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2 0 2 2 A N N U A L R E P O R T
Our products and technologies touch millions of lives
in a positive way on a daily basis.
Our purpose, our strategy, and our team members’ daily efforts are 100% aligned with the long-term
benefits we can deliver for our customers, our communities and our planet. We are transforming
our business structure to better focus on the needs of our customers and respond to advancing
regulations on climate change and indoor air quality. We are implementing this transformation
through our 80/20 strategy – by reducing complexity and investing our resources in those areas
of the business where we have longer-term opportunities to make a difference and win.
Engineering a Cleaner, Healthier World™ is not only Modine’s 2022 theme,Engineering a Cleaner, Healthier World™ is not only Modine’s 2022 theme, A D J U S T E D E A R N I N G S P E R S H A R E
N E T S A L E S ( I N M I L L I O N S )
F I S C A L Y E A R S E N D E D M A R C H 31
2021
2022
Net Sales
$ 1,808
$ 2,050
Adjusted EBITDA
$ 165
$ 159
Adjusted Earnings Per Share
$ 1.14
$ 1.23
Free Cash Flow
$ 117
$ (29)
Net Debt
$ 297
$ 333
(Dollars in millions except per share amounts.)
Adjusted EBITDA and adjusted earnings per share exclude restructuring expenses,
impairment charges, costs associated with the review of strategic alternatives for the
automotive business, strategic reorganization costs, and certain other gains or charges.
In addition, adjusted earnings per share excludes the impact of income tax charges or
benefits related to valuation allowances.
Free cash flow represents net cash provided by operating activities less expenditures for
property, plant and equipment. Net debt is total debt less cash and cash equivalents.
20182019202020212022$1.501.00.50020182019202020212022$2,0001,5001,0005000
“Fiscal 2022 was a year of significant change for Modine, but it was also
A YEAR OF SIGNIFICANT PROGRESS.”
This included the implementation of a new organizational
structure, the introduction of new members of our
management team, and the aggressive application of
the 80/20 principles that help us more purposefully
manage our portfolio of businesses.
Last year, we laid out a vision for Modine where we would organize
the company differently, driven by market-based verticals and
led by general managers empowered to make decisions with full
accountability for results. A structure that allowed us to focus
on our greatest opportunities while providing compelling career
paths for our employees. This year we executed on those plans
and more, allowing us to develop the framework necessary
to achieve our transformation. Last year at this time we were
at an inflection point. This year, we have made the necessary
steps forward, all while continuing to operate in an increasingly
challenging economic environment.
UNLOCKING VALUE IN MODINE
We began laying the groundwork for our transformation by
introducing the 80/20 mindset to our workforce. We collected
and analyzed our customer and product data, giving us a strong
understanding of what drives our profitability and identifying
areas requiring improvement. The data has highlighted
opportunities for us to reduce the complexity of our business,
evolve our commercial practices, and create strategies to better
serve and develop target customers.
For example, we improved the profitability of our coils business
by introducing filters on both part numbers and low-volume
orders that helped reduce our order backlog and lead times for
our most important customers, while improving profitability on
those low-volume orders. We are simplifying our product offerings
and differentiating our customer interfaces in other parts of the
company as well, sharing our learning and celebrating our wins.
This process is allowing us to reimagine and ultimately better
focus our commercial organization, while repositioning capital
and resources to fuel our growth initiatives.
To support this new approach, we recruited seasoned leaders
with experience driving transformative change in high-performing
organizations and put them into roles where they can have a
significant positive impact and make rapid decisions. The additions
included two new segment presidents and six new vice president/
general managers. These leaders injected fresh energy into the
management team, working alongside many of our other long-
tenured leaders. In addition, our new organizational structure
created many opportunities for our existing employees to step
into expanded roles, creating exciting career opportunities.
Once the organizational structure was transformed and the
leadership team was in place, we developed detailed strategic plans
designed to meet the specific objective of each verticle – venture,
grow or improve. We are now providing our teams with the tools
they need to be successful, including dedicated resources to create
an entrepreneurial environment and to challenge the status quo.
We implemented these changes during a time of unprecedented
challenges that included the ongoing COVID pandemic, material cost
inflation, and supply chain disruptions. Our team met these challenges
head-on, addressing each and every obstacle presented to us.
THE YEAR IN REVIEW
Fiscal 2022 sales were $2.1 billion, a 13% increase from the
prior year. Sales in our Building HVAC (BHVAC), Commercial
and Industrial Solutions (CIS) and Heavy Duty Equipment (HDE)
segments were all up over 20% from the prior year.
Those increases more than offset the decline in our Automotive
segment, which was primarily due to the sale of our air-cooled
automotive business in the first quarter of fiscal 2022 along with
the impact of the ongoing semiconductor shortage. We reported
adjusted EBITDA of $159 million, a four percent decrease from
the prior year.
ambitious goals to rapidly improve our profit margin, which we
expect to result in higher earnings and cash flow. Our focus is firmly
set on the products and markets where we want to grow, namely
HVAC and refrigeration, data centers, coatings, and the exciting EV
markets. These businesses have the strongest market drivers and
also provide the best return on our investments.
While adjusted EBITDA was down slightly from last year, we were
able to offset more than $100 million in material cost increases
with pricing adjustments. In our vehicular businesses, pricing
is governed by contractual agreements that dictate the timing
and extent to which we can pass through increases in our input
costs with future price adjustments. We have captured the price
increases possible through these arrangements and are working
with our customers to improve these contractual conditions given
the current environment.
In our other businesses, we have focused on commercial
excellence, ensuring that we are adequately compensated for
the value we provide. This included implementing multiple price
increases throughout the year, establishing fee structures and
surcharges, and charging for nonrecurring engineering services.
We will continue to manage prices and other charges as
necessary to offset the ongoing impact of cost inflation.
As a result of the hard work done to transform our organizational
structure, we have changed and simplified our reporting segments
in fiscal 2023. Our BHVAC business was combined with the CIS
segment to create our new Climate Solutions segment. This business
focuses on providing system solutions to the HVAC, refrigeration
and rapidly growing data center markets while continuing to provide
heat transfer products (coils) to a variety of end-market applications.
We have also combined our HDE and Automotive segments with
the coatings business of our CIS segment to create our new
Performance Technologies segment. This segment serves our
traditional vehicular end markets with both liquid-cooled and
air-cooled thermal products while increasingly focusing on new
and advanced technologies.
This past year, we created a new team focused on advanced
thermal systems for electric vehicles (EV) including our battery
thermal management systems and electronic cooling packages.
This team is hyperfocused on these developing markets, building
new relationships and supporting existing customers as they move
towards electric and other alternative powertrains. At this time last
year, we were engaged on 35 systems-oriented programs and had
24 prototype orders. Our team has made connections with many
new potential customers this year, and we are currently engaged on
75 programs, have 46 prototype orders, and 12 production awards.
These awards equate to a peak annual revenue of $67 million,
and we firmly believe that we have potential far beyond that. This
business is included in the Performance Technologies segment.
We believe that creating the new Climate Solutions and
Performance Technologies segments provides numerous benefits.
This leaner, more focused organization optimizes our ability to
coordinate global strategies and ensure our employees can act
quickly and decisively. It will also allow us to simplify and improve
our external messaging and financial reporting processes.
Next, we will focus on addressing and simplifying our
underperforming businesses. This will involve the continued
application of 80/20 to reduce complexity in our product offerings
and improve our commercial excellence discipline and operational
efficiency in manufacturing and supply chain. In addition, we will
complete the previously announced restructuring actions to
reduce overhead in certain areas of our business. Making these
improvements now, while reallocating resources, will help these
businesses generate the cash necessary to fund this restructuring.
None of this will be easy, but it is necessary in order for us to be
able to meet our financial targets.
Finally, our ultimate objective is to accelerate growth as we
advance our transformation. Our mix of business will change as
we grow certain businesses and deemphasize others, which will
fuel improvements in our earnings and cash flow. This will
involve providing our customers with complete systems and
solutions rather than just components. It also means expanding
the geographies where we can support our customers.
All of our work to date, and all of our plans looking forward,
support our purpose of engineering a cleaner, healthier world.
Despite the challenges that we faced this year, our leadership
team remained committed to implementing the changes necessary
to create a better Modine. We are doing this by providing the
trusted products and solutions that bring Modine into customers’
lives every day as we help them meet their sustainability
objectives and ever-increasing regulatory requirements.
The innovations across our business, such as thermal management
systems for electric vehicles that lower emissions, vehicular
solutions that optimize efficiency, and HVAC solutions that enable
the use of low global warming potential (GWP) refrigerants, all
support decarbonization and combat climate change. In addition,
Modine technologies provide for an improved quality of life.
Our HVAC and indoor air quality (IAQ) solutions provide cleaner air
and comfortable temperatures in schools and work environments,
while our data center products support digitalization and safe
information storage in an energy- and water-efficient manner.
These solutions provide our customers with the green technologies
they need to achieve their sustainability targets, while enhancing
efficiency within their supply chains and preserving air quality
within their work and educational spaces.
We are a company with over 100 years of thermal management
expertise focused on delivering solutions to improve our world.
We have an exciting path ahead!
Thank you for your ongoing support of Modine.
Sincerely,
THE ROAD AHEAD
Neil D. Brinker / President and Chief Executive Officer
Now that we have our teams in place and strategies set, it is time
to look forward. We have big plans for the next several years
with aggressive targets to hit. The first step is to ensure our
80/20 activities result in financial margin improvements. We have
Marsha C. Williams / Chairperson, Board of Directors
we are simplifying our organizational
structure to better focus our resources
on those markets where we can best
drive consistent, profitable growth.
Our Performance Technologies segment
brings value to customers by enhancing the
performance of their systems through technologies
and services, from enhanced fuel efficiency and
durability to improved battery safety and prolonged
life of components in harsh environments.
Our Climate Solutions segment
provides energy-efficient, climate-controlled solutions
and components for a wide range of critical applications
including HVAC and refrigeration, data centers and
heat transfer products.
Together, our organization is focused
on developing new, disruptive technologies to address
key global megatrends including climate change, energy
efficiency, resource scarcity, global health, population
growth, rapid urbanization and cloud technology.
The Climate Solutions segment brings together our Building
HVAC segment and the coils and coolers business from our
CIS segment. This segment provides systems and solutions to
the HVAC, Refrigeration and Data Center markets, and heat
transfer products (coils) to a wide variety of applications.
The Climate Solutions segment is focused
on providing energy efficient, safe, climate-
controlled solutions and components for a
wide range of critical applications.
Using the 80/20 mindset, we are making decisions today to invest
in those markets with the strongest trends and greatest potential
including heating, indoor air quality and data centers. Our new
organizational structure and fully aligned leadership team have
the entrepreneurial approach needed to increase market share
in our most attractive markets and to better serve our customers
in the geographic markets where they most need our solutions.
At the core is our new leadership team employing a strategy of
doing what is best for Modine. With that comes a focus of taking
care of core customers in the key markets of data centers, indoor
air quality and HVAC. By not trying to be all things to all people,
we are able to serve niche markets and sell more of the products
where our strengths lie. Our customers understand that they benefit
from this more intentional practice. Our distributors recognize the
loyalty shown to them and the increased market share.
This new structure will bring a focus and depth that did not exist
before. It will also result in practices and procedures that limit
emissions, refrigerants, use of water and amps while highlighting
efficiency, supporting our mission of engineering a cleaner, healthier
world. It will soon be abundantly clear that Modine is a more
limber, faster reacting organization and an even greater threat.
Our distributors will appreciate the entrepreneurial and structured
approach. Our customers will benefit from the dedication to
quality, service and value.
As the world looks to more sustainable solutions,
the Performance Technologies segment provides
our customers with the products and technologies
needed to accelerate the transition.
We bring value to our customers by enhancing the performance
Advanced Thermal Systems for electric and specialty vehicles
of their systems through technologies and services, from
is another area targeted for rapid growth. This group is working
enhanced fuel efficiency and durability to improved battery
as an independent team and has been given the resources
safety and prolonged life of components in harsh environments.
needed to grow. We are currently evaluating a wide range
These technologies facilitate an overall better performance
of end markets and applications that will require our thermal
and a cleaner, healthier world.
management technology as the world moves swiftly towards
Our Performance Technologies segment brings together our
are partnering with current customers and are developing
HDE and Automotive segments, along with the coatings
relationships with new market entrants that are leading the way
business that was previously part of the CIS segment. Our
in developing the technology to bring more sustainable solutions.
electrification and other alternative powertrains. Our engineers
coatings business has historically focused primarily on HVAC
and refrigeration end markets, providing corrosion protection
This segment has so far been successful even in a volatile
for both Modine products and for other customers. This is
environment. Challenged by inflation and supply chain issues,
a growth area for us, and we believe that our products and
we are not only competing, but we are growing. Our new
solutions can apply to other equipment, including vehicular
leadership team is dedicated to driving long-term improvement.
applications. For this reason, our coating business, along with
With our 80/20 strategy in place, we have laid the groundwork
our systems and component solutions for electric vehicles,
for a brighter tomorrow. As the world looks to more sustainable
will now be part of our Advanced Solutions business unit in
solutions, we are poised to not only be a significant supplier
the Performance Technologies segment.
for the foreseeable future, but a disrupter as well.
on sustainability and efficiency, we stand
poised to thrive while serving new and
existing customers with advanced solutions
that meet the growing demands of a
changing world. We’re doing our part to
engineer a cleaner, healthier world.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(cid:1)
[(cid:51)(cid:51)] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended March 31, 2022
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
(cid:45)(cid:72)(cid:55)(cid:58)(cid:63)(cid:68)(cid:61)(cid:1)(cid:44)(cid:79)(cid:67)(cid:56)(cid:69)(cid:66)(cid:7)(cid:73)(cid:8)(cid:1)
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 [(cid:51)]
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 [(cid:51)]
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 [(cid:51)] 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 [(cid:51)] No [ ]
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer [ ]
Accelerated Filer [(cid:51)]
Non-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. [(cid:51)]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes [ ] No [(cid:51)]
Approximately 98 percent of the outstanding shares are held by non-affiliates. The aggregate market value of these shares
was approximately $576 million based upon the market price of $11.33 per share on September 30, 2021, 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 51,970,887 at May 20, 2022.
An Exhibit Index appears at pages 92-95 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 2022 Annual
Meeting of Shareholders
Part III of Form 10-K
(Items 10, 11, 12, 13, 14)
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MODINE MANUFACTURING COMPANY
TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS. ........................................................................................................................................ 1
ITEM 1A. RISK FACTORS. ............................................................................................................................. 10
ITEM 1B. UNRESOLVED STAFF COMMENTS. ........................................................................................... 19
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. ........................................................................................................ 23
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. ................ 41
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. ................................................ 45
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE. ................................................................................................. 88
ITEM 9A. CONTROLS AND PROCEDURES. ................................................................................................ 88
ITEM 9B. OTHER INFORMATION................................................................................................................. 88
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS. ................................................................................................................................ 88
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. ......................... 89
ITEM 11. EXECUTIVE COMPENSATION. ................................................................................................... 89
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS. ............................................................................ 90
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE. ........................................................................................................................... 90
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. .................................................................. 90
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 ................................................................................................................................. 96
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PART I
ITEM 1. BUSINESS.
Modine Manufacturing Company specializes in providing innovative and environmentally responsible thermal
management solutions to diversified global markets and customers. Our broad portfolio of systems and solutions support
our purpose of engineering a cleaner, healthier world ™.
We sell thermal management products and solutions 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:
(cid:16) Heating, ventilation and cooling OEMs;
(cid:16) Construction architects and contractors;
(cid:16) Wholesalers of heating equipment;
(cid:16) Agricultural, industrial and construction equipment OEMs;
(cid:16) Commercial and industrial equipment OEMs; and
(cid:16) Automobile, truck, bus, and specialty vehicle OEMs.
We develop sustainable solutions to meet the ever-increasing heat transfer needs of our customers. Our products and
systems solve complex heat transfer challenges requiring effective thermal management. Typical customer and market
demands include products and systems that are more efficient, lighter weight, more compact, and more durable as our
customers ensure compliance with increasingly stringent energy efficiency, emissions and fuel economy 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
Building on over 100 years of excellence in thermal management, we provide trusted systems and solutions that enable
our customers to succeed in the ever-changing global marketplace, all while improving air quality and conserving natural
resources. Our air purification systems improve air quality in schools and businesses. Our data center cooling solutions
reduce water and energy consumption by data centers. Our thermal components lower harmful emissions for internal
combustion engines and our battery thermal management systems enable cleaner running electric vehicles. Our cooler
and coatings products also encourage the transition to environmentally-friendly refrigerants.
Fiscal 2022 was a year of significant change for Modine — a year of significant progress. We have onboarded seasoned
leaders with the requisite experience to drive transformative change, including two new segment presidents as well as
general managers focused on market-based verticals within our business. Our new leadership teams are driving change
by applying 80/20 principles to our business. We are analyzing our business to better focus resources on products and
markets with the highest growth opportunities and best return profiles. With our teams in place, we are focused on
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1
growing the areas of our business with the strongest market drivers and best returns, including HVAC&R, data centers,
and electric vehicles.
During fiscal 2022, our consolidated net sales were $2.1 billion, a 13 percent increase from $1.8 billion in fiscal 2021.
This increase was primarily due to higher sales in our Heavy Duty Equipment (“HDE”), Commercial and Industrial
Solutions (“CIS”), and Building HVAC Systems (“BHVAC”) segments, partially offset by lower sales in our
Automotive segment. Our operating income of $119 million in fiscal 2022 represents a $217 million improvement from
the prior year operating loss of $98 million. The operating income and operating loss during fiscal 2022 and 2021
include $56 million of impairment reversals and $167 million of impairment charges, respectively, primarily related to
assets within the Automotive segment that were held for sale during portions of fiscal 2021 and 2022.
Our top five customers are in the commercial vehicle, off-highway and automotive and light vehicle markets and our ten
largest customers accounted for 39 percent of our fiscal 2022 sales. In fiscal 2022, 60 percent of our total sales were
generated from customers outside of the U.S., with 53 percent of total sales generated by foreign operations and 7
percent generated by exports from the U.S. 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.
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 and light vehicle
Automotive and light vehicle
Off-highway
Off-highway
Commercial vehicle
Commercial vehicle
Data center cooling
Data center cooling
Industrial cooling
Industrial cooling
Other
Other
Competitive Position
Fiscal 2022
Fiscal 2022
38%
18%
16%
16%
5%
3%
4%
Fiscal 2021
Fiscal 2021
34%
25%
15%
15%
4%
4%
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. 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.
Business Segments
Our chief operating decision maker reviews the separate financial results for each of our operating segments. These
results are used to evaluate the performance of each business segment and for making decisions on the allocation of
resources. Financial information for our operating segments is included in Note 22 of the Notes to Consolidated
Financial Statements.
Effective July 1, 2021, we aligned the data center businesses previously managed by and reported within the CIS
segment under the BHVAC segment. The BHVAC segment assumed management of our business in Guadalajara, Spain
and a portion of our business in Grenada, Mississippi. Through this segment change, we aligned our data center
businesses under the same leadership team to accelerate commercial excellence, operational improvements, and
organizational efficiencies.
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Effective April 1, 2022, we began managing our company under two operating segments, Climate Solutions and
Performance Technologies. The Climate Solutions segment includes the BHVAC and CIS segment businesses with the
exception of CIS Coatings. The Performance Technologies segment includes the HDE and Automotive segment
businesses and the CIS Coatings business. Our new structure aligns businesses serving similar or complimentary end
markets, products and technologies under common segment management. We expect this simplified segment structure
will allow us to better focus our resources on targeted growth opportunities and more efficiently apply the 80/20
principles across all product lines to optimize profit margins and cash flow.
Building HVAC Systems Segment
Market Overview
Our BHVAC businesses in North America serve heating, indoor air quality, and data center markets. Our businesses in
the United Kingdom (“U.K.”) and in Spain serve data center, air conditioning, and indoor air quality markets in the U.K.,
mainland Europe, the Middle East, Far East and Africa (“EMEA”).
The heating market in North America experienced moderate growth in fiscal 2022. We expect increasing demands for
energy efficiency and decarbonization initiatives will drive additional modest growth in the North American heating
markets in fiscal 2023.
The North American indoor air quality market experienced strong growth during fiscal 2022, 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. We expect the federal COVID recovery funds for schools to upgrade
facilities, including their HVAC systems, will drive continued strong growth in the North American indoor air quality
market in fiscal 2023.
In fiscal 2022, the data center markets in North America and EMEA experienced strong growth. We expect continued
strong growth in the data center markets in fiscal 2023, driven by the ever-increasing reliance on digital technologies,
specifically colocation and cloud usage. Market demand for data usage and storage continues to rise, driven by the
increased use of the IoT (Internet of Things) technology, which connects various devices through the internet, artificial
intelligence, smart phones, and digital transformation trends. Digital transformation trends driving market demand
include employers offering remote work arrangements and an increased focus on the digital customer experience, as
more transactions and customer interactions are taking place virtually through websites and mobile applications.
The indoor air quality and air conditioning markets served by our U.K. business experienced moderate growth in fiscal
2022. We expect these markets will continue to exhibit moderate growth in fiscal 2023. 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. We expect commercial investment,
construction market activity, and energy efficiency legislation will drive increased demand in the air conditioning and
indoor air quality 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); perimeter heating products (commercial fin-tube radiation, cabinet unit heaters, and convectors); roof-
mounted direct- and indirect-fired makeup air units; unit ventilators; single packaged vertical units; ceiling cassettes; IT
cooling solutions including precision air conditioning units for data center applications; computer room air conditioning
(CRAC) and computer room air handler (CRAH) units; hybrid fan coils; fan walls; chillers; condensers 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 residential, commercial and
industrial applications, including data center management (including large colocation, cloud service providers and
hyperscalers), education, hospitality, telecommunications, hotels, restaurants, hospitals, residential garages, warehousing,
manufacturing, and greenhouses.
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Commercial and Industrial Solutions Segment
Market Overview
Our CIS businesses provide a broad offering of thermal management products to the HVAC&R markets in North
America, EMEA, and China. In fiscal 2022, the primary HVAC&R and industrial cooling markets served by our CIS
segment experienced modest to moderate growth. We expect continued moderate growth in these markets in fiscal 2023.
Trends influencing the primary CIS markets include refrigerant substitution and energy efficiency requirements, both of
which are expected to benefit the commercial HVAC&R 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.
Products
Coils (microchannel, heat recovery, round tube plate fin, and motor and generator cooling coils); coolers (evaporator unit
coolers, remote condensers, fluid coolers, transformer oil coolers, gas coolers, dry and brine coolers, and air blast
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, food and
beverage processing, precision and industrial cooling, and industrial power conversion, production, and transmission.
Heavy Duty Equipment and Automotive Segments
Geographically, we have a strong presence in the vehicular markets within the U.S., Mexico, Brazil, Europe, China,
India 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 consistently apply pricing pressure on 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.
The following summarizes the primary vehicular markets we serve:
Commercial Vehicle
Market Overview
During fiscal 2022, the North American and European commercial vehicle markets, particularly for heavy- and medium-
duty trucks, experienced strong growth as these markets continued to recover from the negative impacts of the COVID-
19 pandemic, which were most severe during the first half of fiscal 2021. The commercial vehicle markets in Asia
experienced modest declines resulting from cyclical market weakness in fiscal 2022. Global supply chain challenges and
rising inflation pressures began in fiscal 2022 and we expect these challenges will continue in fiscal 2023.
