assets
2020: Valuation Allowance for
Deferred Tax Assets
2019: Valuation Allowance for
Deferred Tax Assets
Balance at
Beginning of
Period
Additions
Charged
(Benefit) to
Costs and
Expenses
Charged to
Other
Accounts
Reclassified as
Held for Sale
Balance at End
of Period
$
46.9
$
86.2
$
2.8
(a)
$
(45.2)
$
90.7
$
43.4
$
4.5
$
(1.0)
(a)
$
-
$
46.9
$
48.9
$
(1.6)
$
(3.9)
(a)
$
-
$
43.4
(a) Foreign currency translation and other adjustments.
91
91
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
(THE “REGISTRANT”)
(THE “REGISTRANT”)
(THE “REGISTRANT”)
(COMMISSION FILE NO. 1-1373)
(COMMISSION FILE NO. 1-1373)
(COMMISSION FILE NO. 1-1373)
MODINE MANUFACTURING COMPANY
(THE “REGISTRANT”)
(COMMISSION FILE NO. 1-1373)
EXHIBIT INDEX
TO
2021 ANNUAL REPORT ON FORM 10-K
EXHIBIT INDEX
TO
2021 ANNUAL REPORT ON FORM 10-K
EXHIBIT INDEX
EXHIBIT INDEX
TO
TO
2021 ANNUAL REPORT ON FORM 10-K
2021 ANNUAL REPORT ON FORM 10-K
Incorporated Herein By
Incorporated Herein By
Incorporated Herein By
Referenced To
Referenced To
Referenced To
Incorporated Herein By
Referenced To
Filed
Filed
Filed
Filed
Herewith
Herewith
Herewith
Herewith
Exhibit
Exhibit
Exhibit
Exhibit
No.
No.
No.
No.
Description
Description
Description
Description
2.1*
2.1*
2.1*
2.1*
3.1
3.1
3.1
3.1
3.2
3.2
3.2
3.2
4.1
4.1
4.1
4.1
4.2
4.2
4.2
4.2
4.3**
4.3**
4.3**
4.3**
4.4**
4.4**
4.4**
4.4**
4.5
4.5
4.5
4.5
4.6
4.6
4.6
4.6
4.7
4.7
4.7
4.7
4.8
4.8
4.8
4.8
4.9
4.9
4.9
4.9
4.10
4.10
4.10
4.10
4.11
4.11
4.11
4.11
Securities and Asset Purchase Agreement, dated as of
Securities and Asset Purchase Agreement, dated as of
Securities and Asset Purchase Agreement, dated as of
Securities and Asset Purchase Agreement, dated as of
November 2, 2020, by and between the Company and Dana
November 2, 2020, by and between the Company and Dana
November 2, 2020, by and between the Company and Dana
November 2, 2020, by and between the Company and Dana
Incorporated.
Incorporated.
Incorporated.
Incorporated.
Exhibit 2.1 to Registrant’s Current
Exhibit 2.1 to Registrant’s Current
Exhibit 2.1 to Registrant’s Current
Exhibit 2.1 to Registrant’s Current
Report on Form 8-K dated November 2,
Report on Form 8-K dated November 2,
Report on Form 8-K dated November 2,
Report on Form 8-K dated November 2,
2020
2020
2020
2020
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Exhibit 3.1 to Form 10-K for the fiscal
Exhibit 3.1 to Form 10-K for the fiscal
Exhibit 3.1 to Form 10-K for the fiscal
year ended March 31, 2018
year ended March 31, 2018
year ended March 31, 2018
Exhibit 3.1 to Form 10-K for the fiscal
year ended March 31, 2018
Bylaws, as amended.
Bylaws, as amended.
Bylaws, as amended.
Bylaws, as amended.
Form of Stock Certificate of the Registrant.
Form of Stock Certificate of the Registrant.
Form of Stock Certificate of the Registrant.
Form of Stock Certificate of the Registrant.
Exhibit 3.1 to Registrant’s Current
Exhibit 3.1 to Registrant’s Current
Exhibit 3.1 to Registrant’s Current
Exhibit 3.1 to Registrant’s Current
Report on Form 8-K dated June 17, 2020
Report on Form 8-K dated June 17, 2020
Report on Form 8-K dated June 17, 2020
Report on Form 8-K dated June 17, 2020
Exhibit 4(a) to Form 10-K for the fiscal
Exhibit 4(a) to Form 10-K for the fiscal
year ended March 31, 2003 (“2003 10-
year ended March 31, 2003 (“2003 10-
K”)
K”)
Exhibit 4(a) to Form 10-K for the fiscal
Exhibit 4(a) to Form 10-K for the fiscal
year ended March 31, 2003 (“2003 10-
year ended March 31, 2003 (“2003 10-
K”)
K”)
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
See Exhibit 3.1 hereto.
