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A W O R L D O F D I F F E R E N C E
2 0 2 3 A N N U A L R E P O R T
20
23
A YEAR OF
TRANSFORMATION
A world of difference
It started with a question: how can we leverage our rich heritage
of engineering and innovation to contribute to building a cleaner,
healthier world? That question put everything into focus.
It became our purpose, our North Star, in everything we do.
We realized that if we wanted to have a lasting impact –
to deliver products that made a difference in the lives of millions –
we needed to change. And change we did. In fiscal 2023,
we embarked on a transformation journey to revolutionize
the way we did business. We began rolling out 80/20 principles
across the company, simplified our organizational structure,
and empowered our teams to make bold decisions about
the products and markets they served.
Following a year of operating with a new mindset and
organizational structure, we’re living up to our legacy of
providing our customers and communities with innovative
engineering solutions that improve air quality and
conserve natural resources.
We’ve seen a world of difference within our walls,
and our products are making a difference in the
world outside them.
A better
business,
by the
numbers
NET SALES (IN MILLIONS)
ADJUSTED EARNINGS PER SHARE
FISCAL YEARS ENDED MARCH 31
2022
2023
Net Sales
$ 2,050
$ 2,298
Adjusted EBITDA
$ 159
$ 212
Adjusted Earnings Per Share
$ 1.23
$ 1.95
Free Cash Flow
$ (29)
$ 57
Net Debt
$ 333
$ 286
(Dollars in millions, except per share amounts.)
Adjusted EBITDA and adjusted earnings per share exclude restructuring expenses,
impairment charges or reversals, 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.
2019202020212022202320192020202120222023$2,5002,0001,5001,0005000$2.001.501.00.500
DEAR SHAREHOLDERS,
Having just completed my second full fiscal year at Modine, I am pleased
support the expansion of their data center operations in Northern
to report that the transformation of our business is well underway
Virginia. Bringing our chiller product to North America was an
and firmly on track. Over the past two years, we have focused our
important step, allowing us to provide a complete system solution
organization by simplifying and segmenting the business, building our
to our colocation customers, expand partnerships and broaden the
leadership team and decentralizing operations. In the first quarter of
scope of our capabilities. Sales of our data center products increased
fiscal 2023, we officially transitioned to our two-segment structure –
by 60% this past year, and we are expecting further double-digit gains
Performance Technologies and Climate Solutions. This was a critical
in fiscal 2024.
step on our journey and set us on the path to success.
Our HVAC & Refrigeration business also contributed to the success
But that was only the beginning. We held our first investor and analyst
of the Climate Solutions segment. The Indoor Air Quality business
day at the New York Stock Exchange in June 2022. At that event, we
continued its focus on the K-12 schools market in North America,
introduced our purpose statement: Engineering a Cleaner, Healthier
benefiting from the significant funding available from various COVID-
World™. This statement not only captures what we are doing today,
related relief measures. The Coolers & Power-Process business
but also how we will set our priorities for the future. We also presented
significantly improved margin this year. It is currently focused on
our strategy for transforming our business along with financial goals to
product development, including expanding our range of high-
measure our success. Our objectives are clear and our strategies are
performing coolers that use natural refrigerants with low global
defined. This year was about execution, getting out to a strong start and
warming potential (GWP). Our commitment to developing new products
exceeding expectations.
THE YEAR IN REVIEW
and technologies will allow our customers to meet new and future
regulatory requirements, including those that require the elimination
of hydrofluorocarbons (HFCs).
Fiscal 2023 sales were $2.3 billion, a 12% increase from the prior year.
We reported a record-breaking adjusted EBITDA of $212 million,
The Heat Transfer Products (HTP) business grew in both revenue and
a 34% increase from the prior year, and free cash flow of $57 million.
margins this past year, clearly benefiting from the application of 80/20
principles to their business. When setting strategies for the business
Our Climate Solutions segment had an outstanding year. Last fall,
verticals, HTP was designated as “Improve” because their margins were
we opened our new chiller plant in Rockbridge, Virginia, complete
below target. The team took this challenge seriously by aggressively
with state-of-the art testing facilities, to grow our Data Center business.
simplifying their business and simultaneously implementing commercial
We also announced that we won a significant order with Corscale to
strategies to improve profitability. HTP has now earned the right to grow.