In fiscal 2023, we expect overall moderate growth in the global commercial vehicle markets, with the strongest growth
expected in North America, as customers work through backlog orders, and Brazil, where we expect strong growth
trends influenced by upcoming emission standards. We expect that the commercial vehicle market in China, however,
will moderately decline in fiscal 2023 due to cyclical market weakness and the negative impacts of recent government-
required lock-downs and supply chain challenges associated with COVID-19.
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
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transfer products and systems. We recently announced availability of our suite of EVantage™ Thermal Management
Systems for commercial electric vehicle chassis. These complete battery thermal management systems regulate battery,
traction motor, and power electronics temperatures within optimal ranges under all operating conditions and are
customizable for all chassis sizes. We are producing these systems for several customers, with additional programs
launching in fiscal 2023. We are also engaged in development with prospective customers – both traditional OEMs and
start-up companies – on vehicles that cover the full range of commercial vehicle applications from last-mile to Class 8
trucks to transit-, coach and school buses. We are well positioned to support these exciting changes.
Products
Powertrain cooling (engine cooling modules, radiators, charge air coolers, condensers, oil coolers, fan shrouds, and surge
tanks); on-engine cooling (exhaust gas recirculation (“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.
Off-Highway
Market Overview
Overall, global off-highway markets experienced strong growth in fiscal 2022. The strongest growth was seen within the
North and South American and European off-highway markets, including agricultural, construction, and mining markets.
Growth was particularly strong for larger tractor and vehicle applications. Global supply chain challenges and rising
inflation pressures began in fiscal 2022 and we expect these challenges will continue in fiscal 2023.
In fiscal 2023, we expect overall moderate growth in the global off-highway markets, with the strongest growth expected
in North America, as customers work through backlog orders with limited inventory currently in the supply chain. We
expect that the off-highway market in China, however, will moderately decline in fiscal 2023 due to cyclical market
weakness and the negative impacts of recent government-required lock-downs and supply chain challenges associated
with COVID-19.
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.
Customers
Construction, agricultural, and mining equipment and engine manufacturers, and industrial manufacturers of material
handling equipment, generator sets and compressors.
Automotive and Light Vehicle
Market Overview
The European, North American and Chinese automotive and light vehicle markets declined during fiscal 2022.
Semiconductor chip shortages and other supply chain challenges resulted in significantly lower global automotive
production and contributed to the market declines. In fiscal 2023, we expect that the limitations associated with
semiconductor chip shortages will ease and, as a result, we expect growth in the North American and Chinese
automotive and light vehicle markets. With regard to the European automotive and light vehicle market, we are
monitoring the impacts of the military conflict in Ukraine. We believe the conflict could result in lower automotive
production in Europe if supply parts and raw materials for OEMs become less available or if there continues to be a
significant impact on energy and fuel availability and prices.
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Overall, we expect that longer-term growth of the global automotive market will be supported by the technology
transformation to electric vehicles, tightening of emissions standards for internal combustion engines, 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 (EGR coolers, engine oil coolers, transmission oil coolers, fuel coolers, charge air coolers and intake air coolers);
liquid-cooled condensers, chillers (including valves) and cooling plates for battery thermal management; coolers and
casings for electronics cooling and coolers for electric axles (“e-axles”).
Customers
Automobile and light truck OEMs, as well as Tier-1 filter module customers, front-end module assemblers, e-axle
producers, power electronics providers, and electric vehicle startup companies.
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 four continents and within the following countries:
North America
South America
Europe
Asia
United States
Mexico
Brazil
China
India
South Korea
United Arab Emirates
Germany
Hungary
Italy
Netherlands
Serbia
Spain
Sweden
United Kingdom
Our non-U.S. subsidiaries and affiliates manufacture and sell a number of commercial, industrial and building HVAC&R
and vehicular 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 in fiscal 2022,
2021, and 2020.
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 with one another, accounted for 39
percent of our consolidated net sales in fiscal 2022. In fiscal 2022, our largest customer accounted for less than 10
percent of our sales. In fiscal 2021 and 2020, Daimler AG, which included Mercedes-Benz Group AG and Daimler
Truck AG prior to the spin-off of Daimler Truck AG in fiscal 2022, 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 Truck AG (including Detroit Diesel, Freightliner, Thomas Built Buses, and Western Star Trucks); Deere &
Company; Denso Corporation; Mercedes-Benz Group AG (including AMG, Athlon, and Maybach); Trane Technologies;
Volkswagen AG (including Audi, MAN, Porsche, Scania, and Navistar); Volvo Group (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
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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 2023 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 and other Intellectual Property
We protect our intellectual property through patents, trademarks, trade secrets and copyrights. As a part of our ongoing
R&D activities, we routinely seek patents on new products and processes. Our Patent Review Committee manages our
intellectual property strategy and portfolio. We own or license numerous patents related to our products and operations.
Also, 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 over
500 active patents and pending patent applications worldwide.
Research and Development
We are committed to 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 more efficient, lighter
weight, more compact, and more durable to meet customer standards as customers work to ensure compliance with
increasingly stringent energy efficiency and emissions requirements. Our heritage includes a depth and breadth of
expertise in thermal management that, combined with our global manufacturing presence, 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 $50 million,
$46 million, and $60 million in fiscal 2022, 2021, and 2020, respectively. As a percentage of our consolidated net sales,
we spent approximately 2 percent on R&D in fiscal 2022 and approximately 3 percent in both fiscal 2021 and 2020. As
our key markets continue to change, we are committed to meaningful R&D investment in the years to come. To achieve
efficiencies and lower development costs, our R&D groups work closely with our customers on special projects and
system designs. These development projects focus on advancements in refrigerant heat exchangers, chillers, adiabatic
gas coolers, remote condensers, unit coolers, fluid coolers, corrosion resistant coatings, and within our data center
business, CRAH units and fan walls. Vehicular-related projects include EGR technology, oil coolers, charge air coolers,
and battery thermal management systems for commercial vehicle, agriculture, construction, and automotive and light
vehicle markets. Our continuous focus on development enables 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, data center cooling, and vehicular and
equipment cooling including electric vehicle, powertrain and engine cooling. We also collaborate with industry,
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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. We regularly monitor our process performance 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 of 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 engineering a cleaner, healthier world by 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 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 EGR 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, lower emissions, and
improved vehicle lifespans. We continue to focus on product 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 $18 million at March 31, 2022.
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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, 2022, we employed approximately 11,100 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 to 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.
Health and Safety
The health and safety of our employees is paramount to us. We are committed to conducting our business operations in a
safe and healthy manner. We employ a behavior-based safety program which proactively seeks to correct at-risk
behaviors while positively reinforcing safe behaviors. We educate and train employees on safe practices and promote
personal accountability and responsibility for safety at all levels of our organization.
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 3.1 in 2020. During
fiscal 2022, we recorded an RIR of 1.18, well below the manufacturing sector average.
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We have also taken steps to protect our global employees from the impacts of the COVID-19 pandemic since its onset,
including enhanced cleaning and sanitation procedures. In addition, we have encouraged our employees to protect
themselves with vaccinations and have held numerous vaccination events across our locations to make vaccinations more
accessible for interested employees.
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,
including 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 regularly 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:
(cid:16) Code of Conduct, which is applicable to all Modine directors and employees, including our executive
officers;
(cid:16) Corporate Governance Guidelines;
(cid:16) Audit Committee Charter;
(cid:16) Human Capital and Compensation Committee Charter;
(cid:16) Corporate Governance and Nominating Committee Charter; and
(cid:16) 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.
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.
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A. MARKET RISKS
Economic Uncertainties
The military conflict between Russia and Ukraine has resulted in geopolitical instability. Our business, financial
position, results of operations and cash flows could be adversely affected by the negative impacts on the global
economy resulting from the conflict in Ukraine.
In February 2022, Russian troops invaded Ukraine and the military conflict is ongoing. While the length and total
impact of the military conflict is unpredictable, it has led to market disruptions, including volatility in raw material prices
and credit and capital markets, and supply chain challenges. In response to the military conflict, governments in the U.S.
and abroad have imposed sanctions against Russia and proposed or threatened additional potential sanctions. These
sanctions could adversely affect the global economy and financial markets in which we operate.
We do not have manufacturing operations in Ukraine or Russia nor any significant business relationships with Ukraine-
or Russian-based customers or suppliers. To date, we have not experienced any material impacts of the ongoing military
conflict. We are monitoring the situation and its impact on the global markets, which may, in turn, impact our business.
For example, it is possible that the conflict could result in lower automotive production in Europe if supply parts and raw
materials for OEMs become less available or if there are continued significant increases in energy and fuel prices. In
addition, the threat of cyberattacks on the global supply chain may increase, which could directly or indirectly impact our
operations.
At this time, we cannot reasonably estimate the full impact of the military conflict between Russia and Ukraine. It is not
possible to predict the extent and duration of the military conflict, sanctions, and any associated market disruptions,
which could have a material adverse effect on our business, financial position, results of operations and cash flows.
The COVID-19 pandemic and associated supply chain challenges could adversely affect our business, financial
position, results of operations and cash flows.
Since its onset, the COVID-19 pandemic has broadly impacted the global economy and our key end markets. During
fiscal 2022, the direct effects on our company from the COVID-19 pandemic generally lessened, particularly compared
with the significant impacts during the first half of fiscal 2021.
The COVID-19 pandemic and other market and economic dynamics have contributed to global supply chain challenges,
labor shortages and inflationary market conditions. Raw material and logistic prices have increased and we, like many
companies, have experienced delays and shortages in certain purchased commodities and components. In addition, our
Automotive segment has been impacted by lower order volume associated with semiconductor shortages, which have
caused lower global automotive production. While we are focused on mitigating the negative impacts of the labor
shortages and supply chain challenges, there can be no assurance that our efforts will be successful, and the pandemic
and related market dynamics could have a material adverse effect on our business, financial position, results of
operations and cash flow.
Since February 2022, COVID-19 cases have increased in many areas in China. As a result of government-required lock-
downs, we suspended production at manufacturing facilities in China for portions of March and April 2022. While these
plants have since reopened, they are currently manufacturing at reduced levels and customer demand has been negatively
impacted by the lock-downs and supply chain challenges, including component shortages. While we are actively
working to address the supply chain challenges and expect to increase production levels at our plants in China in the
second quarter of fiscal 2023, there can be no assurance that our efforts will be successful. All of our other
manufacturing locations are open and operating, although production has been negatively affected at times by employee
absences due 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.
At this time, we cannot reasonably estimate the full impact of the COVID-19 pandemic or the ongoing supply chain
challenges, the full extent of which will depend largely on future developments which are unpredictable and outside of
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our control. If we, our suppliers, or our customers experience prolonged shutdowns or other significant business
disruptions, it is possible that 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.
A future widespread outbreak of an illness or other public health threat could adversely affect our business, financial
position, results of operations and cash flows.
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 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.
Customer and Supplier Matters
Increases 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, sanctions, inflation, the behavior of our suppliers and significant fluctuations in
demand, could have a significant adverse effect on our results of operations. In the shorter-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 prospective price adjustments
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 costs while balancing supply risk, we have added key suppliers to our supply base
during the last year. We are, however, still 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 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.
Strong demand, the potential effects of trade laws and tariffs, capacity constraints, financial instability, public health
crises, such as pandemics and epidemics, 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. If we
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 may be unable to meet our production schedules and could
miss product delivery dates, which would adversely affect our sales, results of operations and customer relationships.
Our results of operations could be adversely affected by price reduction pressures from OEMs.
Although we have been successful in negotiating price increases in many of our contracts in response to the current
inflationary market conditions, we have historically faced price-reduction pressure from our vehicular OEM customers.
Virtually all of these OEMs have imposed aggressive price-reduction initiatives upon their suppliers. We have taken,
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and will continue to take, steps to reduce our operating costs to offset both inflationary pressures and contractual price
reductions in order to achieve profit margins that are acceptable to us. For existing contractual price reductions, if we are
unable to offset price reductions through improved operating efficiencies and manufacturing processes, sourcing
alternatives, technology enhancements and other cost reduction initiatives, or through price negotiations, our results of
operations could be adversely affected.
We expect vehicular OEM customers will continue to apply pricing pressure and many will require contractual price
reductions for new sales programs. As part of our application of the 80/20 principles, we have improved our pricing
discipline and have clear strategic targets in terms of profit margins for new sales programs. If contractual price downs
are unavoidable, we contemplate them in our overall strategy and adjust pricing as necessary to provide satisfactory
profit margins throughout the duration of the sales programs. While we believe that this pricing strategy will strengthen
our business and allow us to focus our resources on higher margin sales programs, it is possible that it may result in a
lower overall win rate for new business in the short-term. If our pricing strategy results in winning less new business,
our results of operations could be adversely affected.
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
areas 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 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.
Climate Change and ESG-Related Risks
Global climate change and related emphasis on ESG matters by various stakeholders could negatively affect our
business.
Increased public awareness and concern regarding global climate change may result in more regional and/or federal
requirements to reduce or mitigate the effects of greenhouse gas emissions. There continues to be a lack of consistent
climate legislation, which creates economic and regulatory uncertainty. Such regulatory uncertainty extends to our
product portfolio and overall costs of compliance, which may impact the demand for our products and/ or require us to
make increased capital expenditures to meet new standards and regulations. Further, our customers and the markets we
serve may impose emissions or other environmental standards upon us through regulation, market-based emissions
policies or consumer preference that we may not be able to timely meet, or which may not be economically feasible for
us, due to the required level of capital investment or technological advancement.
There is a growing consensus that greenhouse gas emissions are linked to global climate changes. Climate changes, such
as extreme weather conditions, create financial risk to our business. For example, the demand for our products and
services may be affected by unseasonable weather conditions. Climate changes could also disrupt our operations by
impacting the availability and cost of materials needed for manufacturing and could increase insurance and other
operating costs. We could also face indirect financial risks passed through the supply chain, and process disruptions due
to climate changes could result in price modifications for our products and the resources needed to produce them.
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Furthermore, customer, investor, and employee expectations in areas such as the environment, social matters and
corporate governance (ESG) have been rapidly evolving and increasing. Specifically, certain customers are requiring
information on our environmental sustainability plans and commitments, which we have not yet released publicly as of
the date of this filing. There can be no assurance of the extent to which any of our future plans or commitments will be
achieved, or that any investments we make in furtherance of achieving any such plans, targets, goals or other
commitments will meet customer, investor, employee or other stakeholder expectations and desires or any legal
standards regarding sustainability performance.
Additionally, the enhanced stakeholder focus on ESG issues requires the continuous monitoring of various and evolving
standards and the associated reporting requirements. A failure to adequately meet stakeholder expectations may result in
the loss of business, diluted market valuation, an inability to attract and retain customers or an inability to attract and
retain top talent.
Competitive Environment
Continued and increased strong competition could adversely affect our business and our results of operations.
The global 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 and global customer base.
We have manufacturing and technical facilities located in North America, South America, Europe, and Asia. In fiscal
2022, 60 percent of our sales were generated from customers outside the U.S., with 53 percent of these sales generated
by our 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, impacts of the military conflict in Ukraine),
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. Governments
in the U.S. and abroad have imposed sanctions on Russia in connection with the military conflict in Ukraine. While we
do not have manufacturing operations in Ukraine or Russia nor any significant business relationships with Russian-based
customers or suppliers, we are actively monitoring the sanctions requirements and reacting as necessary to ensure
compliance. We cannot 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
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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 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
structure that will improve 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 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 compromised or
we could experience a cybersecurity breach from computer viruses, ransomware, phishing, 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. Further, the military conflict in
Ukraine and the associated political uncertainty may increase the threat of cyberattacks on the global supply chain, which
could directly or indirectly impact our operations. 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 material expenditures could be required in order for our products and operations to comply with
evolving environmental, health and safety laws, regulations (including those developed as a concern to climate control),
or other requirements that may be adopted or imposed in the future. Future costs to remediate contamination or to
comply with environmental, health and safety laws and regulations could adversely affect our business, results of
operations, and financial condition.
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 Optimization and Growth Strategies
Inability to execute on our strategic initiatives may adversely impact our business and operating results.
We are well on our way in our strategic transformation. We have onboarded seasoned leaders with the requisite
experience to drive transformative change, including two new segment presidents as well as general managers focused
on market-based verticals within our business. Our leadership teams are driving change by applying 80/20 principles to
our business. We are analyzing our business to better focus resources on products and markets with the highest growth
opportunities and best return profiles. We plan to continue to employ an 80/20 mindset to optimize profit margins and
cash flow. If we are unable to successfully apply the 80/20 principles to our businesses and execute on our strategic
initiatives, we may not achieve the financial or operational successes anticipated.
In addition, we will continue to review our business portfolio and pursue acquisitions to accelerate growth. There can be
no assurance we will be able to identify attractive acquisition targets. If we are unable to successfully execute on organic
growth opportunities or complete acquisitions 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 future acquisitions and operate these businesses profitably, we may
not achieve the financial or operational success expected from the acquisitions.
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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, 2022, we had total outstanding indebtedness of $378 million. 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.
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 $22 million as of March 31, 2022. As a
result of funding relief provisions within the American Rescue Plan Act of 2021, we do not expect to make cash
contributions to our U.S. plans during fiscal 2023. 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.
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 $258 million at March 31, 2022. 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 and risk-adjusted discount rates. 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 general economic uncertainties and impacts associated with the
COVID-19 pandemic and the military conflict in Ukraine, 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
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in which we operate. Unfavorable or unexpected outcomes from one or more tax audits could adversely affect our
results of operations and financial condition.
In addition, as of March 31, 2022, our net deferred tax assets totaled $21 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 supply chain challenges, 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.
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
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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
throughout our organization. We depend significantly on the engagement of our employees and their skills, experience
and industry knowledge to support our objectives and initiatives. We have recently observed tightening and increased
competitiveness in the labor markets and have experienced labor shortages at certain of our manufacturing locations.
Any prolonged labor shortages or significant employee turnover could negatively impact productivity and result in
increased labor costs, such as increased overtime to meet demand or increased wage rates necessary to attract and retain
employees. Overall, difficulty in attracting, developing, and retaining qualified personnel could adversely affect our
business and results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
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; Söderköping, Sweden; Bonlanden, Germany; 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, 2022.
BHVAC
BHVAC
CIS
CIS
HDE
HDE
Automotive
Automotive
Total manufacturing facilities
Total manufacturing facilities
Americas
Americas
Europe
Europe
2
9
6
1
18
4
6
2
5
17
Asia
Asia
-
1
4
2
7
Total
Total
6
16
12
8
42
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 regularly 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.
The following sets forth the name, age (as of March 31, 2022), business experience during at least the last five years, and
certain other information relative to each executive officer of the Company.
Name
Brian J. Agen
Neil D. Brinker
Michael B. Lucareli
Eric S. McGinnis
Age
53
46
53
51
Vice President, Human Resources (October 2012 – Present).
Position
President and Chief Executive Officer (December 2020 – Present). Prior to
joining Modine, Mr. Brinker served as President and Chief Operating
Officer of Advanced Energy Industries, Inc. after serving as its Executive
Vice President and Chief Operating Officer. Prior to joining Advanced
Energy Industries, Inc, Mr. Brinker served as a Group President at IDEX
Corporation.
Executive Vice President, Chief Financial Officer (May 2021 – Present);
previously Vice President, Finance and Chief Financial Officer for the
Company.
President, Climate Solutions (April 2022 – Present); previously Vice
President, Building HVAC upon joining Modine in August 2021. Prior to
joining Modine, Mr. McGinnis served as President, Industrial Systems at
Regal Beloit.
Adrian I. Peace
54
President, Performance Technologies (April 2022 – Present); previously
Vice President, Commercial & Industrial Solutions upon joining Modine in
August 2021. Prior to joining Modine, Mr. Peace served as a Strategy
Advisor for AIP LLC. Prior to AIP LLC, Mr. Peace served as Senior Vice
President, Emerging Business Operations for Republic Services. Prior to
Republic Services, Mr. Peace served as the Vice President of the
International Business and Specialty Brands at W.W. Grainger, Inc.
Sylvia A. Stein
55
Vice President, General Counsel, Corporate Secretary and Chief
Compliance Officer (February 2020 – Present); previously Vice President,
General Counsel and Corporate Secretary for the Company. Prior to
joining Modine, Ms. Stein served as the Associate General Counsel,
Marketing & Regulatory at the Kraft Heinz Foods Company.
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
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.
There are no family relationships among the executive officers and directors. 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.
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20
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
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, 2022,
shareholders of record numbered 2,164.
We did not pay dividends during fiscal 2022 or 2021. 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
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 2023.
The following describes the Company’s purchases of common stock during the fourth quarter of fiscal 2022:
Period
Total Number of
Shares Purchased
Average
Price Paid
Per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum
Number (or
Approximate Dollar
Value) of Shares
that May Yet Be
Purchased Under the
Plans or Programs (a)
January 1 – January 31, 2022
_______
_______
_______
$50,000,000
February 1 – February 28, 2022
17,169 (b)
$10.12
_______
$50,000,000
March 1 – March 31, 2022
10,630 (b)
$9.70
_______
$50,000,000
Total
27,799 (b)
$9.96
_______
(a) Effective November 5, 2020, the Board of Directors approved a two-year, $50.0 million share repurchase
program. This program allows the Company to repurchase Modine common stock at such times and prices
deemed appropriate by the authorized officers of the Company.
(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
plans, gives participants the opportunity to turn back to the Company the number of shares from the award
sufficient to satisfy tax withholding obligations that arise upon the termination of restrictions. These shares are
held as treasury shares.
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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, the Standard & Poor’s (S&P) MidCap 400 Industrials Index, and the S&P SmallCap 600 Industrials
Index. During fiscal 2022 the Company determined that the S&P SmallCap 600 Industrials Index was more
representative of its business and will replace the S&P MidCap 400 Industrials Index for purposes of this performance
graph beginning in fiscal 2023. The graph assumes a $100 investment and reinvestment of dividends. The return shown
on the graph is not necessarily indicative of future performance.
Comparison of Cumulative Five Year Total Return
$200
$150
$100
$50
$0
03/31/17
03/31/18
03/31/19
03/31/20
03/31/21
03/31/22
Modine Manufacturing Company
S&P SmallCap 600 Industrials Index
Russell 2000 Index
S&P MidCap 400 Industrials Index
Company / Index
Company / Index
Modine Manufacturing Company
Modine Manufacturing Company
Russell 2000 Index
Russell 2000 Index
S&P SmallCap 600 Industrials Index
S&P SmallCap 600 Industrials Index
S&P MidCap 400 Industrials Index
S&P MidCap 400 Industrials Index
Initial Investment
Initial Investment
March 31, 2017
March 31, 2017
$100
100
100
100
Indexed Returns
Indexed Returns
Years ended March 31,
Years ended March 31,
2018
173.36
$
2019
113.69
$
2020
$
26.64
2021
121.07
$
2022
$
73.85
111.79
116.52
116.46
114.09
115.17
117.90
86.72
89.24
95.87
168.96
174.33
179.84
159.19
174.34
187.64
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22
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. Our product systems and solutions
support our purpose of engineering a cleaner, healthier world. We operate in four continents, in 15 countries, and
employ approximately 11,100 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, refrigeration, and data center markets. In
addition, our products are used in on- and off-highway original-equipment vehicular applications.