See Exhibit 3.1 hereto.
See Exhibit 3.1 hereto.
See Exhibit 3.1 hereto.
Amended and Restated Collateral Agency Intercreditor
Amended and Restated Collateral Agency Intercreditor
Amended and Restated Collateral Agency Intercreditor
Amended and Restated Collateral Agency Intercreditor
Agreement (the “Original Intercreditor Agreement”) dated as of
Agreement (the “Original Intercreditor Agreement”) dated as of
Agreement (the “Original Intercreditor Agreement”) dated as of
Agreement (the “Original Intercreditor Agreement”) dated as of
August 12, 2010 among the Lenders (as defined therein), the
August 12, 2010 among the Lenders (as defined therein), the
August 12, 2010 among the Lenders (as defined therein), the
August 12, 2010 among the Lenders (as defined therein), the
Noteholders (as defined therein) and JPMorgan Chase Bank,
Noteholders (as defined therein) and JPMorgan Chase Bank,
Noteholders (as defined therein) and JPMorgan Chase Bank,
Noteholders (as defined therein) and JPMorgan Chase Bank,
N.A. as Collateral Agent.
N.A. as Collateral Agent.
N.A. as Collateral Agent.
N.A. as Collateral Agent.
Exhibit 4.3 to August 12, 2010 8-K
Exhibit 4.3 to August 12, 2010 8-K
Exhibit 4.3 to August 12, 2010 8-K
Exhibit 4.3 to August 12, 2010 8-K
First Amendment to the Original Intercreditor Agreement,
First Amendment to the Original Intercreditor Agreement,
First Amendment to the Original Intercreditor Agreement,
First Amendment to the Original Intercreditor Agreement,
among the Lenders, the Note Holders and JPMorgan as
among the Lenders, the Note Holders and JPMorgan as
among the Lenders, the Note Holders and JPMorgan as
among the Lenders, the Note Holders and JPMorgan as
Collateral Agent, pursuant to which the Lenders, the Note
Collateral Agent, pursuant to which the Lenders, the Note
Collateral Agent, pursuant to which the Lenders, the Note
Collateral Agent, pursuant to which the Lenders, the Note
Holders and JPMorgan amended the Original Intercreditor
Holders and JPMorgan amended the Original Intercreditor
Holders and JPMorgan amended the Original Intercreditor
Holders and JPMorgan amended the Original Intercreditor
Agreement.
Agreement.
Agreement.
Agreement.
Exhibit 4.3 to August 30, 2013 8-K
Exhibit 4.3 to August 30, 2013 8-K
Exhibit 4.3 to August 30, 2013 8-K
Exhibit 4.3 to August 30, 2013 8-K
Credit Facility Agreement among Modine Holding GmbH,
Credit Facility Agreement among Modine Holding GmbH,
Credit Facility Agreement among Modine Holding GmbH,
Credit Facility Agreement among Modine Holding GmbH,
Modine Europe GmbH and Deutsche Bank AG dated as of April
Modine Europe GmbH and Deutsche Bank AG dated as of April
Modine Europe GmbH and Deutsche Bank AG dated as of April
Modine Europe GmbH and Deutsche Bank AG dated as of April
27, 2012.
27, 2012.
27, 2012.
27, 2012.
Exhibit 4.10 to Registrant’s Form 10-K
Exhibit 4.10 to Registrant’s Form 10-K
for the fiscal year ended March 31, 2012
for the fiscal year ended March 31, 2012
Exhibit 4.10 to Registrant’s Form 10-K
Exhibit 4.10 to Registrant’s Form 10-K
for the fiscal year ended March 31, 2012
for the fiscal year ended March 31, 2012
Description of Registrant’s securities
Description of Registrant’s securities
Description of Registrant’s securities
Description of Registrant’s securities
Fourth Amended and Restated Credit Agreement dated as of
June 28, 2019.
Fourth Amended and Restated Credit Agreement dated as of
June 28, 2019.