We plan to invest in additional manufacturing capacity to support
A WORLD OF DIFFERENCE
regulation-driven heat pump demand in Europe where we provide
The theme of our annual report this year is “A World of Difference.”
coils to major suppliers. The turnaround of this business clearly
This has two meanings. First, the work we have done these past two
demonstrates the power of 80/20 to provide the focus needed
years is creating a world of difference for our company. We have
to achieve profitable growth.
reorganized and built a high-performing organization focused on the
markets and strategies needed to succeed. We launched and have
The Performance Technologies segment had a good year, with a 12%
embraced 80/20, making it the governing philosophy for everything
increase in revenues. They had a solid increase in adjusted EBITDA
we do. We are well along on this journey in the Climate Solutions
margins and are tracking toward their targets. The segment’s key success
segment, which is clearly ahead of schedule and exceeding our
has been a change in mindset: understanding how to better prioritize
expectations. In Performance Technologies, we are still in the early
opportunities. Historically, we have pursued programs with high capital
phases of implementation and doing the hard work necessary to
requirements and thin margins to maintain revenue growth and cover plant
reach our goals. All of these activities allow us to accelerate profitable
overhead. We are now focused on margin improvement and are shifting
growth and improve our margins and cash flow so that we can continue
our mix of business by promoting growth of our advantaged electric
investing in the technologies that further our purpose.
vehicle thermal systems. Modine’s EVantage™ brand of battery thermal
management systems and electronic cooling packages provide customers
The second meaning intersects with our purpose of Engineering
with a complete thermal solution that can be quickly adopted to various
a Cleaner, Healthier World™. We are making a world of difference for
applications, helping our customers convert their vehicles to electric
our customers with products that are quietly and powerfully improving
in response to market demand. We’ve had a good deal of commercial
our lives. We are delivering customer-centric solutions that solve
success with this product line, winning nine new production orders this
complex problems while supporting health, decarbonization and
past year with an incremental $80 million of peak revenue for these orders.
resource conservation. Our technology-driven culture has resulted in
We currently have 21 total production orders with an expected total peak
numerous breakthroughs throughout our history and we are harnessing
volume of more than $140 million with margins at or above our target.
that expertise in new ways to serve our customers.
The focus in our Air-Cooled and Liquid-Cooled Applications businesses
Our CO2 gas cooler product range is supporting the conversion to
has been on increasing gross margin and simplifying and improving
environmentally friendly refrigerants and has allowed the replacement
business processes under our control. We launched 80/20 in these
of over 10 million pounds of high-GWP synthetic refrigerants. Our school
verticals last fall and have made solid progress toward our objectives.
line of indoor ventilation products provides one million cubic feet of fresh
These businesses typically operate under long-term contracts that
air per minute to classrooms in North America. Our thermal management
contain pass-through provisions that adjust pricing for changes in metals
systems for electric vehicles enable longer battery range per charge,
prices. The team has closely examined our operations to determine
reducing power consumption while eliminating vehicular emissions.
how other rising prices have impacted our cost structure and have
The rapid digitization of the world has put strains on resources like energy
implemented action plans to improve gross margin. In addition, we have
and water, so our data center customers have embraced our free cooling
strengthened filters on new quotations to ensure that future program
chillers that use less energy and water while maintaining a cool operating
wins will meet or exceed profitability targets. We have a heavy lift in
environment. We estimate that 389 million gallons of water were saved
these businesses but our team is actively engaged and making needed
by deploying Modine water-side optimization systems in data centers in
improvements to reach our goals.
2021 alone.
TRANSFORMING FOR A SUSTAINABLE FUTURE
The list of Modine solutions that improve our lives is too long to mention.
Modine’s transformation is creating a sustainable future for our
But rest assured: whether it’s the transition to heat pump technology,
employees. At the same time, our products are creating a more
the need for hospitals to have a reliable back-up power source, or ensuring
sustainable future for our planet. We are applying our long history
the food on your table has been kept at the proper temperature while
of innovation and engineering know-how to improve indoor air quality
being grown, stored or transported, Modine is making a world of
in our schools, reduce water and energy consumption in various HVAC
difference in our lives every day.
and refrigeration applications, convert to more environmentally friendly
refrigerants and lower harmful vehicle emissions while enabling the
Thank you for your ongoing support of Modine.
conversion to cleaner-running electric vehicles. Our purpose – Engineering
a Cleaner, Healthier World™ – drives our decisions as we pivot certain
Sincerely,
portions of our business away from legacy technologies and invest in
new technologies that will lead us toward this brighter future. Our goal is
to exceed expectations as we drive forward, creating a new Modine that
both celebrates our long history while rapidly transforming in response
Neil D. Brinker, President and Chief Executive Officer
to market and regulatory drivers. This benefits all our stakeholders:
our employees, customers, shareholders and communities.