Company Strategy
Fiscal 2022 was a year of significant change for Modine — a year of significant progress. We onboarded seasoned
leaders with the requisite experience to drive transformative change, including two new segment presidents as well as
general managers focused on market-based verticals within our business. Effective April 1, 2022, we began managing
our company under two operating segments, Climate Solutions and Performance Technologies. The Climate Solutions
segment includes the BHVAC and CIS segment businesses with the exception of CIS Coatings. The Performance
Technologies segment includes the HDE and Automotive segment businesses and the CIS Coatings business. Our new
structure aligns businesses serving similar or complimentary end markets, products and technologies under common
segment management.
Our new leadership teams are driving change by applying 80/20 principles to our business. We are analyzing our
business to better focus resources on products and markets with the highest growth opportunities and best return profiles.
The results of our data analytics are changing how we serve our customers and are allowing us to significantly reduce the
complexity of our business, including reducing the number of SKUs, eliminating unprofitable product lines, and
changing how we operate on the factory floor. The data has also highlighted opportunities for us to improve our pricing
practices and develop strategies to target new customers.
With our teams in place, we are focused on growing the areas of our business with the strongest market drivers and best
returns, including HVAC&R, data centers, and electric vehicles. We are also focused on addressing and simplifying the
underperforming areas of our business. We are utilizing an 80/20 mindset to reduce complexity in our product offerings,
improve our pricing discipline, and increase our operational efficiency in both our manufacturing processes and in our
supply chain. In addition, we are executing restructuring actions that were approved in the fourth quarter of fiscal 2022,
which we expect to reduce administrative and overhead costs, primarily in the Performance Technologies segment.
Our ultimate objective is to accelerate growth, allowing us to complete our transformation. We expect to change our mix
of business, as we grow certain areas and strategically deemphasize others. We expect these changes will fuel
improvements in both earnings and cash flow, all while supporting our customers with innovative and environmentally
responsible thermal management solutions to succeed in the ever-changing global marketplace.
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. Each of our business segments has a strong heritage of new product
development and our technology team 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.
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23
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 the HVAC&R and data center markets. In addition, we have a dedicated team focused on products
and solutions for electric vehicles, supporting demands for climate-friendly alternative powertrains. We have provided
our general managers with the tools that they need to be successful, including dedicated resources to create an
entrepreneurial environment and to challenge the status quo.
Operational and Financial Discipline
We are using 80/20 principles to guide our path forward towards commercial excellence. Through closely analyzing our
customer and product data with our 80/20 mindset, we have gained a valuable understanding of what drives our
profitability and have also identified areas requiring improvement. Beginning in fiscal 2023, we began managing our
company under two operating segments, Climate Solutions and Performance Technologies. These segment teams, led by
segment presidents and general managers focused on the underlying market verticals, are driving transformative change
with our 80/20 mindset. Each general manager has developed a strategic plan designed to meet the objective of his or
her market- based vertical - venture, grow, or improve. We expect these strategies to fuel earnings and cash flow
improvements.
While executing on our strategic initiatives, we have faced obstacles including supply chain challenges associated with
the COVID-19 pandemic and other market and economic dynamics and cost inflation. We have and will continue to
address these challenges head-on. We’ve implemented selling price increases for our products in response to raw
material and other price increases and are engaged with suppliers to ensure availability of purchased commodities and
components.
Our executive management incentive compensation (annual cash incentive) plan for fiscal 2022 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 leaders throughout our organization to attract, retain,
and motivate these employees who are responsible for driving the long-term success 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 2022 through 2024 performance period are based upon a target three-year average growth in Adjusted
EBITDA 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 July 1, 2021, we aligned the data center businesses previously managed by and reported within the CIS
segment under the BHVAC segment. The BHVAC segment assumed management of our business in Guadalajara, Spain
and a portion of our business in Grenada, Mississippi. Through this segment change, we aligned our data center
businesses under the BHVAC leadership team in order to accelerate commercial excellence, operational improvements,
and organizational efficiencies.
Effective April 1, 2022, we began managing our company under two operating segments, Climate Solutions and
Performance Technologies. The Climate Solutions segment includes the BHVAC and CIS segment businesses with the
24
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exception of CIS Coatings. The Performance Technologies segment includes the HDE and Automotive segment
businesses and the CIS Coatings business. Our new structure aligns businesses serving similar or complimentary end
markets, products and technologies under common segment management. We expect this simplified segment structure
will allow us to better focus our resources on targeted growth opportunities and more efficiently apply the 80/20
principles across all product lines to optimize profit margins and cash flow.
Building HVAC Systems (16 percent of fiscal 2022 net sales)
Our BHVAC segment manufactures and sells a variety of heating, ventilating, and air conditioning products, primarily
for commercial buildings and data centers in North America and Europe, as well as in the Middle East. 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, restaurants,
hospitals, warehouses, 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 indoor air
quality products include roof-mounted direct- and indirect-fired makeup air units, single-packaged vertical units and unit
ventilators used in school room applications, and ceiling cassettes. Our data center products include IT cooling solutions
including precision air conditioning units, CRAC and CRAH units, fan walls, chillers, and condensers and condensing
units. We also provide other cooling products including precision air conditioning units and air- and water-cooled
chillers used in a variety of commercial building applications. In addition, we provide control solutions for existing
plant equipment and new building management controls and systems.
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 HVAC products. During fiscal 2022, our sales increased in both North America and Europe, primarily driven by
increased sales of heating, ventilation, and data center products.
We expect growth in each of the HVAC and data center markets we serve during fiscal 2023. These markets are heavily
impacted by construction activity, building regulations, owner/occupant comfort requirements, and the ever-increasing
reliance on digital technologies. Growth rates in these markets have shown increasing strength as the need for digital
infrastructure expands and manufacturing, housing, and business investments increase. In addition, we expect sales
growth in the indoor air quality markets in North America during fiscal 2023 to be driven by available federal and local
funding for ventilation improvements by school and healthcare systems in connection with the COVID-19 pandemic.
Commercial and Industrial Solutions (30 percent of fiscal 2022 net sales)
Our CIS segment provides a broad offering of thermal management products to the HVAC&R markets in North
America, EMEA, and China, including solutions tailored to indoor, outdoor, and mobile climates, food storage and
transport-refrigeration, and industrial processes. Our primary product groups in the CIS segment include coils, coolers,
and coatings. Our coils products include microchannel, heat recovery, and round tube plate fin coils for a variety of
commercial and industrial applications. Our coolers include commercial refrigeration units, which are used across the
food supply chain, 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 2022, CIS segment sales increased driven by both increased sales volume, as the primary HVAC&R and
industrial cooling markets were negatively impacted in the prior year from the COVID-19 pandemic, and favorable
product pricing adjustments in response to raw material price increases. In addition, we also implemented targeted
headcount reductions to reduce operational and SG&A cost structures.
Looking ahead, we anticipate continued market growth in the HVAC&R markets. We are utilizing an 80/20 mindset to
simplify our product offerings for coils and improve our pricing discipline to ensure our pricing is reflective of the
service and support that we proudly offer with our products. We are also focused on growing our cooler sales and
believe we can become a market leader in more environmentally friendly carbon dioxide gas coolers and adiabatic
solutions in North America and Europe. In addition, we are targeting sales growth for coatings, both in coatings applied
by us and expanding our market share in aftermarket coating solutions, which allow customers to apply protective
coating solutions themselves.
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25
Heavy Duty Equipment (39 percent of fiscal 2022 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 in the HDE segment increased during fiscal 2022, primarily due to higher sales volume to commercial vehicle and
off-highway customers and favorable product pricing adjustments in response to raw material price increases. The key
markets served by our HDE segment, particularly in the Americas and in Europe, were negatively impacted in the prior
year by the COVID-19 pandemic.
In fiscal 2023, we expect to benefit from anticipated market growth in the commercial vehicle and off-highway markets,
particularly in the Americas and in Europe, partially offset by market weakness expected in China. In addition, we
recently announced availability of our suite of EVantage™ Thermal Management Systems for commercial electric
vehicle chassis. These complete battery thermal management systems regulate battery, traction motor, and power
electronics temperatures. We are producing these systems for several customers, with additional programs launching in
fiscal 2023. We are also engaged in development with prospective customers for solutions related to electric trucks and
buses. Finally, we are applying our 80/20 mindset across our business portfolio to reduce complexity, improve our
pricing discipline, and improve the HDE segment’s profitability and cash flow generation.
Automotive (15 percent of fiscal 2022 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.
We completed the sale of our air-cooled automotive business in Austria during the first quarter of fiscal 2022. Sales in
fiscal 2022 decreased, primarily due to lower sales from the air-cooled automotive business and lower sales volume. Our
fiscal 2022 sales were negatively impacted by the global semiconductor chip shortage and its impact on the global
automotive market. During fiscal 2022, we recorded $20 million of restructuring expenses within the Automotive
segment, primarily related to targeted headcount reductions in Europe to reduce administrative and overhead costs.
We expect that the semiconductor chip shortages will begin to ease in fiscal 2023, which we anticipate will drive sales
volume growth particularly in North America and in China. We are monitoring the automotive and light vehicle markets
in Europe in light of potential impacts from the military conflict between Russia and Ukraine, which may further
aggravate supply chain challenges and increase energy and fuel prices. We expect such impacts could negatively impact
automotive production levels in Europe. We are focused on targeted growth opportunities with electric vehicle
customers, as the demand and investment in electric vehicles continues to grow in light of increasingly stringent global
emissions and energy efficiency requirements.
Consolidated Results of Operations
COVID-19 Pandemic and Supply Chain Disruptions
During fiscal 2022, the effects on our company from the COVID-19 pandemic lessened, particularly compared with the
significant impacts during the first half of fiscal 2021.
The COVID-19 pandemic and other market and economic dynamics have contributed to global supply chain challenges
and inflationary market conditions. Since the fourth quarter of fiscal 2022, the military conflict between Russia and
Ukraine and the related sanctions imposed by governments in the U.S. and abroad have further aggravated these market
conditions, particularly driving higher oil and gas prices. We, like many companies, have experienced labor shortages
and negative impacts from supply chain challenges, including rising prices for raw materials and logistics, as well as
delays and shortages in certain commodities and components we purchase from suppliers. We are focused on mitigating
the negative impacts of these supply chain challenges. We have implemented selling price increases for our products in
response to raw material and other price increases and are engaged with suppliers to ensure availability of key raw
materials. In addition, our Automotive segment has been impacted by lower order volume associated with
semiconductor shortages, which have caused lower global automotive production.
26
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Since February 2022, COVID-19 cases have increased in many areas in China. As a result of government-required lock-
downs, we suspended production at manufacturing facilities in China for portions of March and April 2022. While these
plants have since reopened, they are currently manufacturing at reduced levels and customer demand has been negatively
impacted by the lock-downs and supply chain challenges, including component shortages. We are actively working to
address the supply chain challenges and expect to increase production levels at our plants in China in the second quarter
of fiscal 2023. All of our other manufacturing locations are open and operating, although production has been negatively
affected at times by employee absences due to COVID-19.
We expect temporary disruptions due to illness-related employee absences and the pressures associated with supply
chain challenges will continue, at least in the near term. We cannot reasonably estimate the full impact that the COVID-
19 pandemic or the ongoing supply chain challenges will have on our business, results of operations, or cash flows in the
future.
Liquid-cooled Automotive Business
On October 25, 2021, we announced that we agreed with Dana Incorporated (“Dana”) to terminate an agreement for the
sale of our liquid-cooled automotive business. In connection with the termination of the sale agreement, we determined
that the liquid-cooled automotive business no longer met the requirements to be classified as held for sale during the
third quarter of fiscal 2022. While held for sale, we had fully impaired the long-lived assets within the liquid-cooled
automotive business, which primarily consisted of property, plant and equipment assets. Upon reverting back to held
and used classification, we adjusted the long-lived assets to the lower of their (i) carrying value, as if held for sale
classification had not been met; or (ii) fair value. As a result, we reversed $57 million of previous impairment charges
during the third quarter of fiscal 2022 within the Automotive segment. In addition, we resumed depreciating the
property, plant and equipment assets based upon the remeasured asset values.
In total, we recorded $56 million of net impairment reversals during fiscal 2022 within the Automotive segment related
to assets that are no longer held for sale, primarily driven by the $57 million impairment reversal in the third quarter
discussed above. See Note 2 of the Notes to Consolidated Financial Statements for additional information.
Air-cooled Automotive Business
On April 30, 2021, we sold our air-cooled automotive business to Schmid Metall GmbH. As a result of this transaction,
we recorded a loss of $7 million during the first quarter of fiscal 2022.
Fiscal 2022 Highlights
Fiscal 2022 net sales increased $242 million, or 13 percent, from the prior year, primarily due to higher sales in our
HDE, CIS, and BHVAC segments, partially offset by lower sales in our Automotive segment. Cost of sales increased
$226 million, or 15 percent, from the prior year primarily due to higher raw material prices and higher sales volume.
Gross profit increased $16 million and gross margin declined 110 basis points to 15.1 percent. SG&A expenses
increased $4 million, primarily due to higher compensation-related expenses, as the prior-year benefitted from cost-
saving actions implemented in response to COVID-19. We withdrew most of these cost-savings actions in the third
quarter of fiscal 2021 as production returned to more normal levels. Operating income of $119 million during fiscal
2022 represents a $217 million improvement from the prior-year operating loss of $98 million. The operating income
and operating loss during fiscal 2022 and 2021 include $56 million of impairment reversals and $167 million of
impairment charges, respectively, primarily related to the automotive businesses that were held for sale.
Fiscal 2021 Highlights
Fiscal 2021 net sales decreased $167 million, or 8 percent, from the prior year, primarily due to lower sales across our
business segments, largely driven by the negative impacts of the COVID-19 pandemic. Foreign currency exchange rate
changes favorably impacted sales in fiscal 2021 by $28 million. Cost of sales decreased $153 million, or 9 percent, from
the prior 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. 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 the $167 million of impairment charges recorded, partially offset by lower
SG&A expenses.
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27
The following table presents our consolidated financial results on a comparative basis for fiscal years 2022, 2021 and
2020.
2022
Years ended March 31,
Years ended March 31,
2021
2020
(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 (reversals) - net
Impairment charges (reversals) - net
Loss (gain) on sale of assets
Loss (gain) on sale of assets
Operating income (loss)
Operating income (loss)
Interest expense
Interest expense
Other expense - net
Other expense – net
Earnings (loss) before income taxes
Earnings (loss) before income taxes
Provision for income taxes
Provision for income taxes
Net earnings (loss)
Net earnings (loss)
$
$
$
$'s
2,050
1,741
309
215
24
(56)
7
119
(16)
(2)
101
(15)
86
% of sales
100.0%
84.9%
15.1%
10.5%
1.2%
-2.7%
0.3%
5.8%
-0.8%
-0.1%
5.0%
-0.7%
4.2%
$'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%
$
$
$
Year Ended March 31, 2022 Compared with Year Ended March 31, 2021
Fiscal 2022 net sales of $2,050 million were $242 million, or 13 percent, higher than the prior year, primarily due to
higher sales volume and favorable pricing adjustments in response to raw material price increases in our HDE, CIS, and
BHVAC segments. Sales in these segments increased $142 million, $115 million, and $74 million, respectively.
Automotive segment sales decreased $85 million.
Fiscal 2022 cost of sales of $1,741 million increased $226 million, or 15 percent, primarily due to higher raw material
prices, which increased $148 million, and higher sales volume. In addition, cost of sales in fiscal 2021 was favorably
impacted by cost-saving actions taken in response to the COVID-19 pandemic. These factors, which caused an increase
in cost of sales compared with the prior year, were partially offset by lower depreciation expense in the Automotive
segment and improved operating efficiencies. As a percentage of sales, cost of sales increased 110 basis points to 84.9
percent.
As a result of higher sales and higher cost of sales as a percentage of sales, fiscal 2022 gross profit increased $16 million
and gross margin declined 110 basis points to 15.1 percent.
Fiscal 2022 SG&A expenses increased $4 million. The increase in SG&A expenses was primarily due to higher
compensation-related expenses, as the prior year was favorably impacted by cost-saving actions implemented to mitigate
the negative impacts of COVID-19. In addition, environmental charges related to a previously-owned manufacturing
facility in the U.S. increased $3 million. These increases were partially offset by lower costs related to our review of
strategic alternatives for the Automotive segment businesses and lower strategic reorganization costs, which decreased
$4 million and $3 million, respectively. The lower strategic reorganization costs primarily resulted from lower severance
expenses for executive management positions.
Restructuring expenses of $24 million in fiscal 2022 increased $11 million compared with last year, primarily due to
higher severance-related expenses in the Automotive segment, partially offset by lower severance-related expenses in the
CIS and HDE segments. We are targeting approximately $20 million of annual cost savings on a consolidated basis
from the restructuring actions approved in fiscal 2022.
The net impairment reversals of $56 million during fiscal 2022 primarily related to assets that were held for sale in the
Automotive segment. In fiscal 2021, we recorded $167 million of impairment charges to write down the long-lived
assets in the liquid- and air-cooled automotive businesses when they were classified as held for sale. In fiscal 2022, we
adjusted the long-lived assets in the liquid-cooled automotive business to the lower of carrying or fair value when they
no longer met the held for sale classification criteria.
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We sold our air-cooled automotive business on April 30, 2021. As a result of the sale, we recorded a $7 million loss on
sale at Corporate during fiscal 2022.
Operating income of $119 million during fiscal 2022 represents an improvement of $217 million from the prior-year
operating loss of $98 million. The operating income and operating loss during fiscal 2022 and 2021 included the
significant impairment reversal and impairment charges within the Automotive segment. In addition, as compared with
the prior year, the fiscal 2022 operating income was favorably impacted by higher gross profit. Operating income was
negatively impacted by higher restructuring expenses, the loss on sale of the air-cooled automotive business, and higher
SG&A expenses.
The provision for income taxes was $15 million and $90 million in fiscal 2022 and 2021, respectively. The $75 million
decrease was primarily due to the absence of $117 million of income tax charges recorded in fiscal 2021 to increase the
valuation allowances on deferred tax assets in the U.S. and in certain foreign jurisdictions and a net $11 million income
tax benefit recorded in fiscal 2022 related to valuation allowances on deferred tax assets in foreign jurisdictions. These
drivers, which decreased the provision for income taxes, were partially offset by the absence of income tax benefits
totaling $47 million recorded in the prior year, including $38 million related to the Automotive segment impairment
charges and $9 million resulting from the allocation of the income tax provision between net earnings and other
comprehensive income. See Note 8 of the Notes to Consolidated Financial Statements for additional information.
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 across our business segments, partially offset by a $28 million favorable impact of foreign currency
exchange rate changes. Sales in the HDE, Automotive, BHVAC, and CIS segments decreased $64 million, $47 million,
$44 million, and $29 million, respectively. Fiscal 2021 sales were significantly impacted by market-driven volume
declines and temporary plant closures early in fiscal 2021 due to the COVID-19 pandemic.
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 $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 $30 million, and lower compensation-related expenses, which decreased $13 million, largely resulting from
cost-saving actions taken in response to COVID-19. These favorable drivers were partially offset by $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 when they were classified as held for sale.
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
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lower earnings in our BHVAC segment, which decreased $13 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.
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.
Segment Results of Operations
Effective July 1, 2021, we aligned the data center businesses previously managed by and reported within the CIS
segment under the BHVAC segment. The BHVAC segment assumed management of our business in Guadalajara, Spain
and a portion of our business in Grenada, Mississippi. Through this segment change, we aligned our data center
businesses under the same leadership team to accelerate commercial excellence, operational improvements, and
organizational efficiencies. As a result, we revised our reporting segments and are reporting the financial results of the
transferred businesses within the BHVAC segment. The segment realignment had no impact on the HDE and
Automotive segments or on our consolidated financial position, results of operations, and cash flows. We have recast the
segment financial information for fiscal 2021 and 2020 to conform to the fiscal 2022 presentation.
Effective April 1, 2022, we began managing our company under two operating segments, Climate Solutions and
Performance Technologies. The Climate Solutions segment includes the BHVAC and CIS segment businesses with the
exception of CIS Coatings. The Performance Technologies segment includes the HDE and Automotive segment
businesses and the CIS Coatings business. Beginning for fiscal 2023, we will report the financial results under the new
segment structure.
BHVAC
2022
Years ended March 31,
Years ended March 31,
2021
2020
(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
Operating income
Operating income
$'s
% of sales
$'s
% of sales
$'s
% of sales
$
337
100.0%
$
263
100.0%
$
307
100.0%
243
94
48
46
$
72.2%
27.8%
14.1%
13.6%
178
85
40
45
$
67.6%
32.4%
15.2%
17.2%
206
100
42
58
$
67.3%
32.7%
13.7%
19.0%
Year Ended March 31, 2022 Compared with Year Ended March 31, 2021
BHVAC net sales increased $74 million, or 28 percent, in fiscal 2022 compared with the prior year, primarily due to
higher sales volume and, to a lesser extent, favorable pricing adjustments in response to raw material price increases.
Sales to commercial HVAC customers increased $41 million, primarily due to higher sales of heating and ventilation
products in North America. In addition, sales to data center customers increased $32 million.
BHVAC cost of sales increased $65 million, or 37 percent, in fiscal 2022, primarily due to higher sales volume and
higher raw material prices, which increased by $16 million. As a percentage of sales, cost of sales increased 460 basis
points to 72.2 percent, primarily due to the higher material costs.
As a result of higher sales and higher cost of sales as a percentage of sales, gross profit increased $9 million and gross
margin declined 460 basis points to 27.8 percent.
BHVAC SG&A expenses increased $8 million compared with the prior year, yet decreased 110 basis points as a
percentage of sales. The increase in SG&A expenses was primarily due to higher compensation-related expenses, which
increased $6 million and included higher commission expenses.
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Operating income in fiscal 2022 of $46 million increased $1 million, primarily due to higher gross profit, partially offset
by higher SG&A expenses.
Year Ended March 31, 2021 Compared with Year Ended March 31, 2020
BHVAC net sales decreased $44 million, or 14 percent, in fiscal 2021 compared with the prior year, primarily due to
lower sales to a significant data center customer. Sales to data center customers decreased $42 million compared with
the prior year. Sales to commercial HVAC customers were consistent with the prior year, as higher sales of ventilation
and heating products in the U.S. were largely offset by lower sales in Europe.
BHVAC cost of sales decreased $28 million, or 14 percent, in fiscal 2021, primarily due to lower sales volume. As a
percentage of sales, cost of sales increased 30 basis points to 67.6 percent and was negatively impacted by unfavorable
sales mix.
As a result of the lower sales and higher cost of sales as a percentage of sales, gross profit decreased $15 million and
gross margin declined 30 basis points to 32.4 percent.
BHVAC SG&A expenses decreased $2 million from the prior year. The decrease in SG&A expenses was primarily due
to lower compensation-related expenses.
Operating income in fiscal 2021 of $45 million decreased $13 million, primarily due to lower gross profit.