Fourth Amended and Restated Credit Agreement dated as of
Fourth Amended and Restated Credit Agreement dated as of
June 28, 2019.
June 28, 2019.
Exhibit 4.14 to Registrant’s Form 10-K
Exhibit 4.14 to Registrant’s Form 10-K
Exhibit 4.14 to Registrant’s Form 10-K
Exhibit 4.14 to Registrant’s Form 10-K
for fiscal year ended March 31, 2020
for fiscal year ended March 31, 2020
for fiscal year ended March 31, 2020
for fiscal year ended March 31, 2020
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Report on Form 8-K dated June 28, 2019
Report on Form 8-K dated June 28, 2019
Report on Form 8-K dated June 28, 2019
Report on Form 8-K dated June 28, 2019
Second Amended and Restated Note Purchase and Private Shelf
Agreement dated as of August 6, 2019
Second Amended and Restated Note Purchase and Private Shelf
Agreement dated as of August 6, 2019
Second Amended and Restated Note Purchase and Private Shelf
Second Amended and Restated Note Purchase and Private Shelf
Agreement dated as of August 6, 2019
Agreement dated as of August 6, 2019
Exhibit 4.1 to Registrant’s Form 10-Q
Exhibit 4.1 to Registrant’s Form 10-Q
Exhibit 4.1 to Registrant’s Form 10-Q
Exhibit 4.1 to Registrant’s Form 10-Q
for the third quarter ended December 31,
for the third quarter ended December 31,
for the third quarter ended December 31,
for the third quarter ended December 31,
2019
2019
2019
2019
First Amendment to Second Amended and Restated Note
First Amendment to Second Amended and Restated Note
First Amendment to Second Amended and Restated Note
First Amendment to Second Amended and Restated Note
Purchase and Private Shelf Agreement dated as of January 31,
Purchase and Private Shelf Agreement dated as of January 31,
Purchase and Private Shelf Agreement dated as of January 31,
Purchase and Private Shelf Agreement dated as of January 31,
2020
2020
2020
2020
Exhibit 4.2 to Registrant’s Form 10-Q
Exhibit 4.2 to Registrant’s Form 10-Q
Exhibit 4.2 to Registrant’s Form 10-Q
Exhibit 4.2 to Registrant’s Form 10-Q
for the third quarter ended December 31,
for the third quarter ended December 31,
for the third quarter ended December 31,
for the third quarter ended December 31,
2019
2019
2019
2019
First Amendment to Fourth Amended and Restated Credit
Agreement dated as of May 19, 2020
First Amendment to Fourth Amended and Restated Credit
Agreement dated as of May 19, 2020
First Amendment to Fourth Amended and Restated Credit
First Amendment to Fourth Amended and Restated Credit
Agreement dated as of May 19, 2020
Agreement dated as of May 19, 2020
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Report on Form 8-K dated May 19, 2020
Report on Form 8-K dated May 19, 2020
Report on Form 8-K dated May 19, 2020
Report on Form 8-K dated May 19, 2020
(“May 19, 2020 8-K”)
(“May 19, 2020 8-K”)
(“May 19, 2020 8-K”)
(“May 19, 2020 8-K”)
Second Amendment to Second Amended and Restated Note
Second Amendment to Second Amended and Restated Note
Second Amendment to Second Amended and Restated Note
Second Amendment to Second Amended and Restated Note
Purchase and Private Shelf Agreement dated as of May 19, 2020
Purchase and Private Shelf Agreement dated as of May 19, 2020
Purchase and Private Shelf Agreement dated as of May 19, 2020
Purchase and Private Shelf Agreement dated as of May 19, 2020
Exhibit 4.2 to May 19, 2020 8-K
Exhibit 4.2 to May 19, 2020 8-K
Exhibit 4.2 to May 19, 2020 8-K
Exhibit 4.2 to May 19, 2020 8-K
92
92
92
92
92
4.12
4.13
10.1***
10.2***
10.3***
10.4***
Amendment No. 2 to Fourth Amended and Restated Credit
Agreement dated as of May 18, 2021
Exhibit 4.1 to Registrant’s Current
Report on Form 8-K dated May 18, 2021
(“May 18, 2021 8-K”)
Third Amendment to Second Amended and Restated Note
Purchase and Private Shelf Agreement dated as of May 18, 2021
Exhibit 4.2 to May 18, 2021 8-K
Director Emeritus Retirement Plan effective April 1, 1992 (and
frozen as of July 1, 2000).