MODINE
WITH
MOMENTUM
In fiscal 2023, we successfully implemented
a structural reorganization to better allocate
resources to markets where we could best
drive consistent, profitable growth.
That reorganization wasn’t easy but
worthwhile endeavors rarely are. Our team
embraced the strategy and worked diligently
to ensure its success. We set clear financial
targets, defined strategic objectives, and
utilized 80/20 principles to make decisions
across both business segments. The results
speak for themselves.
As we look back over the past year, we’re
proud of our accomplishments and are
committed to driving momentum. In fiscal
2024, we will build on this foundation and
accelerate our growth. We’ve made significant
strides, but there’s still a world of difference
yet to come.
Climate Solutions
EXCEEDING
EXPECTATIONS
Delivering results
6
SMALL TEAMS. BIG VISION
Gone are the days of spreading a mile wide and an
inch deep. As part of our 80/20 mindset, we’re utilizing
smaller teams to work more effectively on specific
products and markets. By centering our energy and
focus, we can provide better service to our customers
and find more opportunities to deliver profitable growth.
A FUTURE IN FOCUS
With a narrowed focus on delivering exceptional products,
our Climate Solutions segment is not just meeting the
demands of our business but far exceeding them. Through
a focused portfolio of specialty solutions to serve the HVAC,
refrigeration, and data center industries, this segment has
turned average customers into raving fans, moving our
business forward in the process.
A BETTER TOMORROW, TODAY
Our Climate Solutions segment is Engineering a Cleaner,
Healthier World™ with technologies that help our customers
conserve natural resources. Our three business verticals –
Heat Transfer Products, HVAC and Refrigeration, and Data
Centers – provide safe, energy-efficient ventilation and climate-
control solutions, components, and services for a range of critical
applications. Our products improve indoor air quality in schools,
enable the transition to more environmentally friendly refrigerants,
and reduce energy and water consumption in data centers and
other HVAC & refrigeration applications. Our engineers are
working with our customers to develop solutions that not only
meet their needs but also build a stronger future.
Our team is focused on driving performance in the coming year
and will work tirelessly to continue exceeding expectations. Why?
Because the better we perform, the better our world will be.
Performance Technologies
PIVOTING &
PERFORMING
In a changing world
FINDING OUR FOOTING,
DEFENDING OUR VALUE
After performing a strategic review of
our business, our Performance Technologies
segment identified certain areas that need
improvement and others primed for growth.
Using 80/20 principles, we changed our
mindset to focus on our best opportunities
in order to defend our value and ensure
profitable performance.
Our Air-Cooled and Liquid-Cooled Applications
businesses are shifting focus to provide thermal
management components to new markets,
such as stationary power. In our Advanced
Solutions business, we’ve recently launched
our EVantage™ line of thermal systems for
a variety of commercial electric vehicles,
including medium- and heavy-duty trucks,
school and transit buses, fire trucks, and other
specialty vehicles. We are working with our
customers to accelerate the conversion to
zero-emission vehicles by providing reliable
and energy-efficient thermal solutions.
DRIVING GROWTH THROUGH INNOVATION
Our Performance Technologies segment is changing
its business mix. From the genset market to emerging
vehicular applications, our team is delivering superior,
reliable products. As the world continues to evolve and
look for more sustainable approaches, our team is ready
to meet the opportunities and deliver the solutions that
our customers need.
PRIDE IN PERFORMANCE
Modine has a long, proud legacy of innovation.
Emerging technologies and new market drivers create
opportunities for us to leverage our expertise in exciting
ways. As we’ve found our footing and pivoted to a more
focused path over the last year, our team has exhibited
hard work and ingenuity. We’re extremely proud of the
team’s performance and excited to see what comes next.
THE
WORLD
AHEAD
In everything we do, we do it
with the purpose of Engineering
a Cleaner, Healthier World™.
Not just for today, but for tomorrow
and all the days that come after.
Our products have helped make a
positive impact on the planet over the
last year, but what we’re really excited
about is the world of difference we
can make in the years to come.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended March 31, 2023
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ____________ to ____________
Commission file number 1-1373
MODINE MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)
Wisconsin
(State or other jurisdiction of incorporation or organization)
39-0482000
(I.R.S. Employer Identification No.)
1500 DeKoven Avenue, Racine, Wisconsin
(Address of principal executive offices)
53403
(Zip Code)
Registrant's telephone number, including area code (262) 636-1200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.625 par value
MOD
New York Stock Exchange
Securities Registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No []
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No []
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files).