CIS
2022
Years ended March 31,
Years ended March 31,
2021
2020
(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 charge
Operating income
Operating income
$'s
% of sales
$'s
% of sales
$'s
% of sales
$
627
100.0%
$
512
100.0%
$
541
100.0%
539
88
51
2
-
35
$
85.9%
14.1%
8.1%
0.4%
-
5.6%
448
64
49
5
-
10
$
87.5%
12.5%
9.5%
1.0%
-
2.0%
477
64
51
2
1
11
$
88.1%
11.9%
9.3%
0.4%
0.1%
2.1%
Year Ended March 31, 2022 Compared with Year Ended March 31, 2021
CIS net sales increased $115 million, or 22 percent, in fiscal 2022 compared with the prior year, primarily due to higher
sales volume and favorable product pricing adjustments in response to raw material price increases. CIS sales in fiscal
2021 were negatively impacted by the COVID-19 pandemic, primarily in the first half of the fiscal year. Sales to
commercial HVAC&R customers increased $117 million.
CIS cost of sales increased $91 million, or 20 percent, primarily due to higher sales volume and higher raw material
prices, which increased by $51 million. As a percentage of sales, cost of sales decreased 160 basis points to 85.9
percent, primarily due to the favorable impacts of the higher sales volume and improved operating efficiencies, partially
offset by higher material costs.
As a result of the higher sales and lower cost of sales as a percentage of sales, gross profit increased $24 million and
gross margin improved 160 basis points to 14.1 percent.
CIS SG&A expenses increased $2 million compared with the prior year, yet decreased 140 basis points as a percentage
of sales. The increase in SG&A expenses was primarily due to higher compensation-related expenses.
Restructuring expenses during fiscal 2022 decreased $3 million, primarily due to lower severance expenses. The fiscal
2022 severance expenses primarily related to targeted headcount reductions in Europe and China. The fiscal 2021
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severance expenses primarily related to plant consolidation activities in China and targeted headcount reductions in
North America.
Operating income in fiscal 2022 increased $25 million to $35 million, primarily due to higher gross profit.
Year Ended March 31, 2021 Compared with Year Ended March 31, 2020
CIS net sales decreased $29 million, or 5 percent, in fiscal 2021 compared with the prior year, primarily due to lower
sales volume resulting from the impacts of the COVID-19 pandemic, partially offset by a $12 million favorable impact
of foreign currency exchange rate changes. Sales to commercial HVAC&R customers decreased $33 million and were
partially offset by higher industrial cooling sales, which increased $5 million.
CIS cost of sales decreased $29 million, or 6 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 decreased
60 basis points to 87.5 percent, as the favorable impact of cost-reduction and procurement initiatives more than offset the
impact of the lower sales volume.
As a result of both the lower sales and lower cost of sales as a percentage of sales, gross profit remained consistent at $64
million and gross margin improved 60 basis points to 12.5 percent.
CIS SG&A expenses decreased $2 million compared with the prior year. The decrease in SG&A expenses was primarily
due to lower compensation-related expenses.
Restructuring expenses during fiscal 2021 increased $3 million, primarily due to higher severance expenses. The fiscal
2021 restructuring expenses 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 $1 million to $10 million, primarily due to higher restructuring expenses,
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
2022
Years ended March 31,
Years ended March 31,
2021
2020
$'s
% of sales
$'s
% of sales
$'s
% of sales
$
824
100.0%
$
682
100.0%
$
746
100.0%
737
87
51
1
35
$
89.4%
10.6%
6.2%
0.2%
4.2%
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%
Year Ended March 31, 2022 Compared with Year Ended March 31, 2021
HDE net sales increased $142 million, or 21 percent, in fiscal 2022 compared with the prior year, primarily due to higher
sales volume and, to a lesser extent, favorable product pricing adjustments in response to raw material price increases.
HDE sales in fiscal 2021 were negatively impacted by the COVID-19 pandemic. Sales to off-highway and commercial
vehicle customers increased $71 million and $69 million, respectively.
HDE cost of sales increased $143 million, or 24 percent, primarily due to higher sales volume and higher raw material
prices, which increased approximately $67 million. As a percentage of sales, cost of sales increased 240 basis points to
89.4 percent, primarily due to the higher material prices.
As a result of higher sales and higher cost of sales as a percentage of sales, gross profit decreased $1 million and gross
margin declined 240 basis points to 10.6 percent.
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HDE SG&A expenses increased $2 million compared with the prior year, yet decreased 90 basis points as a percentage
of sales. The increase in SG&A expenses was primarily related to higher compensation-related expenses, which
increased $6 million, partially offset by lower development and other administrative costs.
Restructuring expenses during fiscal 2022 decreased $2 million, primarily due to lower severance expenses.
Operating income in fiscal 2022 decreased $2 million to $35 million, primarily due to lower gross profit and higher
SG&A expenses, partially offset by lower restructuring expenses.
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 $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.
AUTOMOTIVE
2022
Years ended March 31,
Years ended March 31,
2021
2020
(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 (reversals) - net
Impairment charges (reversals) - net
Gain on sale of assets
Gain on sale of assets
Operating income (loss)
Operating income (loss)
$'s
% of sales
$'s
% of sales
$'s
% of sales
$
313
100.0%
$
398
100.0%
$
445
100.0%
274
39
40
20
(56)
-
35
$
87.5%
12.5%
12.6%
6.5%
-17.9%
-
11.3%
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%
Year Ended March 31, 2022 Compared with Year Ended March 31, 2021
Automotive net sales decreased $85 million, or 21 percent, in fiscal 2022 compared with the prior year, primarily due to
$58 million of lower sales from the air-cooled automotive business, which we sold in the first quarter of fiscal 2022, and
lower sales volume, largely associated with the negative impacts of the global semiconductor chip shortage on the global
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33
automotive market. These drivers, which decreased sales, were partially offset by favorable product pricing adjustments
in response to raw material price increases. Sales in Europe, North America, and Asia decreased $62 million, $13
million, and $11 million, respectively.
Automotive cost of sales decreased $68 million, or 20 percent, compared with the prior year, primarily due to lower sales
volume and lower depreciation expenses, which decreased $9 million. We ceased depreciating the property, plant and
equipment assets within the liquid- and air-cooled automotive businesses when they were classified as held for sale
during the second half of fiscal 2021. Upon reverting back to held and used classification during the third quarter of
fiscal 2022, we resumed depreciating the property, plant and equipment assets in the liquid-cooled automotive business.
These decreases were partially offset by higher raw material prices, which increased $14 million. As a percentage of
sales, cost of sales increased 160 basis points to 87.5 percent.
As a result of the lower sales and higher cost of sales as a percentage of sales, gross profit decreased $17 million and
gross margin declined 160 basis points to 12.5 percent.
Automotive SG&A expenses increased $4 million compared with the prior year. The increase in SG&A expenses was
primarily related to higher compensation-related expenses and, to a lesser extent, higher development and administrative
expenses.
Restructuring expenses during fiscal 2022 totaled $20 million, an increase of $16 million compared with the prior year.
The increase was primarily driven by higher severance expenses in Europe related to targeted headcount reductions.
The fiscal 2022 net impairment reversal of $56 million primarily related to assets in our liquid-cooled automotive
business. We remeasured the previously impaired long-lived assets within the liquid-cooled automotive business to the
lower of their carrying or fair value once they were no longer held for sale. The fiscal 2021 impairment charges totaling
$167 million related to assets in the liquid- and air-cooled automotive businesses, which were first classified as held for
sale in fiscal 2021.
Operating income of $35 million during fiscal 2022 represents a $186 million improvement from the prior-year operating
loss of $151 million. The operating income and operating loss during fiscal 2022 and 2021 were driven by the
significant net impairment reversal and impairment charges, respectively. In addition, as compared with the prior year,
operating income was unfavorably impacted by lower gross profit and higher restructuring expenses.
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 $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 $8 million.
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.
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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. During fiscal 2020, we
recorded asset impairment charges totaling $8 million, primarily related to manufacturing facilities in Austria and
Germany.
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.
Liquidity and Capital Resources
Our primary sources of liquidity are cash flow from operating activities, our cash and cash equivalents as of March 31,
2022 of $45 million, and an available borrowing capacity of $173 million under our revolving credit facility. Given our
extensive international operations, approximately $42 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.
Our primary contractual obligations include pension obligations, debt and related interest payments, lease obligations,
and obligations for capital expenditures. Our pension liabilities totaled $49 million as of March 31, 2022. As a result of
funding relief provisions within the American Rescue Plan Act of 2021, we do not expect to make cash contributions to
our U.S. plans during fiscal 2023.
Net Cash Provided by Operating Activities
Net cash provided by operating activities in fiscal 2022 was $12 million, a decrease of $138 million from $150 million in
the prior year. This decrease in operating cash flow was primarily due to unfavorable net changes in working capital,
including higher inventory and accounts receivable levels and higher payments for incentive compensation and employee
benefits as compared with the same period in the prior year. Inventory, including amounts that were held for sale,
increased $61 million from March 31, 2021 to March 31, 2022. The higher inventory levels in fiscal 2022 have largely
resulted from both increased raw material prices and strategic safety stock builds in connection with global supply chain
constraints and challenges.
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. We paid half of the deferred amount in fiscal 2022 and expect to pay the other half in fiscal 2023.
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.
Capital Expenditures
Capital expenditures of $40 million during fiscal 2022 increased $8 million compared with fiscal 2021. Our capital
spending in fiscal 2022 primarily occurred in the HDE and Automotive segments, which totaled $15 million and $13
million, respectively, and included tooling and equipment purchases in conjunction with new and renewal programs with
customers. In fiscal 2021, we delayed certain projects and the purchase of certain program-related equipment and
tooling to preserve our available liquidity during the first year of the COVID-19 pandemic.
Debt
Our total debt outstanding increased $38 million to $378 million at March 31, 2022 compared with the prior year,
primarily due to borrowings during fiscal 2022. As of March 31, 2021, $5 million of debt was classified within
liabilities held for sale on our consolidated balance sheet.
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35
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 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, 2022, our leverage ratio and interest
coverage ratio were 2.3 and 11.4, respectively. We expect to remain in compliance with our debt covenants during fiscal
2023 and beyond.
See Note 17 of the Notes to Consolidated Financial Statements for additional information regarding our credit
agreements.
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 materially 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. In the event 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. 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 $315 million and $90 million, respectively, at March 31, 2022. 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 and BHVAC segments. 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
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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 2022, we recorded net impairment reversals of $56 million, primarily related to assets that were held for
sale in the Automotive segment. In fiscal 2021, we recorded $167 million of impairment charges to write down the long-
lived assets in the liquid- and air-cooled automotive businesses when they were classified as held for sale. In fiscal 2022,
we adjusted the long-lived assets in the liquid-cooled automotive business to the lower of carrying or fair value when
they no longer met the held for sale classification criteria. See Note 2 of the Notes to the Consolidated Financial
Statements for additional information.
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. Goodwill resulting from recent acquisitions generally represents the highest risk
of impairment, which typically decreases as the businesses are integrated into the Company and positioned 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 and risk-adjusted discount rates. 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- and business-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 general economic uncertainties and impacts associated with the COVID-19 pandemic
and the military conflict in Ukraine. We cannot predict the occurrence of certain events or changes in circumstances that
might adversely affect the carrying value of goodwill.
At March 31, 2022, our goodwill totaled $168 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, 2022 by applying
a fair value-based test and determined the fair value of each of our reporting units exceeded the respective book value.
A 10 percent decrease in the estimated fair value of our reporting units would not have resulted in a different conclusion.
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
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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.
Pension Obligations
Our calculation of the expense and liabilities of our pension plans is dependent upon various assumptions. At March 31,
2022, our pension liabilities totaled $49 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 benefit cost. Our
domestic pension plans are closed to new participants; therefore, participants in these plans are not accruing benefits
based upon their current 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
2022 and 2021 was 7.5 percent. For fiscal 2023, we have assumed a rate of 7.0 percent. A change of 25 basis points in
the expected rate of return on assets would impact our fiscal 2023 pension expense by less than $1 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 2022 and 2021, for purposes of determining pension expense, we used a discount rate of 3.2
and 3.4 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 2023 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.
Loss Reserves
We maintain liabilities and reserves for a number of loss exposures, including environmental remediation costs, product
warranties, self-insurance costs, 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
38
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methodologies for the particular type of loss reserve being calculated. See Notes 15 and 20 of the Notes to Consolidated
Financial Statements for additional information regarding product warranties and contingencies and litigation,
respectively.
Forward-Looking Statements
This report, including, but not limited to, the discussion under Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations, contains statements, including information about future financial
performance, accompanied by phrases such as “believes,” “estimates,” “expects,” “plans,” “anticipates,” “intends,” and
other similar “forward-looking” statements, as defined in the Private Securities Litigation Reform Act of 1995.
Modine’s actual results, performance or achievements may differ materially from those expressed or implied in these
statements, because of certain risks and uncertainties, including, but not limited to, those described under “Risk Factors”
in Item 1A. in Part I. of 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:
(cid:120) The impact of potential adverse developments or disruptions in the global economy and financial markets,
including impacts related to tariffs, sanctions and other trade issues or cross-border trade restrictions (and any
potential resulting trade war), inflation and supply chain challenges, and including impacts associated with the
military conflict between Russia and Ukraine;
(cid:120) The impact of the COVID-19 pandemic on the national and global economy, our business, suppliers, customers,
and employees;
(cid:120) The impact of other 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 foreign
currency exchange rate fluctuations; changes in interest rates; recession and recovery therefrom; and the general
uncertainties about the impact of regulatory and/or policy changes, including those related to tax and trade that
have been or may be implemented in the U.S. or abroad;
(cid:120) 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, including through our
quotation process or through contract provisions for prospective price adjustments, as well as the inherent lag in
timing of such contract provisions;
(cid:120) Our ability to mitigate increased labor costs and labor shortages; and
(cid:120) 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:
(cid:120) The impact of problems, including logistic and transportation challenges, associated with suppliers meeting our
quantity, quality, price and timing demands, and the overall health of our suppliers, including their ability and
willingness to supply our volume demands if their production capacity becomes constrained;
(cid:120) The overall health of and price-reduction pressure from 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;
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(cid:120) Our ability to maintain current customer relationships and compete effectively for new business, including our
ability to achieve profit margins acceptable to us by offsetting or otherwise addressing any cost increases
associated with supply chain challenges and inflationary market conditions;
(cid:120) The impact of product or manufacturing difficulties or operating inefficiencies, including any program launch
and product transfer challenges and warranty claims;
(cid:120) The impact of delays or modifications initiated by major customers with respect to program launches, product
applications or requirements;
(cid:120) 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;
(cid:120) Our ability to effectively and efficiently manage our cost structure in response to sales volume increases or
decreases and to complete restructuring activities and realize the anticipated benefits of those activities;
(cid:120) 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;
(cid:120) Our ability to recruit and maintain talent, including personnel in managerial, leadership, operational and
administrative functions, in light of tight global labor markets;
(cid:120) Our ability to protect our proprietary information and intellectual property from theft or attack by internal or
external sources;
(cid:120) The impact of a substantial disruption or material breach of our information technology systems, and any
related delays, problems or costs;
(cid:120)
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;
(cid:120) Work stoppages or interference at our facilities or those of our major customers and/or suppliers;
(cid:120) The constant and increasing pressures associated with healthcare and associated insurance costs; and
(cid:120) Costs and other effects of litigation, claims, or other obligations.
Strategic Risks:
(cid:120) Our ability to successfully realize anticipated benefits from strategic initiatives and our application of 80/20
principles to our business, through which we are focused on reducing complexity and growing businesses with
strong market drivers;
(cid:120) Our ability to successfully execute strategies to reduce costs and improve operating margins; and
(cid:120) The potential impacts from actions by activist shareholders, including disruption of our business and related
costs.
Financial Risks:
(cid:120) Our ability to fund our global liquidity requirements efficiently for our 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;
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(cid:120) The impact of increases in interest rates in relation to our variable-rate debt obligations;
(cid:120) The impact of changes in federal, state or local taxes that could have the effect of increasing our income tax
expense;
(cid:120) 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);
(cid:120) The potential unfavorable impact of foreign currency exchange rate fluctuations on our financial results; and
(cid:120) 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 2022, 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 2022,
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 2022, changes in foreign currency exchange rates
favorably impacted our sales by $10 million; however, the impact on our operating income was only $1 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 2022, there would not have
been a material impact on our fiscal 2022 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, including
swingline borrowings, is variable and is currently based primarily on either LIBOR or EURIBOR, plus 137.5 to 250
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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, 2022, our outstanding borrowings on variable-rate term loans and the revolving credit facility totaled
$164 million and $72 million, respectively. Based upon our outstanding debt with variable interest rates at March 31,
2022, a 100-basis point increase in interest rates would increase our annual interest expense in fiscal 2023 by
approximately $2 million.
Commodity Price and Supply Risk
To produce the products we sell, we purchase raw materials and supplies including aluminum, copper, steel and stainless
steel (nickel), and natural gas. In addition, we also purchase components and parts that are integrated into our end
products.
We seek to mitigate commodity price risk primarily by adjusting product pricing in response to applicable price
increases. Our contracts with certain vehicular customers contain provisions 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 instances where the risk is not covered contractually, we seek to adjust product pricing in
response to price increases, including through our quotation process and through price list increases.
In fiscal 2022, we experienced a significant increase in raw material prices and price increases on other goods and
services in connection with global supply chain challenges. In response, we implemented selling price increases for our
products. The full impact of these selling price increases, however, are not expected to be realized until fiscal 2023 as
the higher pricing works through our existing orders. Nevertheless, we are still subject to the risk of further price
increases on commodities, components, and other goods and services that we purchase.
Regarding supply risk in light of recent supply chain challenges, we are engaged with our suppliers to ensure availability
of purchased commodities and components and we have added key suppliers to our supply base during the last
year. However, we are still dependent upon limited sources of supply for certain components used in the manufacture of
our products, including aluminum, copper, steel and stainless steel (nickel). Even with this expanded supply base, we
are exposed to the risk of suppliers of certain raw materials not being able or willing to meet strong customer demand, as
they may not increase their output capacity as quickly as customers increase their orders, the impact of trade laws and
tariffs, and increased prices being charged by raw material suppliers.
We also 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, 2022, 29 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:
(cid:120) 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, 2022;
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(cid:120) 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;
(cid:120) 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.
(cid:120)
In addition, we are exposed to risks associated with price reduction pressure applied by OEM customers. If contractual
price downs are unavoidable, we contemplate them in our overall strategy and adjust pricing as necessary to provide
profit margins that are acceptable to us.
Economic and Market Risk
Economic risk represents the possibility of loss resulting from economic instability in certain areas of the world, such as
that caused by geopolitical uncertainly or pandemics, 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.
Considering our global presence, we also encounter risks imposed by potential trade restrictions, including tariffs,
embargoes, sanctions, 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, data centers, indoor air quality, and aftermarket coatings. Our investments in these areas are 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 2022 and 2021,
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 2022, 2021, and 2020, net gains and losses recognized in cost of sales
related to commodity forward contracts were approximately $1 million or less 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 2022, 2021, and 2020, 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
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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, 2022, all counterparties had a sufficient long-term credit rating.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended March 31, 2022, 2021 and 2020
(In millions, except for per share amounts)
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 (reversals) – net
Impairment charges (reversals) - net
Loss (gain) on sale of assets
Loss (gain) on sale of assets
Operating income (loss)
Operating income (loss)
Interest expense
Interest expense
Other expense – net
Other expense - net
Earnings (loss) before income taxes
Earnings (loss) before income taxes
Provision for income taxes
Provision for income taxes
Net earnings (loss)
Net earnings (loss)
Net earnings attributable to noncontrolling interest
Net earnings attributable to noncontrolling interest
Net earnings (loss) attributable to Modine
Net earnings (loss) attributable to Modine
Net earnings (loss) per share attributable to Modine shareholders:
Net earnings (loss) per share attributable to Modine shareholders:
Basic
Basic
Diluted
Diluted
Weighted-average shares outstanding:
Weighted-average shares outstanding:
Basic
Basic
Diluted
Diluted
2022
2021
2020
$
2,050.1
$
1,808.4
$
1,975.5
1,740.8
1,515.0
309.3
215.1
24.1
(55.7)
6.6
119.2
(15.6)
(2.1)
101.5
(15.2)
86.3
(1.1)
293.4
210.9
13.4
166.8
-
(97.7)
(19.4)
(2.2)
(119.3)
(90.2)
(209.5)
(1.2)
1,668.0
307.5
249.6
12.2
8.6
(0.8)
37.9
(22.7)
(4.8)
10.4
(12.4)
(2.0)
(0.2)
$
85.2
$
(210.7)
$
(2.2)
$
1.64
$
1.62
$
(4.11)
$
(0.04)
$
(4.11)
$
(0.04)
52.0
52.5
51.3
51.3
50.8
50.8
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 STATEMENTS OF COMPREHENSIVE INCOME
For the years ended March 31, 2022, 2021 and 2020
(In millions)
Net earnings (loss)
Net earnings (loss)
Other comprehensive income (loss):
Other comprehensive income (loss)
Foreign currency translation
Foreign currency translation
Defined benefit plans, net of income taxes of $0, $10.4 and ($8.3) million
Defined benefit plans, net of income taxes of $0, $10.4 and ($8.3) million
Cash flow hedges, net of income taxes of $0, $0.6 and ($0.5) million
Cash flow hedges, net of income taxes of $0, $0.6 and ($0.5) 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
2022
2021
2020
$
86.3
$
(209.5)
$
(2.0)
(8.3)
19.7
0.1
11.5
97.8
(0.9)
30.9
30.1
1.6
62.6
(146.9)
(1.7)
(19.2)
(24.6)
(1.5)
(45.3)
(47.3)
0.2
$
96.9
$
(148.6)
$
(47.1)
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.
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46
MODINE MANUFACTURING COMPANY
CONSOLIDATED BALANCE SHEETS
March 31, 2022 and 2021
(In millions, except per share amounts)
ASSETS
Cash and cash equivalents
Trade accounts receivable – net
Inventories
Assets held for sale
Other current assets
Total current assets
Property, plant and equipment – net
Intangible assets
Goodwill
Deferred income taxes
Other noncurrent assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term debt
Long-term debt – current portion
Accounts payable
Accrued compensation and employee benefits
Liabilities held for sale
Other current liabilities
Total current liabilities
Long-term debt
Deferred income taxes
Pensions
Other noncurrent liabilities
Total liabilities
Commitments and contingencies (see Note 20)
Shareholders’ equity :
Preferred stock, $0.025 par value, authorized 16.0 million shares, issued – none
Common stock, $0.625 par value, authorized 80.0 million shares, issued 54.8
million and 54.3 million shares
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost, 2.8 million and 2.7 million shares
Total Modine shareholders’ equity
Noncontrolling interest
Total equity
Total liabilities and equity
The notes to consolidated financial statements are an integral part of these statements.