Exhibit 10(a) to Registrant’s Form 10-K
for the fiscal year ended March 31, 2002
Employment Agreement between the Registrant and Thomas A.
Burke dated as of June 15, 2007.
Exhibit 10.3 to Registrant’s Current
Report on Form 8-K dated June 15, 2007
Form of Amendment No. 1 to Employment Agreement entered
into as of July 1, 2008 with Thomas A. Burke.
Exhibit 10.1 to Registrant’s Current
Report on Form 8-K dated July 1, 2008
Form of Change in Control and Termination Agreement
(amended and restated) between the Registrant and officers
other than Neil Brinker.
Exhibit 10(f) to Registrant’s Form 10-K
for the fiscal year ended March 31, 2004
10.6***
Executive Supplemental Retirement Plan (as amended).
Exhibit 10(f) to Registrant's Form 10-K
for the fiscal year ended March 31, 2000
10.7***
Deferred Compensation Plan (as amended).
Exhibit 10(y) to 2003 10-K
10.8***
2008 Incentive Compensation Plan
(Amended and Restated effective May 7, 2014).
Exhibit 10.1 to Registrant's Current
Report on Form 8-K dated July 17, 2014
10.9***
Form of Fiscal 2021 Performance Cash Award Agreement.
Exhibit 10.1 to Registrant’s Form 8-K
dated September 30, 2020 (“September
30, 2020 8-K”)
10.10***
Form of Fiscal 2021 Incentive Stock Option Award Agreement. Exhibit 10.2 to September 30, 2020 8-K
10.11***
Form of Fiscal 2021 Non-Qualified Stock Option Award
Agreement.
Exhibit 10.3 to September 30, 2020 8-K
10.12***
Form of Fiscal 2021 Restricted Stock Unit Award Agreement.
Exhibit 10.4 to September 30, 2020 8-K
10.13*** Amendment No. 1 to Form of Change in Control and
Termination Agreement (amended and restated) between the
Registrant and Officers other than Neil Brinker.
Exhibit 10.17 to Registrant's Form 10-K
for the fiscal year ended March 31, 2011
10.14***
Supplemental Severance Policy.
10.15***
2017 Incentive Compensation Plan.
10.16***
Form of Fiscal 2021 Non-Employee Director Restricted Stock
Unit Award.
Exhibit 10.1 to Registrant’s Current
Report on Form 8-K dated October 17,
2011
Exhibit 10.1 to Registrant’s Current
Report on Form 8-K dated July 20, 2017
Exhibit 10.2 to Registrant’s Current
Report on Form 8-K dated July 23, 2020
(“July 23, 2020 8-K”)
10.17***
Transition and Separation Agreement between Thomas A.
Burke and Modine Manufacturing Company effective as of
August 4, 2020.
Exhibit 10.6 to the Registrant’s Form
10-Q for the second quarter ended
September 30, 2020
10.18***
[Corrected] Offer Letter dated as of November 10, 2020, by and
between the Company and Neil Brinker.
Exhibit 10.1 to the Registrant’s Form
10-Q for the third quarter ended
December 31, 2020 (“December 31,
2020 10-Q”)
93
93
10.19***
Employment Retention Agreement for Scott Wollenberg, dated
as of July 26, 2019.
10.20***
Form of Make-Whole RSU Award Agreement with Neil
Brinker.
Exhibit 10.5 to the Registrant’s Form
10-Q for the first quarter ended June 30,
2019
Exhibit 10.2 to December 31, 2020 10-Q
10.21***
Form of Make-Whole Performance Cash Award Agreement
with Neil Brinker.
Exhibit 10.3 to December 31, 2020 10-Q
10.22***
2020 Incentive Compensation Plan.
Exhibit 10.1 to July 23, 2020 8-K
10.23***
Separation Letter Agreement between the Company and Scott L.
Bowser, effective as of March 16, 2021.
10.24***
Form of Retention Letter, effective August 31, 2020, between
the Company and each of Michael B. Lucareli, Scott L. Bowser
and Sylvia A. Stein.
Exhibit 10.1 to Registrant’s Current
Report on Form 8-K dated August 31,
2020
21
23
31.1
31.2
32.1
32.2
List of subsidiaries of the Registrant.
Consent of independent registered public accounting firm.
Rule 13a-14(a)/15d-14(a) Certification of Neil D. Brinker,
President and Chief Executive Officer.
Rule 13a-14(a)/15d-14(a) Certification of Michael B. Lucareli,
Executive Vice President, Chief Financial Officer.
Section 1350 Certification of Neil D. Brinker, President and
Chief Executive Officer.
Section 1350 Certification of Michael B. Lucareli, Executive
Vice President, Chief Financial Officer.
101.INS
Instance Document
101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as inline XBRL and
contained in Exhibit 101).
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K because they are
*
not material and would likely cause competitive harm to the Company if publicly disclosed.
** Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant has omitted certain agreements with respect to
long-term debt not exceeding 10% of consolidated total assets. The Registrant agrees to furnish a copy of any such
agreements to the Securities and Exchange Commission upon request.
*** Denotes management contract or executive compensation plan or arrangement required to be filed as an exhibit
pursuant to Item 15 of Form 10-K.
94
94
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.
Date: May 27, 2021
Modine Manufacturing Company
By: /s/ Neil D. Brinker
Neil D. Brinker, President
and Chief Executive Officer
(Principal 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.
/s/ Neil D. Brinker
Neil D. Brinker
President, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Michael B. Lucareli
Michael B. Lucareli
Executive Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Marsha C. Williams
Marsha C. Williams
Chairperson, Board of Directors
/s/ Eric D. Ashleman
Eric D. Ashleman
Director
/s/ David G. Bills
David G. Bills
Director
/s/ Charles P. Cooley
Charles P. Cooley
Director
/s/ Suresh V. Garimella
Suresh V. Garimella
Director
/s/ Larry O. Moore
Larry O. Moore
Director
/s/ Christopher W. Patterson
Christopher W. Patterson
Director
/s/ Christine Y. Yan
Christine Y. Yan
Director
May 27, 2021
May 27, 2021
May 27, 2021
May 27, 2021
May 27, 2021
May 27, 2021
May 27, 2021
May 27, 2021
May 27, 2021
May 27, 2021
95
95
CORPORATE INFORMATION
Corporate Headquarters
Modine Manufacturing Company
1500 DeKoven Avenue
Racine, WI 53403-2552
Telephone: 262.636.1200
Website: www.modine.com
Stock Exchange
New York Stock Exchange
Ticker Symbol: MOD
New York Stock Exchange Compliance
Modine Manufacturing Company has included as exhibits to its
Form 10-K filed with the Securities and Exchange Commission
certifications by the company’s Chief Executive Officer in the role
of Principal Executive Officer and Chief Financial Officer in the
role of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. Modine Manufacturing Company
also has filed with the New York Stock Exchange (NYSE) the most
recent Domestic Company Section 303A Annual CEO Certification
as required by the NYSE Listed Company Manual.
Form 10-K Report
Modine’s Form 10-K Report, filed in May 2021 with the
Securities and Exchange Commission, is contained within this
report. It and the proxy statement also are available to shareholders
and interested individuals without charge by contacting
Investor Relations at the company’s headquarters address,
or by visiting the Investors section at www.modine.com.
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
833 East Michigan Street
Suite 1200
Milwaukee, WI 53202
Telephone: 414.212.1600
Transfer Agent and Registrar
Equiniti Trust Company is Modine’s stock transfer agent and
registrar and maintains the company’s shareholder records.
Shareholders needing information about account records, stock
certificates and change of address should contact:
EQ Shareowner Services
P.O. Box 64854
St. Paul, MN 55164-0854
Telephone: 800.468.9716
Direct Purchase Plan
(Shareowner Service Plus Plan)
Shareholders can build their investments in Modine through a
no-cost purchase plan for automatically 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 plan
material and enrollment information, please call 800.468.9716.
The Modine Manufacturing Company Direct Stock Purchase Plan
is administered by the company’s transfer agent, EQ Shareowner
Services. Inquiries may be directed to the address listed above.
Modine SEC Filings and News Releases
Shareholders
Forms 10-K, 10-Q and 8-K, news releases and other
company information can be obtained at www.modine.com,
or by contacting Investor Relations at the company’s
headquarters address, by telephone at 262.636.1200
or by e-mail at kathleen.t.powers@modine.com.
Annual Meeting of Shareholders
The 2021 Annual Meeting of Shareholders will be held
at 8:00 a.m. Central Time on Thursday, July 22.