47
2 02 2
2 02 1
$
45.2
$
37.8
367.5
281.2
-
63.7
757.6
315.4
90.3
168.1
27.2
68.4
267.9
195.6
107.6
35.9
644.8
269.9
100.6
170.7
24.5
66.2
$
1,427.0
$
1,276.7
$
7.7
$
1.4
21.7
325.8
85.1
-
54.2
494.5
348.4
5.9
47.2
72.9
968.9
21.9
233.9
66.5
103.3
42.2
469.2
311.2
5.9
58.6
75.7
920.6
-
-
34.2
261.6
344.4
(149.5)
(40.0)
450.7
7.4
458.1
33.9
255.0
259.2
(161.2)
(38.2)
348.7
7.4
356.1
$
1,427.0
$
1,276.7
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MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended March 31, 2022, 2021 and 2020
(In millions)
Cash flows from operating activities:
Net earnings (loss)
Adjustments to reconcile net earnings (loss) to net cash provided
(cid:3)(cid:69)(cid:92)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)
2022
2021
2020
$
86.3
$
(209.5)
$
(2.0)
Depreciation and amortization
Impairment charges (reversals) – net
Loss (gain) on sale of assets
Stock-based compensation expense
Deferred income taxes
Other – net
Changes in operating assets and liabilities:
Trade accounts receivable
Inventories
Accounts payable
Accrued compensation and employee benefits
Other assets
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Expenditures for property, plant and equipment
Proceeds from (payments for) dispositions of assets
Disbursements for loan origination (see Note 1)
Proceeds from maturities of short-term investments
Purchases of short-term investments
Proceeds from sale of investment in affiliate (see Note 1)
Other – net
Net cash used for investing activities
Cash flows from financing activities:
Borrowings of debt
Repayments of debt
Borrowings (repayments) on bank overdraft facilities – net
Dividend paid to noncontrolling interest
Financing fees paid
Purchase of treasury stock under share repurchase program
Other – net
Net cash provided by (used for) financing activities
Effect of exchange rate changes on cash
Net (decrease) increase in cash, cash equivalents, restricted cash and cash held for sale
Cash, cash equivalents, restricted cash and cash held for sale – beginning of year
54.8
(55.7)
6.6
5.7
(3.8)
3.1
(55.6)
(70.7)
55.1
9.8
(2.4)
(21.7)
11.5
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
(0.8)
6.6
1.0
5.6
36.6
(12.0)
(37.7)
(15.2)
14.7
(24.6)
57.9
(40.3)
(32.7)
(71.3)
(7.6)
(4.7)
3.6
(3.9)
-
1.9
(51.0)
0.7
-
3.4
(3.6)
-
0.9
(31.3)
6.2
-
4.1
(3.3)
3.8
-
(60.5)
351.8
(306.7)
32.7
(183.6)
672.0
(630.3)
(4.3)
(0.9)
(0.2)
-
(0.5)
39.2
(0.4)
(0.7)
46.1
3.6
-
(0.8)
-
3.0
(145.1)
1.4
(25.2)
71.3
1.2
(1.3)
(2.8)
(2.4)
(3.1)
33.3
(1.6)
29.1
42.2
Cash, cash equivalents, restricted cash and cash held for sale – end of year
$
45.4
$
46.1
$
71.3
The notes to consolidated financial statements are an integral part of these statements.
48
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MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the years ended March 31, 2022, 2021 and 2020
(In millions)
Balance, March 31, 2019
Net (loss) earnings
Other comprehensive loss
Stock options and awards
Purchase of treasury stock
Stock-based compensation expense
Dividend paid to noncontrolling interest
Balance, March 21, 2020
Net (loss) earnings
Other comprehensive income
Stock options and awards
Purchase of treasury stock
Stock-based compensation expense
Balance, March 21, 2021
Net earnings
Other comprehensive income (loss)
Stock options and awards
Purchase of treasury stock
Stock-based compensation expense
Dividend paid to noncontrolling interest
Balance, March 21, 2022
Common stock
Common s tock
S hares Amount
Shares Amount
33.0
$
52.8
-
-
0.6
-
-
-
-
-
0.3
-
-
-
Additional
Additional
paid-in
paid-in
capital
capital
$
238.6
-
-
(0.1)
-
6.6
-
53.4
33.3
245.1
-
-
0.9
-
-
-
-
0.6
-
-
-
-
3.6
-
6.3
54.3
33.9
255.0
-
-
0.5
-
-
-
-
-
0.3
-
-
-
-
-
0.9
-
5.7
-
Accumulated
Accumulated
other
other
comprehens ive
comprehensive
los s
loss
$
(178.4)
Treas ury
Treasury
s tock , at
stock,
cos t
at cost
$
(31.4)
Non-
Non-
controlling
controlling
interes t
interest
$
7.2
Total
Total
$
541.1
-
(44.9)
-
-
-
-
-
-
-
(5.7)
-
-
(223.3)
(37.1)
-
62.1
-
-
-
(161.2)
-
11.7
-
-
-
-
-
-
-
(1.1)
-
(38.2)
-
-
-
(1.8)
-
-
0.2
(0.4)
-
-
-
(1.3)
5.7
1.2
0.5
-
-
-
7.4
1.1
(0.2)
-
-
-
(0.9)
(2.0)
(45.3)
0.2
(5.7)
6.6
(1.3)
493.6
(209.5)
62.6
4.2
(1.1)
6.3
356.1
86.3
11.5
1.2
(1.8)
5.7
(0.9)
Retained
Retained
earning s
earnings
472.1
$
(2.2)
-
-
-
-
-
469.9
(210.7)
-
-
-
-
259.2
85.2
-
-
-
-
-
54.8
$
34.2
$
261.6
$
344.4
$
(149.5)
$
(40.0)
$
7.4
$
458.1
The notes to consolidated financial statements are an integral part of these statements.
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49
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Note 1: Significant Accounting Policies
Nature of Operations
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 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
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
coatings; and iii) powertrain cooling and engine cooling.
Disposition of Air-cooled Automotive Business in Fiscal 2022
On April 30, 2021, the Company sold its air-cooled automotive business to Schmid Metall GmbH. As a result of this
transaction, the Company recorded a loss of $6.6 million during fiscal 2022, which included the write-off of $1.7 million of
net actuarial losses related to its pension plan. The Company reported this loss within the loss on sale of assets line on the
consolidated statement of operations. Upon transaction closing, $5.9 million of cash within the business transferred to the
buyer. Later in fiscal 2022, the Company paid the buyer $2.4 million upon the finalization of a purchase price adjustment for
net working capital and certain other items. Prior to the disposition, the Company reported the financial results of this
business within the Automotive segment. See Note 2 for information regarding the accounting for this business while it was
held for sale. Net sales of the air-cooled automotive business were $63.0 million and $93.0 million in fiscal 2021 and 2020,
respectively.
In connection with the sale of the air-cooled automotive business, the Company provided the buyer with a 5-year, €4.0 million
loan facility. Borrowings under the agreement currently bear interest at 2.6 percent. During fiscal 2022, the Company
disbursed €4.0 million ($4.7 million) to the buyer under this facility. The Company recorded the loan receivable within other
noncurrent assets on its consolidated balance sheet because the Company expects to receive the principal repayment more than
twelve months from the balance sheet date.
Disposition of Previously-Closed Facility in Fiscal 2022
During fiscal 2022, the Company sold a previously-closed manufacturing facility in the U.S. and received net cash proceeds of
$0.7 million. As a result of the sale, the Company recorded an impairment charge of $0.3 million within the Commercial and
Industrial Solutions (“CIS”) segment to write down the property to fair value less costs to sell.
Chief Executive Officer (“CEO”) Transition in Fiscal 2021
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
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
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.
Sale of Facility in Germany in Fiscal 2020
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
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”) in Fiscal 2020
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
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
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 was $0.1 million.
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Basis of Presentation
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
determining assets, liabilities, revenue, expenses and related disclosures. Actual amounts could differ materially from those
estimates.
Consolidation Principles
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.
Revenue Recognition
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
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
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.
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, 2022 and 2021, the allowance for credit losses
was $1.7 million and $1.3 million, respectively. The changes to the Company’s allowance for credit losses during fiscal 2022
and 2021 were not material and primarily consisted of current-period provisions, write-offs charged against the allowance,
recoveries collected, and foreign currency translation.
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
consolidated balance sheets and the proceeds are included in cash flows from operating activities in the consolidated
statements of cash flows. During fiscal 2022, 2021, and 2020, the Company sold $126.4 million, $88.7 million, and $75.4
million, respectively, of accounts receivable to accelerate cash receipts. During fiscal 2022, 2021, and 2020, the Company
recorded costs totaling $0.3 million, $0.2 million, and $0.5 million, respectively, related to selling accounts receivable in the
consolidated statements of operations.
Warranty
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
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
for additional information.
Tooling
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
March 31, 2022 and 2021, Company-owned tooling totaled $18.3 million and $14.1 million, respectively.
In certain instances, tooling is owned by the customer. 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 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-owned tooling costs were not accompanied by guaranteed reimbursement. At March 31, 2022 and 2021,
customer-owned tooling receivables totaled $12.3 million and $8.1 million, respectively. For the March 31, 2021 consolidated
balance sheet, $5.6 million of the $8.1 million was included within assets held for sale.
51
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Stock-based Compensation
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
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 2022, 2021, and
2020, research and development costs totaled $50.3 million, $46.3 million, and $59.5 million, respectively.
Translation of Foreign Currencies
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
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
operations within other income and expense.
Derivative Instruments
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
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.
These instruments are used to manage financial risks and are not speculative. See Note 19 for additional information.
Income Taxes
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
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
(“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.
Earnings per Share
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
outstanding during the period. The calculation of diluted earnings per share excludes potential common shares if their
inclusion would have an anti-dilutive effect. See Note 9 for additional information.
Cash and 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
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
balance sheets.
Short-term Investments
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
consolidated balance sheets. At both March 31, 2022 and 2021, the Company’s short-term investments totaled $3.7 million.
Inventories
The Company values inventories using a first-in, first-out or weighted-average basis, at the lower of cost and net realizable
value.
Property, Plant and Equipment
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
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
consolidated statements of operations. Capital expenditures of $9.0 million, $7.9 million, and $8.7 million were accrued at
52
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
March 31, 2022, 2021 and 2020, respectively. At March 31, 2021, $2.7 million of the $7.9 million was included within
liabilities held for sale on the consolidated balance sheet. All of the other accrued capital expenditure amounts were presented
within accounts payable.
Leases
The Company’s most significant leases represent leases of real estate, such as manufacturing facilities, warehouses, and office
buildings. The Company also leases manufacturing and IT equipment and vehicles. The Company recognizes right-of-use
(“ROU”) assets and lease liabilities at the lease commencement date, based upon the present value of lease payments over the
lease term. See Note 16 for additional information.
Goodwill
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
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, 2022 and determined the fair value of each of its reporting units exceeded the
respective book value. See Note 14 for additional information.
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
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
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
Company estimates fair value using a variety of valuation techniques, including discounted cash flows, market values and
comparison values for similar assets.
Assets Held for Sale
The Company classifies an asset as held for sale when (i) 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; (ii) the asset is available for immediate sale in its
present condition; (iii) an active program to locate a buyer and other actions required to complete the sale have been initiated;
(iv) the sale of the asset is expected to be completed within one year; and (v) it is unlikely that significant changes will be
made to the plan. Upon classification as held for sale, the Company records the carrying value of the asset at the lower of its
carrying value or its estimated fair value, less costs to sell. In addition, the Company ceases to record depreciation for assets
held for sale. See Note 2 for additional information.
Deferred Compensation Trusts
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
consolidated balance sheets.
Self-insurance Reserves
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
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.
The Company charges costs of claims, including the impact of changes in reserves due to claim experience and severity, to
cost of sales or SG&A expenses. The Company reviews and updates the amount of its insurance-related reserves on a
quarterly basis.
Environmental Liabilities
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
assets from third parties, including prior owners, when recovery is probable. To the extent that the required remediation
procedures change, or additional contamination is identified, the Company’s estimated environmental liabilities may also
change. See Note 20 for additional information.
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53
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Supplemental Cash Flow Information
Interest paid
Interest paid
Income taxes paid
Income taxes paid
Years ended March 31,
Years ended March 31,
2021
17.9
19.7
2022
14.1
21.8
$
$
2020
21.4
18.8
$
See Note 16 for supplemental cash flow information related to the Company’s leases.
New Accounting Guidance Adopted in Fiscal 2022
Income Tax Simplification
In December 2019, the Financial Accounting Standards Board (“FASB”) issued new guidance designed to simplify the
accounting for income taxes. The new guidance eliminated certain exceptions related to the approach for intraperiod tax
allocations and the methodology for deferred tax liabilities. The Company adopted this guidance as of April 1, 2021. The
adoption did not have a material impact on the Company’s consolidated financial statements.
New Accounting Guidance Adopted in Fiscal 2021
Credit Losses
In June 2016, the 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 modified the 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 balance sheets, statements of operations or
statements of cash flows.
New Accounting Guidance Adopted in Fiscal 2020
Leases
In February 2016, the FASB issued comprehensive lease accounting guidance that requires balance sheet recognition for most
leases. The Company adopted this guidance in fiscal 2020 and recognized ROU assets and lease liabilities for operating leases
on its consolidated balance sheet. 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. In addition, there
was no impact to retained earnings and the adoption of the new guidance did not have a material impact on the Company’s
consolidated statement of operations or consolidated statement of cash flows. See Note 16 for information regarding the
Company’s leases.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
In February 2018, the FASB issued new guidance related to the accounting for certain stranded income tax effects in
accumulated other comprehensive income (loss) resulting from tax reform legislation that was enacted in the U.S. in December
2017. This guidance provided companies the option to reclassify stranded income tax effects to retained earnings. The
Company adopted this guidance in fiscal 2020 and chose not to reclassify stranded income tax effects; therefore, there was no
impact to the Company’s consolidated financial statements.
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
Incorporated (“Dana”). Beginning at that time, the Company classified this business as held for sale and ceased recording
depreciation expense for its long-lived assets. On October 25, 2021, the Company announced that it agreed with Dana to
terminate the sale agreement. Both companies had been actively engaged in the regulatory review process in Germany for
many months and agreed that it was no longer in the best interest of either party to pursue the sale transaction further.
In connection with the termination of the sale agreement, the Company determined that the liquid-cooled automotive business
no longer met the requirements to be classified as held for sale. As a result, the Company remeasured the long-lived assets
reverting back to held and used classification at the lower of their (i) carrying value, as if held for sale classification had not
been met; or (ii) fair value at the date of the decision not to sell and reversed $57.2 million of held for sale impairment charges
during the third quarter of fiscal 2022. The long-lived assets primarily consisted of property, plant and equipment assets and
54
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
were fully impaired while classified as held for sale. For purposes of the remeasurement, the Company engaged third-party
valuation specialists to assist in estimating the fair values of the assets. The Company primarily used the market and cost
valuation approaches and utilized third-party information from various industry-accepted sources, including applicable
government-published statistics and data from appraisal and resale service providers. The market approach focused on prices
for comparable assets in arm’s length transactions. For land and building assets, for example, sales of similar properties near
the Company’s facilities were analyzed. For machinery and equipment assets, the Company referenced available third-party
information regarding the selling prices of similar equipment. The cost approach focused on the amount for which an asset
could be replaced or reproduced. The cost of an asset was then adjusted downward based on various factors including, but not
limited to, age, location, and physical condition. After estimating the fair values of the assets reverting back to held and used
classification, the Company compared the fair value for each asset to its carrying value. Carrying value represented each
asset’s carrying value before the initial impairment charge, reduced for depreciation that would have been recorded if the asset
had not been classified as held for sale. The Company then adjusted each asset to the lower of fair value or carrying value,
resulting in the reversal of $57.2 million of previous impairment charges. In addition, the Company resumed depreciating the
property, plant and equipment assets of the liquid-cooled automotive business based on the remeasured asset values during the
third quarter of fiscal 2022.
The $57.2 million held for sale impairment reversal during the third quarter of fiscal 2022 was partially offset
by $1.2 million of net held for sale impairment charges recorded earlier in fiscal 2022. At both June 30, 2021 and
September 30, 2021, while the liquid-cooled automotive business was held for sale, the Company reassessed its fair value less
costs to sell. As a result of these evaluations, the Company recorded a total of $8.6 million of impairment charges during
the first and second quarters of fiscal 2022. These impairment charges reduced the net carrying value of property, plant and
equipment additions during each quarter to zero. In addition, in connection with a modification of the sale perimeter in
the first quarter of fiscal 2022, the Company determined that certain manufacturing operations no longer met the requirements
to be classified as held for sale. As a result, the Company reversed $7.4 million of previous impairment charges to adjust the
long-lived assets within the asset groups impacted by the sale perimeter change to their estimated fair value. The Company’s
determination of fair value for the long-lived assets within the businesses impacted by the sale perimeter change in the first
quarter involved judgement and the use of significant estimates and assumptions, including assumptions regarding future
revenue projections and operating profit margins and risk-adjusted discount rates.
When the liquid-cooled automotive business was initially classified as held for sale during the third quarter of fiscal 2021, the
Company assessed the disposal group’s fair value less costs to sell and reduced the net carrying value of the disposal group’s
long-lived assets to zero. During fiscal 2021, the Company recorded impairment charges totaling $138.3 million related to the
long-lived assets within the liquid-cooled automotive business.
Also during fiscal 2021, the Company signed a definitive agreement to sell its air-cooled automotive business to Schmid
Metall GmbH. Upon classification as held for sale, the Company estimated an implied loss in excess of the carrying value of
the disposal group’s long-lived assets, which primarily consisted of property, plant and equipment assets. As a result, the
Company recorded a $26.8 million impairment charge related to the air-cooled automotive business, reducing the carrying
value of the disposal group’s long-lived assets to zero. In addition, the Company recorded an impairment charge of $1.7
million related to other equipment within the Automotive segment. See Note 1 for additional information regarding the
accounting for the sale of the air-cooled automotive business, which was completed in fiscal 2022.
The Company reported the impairment charges and reversals during fiscal 2022 and 2021 within the impairment charges
(reversals) line on the consolidated statements of operations.
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55
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Assets and Liabilities Held for Sale
As of March 31, 2021, the Company presented the assets and liabilities of the liquid- and air-cooled automotive businesses as
held for sale. The major classes of assets and liabilities held for sale were as follows:
March 31, 2021
ASSETS
Cash and cash equivalents
Cash and cash equivalents
Trade accounts receivables – net
Trade accounts receivables - net
Inventories
Inventories
Other current assets
Other current assets
Property, plant and equipment – net
Property, plant and equipment - net
Other noncurrent assets
Other noncurrent assets
Impairment of carrying value
Impairment of carrying value
Total assets held for sale
Total assets held for sale
LIABILITIES
Short-term debt
Short-term debt
Accounts payable
Accounts payable
Accrued compensation and employee benefits
Accrued compensation and employee benefits
Other current liabilities
Other current liabilities
Pensions
Pensions
Other noncurrent liabilities
Other noncurrent liabilities
Total liabilities held for sale
Total liabilities held for sale
Note 3: Revenue Recognition
$
8.0
54.4
24.7
12.8
164.0
8.8
(165.1)
107.6
5.0
46.3
15.5
12.2
17.8
6.5
103.3
$
$
$
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
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
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
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
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
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
year is immaterial.
The following is a description of the Company’s principal revenue-generating activities:
Building HVAC Systems (“BHVAC”)
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 Europe, as well as the Middle East.
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
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; the majority of the underlying sales
contracts 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 the majority of its products at the time control is transferred to the customer
based upon shipping terms, which is generally upon shipment. For sales to customers whose contract cancellation terms
56
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
provide an enforceable right to payment, the BHVAC 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 not yet shipped to its customers.
Commercial and Industrial Solutions (“CIS”)
The CIS segment principally generates revenue from providing thermal management products, including customized coils and
coolers, to the heating, ventilating, air conditioning, and refrigeration markets in North America, Europe, and Asia. In
addition, the segment applies corrosion protection solutions, which are referred to as coatings, to heat-transfer equipment.
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
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
generally upon shipment.
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
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
services not yet shipped to its customers.
Heavy Duty Equipment (“HDE”) and Automotive
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
products, including, but not limited to, radiators, charge air coolers, condensers, oil coolers, EGR coolers, and fuel coolers, to
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 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
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,
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
recognize revenue primarily at the time control is transferred to the customer based upon shipping terms, which is generally
upon shipment.
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
satisfaction of the performance obligations. The HDE segment measures progress by evaluating the production status of
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.
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
the assets as a reduction to revenue when the related products are sold to customers.
Disaggregation of Revenue
The tables below present revenue for each of the Company’s business segments, BHVAC, CIS, HDE, and Automotive. Each
segment’s revenue is disaggregated by primary end market, by geographic location and based upon the timing of revenue
recognition and includes inter-segment sales.
Effective July 1, 2021, the Company aligned the data center businesses previously managed by and reported within the CIS
segment under the BHVAC segment; see Note 22 for additional information regarding the Company’s operating segments. In
connection with this segment realignment, the Company also reassessed end market classifications within the impacted
57
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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)
businesses. The primary end market revenue information presented in the tables below for fiscal 2021 and 2020 has been
recast to conform to the Company’s new classifications for its end markets.
Year ended March 31, 2022
Year ended March 31, 2022
BHVAC
CIS
HDE
Automotive
Segment
Total
$
$
$
Primary end market:
Commercial HVAC&R
Data center cooling
Industrial cooling
Commercial vehicle
Off-highway
Automotive and light vehicle
Other
Net sales
Geographic location:
Americas
Europe
Asia
Net sales
Timing of revenue recognition:
Products transferred at a point in time
Products transferred over time
Net sales
Primary end market:
Commercial HVAC&R
Data center cooling
Industrial cooling
Commercial vehicle
Off-highway
Automotive and light vehicle
Other
Net sales
Geographic location:
Americas
Europe
Asia
Net sales
Timing of revenue recognition:
Products transferred at a point in time
Products transferred over time
Net sales
-
$
-
-
319.7
331.9
84.0
88.9
824.5
$
-
$
-
-
14.5
4.7
286.0
8.1
313.3
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Year ended March 31, 2021
Year ended March 31, 2021
BHVAC
CIS
HDE
Automotive
Segment
Total
$
$
$
$
-
-
-
250.4
260.7
97.9
73.1
682.1
$
$
-
-
-
14.4
3.4
357.8
22.7
398.3
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
38.2
220.5
54.6
313.3
313.3
-
313.3
51.0
282.0
65.3
398.3
398.3
-
398.3
511.6
156.3
156.6
824.5
789.8
34.7
824.5
388.2
133.2
160.7
682.1
655.2
26.9
682.1
784.6
96.6
69.8
334.2
336.6
370.0
110.1
2,101.9
1,074.3
788.5
239.1
2,101.9
2,002.0
99.9
2,101.9
627.3
64.5
72.1
264.8
264.1
455.7
107.5
1,856.0
852.1
733.4
270.5
1,856.0
1,783.4
72.6
1,856.0
546.6
-
69.8
-
-
-
11.1
627.5
336.9
262.7
27.9
627.5
580.9
46.6
627.5
429.8
-
72.1
-
-
-
10.5
512.4
268.7
199.2
44.5
512.4
472.5
39.9
512.4
238.0
96.6
-
-
-
-
2.0
336.6
187.6
149.0
-
336.6
318.0
18.6
336.6
197.5
64.5
-
-
-
-
1.2
263.2
144.2
119.0
-
263.2
257.4
5.8
263.2
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58
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Year ended March 31, 2020
Year ended March 31, 2020
BHVAC
CIS
HDE
Automotive
Segment
Total
$
$
$
Primary end market:
Commercial HVAC&R
Data center cooling
Industrial cooling
Commercial vehicle
Off-highway
Automotive and light vehicle
Other
Net sales
Geographic location:
Americas
Europe
Asia
Net sales
Timing of revenue recognition:
Products transferred at a point in time
Products transferred over time
Net sales
$
$
$
462.9
-
66.7
-
-
-
11.5
541.1
309.2
186.5
45.4
541.1
501.5
39.6
541.1
$
-
-
-
302.1
240.8
108.4
94.6
745.9
$
$
-
-
-
21.6
13.1
400.4
9.8
444.9
$
484.5
141.2
120.2
745.9
715.1
30.8
745.9
70.3
321.0
53.6
444.9
444.9
-
444.9
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
197.5
106.9
-
-
-
-
2.1
306.5
175.8
130.7
-
306.5
240.4
66.1
306.5
660.4
106.9
66.7
323.7
253.9
508.8
118.0
2,038.4
1,039.8
779.4
219.2
2,038.4
1,901.9
136.5
2,038.4
Contract Balances
Contract assets and contract liabilities from contracts with customers were as follows:
Contract assets
Contract liabilities
March 31, 2022
$
26.8
11.8
March 31, 2021
$
5.7
5.6
At March 31, 2021, $7.1 million and $2.9 million of contract assets and contract liabilities, respectively, were classified as
held for sale and excluded from the amounts above. See Note 2 for additional information.
Contract assets, included within other current assets in the consolidated balance sheets, primarily consist of capitalized costs
related to customer-owned tooling contracts, wherein the customer has guaranteed reimbursement, and assets recorded for
revenue recognized over time, which represent the Company’s rights to consideration for work completed but not yet billed.
The $21.1 million increase in contract assets during fiscal 2022 primarily resulted from an increase in contract assets for
revenue recognized over time and the reclassification of contract assets previously held for sale.
Contract liabilities, included within other current liabilities in the consolidated balance sheets, consist of payments received in
advance of satisfying performance obligations under customer contracts, including contracts for customer-owned tooling. The
$6.2 million increase in contract liabilities during fiscal 2022 primarily resulted from payments received in advance of the
Company’s satisfaction of performance obligations and the reclassification of contract liabilities previously held for sale.
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
advantageous market for the asset or liability in an orderly transaction between market participants. Fair value measurements
are classified under the following hierarchy:
(cid:120) Level 1 – Quoted prices for identical instruments in active markets.
(cid:120) 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.
(cid:120) Level 3 – Model-derived valuations in which one or more significant inputs are not observable.
59
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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.
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
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 held for sale. The fair value of the Company’s long-term debt is disclosed in Note 17.
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
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,
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
31, 2022 and 2021, the fair values of the investments and obligations for the Company’s deferred compensation plans each
totaled $2.9 million and $2.8 million, respectively.
Plan assets related to the Company’s pension plans were classified as follows:
March 31, 2022
March 31, 2022
Level 2
Level 2
Level 1
Level 1
Total
Total
Money market investments
Money market investments
Fixed income securities
Fixed income securities
Pooled equity funds
Pooled equity funds
U.S. government and agency securities
U.S. government and agency securities
Other
Other
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
-
$
-
40.4
-
0.1
40.5
$
2.2
9.1
-
11.8
1.4
24.5
Money market investments
Money market investments
Fixed income securities
Fixed income securities
Pooled equity funds
Pooled equity funds
U.S. government and agency securities
U.S. government and agency securities
Other
Other
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
-
$
-
37.3
-
0.1
37.4
$
2.5
8.9
-
14.5
1.0
26.9
$
$
$
2.2
9.1
40.4
11.8
1.5
65.0
114.9
179.9
2.5
8.9
37.3
14.5
1.1
64.3
119.0
183.3
$
March 31, 2021
March 31, 2021
Level 2
Level 2
Level 1
Level 1
Total
Total
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
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
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
reliable. The Company classified these assets within Level 2 of the valuation hierarchy. As of March 31, 2022 and 2021, the
Company held no Level 3 assets within its pension plans.
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
hierarchy. The terms and conditions for redemptions vary for the investments valued at NAV. The real estate and fixed
60
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
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
requirements. The Company does not intend to sell or otherwise dispose of these investments at prices different than the NAV
per unit.
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
and other executives that consists of stock awards, stock options, and performance-based stock awards granted for retention
and performance, (2) a discretionary equity program for other management and key employees, and (3) stock awards for non-
employee directors. The Company’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 2022 were issued
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 2022 and 2021. At present, the Company accomplishes the
fulfillment of equity-based grants through the issuance of new common shares. As of March 31, 2022, approximately 1.3
million shares 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 individual’s minimum tax withholding obligations. These shares are held as treasury shares. The
Company recorded stock-based compensation expense of $5.7 million, $6.3 million, and $6.6 million in fiscal 2022, 2021, and
2020, respectively.
Stock Options
The Company recorded $1.1 million, $0.9 million, and $1.3 million of compensation expense related to stock options in fiscal
2022, 2021, and 2020, respectively. The fair value of stock options that vested during fiscal 2022, 2021, and 2020, was $0.9
million, $1.3 million, and $1.2 million, respectively. As of March 31, 2022, the total compensation expense not yet
recognized related to non-vested stock options was $2.0 million and the weighted-average period in which the remaining
expense is expected to be recognized was 2.7 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:
Fair value of options
Fair value of options
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
Years ended March 31,
Years ended March 31,
2022
8.79
$
2021
3.46
$
2020
5.56
$
6.1
1.1%
56.5%
0.0%
6.1
0.4%
54.1%
0.0%
6.3
2.2%
39.2%
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
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
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
options. The expected lives of the awards are based upon historical patterns and the terms of the options. Based upon the
terms of the annual awards, outstanding stock options vest 25 percent per year for four years.
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
A summary of stock option activity for fiscal 2022 was as follows:
Outstanding, beginning of year
Outstanding, beginning of year
Granted
Granted
Exercised
Exercised
Forfeited or expired
Forfeited or expired
Outstanding, ending of year
Outstanding, end of year
Shares
Shares
1.1
0.2
(0.1)
(0.2)
1.0
Weighted-average
Weighted-average
exercise price
exercise price
$
11.63
16.64
13.72
$
13.51
12.12
Weighted-average
Weighted-average
remaining contractual
remaining contractual
term (years)
term (years)
Aggregate
Aggregate
intrinsic value
intrinsic value
6.8
$
0.7
Exercisable, March 31, 2022
Exercisable, March 31, 2022
0.5
$
12.47
5.1
$
0.2
The aggregate intrinsic value represents the difference between the closing price of Modine’s common shares on the last
trading day of fiscal 2022 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
upon daily changes in the price of Modine’s common shares.
Additional information related to stock options exercised is as follows:
Intrinsic value of stock options exercised
Intrinsic value of stock options exercised
$
0.1
$
1.4
$
0.1
Proceeds from stock options exercised
Proceeds from stock options exercised
1.4
4.1
0.1
Years ended March 31,
Years ended March 31,
2022
2021
2020
Restricted Stock
The Company recorded $5.0 million, $4.3 million, and $4.5 million of compensation expense related to restricted stock in
fiscal 2022, 2021, and 2020, respectively. The fair value of restricted stock awards that vested during fiscal 2022, 2021, and
2020 was $4.4 million, $4.5 million, and $4.4 million, respectively. At March 31, 2022, the Company had $6.0 million of
unrecognized compensation expense related to non-vested restricted stock, which it expects to recognize over a weighted-
average period of 2.4 years. The Company values restricted stock awards using the closing market price of its common shares
on the date of grant. Based upon the terms of the annual awards, outstanding restricted stock awards vest 25 percent per year
for four years. Restricted stock awards to non-employee directors were fully vested at the time of grant.
A summary of restricted stock activity for fiscal 2022 was as follows:
Non-vested balance, beginning of year
Non-vested balance, beginning of year
Granted
Granted
Vested
Vested
Forfeited
Forfeited
Non-vested balance, end of year
Non-vested balance, end of year
Weighted-average
Weighted-average
price
price
$
10.05
Shares
Shares
0.7
0.4
(0.3)
(0.1)
0.7
15.13
12.05
$
12.44
11.61
Restricted Stock – Performance-Based Shares
The Company granted performance-based cash awards in fiscal 2022 and 2021 in lieu of performance-based stock awards.
For performance-based stock awards, the Company values the awards using the closing market price of its common shares on
the date of grant. In fiscal 2022, the Company recorded a $0.4 million benefit related to the performance-based stock awards
granted in fiscal 2020. The payout earned for the fiscal 2020 awards was less than previously estimated. In fiscal 2021 and
2020, the Company recorded $1.1 million and $0.8 million of compensation expense related to performance-based stock
awards, respectively. At March 31, 2022, the performance period associated with the most recent performance-based stock
awards granted in fiscal 2020 was complete; therefore, there was no unrecognized compensation expense remaining.
62
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
The payouts earned under the performance portion of the restricted stock award program are based upon the attainment of
certain financial goals over a three-year period and are paid 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 the performance-based cash awards granted in fiscal 2021 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. The performance metrics for the performance-based cash
awards granted in fiscal 2022 are based upon both a target three-year average consolidated cash flow return on invested capital
and a target three-year average growth in consolidated net earnings before interest, taxes, depreciation, amortization, and
certain other adjustments (“Adjusted EBITDA”) at the end of the three-year performance period ending March 31, 2024.
Note 6: Restructuring Activities
During fiscal 2022, the Company committed to restructuring actions intended to reduce SG&A and operational expenses,
particularly within the Automotive segment. During fiscal 2022, the Company recorded $22.1 million of severance expenses,
most of which related to the recently-announced restructuring program. The majority of the severance expenses, $19.9
million, were recorded in the Automotive segment and primarily relate to targeted headcount reductions in Europe. In
addition, the Company implemented targeted headcount reductions in the CIS, HDE, and BHVAC segments. Also in fiscal
2022, the Company incurred equipment transfer costs within the HDE segment.
During fiscal 2021 and 2020, 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
Americas within the HDE segment and supported the Company’s objective of reducing operational and SG&A cost structures.
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
severance expenses during fiscal 2021. Other plant consolidation activities in fiscal 2021 and 2020 included transferring
product lines to the Company’s CIS manufacturing facility in Mexico.
Restructuring and repositioning expenses were as follows:
Employee severance and related benefits
Employee severance and related benefits
Other restructuring and repositioning expenses
Other restructuring and repositioning expenses
Total
Total
$
22.1
$
11.7
$
10.2
2.0
24.1
$
1.7
13.4
$
2.0
12.2
$
Years ended March 31,
Years ended March 31,
2022
2021
2020
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:
Beginning balance
Beginning balance
Additions
Additions
Payments
Payments
Reclassified from (to) held for sale
Reclassified from (to) held for sale
Effect of exchange rate changes
Effect of exchange rate changes
Ending balance
Ending balance
Years ended March 31,
Years ended March 31,
2021
5.0
2022
4.0
$
$
22.1
(5.7)
0.4
(0.6)
11.7
(10.5)
(2.5)
0.3
$
20.2
$
4.0
During fiscal 2022 and 2021, the Company recorded $56.0 million of net asset impairment reversals and $166.8 million of
impairment charges, respectively, within its Automotive segment. See Note 2 for additional information.
Also during fiscal 2022, the Company recorded an impairment charge of $0.3 million to reduce the carrying value of a
previously closed CIS facility to its estimated fair value, less costs to sell.
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
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 a previously-closed CIS Austrian facility
to its estimated fair value, less costs to sell.
Note 7: Other Income and Expense
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,
2022
2021
2020
$
0.4
$
0.5
$
0.4
(1.4)
(1.1)
-
0.6
(3.3)
-
(2.4)
(3.0)
0.2
$
(2.1)
$
(2.2)
$
(4.8)
(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.
(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
for additional information.
Note 8: Income Taxes
The U.S. and foreign components of earnings or loss before income taxes and the provision for income taxes consisted of the
following:
Years ended March 31,
Years ended March 31,
2021
2022
2020
Components of earnings (loss) before income taxes:
Components of earnings (loss) before income taxes:
United States
United States
Foreign
Foreign
Total earnings (loss) before income taxes
Total earnings (loss) before income taxes
Income tax provision (benefit):
Income tax provision (benefit):
Federal:
Federal:
Current
Current
Deferred
Deferred
State:
State:
Current
Current
Deferred
Deferred
Foreign:
Foreign:
Current
Current
Deferred
Deferred
Total income tax provision
Total income tax provision
$
$
$
0.4
101.1
101.5
(48.7)
(70.6)
(119.3)
$
$
$
(26.1)
36.5
10.4
$
0.1
-
$
(0.1)
58.3
$
(3.4)
(1.7)
1.1
-
0.4
9.2
(0.1)
(2.3)
17.8
(3.8)
15.2
$
22.0
0.4
90.2
$
14.9
5.0
12.4
$
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64
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
The reconciliation between the U.S. federal statutory rate and the Company’s effective tax rate was as follows:
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
Years ended March 31,
Years ended March 31,
2021
2022
2020
21.0%
1.4
3.5
(8.8)
(3.4)
0.6
0.6
(0.2)
(2.7)
1.6
1.4
21.0%
0.9
(9.1)
(92.9)
2.2
(1.3)
(0.2)
0.1
1.3
3.0
(0.6)
21.0%
(12.0)
32.9
156.9
(36.7)
4.0
3.6
(37.9)
(12.5)
(11.0)
10.9
15.0%
(75.6%)
119.2%
The effective tax rates in both fiscal 2022 and 2021 were significantly impacted by impairment charges or reversals, largely
related to the liquid-cooled automotive business, and income tax charges or benefits related to valuation allowances. See Note
2 for information regarding the impairment charges and reversals. The income tax benefits associated with the fiscal 2021
impairment charges totaled $24.4 million and $13.3 million in the U.S. and in certain foreign jurisdictions, respectively. The
income tax charges or benefits related to valuation allowances are described below.
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
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
tax planning strategies. In addition, the Company considers the duration of statutory carryforward periods and historical
financial results.
Based upon its analyses during fiscal 2022, the Company determined it was more likely than not that the deferred tax assets in
certain foreign jurisdictions will be realized. As a result, the Company reversed the valuation allowances related to these
deferred tax assets and recorded income tax benefits totaling $13.0 million. The Company’s analyses included consideration
of the transaction perimeter modification during the first quarter and the termination of the sale agreement during the third
quarter for the liquid-cooled automotive business and the related impairment reversals. Separately, the Company determined it
was more likely than not that the deferred tax assets in a foreign jurisdiction would not be realized. As a result, the Company
recorded an income tax charge of $1.6 million. Together, these fiscal 2022 valuation allowance adjustments resulted in a net
income tax benefit of $11.4 million during fiscal 2022. In addition, the Company recorded a net increase of deferred tax asset
valuation allowances totaling $2.5 million.
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 would not be realized. As a result, the Company recorded income tax charges
totaling $116.5 million to increase the valuation allowances on deferred tax assets in the U.S. ($103.3 million) and in certain
foreign jurisdictions ($13.2 million). Of these income tax charges, the majority 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 included consideration of the impairment charges recorded for the liquid-cooled automotive business, which 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. 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 resulting from allocation of the income tax provision
between net earnings and other comprehensive income.
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 the 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
65
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
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
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
tax benefits resulting from a lapse in statutes of limitations and settlements.
At March 31, 2022, valuation allowances against deferred tax assets in the U.S. and in certain foreign jurisdictions totaled
$85.8 million and $26.4 million, respectively. 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 eliminating the need
for a valuation allowance. 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 further
valuation allowances.
The tax effects of temporary differences that gave rise to deferred tax assets and liabilities were as follows:
Deferred tax assets:
Deferred tax assets:
Accounts receivable
Accounts receivable
Inventories
Inventories
Plant and equipment
Plant and equipment
Lease liabilities
Lease liabilities
Pension and employee benefits
Pension and employee benefits
Net operating and capital losses
Net operating and capital losses
Credit carryforwards
Credit carryforwards
Other, principally accrued liabilities
Other, principally accrued liabilities
Total gross deferred tax assets
Total gross deferred tax assets
Less: valuation allowances
Less: valuation allowances
Net deferred tax assets
Net deferred tax assets
Deferred tax liabilities:
Deferred tax liabilities:
Plant and equipment
Plant and equipment
Lease assets
Lease assets
Goodwill
Goodwill
Intangible assets
Intangible assets
Other
Other
Total gross deferred tax liabilities
Total gross deferred tax liabilities
Net deferred tax assets
Net deferred tax assets
March 31,
March 31,
2022
2021
$
0.8
6.5
19.9
13.5
27.5
53.9
48.5
13.5
184.1
(112.2)
71.9
$
0.3
4.5
7.5
14.0
24.0
52.7
51.8
8.9
163.7
(90.7)
73.0
8.6
13.2
4.9
22.4
1.5
50.6
21.3
$
9.8
13.8
5.1
25.1
0.6
54.4
18.6
$
At March 31, 2021, the net deferred tax assets presented in the table above excluded 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 held for sale businesses. At March 31, 2022, the table above includes the net deferred tax assets of the liquid-cooled
automotive business, which is no longer classified as held for sale. See Note 2 for additional information.
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Unrecognized tax benefits were as follows:
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
Lapse of statute of limitations
Lapse of statute of limitations
Ending balance
Ending balance
$
$
Ye ars e nde d M arch 3 1 ,
Years ended March 31,
2 02 1
9.7
0.1
(0.6)
0.9
(0.5)
9.6
2 0 2 2
9.6
0.1
(0.2)
1.0
(1.2)
9.3
$
$
The Company’s liability for unrecognized tax benefits as of March 31, 2022 was $9.3 million and, if recognized, $1.6 million
would have an effective tax rate impact. The Company estimates a $0.4 million decrease in unrecognized tax benefits during
fiscal 2023 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 2022, 2021 and 2020, interest and penalties included within income tax expense in the consolidated statements of
operations were not significant. At March 31, 2022 and 2021, accrued interest and penalties totaled $0.7 million and $0.6
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, 2022, 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
Italy
United States
Fiscal 2016 - Fiscal 2021
Fiscal 2016 - Fiscal 2021
Fiscal 2019 - Fiscal 2021
At March 31, 2022, the Company had federal and state tax credits of $59.0 million that, if not utilized against U.S. taxes, will
expire between fiscal 2023 and 2042. The Company also had state and local tax loss carryforwards totaling $136.4 million
that, if not utilized against state apportioned taxable income, will expire between fiscal 2023 and 2042. In addition, the
Company had tax loss and foreign attribute carryforwards totaling $255.8 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
taxable income, $38.5 million of these carryforwards will expire between fiscal 2023 and 2034, and $217.3 million, mainly
related to the U.S, Germany, Hungary 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.
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
liabilities would total approximately $12.0 million if the accumulated foreign earnings were distributed; however, the actual
tax cost would be dependent on circumstances existing when remittance occurs.
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Note 9: Earnings Per Share
The components of basic and diluted earnings per share were as follows:
Basic Earnings Per S hare:
Net earnings (loss) attributable to M odine
Years ended March 31,
Years ended March 31,
2022
2021
2020
$ 85.2
$ (210.7)
$ (2.2)
Weighted-average shares outstanding – basic
52.0
51.3
50.8
Net earnings (loss) per share – basic
$ 1.64
$ (4.11)
$ (0.04)
Diluted Earnings Per S hare:
Net earnings (loss) attributable to M odine
Weighted-average shares outstanding – basic
Effect of dilutive securities
Weighted-average shares outstanding – diluted
$ 85.2
$ (210.7)
$ (2.2)
52.0
0.5
51.3
-
50.8
-
52.5
51.3
50.8
Net earnings (loss) per share – diluted
$ 1.62
$ (4.11)
$ (0.04)
For fiscal 2022, 2021 and 2020, the calculation of diluted earnings per share excluded 0.5 million, 1.0 million, and 1.1 million,
stock options, respectively, because they were anti-dilutive. For fiscal 2022, 2021 and 2020, the calculation of diluted
earnings per share excluded 0.2 million, 0.4 million, and 0.5 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,
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.
Note 10: Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash consisted of the following:
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
March 31,
March 31,
2022
45.2
2021
37.8
$
$
0.2
-
0.1
8.2
$
45.4
$
46.1
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
commercial agreements.
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68
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Note 11: Inventories
Inventories consisted of the following:
Raw materials
Raw materials
Work in process
Work in process
Finished goods
Finished goods
Total inventories
Total inventories
March 31,
March 31,
2022
2021
$ 186.7
$ 117.1
55.1
38.5
39.4
40.0
$ 281.2
$ 195.6
Inventories in the table above as of March 31, 2021 exclude amounts classified as held for sale. See Note 2 for additional
information.
Note 12: Property, Plant and Equipment
Property, plant and equipment, including depreciable lives, consisted of the following:
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)
Office equipment (3-10 years)
Office equipment (3-10 years)
Construction in progress
Construction in progress
Less: accumulated depreciation
Less: accumulated depreciation
Net property, plant and equipment
Net property, plant and equipment
March 31,
March 31,
2022
2021
$
16.8
$
16.4
264.6
869.4
96.2
31.2
1,278.2
(962.8)
203.5
623.2
81.3
19.0
943.4
(673.5)
$
315.4
$
269.9
Property, plant and equipment in the table above as of March 31, 2021 exclude amounts classified as held for sale. See Note 2
for additional information.
Depreciation expense totaled $46.4 million, $60.1 million, and $68.2 million for fiscal 2022, 2021, and 2020, respectively.
Gains and losses related to the disposal of property, plant and equipment are recorded within SG&A expenses. For fiscal
2022, gains related to the disposal of property, plant and equipment totaled $0.1 million. For fiscal 2021 and 2020, losses
related to the disposal of property, plant and equipment totaled $0.7 million, and $0.6 million, respectively.
Note 13: Intangible Assets
Intangible assets consisted of the following:
March 31, 2022
March 31, 2022
March 31, 2021
March 31, 2021
Gross
Net
Gross
Net
Carrying
Accumulated
Intangible
Carrying
Accumulated
Intangible
Value
Amortization
Assets
Value
Amortization
Assets
$
61.2
$
(20.1)
$
41.1
$
62.8
$
(16.9)
$
45.9
50.8
23.1
(13.8)
(10.9)
37.0
12.2
51.5
23.9
(11.4)
(9.3)
40.1
14.6
$
135.1
$
(44.8)
$
90.3
$
138.2
$
(37.6)
$
100.6
Customer relationships
Customer relationships
Trade names
Trade names
Acquired technology
Acquired technology
Total intangible assets
Total intangible assets
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69
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
The Company recorded $8.4 million, $8.5 million, and $8.9 million of amortization expense during fiscal 2022, 2021, and
2020, respectively. The Company estimates that it will record approximately $8.0 million of annual amortization expense in
fiscal 2023 through 2027.
Note 14: Goodwill
Effective July 1, 2021, the Company aligned the data center businesses previously managed by and reported within the CIS
segment under the BHVAC segment; see Note 22 for additional information. As a result of this segment realignment, the
Company reassigned a total of $32.5 million of goodwill from a reporting unit within the CIS segment to the reporting units
within the BHVAC segment using the relative fair value approach. To determine the amount of goodwill to be reassigned, the
Company compared the estimated fair values of the businesses transferred to the BHVAC segment with the CIS reporting unit
immediately prior to the segment change. The Company estimated the fair values of the affected businesses based upon the
present value of their estimated future cash flows. The Company’s determination of fair value involved 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 and risk-adjusted discount rates. In addition, in conjunction with the
goodwill reassignment evaluation, the Company tested its reporting units for potential impairment during the second quarter of
fiscal 2022 and concluded that the estimated fair value of each reporting unit exceeded its respective carrying value.