A formal notice of the meeting, proxy statement and proxy voting
card will be mailed to shareholders in accordance with Securities
and Exchange Commission regulations.
As of March 31, 2021, there were 2,220 shareholders
of record. In addition, Modine estimates that there
were approximately 9,093 beneficial shareholders
as of that date.
Trademarks
Trademarks or registered trademarks of Modine Manufacturing
Company are denoted by a registration symbol in this report.
Copyright © 2021 Modine Manufacturing Company.
All Rights Reserved.
OFFICERS & DIRECTORS*
O F FI C E R S
B O A R D O F D I R E CT O R S **
Brian J. Agen
Vice President, Human Resources
Age 52; joined Modine in 1996
Matthew J. McBurney
Vice President, Building HVAC
Age 52; joined Modine in 1992
Neil D. Brinker
Scott A. Miller
President and Chief Executive Officer
Vice President, Commercial
Age 45; joined Modine in 2020
Joel T. Casterton
and Industrial Solutions
Age 56; joined Modine in 1999
Vice President, Heavy Duty Equipment
James R. Moise
Vice President, Global Supply Chain
Age 58; joined Modine in 2017
Kathleen T. Powers
Vice President, Treasurer, Investor
Relations and Tax
Age 53; joined Modine in 2011
Sylvia A. Stein
Vice President, General Counsel, Corporate
Secretary and Chief Compliance Officer
Age 55; joined Modine in 2018
Age 49; joined Modine in 2005
Thomas P. Drahos
Vice President, Global Operations
Age 55; joined Modine in 2003
Mark D. Hudson
Vice President, Corporate Controller
Age 50; joined Modine in 2012
C. Steve Langer
Vice President, Information Technology
Age 58; joined Modine in 2018
Michael B. Lucareli
Executive Vice President,
Chief Financial Officer
Age 52; joined Modine in 1999
Committees of the Board
(A) Audit Committee: This committee, composed solely of independent directors, appoints the independent auditors;
works with the independent auditors in determining audit plan and scope; reviews the results of the audit; oversees
management’s implementation of systems of internal controls and the adequacy of internal accounting controls; reviews
the company’s compliance program and approves the company’s Code of Ethics and Business Conduct; reviews and
approves all services and fees of the independent accountants; reviews proposed material changes in accounting or
financial reporting practices; and reviews required periodic financial statements.
(B) Corporate Governance and Nominating Committee: This committee, also composed solely of independent directors,
develops and implements policies and processes relating to corporate governance matters; reviews the backgrounds of
prospective nominees to the Board and makes recommendations to the Board regarding such persons.
(C) Human Capital & Compensation Committee: This committee, also composed solely of independent directors, reviews
and recommends candidates for officer positions; reviews performance of and recommends compensation for officers;
and administers Modine’s incentive compensation plans.
(D) Technology Committee: This committee reviews and makes recommendations to the Board on major strategies
and other subjects related to Modine’s technology.
*Officers and Board of Directors listed as of May 31, 2021.
**Board of Director Committee charters are available on the corporate governance section of www.modine.com.
Eric D. Ashleman A,B
Chief Executive Officer and
President of Idex Corporation
Age 54; Director since 2019
David G. Bills A,B,D
Senior Advisor at
Incentrum Group Merchant Banking
Age 60; Director since 2015
Neil D. Brinker
President and Chief Executive Officer
of Modine
Age 45; Director since 2020
Charles P. Cooley A,B,C
Retired; Senior Vice President and Chief
Financial Officer of The Lubrizol Corporation
Age 65; Director since 2006
Dr. Suresh V. Garimella C,D
President, University of Vermont
Age 57; Director since 2011
Larry O. Moore C,D
Retired; Senior Vice President, Module Centers
and Operations of Pratt & Whitney
Age 71; Director since 2010
Christopher W. Patterson A,C
Retired; President and Chief Executive Officer
of Daimler Trucks North America LLC
Age 67; Director since 2010
Marsha C. Williams B
Retired; Senior Vice President and Chief
Financial Officer of Orbitz Worldwide, Inc.
Age 70; Director since 1999
Christine Y. Yan A,B,D
Retired; Vice President of Integration,
Stanley Black and Decker, Inc.
Age 55; Director since 2014
Modine Manufacturing Company
1500 DeKoven Avenue
Racine, WI 53403-2552 USA
www.modine.com