The following table presents a rollforward of the carrying value of goodwill from March 31, 2020 to March 31, 2022. The
Company has revised the March 31, 2021 and 2020 goodwill balances to be comparable with the current segment structure.
Balance, March 31, 2020
Balance, March 31, 2020
Effect of exchange rate changes
Effect of exchange rate changes
Balance, March 31, 2021
Balance, March 31, 2021
Effect of exchange rate changes
Effect of exchange rate changes
Balance, March 31, 2022
Balance, March 31, 2022
BHVAC
44.7
$
2.3
47.0
(1.6)
45.4
$
CIS
Total
$
$
121.4
2.3
123.7
(1.0)
122.7
166.1
4.6
170.7
(2.6)
168.1
$
$
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
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
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 and risk-adjusted discount rates.
As a result of its annual goodwill impairment tests performed as of March 31, 2022, the Company determined that the fair
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.
At both March 31, 2022 and 2021, accumulated goodwill impairment losses totaled $31.6 million and $9.2 million, within the
HDE and Automotive segments, respectively.
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70
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Note 15: Product Warranties and Other Commitments
Product Warranties
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
expected claims will differ from previous estimates.
Changes in accrued warranty costs were as follows:
Beginning balance
Beginning balance
Warranties recorded at time of sale
Warranties recorded at time of sale
Adjustments to pre-existing warranties
Adjustments to pre-existing warranties
Settlements
Settlements
Reclassified from (to) held for sale
Reclassified from (to) held for sale
Effect of exchange rate changes
Effect of exchange rate changes
Ending balance
Ending balance
Years ended March 31,
Years ended March 31,
2022
2021
$
5.2
$
7.9
5.5
(1.3)
(4.4)
1.3
-
5.5
(0.9)
(5.6)
(2.0)
0.3
$
6.3
$
5.2
Indemnification Agreements
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
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 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
31, 2022 was not material.
Commitments
At March 31, 2022, the Company had capital expenditure commitments of $14.6 million. Significant commitments include
tooling and equipment expenditures 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 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 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.
Note 16: Leases
The Company determines if an arrangement is a lease at contract inception. The lease term begins upon lease commencement,
which is when the Company takes possession of the asset, and may include options to extend or terminate the lease when it is
reasonably certain that such options will be exercised. The Company uses the lease term within its determination of the
appropriate lease classification, either as an operating lease or as a finance lease, and to calculate straight-line lease expense
for its operating leases.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the
Company’s obligation to make lease payments arising from the lease. The Company recognizes ROU assets and lease
liabilities at the 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
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.
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.
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Based upon its accounting policy, the Company does not separate lease and non-lease components for any asset class. In
addition, the Company does not record short-term leases (i.e. leases with an initial term of 12 months or less) on its
consolidated balance sheets.
Certain leases require the Company to pay taxes, insurance, maintenance, and other operating expenses associated with the
leased asset. Such amounts are not included in the measurement of the lease liability to the extent they are variable in nature.
These variable lease costs are recognized as variable lease expense when incurred. The depreciable life of the ROU assets and
related leasehold improvements are limited by the expected lease term, unless the lease contains a provision to transfer title to
the Company or a purchase option that the Company expects to execute.
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
leases have remaining lease terms of 1 to 12 years. Certain leases contain renewal options for varying periods, which are at
the Company’s discretion. If reasonably certain of exercise, the Company includes the renewal periods within the calculation
of ROU assets and lease liabilities. The Company’s lease agreements do not contain material residual value guarantees or
material restrictive covenants.
Lease Assets and Liabilities
The following table provides a summary of leases recorded on the consolidated balance sheets. The amounts as of March 31,
2021 exclude operating lease ROU assets and lease liabilities, which each totaled $6.1 million, that were classified as held for
sale on the Company’s consolidated balance sheet; see Note 2 for additional information.
Lease Assets
Lease Assets
Operating lease ROU assets
Operating lease ROU assets
Finance lease ROU assets (a)
Finance lease ROU assets (a) Property, plant and equipment - net
Other noncurrent assets
Other noncurrent assets
Property, plant and equipment - net
$
52.1
7.7
$
54.1
8.3
Balance Sheet Location
March 31, 2022 March 31, 2021
Lease Liabilities
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 noncurrent liabilities
Other noncurrent liabilities
Long-term debt - current portion
Long-term debt - current portion
Long-term debt
Long-term debt
$
12.7
41.2
0.4
2.8
$
11.2
44.8
0.4
3.2
(a) Finance lease ROU assets were recorded net of accumulated amortization of $2.8 million and $2.4 million as of
March 31, 2022 and 2021, 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.
The components of lease expense were as follows:
Operating lease expense (a)
Operating lease expense (a)
Finance lease expense:
Finance lease expense:
Depreciation of ROU assets
Depreciation of ROU assets
Interest on lease liabilities
Interest on lease liabilities
Total lease expense
Total lease expense
Years ended March 31,
Years ended March 31,
2022
20.0
$
2021
19.5
$
2020
21.2
$
0.5
0.2
20.7
$
0.5
0.2
20.2
$
0.5
0.2
21.9
$
(a) In fiscal 2022, 2021, and 2020 operating lease expense included short-term lease expense of $4.2 million, $3.5
million, and $4.1 million respectively. Variable lease expense was not significant.
72
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Supplemental Cash Flow Information
Years ended March 31,
Years ended March 31,
Years ended March 31,
2022
2021
2021
2022
2020
2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
Financing cash flows for finance leases
ROU assets obtained in exchange for lease liabilities:
Operating leases
Finance leases
$
$
15.7
15.7
$
$
14.2
14.2
$
$
14.7
14.7
0.6
0.6
0.6
0.6
0.5
0.5
$
7.8
$
0.1
7.8
0.1
$
9.8
$
0.1
9.8
0.1
$
9.0
$
0.2
9.0
0.2
Lease Term and Discount Rates
Weighted-average remaining lease term:
Operating leases
Finance leases
Weighted-average discount rate:
Operating leases
Finance leases
March 31, 2022 March 31, 2021
8.5 years
6.8 years
6.9 years
7.8 years
3.4%
4.6%
3.3%
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, 2022:
Fiscal Year
Fiscal Year
2023
2024
2025
2026
2027
2028 and beyond
Total lease payments
Less: Interest
Present value of lease liabilities
Operating Leases
Operating Leases
$
14.2
Finance Leases
Finance Leases
$
0.6
10.2
7.8
6.8
6.2
16.4
61.6
0.6
0.6
0.5
0.5
0.9
3.7
$
(7.7)
53.9
$
(0.5)
3.2
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Note 17: Indebtedness
Long-term debt consisted of the following:
Fiscal year
Fiscal year
of maturity March 31, 2022 March 31, 2021
of maturity March 31, 2022 March 31, 2021
Term loans
Term loans
Revolving credit facility
Revolving credit facility
5.9% Senior Notes
5.9% Senior Notes
5.8% Senior Notes
5.8% Senior Notes
Other (a)
Other (a)
Less: current portion
Less: current portion
Less: unamortized debt issuance costs
Less: unamortized debt issuance costs
Total long-term debt
Total long-term debt
2025
2025
2029
2027
$
163.7
$
178.9
64.9
100.0
41.7
3.2
373.5
(21.7)
4.8
100.0
50.0
3.6
337.3
(21.9)
(3.4)
348.4
$
(4.2)
311.2
$
(a) Other long-term debt primarily includes finance lease obligations.
Long-term debt, including the current portion of long-term debt, matures as follows:
Fiscal Year
2023
2024
2025
2026
2027
2028 and beyond
Total
$ 21.7
21.7
211.5
33.8
33.8
51.0
$ 373.5
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-
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
applicable reference rate and including a margin percentage dependent upon the Company’s leverage ratio, as described
below. At March 31, 2022, the weighted-average interest rates for revolving credit facility borrowings and the term loans
were 1.9 and 2.4 percent, respectively. Based 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.
At March 31, 2022, the Company’s borrowings under its revolving credit and swingline facilities totaled $64.9 million and
$7.0 million, respectively, and domestic letters of credit totaled $5.4 million. As a result, available borrowing capacity under
the Company’s revolving credit facility was $172.7 million as of March 31, 2022. At March 31, 2021, the Company’s
borrowings under its revolving credit and swingline facilities totaled $4.8 million and $1.4 million, respectively.
The Company also maintains credit agreements for its foreign subsidiaries. There were $0.7 million of short-term borrowings
related to these foreign credit agreements at March 31, 2022. At March 31, 2021, $5.0 million of outstanding short-term
foreign borrowings were classified as held for sale. See Note 2 for additional information.
Provisions in the Company’s credit agreement, Senior Note agreements, and various foreign credit agreements require the
Company to maintain compliance with various covenants and include certain cross-default clauses. Under its primary debt
74
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
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
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.
The leverage ratio covenant requires the Company to limit its consolidated indebtedness, less a portion of its cash balances,
both as defined by the credit agreements, to no more than three and one-quarter times consolidated net earnings before interest,
taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”.) The Company is also subject to an
interest expense coverage ratio covenant, which requires the Company to maintain Adjusted EBITDA of at least three times
consolidated interest expense. As of March 31, 2022, the Company was in compliance with its debt covenants; its leverage
ratio and interest coverage ratio were 2.3 and 11.4, respectively.
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, 2022 and 2021, 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
$138.9 million and $146.0 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.
Note 18: Pension and 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
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
employee contributions for part of the year. The Company’s expense for defined contribution employee benefit plans during
fiscal 2022, 2021, and 2020 was $6.4 million, $3.0 million, and $6.6 million, respectively.
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
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.
Pension 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,
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
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
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 and Italy and are closed to new participants. The
Company previously maintained a pension plan in Austria that conveyed to the buyer of the air-cooled automotive business
during fiscal 2022; see Note 1 for additional information.
The Company contributed $3.5 million, $19.3 million, and $3.5 million to its U.S. pension plans during fiscal 2022, 2021, and
2020, respectively. In addition, the Company contributed $1.5 million, $2.2 million, and $2.3 million to its non-U.S. pension
plans during fiscal 2022, 2021, and 2020, 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 2022, 2021, and 2020 was $0.3 million.
75
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Measurement Date
The Company uses March 31 as the measurement date for its pension and postretirement plans.
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,
Years ended March 31,
2021
2022
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gain) loss
Benefits paid
Disposition of air-cooled automotive business
Curtailment gains (a)
Effect of exchange rate changes
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
Amounts recognized in the consolidated balance sheets:
Current liability
Noncurrent liability
Liabilities held for sale (b)
$
$
260.6
0.3
7.3
(16.5)
(16.0)
(5.5)
-
(1.6)
228.6
183.3
7.6
(16.0)
5.0
179.9
(48.7)
(1.5)
(47.2)
-
(48.7)
$
$
$
$
$
$
$
$
$
$
$
$
264.7
0.4
7.9
2.7
(17.1)
-
(0.1)
2.1
260.6
131.1
47.8
(17.1)
21.5
183.3
(77.3)
(0.9)
(58.6)
(17.8)
(77.3)
(a) The curtailment gains in fiscal 2021 are associated with headcount reductions in Europe within the Automotive
segment. See Note 6 for additional information on the Company’s restructuring activities.
(b) At March 31, 2021, the Company classified the liabilities for pension plans in Germany and Austria within the liquid-
and air-cooled automotive businesses as held for sale. See Note 2 for additional information.
As of March 31, 2022, 2021, and 2020, the benefit obligation associated with the Company’s non-U.S. pension plans totaled
$26.5 million, $36.4 million, and $35.7 million respectively. The $9.9 million decrease in the benefit obligation associated
with non-U.S. pension plans as of March 31, 2022, compared with the prior year, was primarily due to the sale of the air-
cooled automotive business in Austria, which resulted in a $5.5 million decrease. In addition, net actuarial gains during the
year, the impact of foreign currency exchange rate changes, and employer contributions for benefits paid to plan participants
decreased the obligation by $1.9 million, $1.6 million, and $1.5 million, respectively. The decreases were partially offset by
service and interest cost totaling $0.6 million. In fiscal 2021, the $0.7 million increase 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 contributions of $2.2 million for benefits paid to plan participants during the year.
The accumulated benefit obligation for pension plans was $228.1 million and $258.9 million as of March 31, 2022 and 2021,
respectively. The net actuarial loss related to the pension plans recognized in accumulated other comprehensive loss was
$131.5 million and $151.1 million as of March 31, 2022 and 2021, respectively.
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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:
Years ended March 31,
Years ended March 31,
2022
2021
2020
Components of net periodic benefit cost:
Components of net periodic benefit cost:
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
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)
Net actuarial gain (loss)
Amortization of net actuarial loss (b)
Amortization of net actuarial loss (b)
Total recognized in other comprehensive income (loss)
Total recognized in other comprehensive income (loss)
$
0.3
$
0.4
$
0.4
7.3
(12.9)
7.9
(11.5)
9.1
(12.0)
6.9
-
1.6
$
6.9
0.2
3.9
$
6.0
0.2
3.7
$
$
11.4
$
33.8
$
(38.7)
8.6
20.0
$
7.1
40.9
$
6.2
(32.5)
$
(a) The settlement charges resulted from activity associated with the Company’s non-U.S. pension plans.
(b) The fiscal 2022 amount includes $1.7 million of net actuarial losses written-off as a result of the sale of the air-cooled
automotive business. See Note 1 for additional information.
The Company amortized $8.6 million, $7.1 million, and $6.2 million of net actuarial loss in fiscal 2022, 2021, and 2020,
respectively. Exclusive of the $1.7 million written-off in fiscal 2022 upon the sale of the air-cooled automotive business
referenced above, less than $1.0 million of the amortization was attributable to the Company’s non-U.S. pension plans in each
of these years.
The Company used a discount rate of 3.9% and 3.2% as of March 31, 2022 and 2021, respectively, for determining its benefit
obligations under its U.S. pension plans. The Company used a weighted-average discount rate of 1.8% and 1.0% as of March
31, 2022 and 2021, respectively, for determining its benefit obligations under its non-U.S. pension plans. The Company used
a discount rate of 3.2%, 3.4%, and 4.0% to determine its costs under its U.S. pension plans for fiscal 2022, 2021, and 2020,
respectively. The Company used a weighted-average discount rate of 1.6%, 1.4%, and 1.7% to determine its costs under its
non-U.S. pension plans for fiscal 2022, 2021, and 2020, 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
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.
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, 2022 and 2021 were
as follows:
Equity securities
Equity securities
Debt securities
Debt securities
Real estate investments
Real estate investments
Cash and cash equivalents
Cash and cash equivalents
Target allocation
Plan assets
2022
2021
76%
18%
5%
1%
100%
74%
17%
8%
1%
100%
73%
17%
9%
1%
100%
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.
As of March 31, 2022 and 2021, the Company’s pension plans did not directly own shares of Modine common stock.
77
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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
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
monitors investment risk on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements
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 2022, 2021, and 2020 U.S. pension plan expense, the expected rate of
return on plan assets was 7.5 percent. For fiscal 2023 U.S. pension plan expense, the Company has assumed a rate of return on
plan assets of 7.0 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. As a result of funding relief
provisions within the American Rescue Plan Act of 2021, the Company does not expect to make cash contributions to its U.S.
plans during fiscal 2023.
Estimated pension benefit payments for the next ten fiscal years are as follows:
Fiscal Year
Fiscal Year
2023
2024
2025
2026
2027
2028-2032
Estimated Pension
Estimated Pension
Benefit Payments
Benefit Payments
$
15.7
15.9
16.0
15.8
15.7
75.0
Note 19: Derivative Instruments
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
derivative financial instruments to be measured at fair value and recognized as assets or liabilities in the consolidated balance
sheets. All of the Company’s derivative financial instruments are categorized within Level 2 of the fair value hierarchy. Refer
to Note 4 for the definition of a Level 2 fair value measurement. 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.
Commodity Derivatives
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
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
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.
Foreign Exchange Contracts
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-
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
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
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
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.
78
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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:
Balance Sheet Location
Balance Sheet Location
March 31, 2022 March 31, 2021
March 31, 2021
March 31, 2022
Derivatives designated as hedges:
Derivatives designated as hedges:
Commodity derivatives
Commodity derivatives
Foreign exchange contracts
Foreign exchange contracts
Other current assets
Other current assets
Other current assets
Other current assets
$
0.5
$
0.5
0.3
0.1
Derivatives not designated as hedges:
Derivatives not designated as hedges:
Foreign exchange contracts
Foreign exchange contracts
Other current liabilities
Other current liabilities
$
0.3
$
-
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
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Total gains (losses)
Total gains (losses)
Gain (loss) recognized in
other comprehensive income
2022
2021
2020
$
1.1
$
2.2
$
(2.6)
-
-
(0.1)
0.6
1.7
$
(0.1)
2.1
$
0.2
(2.5)
$
Statement of
Operations
Location
Cost of sales
Cost of sales
Net sales
Net sales
Cost of sales
Cost of sales
Gain (loss) reclassified
from AOCI
2022
2021
2020
$
1.2
$
-
$
(0.8)
-
-
(0.1)
0.4
1.6
$
(0.1)
(0.1)
$
0.4
(0.5)
$
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
Total gains (losses)
Total gains (losses)
Statement of Operations
Statement of Operations
Location
Location
Net sales
Net sales
Other income (expense) - net
Other income (expense) - net
Years ended March 31,
Years ended March 31,
2022
2021
2020
$
(0.6)
$
-
$
(0.1)
(0.8)
(1.4)
$
$
0.6
0.6
(0.1)
(0.2)
$
Note 20: Risks, Uncertainties, Contingencies and Litigation
COVID-19 Pandemic and Supply Chain Disruptions
The COVID-19 pandemic and other market and economic dynamics have contributed to global supply chain challenges and
inflationary market conditions. Since the fourth quarter of fiscal 2022, the military conflict between Russia and Ukraine and
the related sanctions imposed by governments in the U.S. and abroad have further aggravated these market conditions,
particularly driving higher oil and gas prices. The Company is focused on mitigating the negative impacts of labor shortages
and supply chain challenges, including rising raw material and logistic prices as well as delays and shortages in certain
purchased commodities and components.
Since February 2022, COVID-19 cases have increased in many areas in China. As a result of government-required lock-
downs, the Company suspended production at its manufacturing facilities in China for portions of March and April 2022.
While these plants have since reopened, they are currently manufacturing at reduced levels and customer demand has been
negatively impacted by the lock-downs and supply chain challenges, including component shortages.
At this time, the Company cannot reasonably estimate the full impact of the COVID-19 pandemic or the ongoing supply chain
challenges. If the Company, its suppliers, or its customers experience prolonged shutdowns or other significant business
disruptions, it is possible that the Company’s 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, results of operations and cash flows.
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Credit Risk
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
Company sells a broad range of products that provide thermal solutions to customers operating throughout the world. In fiscal
2022, no customers accounted for more than ten percent of the Company’s total sales. In fiscal 2021 and 2020, one vehicular
customer accounted for more than ten percent of the Company’s total sales. Sales to the Company’s top ten customers were
39 percent, 43 percent, and 45 percent of total sales in fiscal 2022, 2021, and 2020, respectively. At March 31, 2022 and 2021,
29 percent and 35 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 and light vehicle, commercial vehicle, off-highway, 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 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:
(cid:120) 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;
(cid:120) Accounts receivable – performing periodic customer credit evaluations and actively monitoring their financial
condition and applicable business news;
(cid:120) 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.
(cid:120)
Counterparty Risk
The Company manages counterparty risk through its focus on the following:
(cid:120) Customers – performing thorough reviews of customer credit reports and accounts receivable aging reports by
internal credit committees;
(cid:120) Suppliers – maintaining a supplier risk management program and utilizing industry sources to identify and mitigate
high risk situations; and
(cid:120) Derivatives – ensuring that counterparties to derivative instruments maintain credit ratings that are acceptable to the
Company.
Environmental
The Company has recorded environmental investigation and remediation accruals related to manufacturing facilities in the
U.S., one of which the Company currently owns and operates, and at its former manufacturing facility in the Netherlands.
These accruals primarily relate to soil and groundwater contamination at facilities where past operations followed practices
and procedures that were considered acceptable under then-existing regulations, or where the Company is a successor to the
obligations of prior owners, and current laws and regulations require investigative and/or remedial work to ensure sufficient
environmental compliance. In instances where a range of loss can be reasonably estimated for a probable environmental
liability, but no amount within the range is a better estimate than any other amount, the Company accrues the minimum of the
range. The Company’s accruals for environmental matters totaled $18.2 million and $16.0 million at March 31, 2022 and
2021, respectively. During fiscal 2022, the Company increased its remediation accrual related to a former manufacturing
facility in the U.S. by $3.4 million. As additional information becomes available regarding environmental matters, the
Company will re-assess the liabilities and revise the estimated accruals, if necessary. While it is possible that the ultimate
environmental remediation costs may be in excess of amounts accrued, the Company believes, based upon currently available
information, that the ultimate outcome of these matters, individually and in the aggregate, will not have a material adverse
effect on its financial position. However, these matters are subject to inherent uncertainties, and unfavorable outcomes could
occur, including significant monetary damages.
Other Litigation
In the normal course of business, the Company and its subsidiaries are named as defendants in various lawsuits and
enforcement proceedings by private parties, governmental agencies and/or others in which claims are asserted against Modine.
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
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.
80
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Note 21: Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss were as follows:
Balance, March 31, 2021
Foreign
Currency
Translation
$
(31.0)
Defined
Benefit Plans
$
(130.8)
Cash Flow
Hedges
$
0.6
Total
$
(161.2)
Other comprehensive income (loss) before reclassifications
(8.1)
Reclassifications:
Amortization of unrecognized net loss (a)
Unrecognized net pension loss in disposed business (b)
Realized gains - net (c)
Income taxes
Total other comprehensive income (loss)
-
-
-
-
(8.1)
11.5
6.5
1.7
-
-
19.7
1.7
-
-
(1.6)
-
0.1
5.1
6.5
1.7
(1.6)
-
11.7
Balance, March 31, 2022
$
(39.1)
$
(111.1)
$
0.7
$
(149.5)
Balance, March 31, 2020
Other comprehensive income before reclassifications
Reclassifications:
Amortization of unrecognized net loss (a)
Realized losses - net (c)
Income taxes
Total other comprehensive income
Balance, March 31, 2021
Foreign
Currency
Translation
$
(61.4)
Defined
Benefit Plans
$
(160.9)
Cash Flow
Hedges
$
(1.0)
Total
$
(223.3)
30.4
-
-
-
30.4
33.8
6.7
-
(10.4)
30.1
2.1
-
0.1
(0.6)
1.6
66.3
6.7
0.1
(11.0)
62.1
$
(31.0)
$
(130.8)
$
0.6
$
(161.2)
(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) As a result of the sale of the air-cooled automotive business, the Company wrote-off $1.7 million of net actuarial
losses related to its pension plan as a component of the loss on sale recorded during fiscal 2022. See Note 1 for
additional information.
(c) 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.
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
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 BHVAC segment provides heating, ventilating and air conditioning products to customers in North America
and Europe, as well as the Middle East. 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 automotive and light vehicle markets. In addition, the HDE segment serves the
commercial vehicle and automotive aftermarkets in Brazil.
Each operating segment is managed by a vice president and has separate financial results reviewed by the Company’s chief
operating decision maker. Financial results, including net sales, gross profit, gross margin and operating income, together with
other considerations, are used by the chief operating decision maker in evaluating the performance of each segment and in
making decisions on the allocation of resources among the Company’s various businesses.
Effective July 1, 2021, the Company aligned the data center businesses previously managed by and reported within the CIS
segment under the BHVAC segment. The BHVAC segment assumed management of the Company’s business in Guadalajara,
Spain and a portion of the business in Grenada, Mississippi. Through this segment change, the Company aligned its data
center businesses under the same leadership team to accelerate commercial excellence, operational improvements, and
organizational efficiencies. As a result, the Company revised its reporting segments and reported the financial results of the
transferred businesses within the BHVAC segment, consistent with how the Company’s chief operating decision maker
assessed operating performance and allocated capital resources. The segment realignment had no impact on the HDE and
Automotive segments or on the Company’s consolidated financial position, results of operations, and cash flows. Segment
financial information for fiscal 2021 and 2020 has been recast to conform to the fiscal 2022 presentation.
Effective April 1, 2022, the Company began managing the Company under two operating segments, Climate Solutions and
Performance Technologies. The Climate Solutions segment includes the BHVAC and CIS segment businesses with the
exception of CIS Coatings. The Performance Technologies segment includes the HDE and Automotive segment businesses
and the CIS Coatings business. The Company’s new segment structure aligns businesses serving similar or complimentary
end markets, products and technologies under common segment management. The Company expects this simplified segment
structure will allow it to better focus resources on targeted growth opportunities and allow for a more efficient application of
80/20 principles across all product lines to optimize profit margins and cash flow. Beginning for fiscal 2023, the Company
will report the financial results of the Climate Solutions and Performance Technologies segments.
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:
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, 2022
Year ended March 31, 2022
External Sales
External Sales
Inter-segment
Sales
Inter-segment
Sales
Total
Total
$
334.6
$
2.0
$
336.6
619.5
787.9
308.1
2,050.1
-
8.0
36.6
5.2
51.8
(51.8)
627.5
824.5
313.3
2,101.9
(51.8)
$
2,050.1
$
-
$
2,050.1
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Year ended March 31, 2021
Year ended March 31, 2021
Inter-segment
Sales
Inter-segment
Sales
Total
Total
External Sales
External 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
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
$
262.0
$
1.2
$
263.2
506.4
648.3
391.7
1,808.4
-
6.0
33.8
6.6
47.6
(47.6)
512.4
682.1
398.3
1,856.0
(47.6)
$
1,808.4
$
-
$
1,808.4
Year ended March 31, 2020
Year ended March 31, 2020
Inter-segment
Sales
Inter-segment
Sales
Total
Total
External Sales
External Sales
$
304.4
$
2.1
$
306.5
535.1
693.8
442.2
1,975.5
-
6.0
52.1
2.7
62.9
(62.9)
541.1
745.9
444.9
2,038.4
(62.9)
$
1,975.5
$
-
$
1,975.5
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.
Gross profit:
Gross profit:
BHVAC
BHVAC
CIS
CIS
HDE
HDE
Automotive
Automotive
Segment total
Segment total
Corporate and eliminations
Corporate and eliminations
Gross profit
Gross profit
Operating income:
Operating income:
BHVAC
BHVAC
CIS
CIS
HDE
HDE
Automotive
Automotive
Segment total
Segment total
Corporate and eliminations (a)
Corporate and eliminations (a)
Operating income (loss)
Operating income (loss)
2022
Years ended March 31,
Years ended March 31,
2021
$'s
$
93.6
88.5
87.2
39.3
308.6
0.7
309.3
% of
sales
27.8%
14.1%
10.6%
12.5%
14.7%
-
15.1%
$'s
$
85.3
64.2
88.4
56.0
293.9
(0.5)
293.4
% of
sales
32.4%
12.5%
13.0%
14.1%
15.8%
-
16.2%
$
$
$
2020
$'s
$
100.2
64.3
96.6
48.4
309.5
(2.0)
307.5
% of
sales
32.7%
11.9%
13.0%
10.9%
15.2%
-
15.6%
Years ended March 31,
Years ended March 31,
2022
2021
2020
$
45.7
$
45.2
$
58.2
35.3
34.6
35.4
151.0
(31.8)
10.2
36.8
(150.9)
(58.7)
(39.0)
11.1
37.8
(10.0)
97.1
(59.2)
$
119.2
$
(97.7)
$
37.9
(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
83
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MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
segment or not considered when management evaluates segment performance. During fiscal 2022, 2021, and 2020,
the Company recorded $2.6 million, $6.6 million, and $39.2 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
prepare the underlying businesses for potential sale.
The following is a summary of total assets by segment:
Total assets:
BHVAC
BHVAC
CIS
CIS
HDE
HDE
Automotive (a)
Automotive (a)
Corporate and eliminations (b)
Corporate and eliminations (b)
Total assets
Total assets
March 31,
March 31,
2022
224.3
$
2021
181.1
$
536.4
488.9
188.6
(11.2)
540.1
438.7
124.2
(7.4)
$
1,427.0
$
1,276.7
(a) During fiscal 2022, the Company recorded net impairment reversals totaling $56.0 million related to the liquid-cooled
automotive business. See Note 2 for additional information.
(b) At March 31, 2022 and 2021, Corporate assets totaled $20.8 million and $17.5 million, respectively and were more
than offset by eliminations for intercompany balances, including accounts receivable.
The following is a summary of capital expenditures and depreciation and amortization expense by segment:
Capital expenditures:
Capital expenditures:
BHVAC
BHVAC
CIS
CIS
HDE
HDE
Automotive
Automotive
Corporate
Corporate
Years ended March 31,
Years ended March 31,
2022
$
6.0
2021
$
1.8
2020
$
4.5
4.9
15.4
12.8
1.2
5.8
13.5
11.1
0.5
13.6
31.5
19.1
2.6
Total capital expenditures
Total capital expenditures
$
40.3
$
32.7
$
71.3
Depreciation and amortization expense:
Depreciation and amortization expense:
BHVAC
BHVAC
CIS
CIS
HDE
HDE
Automotive (a)
Automotive (a)
Corporate
Corporate
Years ended March 31,
Years ended March 31,
2022
$
5.9
2021
$
5.5
2020
$
6.2
20.5
23.4
3.4
1.6
22.6
25.5
13.2
1.8
21.2
25.4
22.3
2.0
Total depreciation and amortization expense
Total depreciation and amortization expense
$
54.8
$
68.6
$
77.1
(a) During fiscal 2021, 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. In fiscal 2022, the Company resumed
depreciating the long-lived assets within the liquid-cooled automotive business when it no longer met the
requirements to be classified as held for sale. See Note 2 for additional information.
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84
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:
United States
United States
Italy
Italy
Hungary
Hungary
China
China
United Kingdom
United Kingdom
Germany
Germany
Austria
Austria
Other
Other
Net Sales
Net sales
Years ended March 31,
Years ended March 31,
$
2022
949.6
232.0
185.2
$
2021
765.7
188.6
153.7
$
2020
941.9
187.4
142.4
166.0
118.6
81.2
217.6
96.4
83.4
168.5
82.0
97.5
4.8
312.7
2,050.1
$
59.6
243.4
1,808.4
$
93.0
262.8
1,975.5
$
The following is a summary of property, plant and equipment by geographical area:
United States
United States
China
China
Hungary
Hungary
Mexico
Mexico
Italy
Italy
Germany
Germany
Other
Other
March 31,
March 31,
2022
83.6
$
2021
80.3
$
45.6
44.0
38.5
33.2
12.5
58.0
31.3
27.6
43.5
30.0
1.8
55.4
Total property, plant and equipment (a)
Total property, plant and equipment (a)
$
315.4
$
269.9
(a) As of March 31, 2021, the Company had written-down the carrying value of held for sale property, plant and
equipment within the liquid-cooled automotive business to zero. During fiscal 2022, the business no longer met the
requirements to be classified as held for sale. As a result, the Company remeasured its long-lived assets to the lower
of carrying value or fair value and recorded net impairment reversals totaling $56.0 million during fiscal 2022. The
assets within the liquid-cooled automotive business are located in Hungary, Germany, China, the U.S., Italy, and the
Netherlands. See Note 2 for additional information.
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85
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Modine Manufacturing Company
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
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
statements”). We also have audited the Company's internal control over financial reporting as of March 31, 2022, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
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, 2022 and 2021, and the results of its operations and its cash flows for each of the
three years in the period ended March 31, 2022 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
financial reporting as of March 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Basis for Opinions
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,
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
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
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
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
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained
in all material respects.
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
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
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
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
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.
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
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
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.
86
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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
$168.1 million as of March 31, 2022, and the goodwill associated with the CIS reporting units was $122.7 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, and the risk-adjusted discount rates.
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 the significant assumptions used in management’s fair value estimate 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 and accuracy 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, Wisconsin
May 26, 2022
We have served as the Company’s auditor since 1935.
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87
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, 2022.
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,
2022. 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, 2022, 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, 2022 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 2022 that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not Applicable.
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88
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 2022 Annual
Meeting of Shareholders to be held on July 21, 2022 (the “2022 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 2022 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 2022 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 2022 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 2022 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 2022 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 2022 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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89
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The Company incorporates by reference the information relating to stock ownership under the caption “Security Ownership of
Certain Beneficial Owners and Management,” and under the caption “Equity Compensation Plan Information,” in the 2022
Annual Meeting Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The Company incorporates by reference the information contained in the 2022 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 2022 Annual Meeting Proxy Statement under the
caption “Independent Auditor’s Fees for Fiscal 2022 and 2021.”
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Documents Filed. The following documents are filed as part of this Report:
Page in Form 10-K
1. The consolidated financial statements of Modine Manufacturing Company and its subsidiaries filed
under Item 8:
Consolidated Statements of Operations for the years ended March 31, 2022, 2021 and 2020
Consolidated Statements of Comprehensive Income for the years ended March 31, 2022, 2021 and 2020
Consolidated Balance Sheets at March 31, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended March 31, 2022, 2021 and 2020
Consolidated Statements of Shareholders' Equity for the years ended March 31, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
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, 2022, 2021 and 2020
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.
3. Exhibits and Exhibit Index.
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 two asterisks following its exhibit number.
45
46
47
48
49
50-85
86-87
91
92-95
ITEM 16. FORM 10-K SUMMARY.
None.
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90
MODINE MANUFACTURING COMPANY AND SUBSIDIARIES
(A Wisconsin Corporation)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the years ended March 31, 2022, 2021 and 2020
(In millions)
Additions
Balance at
Beginning of
Period
Charged
(Benefit) to
Costs and
Expenses
Charged to
Other
Accounts
Reclassified
from (to)
Held for Sale
Balance at
End of Period
$
90.7
$
(4.6)
$
(1.0)
(a)
$
27.1
$
112.2
$
46.9
$
86.2
$
2.8
(a)
$
(45.2)
$
90.7
$
43.4
$
4.5
$
(1.0)
(a)
$
-
$
46.9
Description
2022: Valuation Allowance for
Deferred Tax Assets
2021: Valuation Allowance for
Deferred Tax Assets
2020: Valuation Allowance for
Deferred Tax Assets
(a) Foreign currency translation and other adjustments.
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91
MODINE MANUFACTURING COMPANY
(THE “REGISTRANT”)
(COMMISSION FILE NO. 1-1373)
EXHIBIT INDEX
TO
2022 ANNUAL REPORT ON FORM 10-K
Exhibit No.
Description
Incorporated Herein By
Referenced To
Filed
Herewith
2.1
3.1
3.2
Termination Agreement by and between the Company and Dana
Incorporated, dated as of October 25, 2021.
Amended and Restated Articles of Incorporation, as amended.
Bylaws, as amended.
4.1
Form of Stock Certificate of the Registrant.
Exhibit 2.1 to Registrant’s Current
Report on Form 8-K dated October
25, 2021
Exhibit 3.1 to Form 10-K for the
fiscal year ended March 31, 2018
Exhibit 3.1 to Registrant’s Current
Report on Form 8-K dated June 17,
2020
Exhibit 4(a) to Form 10-K for the
fiscal year ended March 31, 2003
(“2003 10-K”)
4.2
4.3*
4.4*
4.5
Amended and Restated Articles of Incorporation, as amended.
See Exhibit 3.1 hereto.
Amended and Restated Collateral Agency Intercreditor
Agreement (the “Original Intercreditor Agreement”) dated as of
August 12, 2010 among the Lenders (as defined therein), the
Noteholders (as defined therein) and JPMorgan Chase Bank,
N.A. as Collateral Agent.
First Amendment to the Original Intercreditor Agreement,
among the Lenders, the Note Holders and JPMorgan as
Collateral Agent, pursuant to which the Lenders, the Note
Holders and JPMorgan amended the Original Intercreditor
Agreement.
Exhibit 4.3 to August 12, 2010 8-K
Exhibit 4.3 to August 30, 2013 8-K
Credit Facility Agreement among Modine Holding GmbH,
Modine Europe GmbH and Deutsche Bank AG dated as of April
April 27, 2012.
27, 2012.
Exhibit 4.10 to Registrant’s Form 10-
K for the fiscal year ended March 31,
2012
4.6
Description of Registrant’s securities
Fourth Amended and Restated Credit Agreement dated as of
June 28, 2019.
Second Amended and Restated Note Purchase and Private Shelf
Agreement dated as of August 6, 2019
4.7
4.8
4.9
First Amendment to Second Amended and Restated Note
Purchase and Private Shelf Agreement dated as of January 31,
2020
Exhibit 4.2 to Registrant’s Form 10-
Q for the third quarter ended
December 31, 2019
Exhibit 4.14 to Registrant’s Form 10-
K for fiscal year ended March 31,
2020
Exhibit 4.1 to Registrant’s Current
Report on Form 8-K dated June 28,
2019
Exhibit 4.1 to Registrant’s Form 10-
Q for the third quarter ended
December 31, 2019
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92
4.10
4.11
4.12
4.13
First Amendment to Fourth Amended and Restated Credit
Agreement dated as of May 19, 2020
Exhibit 4.1 to Registrant’s Current
Report on Form 8-K dated May 19,
2020 (“May 19, 2020 8-K”)
Second Amendment to Second Amended and Restated Note
Purchase and Private Shelf Agreement dated as of May 19, 2020
Exhibit 4.2 to May 19, 2020 8-K
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
10.1**
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
10.2**
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
10.3**
Executive Supplemental Retirement Plan (as amended).
Exhibit 10(f) to Registrant's Form
10-K for the fiscal year ended March
31, 2000
10.4**
Deferred Compensation Plan (as amended).
Exhibit 10(y) to 2003 10-K
10.5**
2008 Incentive Compensation Plan
(Amended and Restated effective May 7, 2014).
10.6**
Form of Fiscal 2022 Performance Cash Award Agreement.
Exhibit 10.1 to Registrant's Current
Report on Form 8-K dated July 17,
2014
Exhibit 10.1 to the Registrant’s Form
10-Q for the first quarter ended June
30, 2021 (“June 30, 2021 10-Q”)
10.7**
Form of Fiscal 2022 Incentive Stock Option Award Agreement. Exhibit 10.2 to June 30, 2021 10-Q
10.8**
Form of Fiscal 2022 Non-Qualified Stock Option Award
Agreement.
Exhibit 10.3 to June 30, 2021 10-Q
10.9**
Form of Fiscal 2022 Restricted Stock Unit Award Agreement.
Exhibit 10.4 to June 30, 2021 10-Q
10.10**
Form of Fiscal 2022 Modine Non-Employee Director Restricted
Stock Unit Award.
10.11**
Change in Control Agreement dated as of June 4, 2021, by and
between Modine Manufacturing Company and Neil D. Brinker
Exhibit 10.4 to Registrant’s Form 10-
Q for the second quarter ended
September 30, 2021 (“September 30,
2021 10-Q”)
Exhibit 10.1 to Registrant’s Current
Report on Form 8-K dated June 4,
2021
10.12**
10.13**
Form of Make-Whole ISO Award Agreement with Eric S.
McGinnis.
Exhibit 10.5 to September 30, 2021
10-Q
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.
Exhibit 10.1 to Registrant’s Current
Report on Form 8-K dated October
17, 2011
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10.15**
2017 Incentive Compensation Plan.
Exhibit 10.1 to Registrant’s Current
Report on Form 8-K dated July 20,
2017
10.16**
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
10.17**
[Corrected] Offer Letter dated as of November 10, 2020, by and
between the Company and Neil Brinker.
10.18**
Employment Retention Agreement for Scott Wollenberg, dated
as of July 26, 2019.
Exhibit 10.1 to the Registrant’s Form
10-Q for the third quarter ended
December 31, 2020 (“December 31,
2020 10-Q”)
Exhibit 10.5 to the Registrant’s Form
10-Q for the first quarter ended June
30, 2019
10.19**
2020 Incentive Compensation Plan.
Exhibit 10.1 to July 23, 2020 8-K
10.20**
10.21**
10.22**
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
Offer Letter dated as of July 2, 2021, by and between the
Company and Adrian Peace.
Exhibit 10.1 to September 30, 2021
10-Q
Offer Letter dated as of July 16, 2021, by and between the
Company and Eric S. McGinnis.
Exhibit 10.2 to September 30, 2021
10-Q
10.23**
First Amendment to Eric S. McGinnis Offer Letter
10.24**
Separation Letter Agreement between the Company and Joel T.
Casterton, dated as of October 25, 2021.
Exhibit 10.3 to September 30, 2021
10-Q
Exhibit 10.1 to Registrant’s Form 10-
Q for the third quarter ended
December 31, 2021 (“December 31,
2021 10-Q”)
10.25**
Separation Letter Agreement between the Company and
Matthew J. McBurney, dated as of October 30, 2021.
Exhibit 10.2 to December 31, 2021
10-Q
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
Inline XBRL Instance Document (the instance document does
not appear in the Interactive Data File because its XBRL tags
are embedded within the Inline XBRL document).
101.SCH
Inline XBRL Taxonomy Extension Schema.
94
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
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101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase
Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase
Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase
Document.
104
Cover Page Interactive Data File (formatted as Inline XBRL and
contained in Exhibits 101).
X
X
X
X
X
X
X
X
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.
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95
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 26, 2022
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/ Charles P. Cooley
Charles P. Cooley
Director
/s/ Suresh V. Garimella
Suresh V. Garimella
Director
/s/ Katherine C. Harper
Katherine C. Harper
Director
/s/ Larry O. Moore
Larry O. Moore
Director
/s/ Christopher W. Patterson
Christopher W. Patterson
Director
/s/ David J. Wilson
David J. Wilson
Director
/s/ Christine Y. Yan
Christine Y. Yan
Director
May 26, 2022
May 26, 2022
May 26, 2022
May 26, 2022
May 26, 2022
May 26, 2022
May 26, 2022
May 26, 2022
May 26, 2022
May 26, 2022
May 26, 2022
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C O R P O R AT E I N F O R M AT I O N
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 fi led with the Securities and Exchange
Commission certifi cations by the company’s Chief Executive
Offi cer in the role of Principal Executive Offi cer and Chief
Financial Offi cer in the role of Principal Financial Offi cer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Modine Manufacturing Company also has fi led with the
New York Stock Exchange (NYSE) the most recent Domestic
Company Section 303A Annual CEO Certifi cation as required
by the NYSE Listed Company Manual.
Form 10-K Report
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 certifi cates 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
Modine’s Form 10-K Report, fi led in May 2022 with the Securities
from your bank account on a monthly basis. To receive plan
and Exchange Commission, is contained within this report.
material and enrollment information, please call 800.468.9716.
It and the proxy statement also are available to shareholders
The Modine Manufacturing Company Direct Stock Purchase Plan
and interested individuals without charge by contacting Investor
is administered by the company’s transfer agent, EQ Shareowner
Relations at the company’s headquarters address, or by visiting
Services. Inquiries may be directed to the address listed above.
the Investors section at www.modine.com.
Modine SEC Filings and News Releases
As of March 31, 2022, there were 2,164 shareholders of record.
Forms 10-K, 10-Q and 8-K, news releases and other company
In addition, Modine estimates that there were approximately
information can be obtained at www.modine.com, or by
11,833 benefi cial shareholders as of that date.
Shareholders
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
Trademarks
Trademarks or registered trademarks of Modine Manufacturing
Company are denoted by a registration symbol in this report.
The 2022 Annual Meeting of Shareholders will be held at
Copyright © 2022 Modine Manufacturing Company.
8:00 a.m. Central Time on Thursday, July 21.
All Rights Reserved.
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.
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O F FI C E R S & D IR E C T O RS *
O F F I C E R S
B O A R D O F D I R E C T O R S * *
Brian J. Agen
Vice President, Human Resources
Age 53; joined Modine in 1996
Neil D. Brinker
President and Chief Executive Officer
Age 46; joined Modine in 2020
Thomas P. Drahos
Vice President, Global Operations
Age 56; joined Modine in 2003
Mark D. Hudson
Vice President, Corporate Controller
Age 51; joined Modine in 2012
C. Steve Langer
Vice President, Information Technology
Age 59; joined Modine in 2018
Michael B. Lucareli
Executive Vice President,
Chief Financial Officer
Age 53; joined Modine in 1999
Eric S. McGinnis
President, Climate Solutions
Age 51; joined Modine in 2021
Adrian I. Peace
President, Performance Technologies
Age 54; joined Modine in 2021
Kathleen T. Powers
Vice President, Treasurer,
Investor Relations and Tax
Age 54; joined Modine in 2011
Sylvia A. Stein
Vice President, General Counsel,
Corporate Secretary and
Chief Compliance Officer
Age 56; joined Modine in 2018
Eric D. Ashleman - A,B
Chief Executive Officer and
President of Idex Corporation
Age 55; Director since 2019
Neil D. Brinker
President and Chief Executive Officer
of Modine
Age 46; Director since 2020
Charles P. Cooley - A,B,C
Retired; Senior Vice President
and Chief Financial Officer of
The Lubrizol Corporation
Age 66; Director since 2006
Dr. Suresh V. Garimella - C,D
President, University of Vermont
Age 58; Director since 2011
Katherine C. Harper - A
Chief Financial Officer of
BDP International
Age 59; Director since 2022
Larry O. Moore - C,D
Retired; Senior Vice President,
Module Centers and Operations
of Pratt & Whitney
Age 72; Director since 2010
Christopher W. Patterson - A,C
Retired; President and
Chief Executive Officer of
Daimler Trucks North America LLC
Age 68; Director since 2010
Marsha C. Williams - B
Retired; Senior Vice President
and Chief Financial Officer of
Orbitz Worldwide, Inc.
Age 71; Director since 1999
David J. Wilson - A,B
President and Chief Executive Officer
of Columbus McKinnon Corporation
Age 53; Director since 2022
Christine Y. Yan - A,B,D
Retired; Vice President of Integration,
Stanley Black and Decker, Inc.
Age 56; Director since 2014
COMMIT TEES O F 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, 2022.
**Board of Director Committee charters are available on the corporate governance section of www.modine.com.
modine.com
Modine Manufacturing Company
1500 DeKoven Avenue
Racine, WI 53403-2552 USA
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