Yes [] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer [ ]
Non-accelerated Filer [ ]
Accelerated Filer []
Smaller reporting company [ ]
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act. [ ]
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. []
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of
the registrant included in the filing reflect the correction of an error to previously issued financial statements. [ ]
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of
incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period
pursuant to §240.10D-1(b). [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes [ ] No []
Approximately 98 percent of the outstanding shares are held by non-affiliates. The aggregate market value of these shares
was approximately $662 million based upon the market price of $12.94 per share on September 30, 2022, 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 52,065,078 at May 19, 2023.
An Exhibit Index appears at pages 88-91 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 2023 Annual
Meeting of Shareholders
Part III of Form 10-K
(Items 10, 11, 12, 13, 14)
MODINE MANUFACTURING COMPANY
TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS. ........................................................................................................................................ 1
ITEM 1A. RISK FACTORS. ............................................................................................................................. 11
ITEM 1B. UNRESOLVED STAFF COMMENTS. ........................................................................................... 19
ITEM 2. PROPERTIES. .................................................................................................................................. 19
ITEM 3. LEGAL PROCEEDINGS. ................................................................................................................ 19
ITEM 4. MINE SAFETY DISCLOSURES. ................................................................................................... 20
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 6. RESERVED ...................................................................................................................................... 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. ........................................................................................................ 23
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. ................ 39
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. ................................................ 42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. .......................................................................................................... 83
ITEM 9A. CONTROLS AND PROCEDURES. ................................................................................................ 83
ITEM 9B. OTHER INFORMATION................................................................................................................. 83
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS. ................................................................................................................................ 83
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. ......................... 83
ITEM 11. EXECUTIVE COMPENSATION. ................................................................................................... 84
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS. ............................................................................ 84
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE. ........................................................................................................................... 85
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. ................................................................. 85
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. ....................................................... 85
ITEM 16. FORM 10-K SUMMARY. ............................................................................................................... 86
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS .............................................. 87
EXHIBIT INDEX ............................................................................................................................. 88
SIGNATURES ................................................................................................................................. 92
(This page intentionally left blank.)
PART I
ITEM 1. BUSINESS.
At Modine Manufacturing Company, we are Engineering a Cleaner, Healthier World ™. Building on more than 100
years of excellence in thermal management, we provide trusted products and technologies that help improve our world.
Our broad portfolio of systems and solutions support our mission of improving indoor air quality, conserving natural
resources, lowering harmful emissions, enabling cleaner running vehicles, and using environmentally friendly
refrigerants.
We sell innovative and environmentally responsible thermal management products and solutions to diversified customers
in 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 customers across the globe include:
Heating, ventilation and cooling OEMs;
Construction architects and contractors;
Wholesalers of heating equipment;
Agricultural, industrial and construction equipment OEMs;
Commercial and industrial equipment OEMs; and
Automobile, truck, bus, and specialty vehicle OEMs.
We partner with our customers across industries to provide sustainable components, systems, and services and solve
complex heat transfer challenges to ensure their climate solutions and performance technologies work more efficiently,
last longer and add comfort to people’s lives. We work to provide the best possible thermal solutions to our customers
by first assessing their entire systems to make sure our products integrate seamlessly with other components. We also
focus on product design, from raw materials to end-of-life recyclability, to optimize total cost of ownership and reduce
negative environmental impacts across the product life cycle. We anticipate and prepare for change, keeping pace with
new and emerging regulations and fulfilling the demand for sustainable technologies in response to increasingly stringent
emissions, fuel economy, and energy efficiency standards.
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.
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.
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
Our purpose is to engineer a cleaner, healthier world by providing products and services that improve indoor air quality,
reduce water and energy consumption, lower harmful emissions, enable cleaner running vehicles, and use
environmentally friendly refrigerants.
In fiscal 2023, we made significant progress toward transforming Modine. We originally announced our vision for a
“new” Modine in late fiscal 2021. In fiscal 2022, we onboarded seasoned leaders with the requisite experience to drive
transformative change, including new segment presidents for our Climate Solutions and Performance Technologies
1
1
segments. Since that time, we have simplified and segmented our organization, aligning teams, led by general managers,
around specific strategies and market-based verticals within our company. Our new leadership teams have embraced
80/20 principles, which focus on the rule that 80 percent of outputs result from 20 percent of inputs. By applying 80/20
principles through data analytics to identify these valuable inputs, and instilling the mindset of prioritizing the factors
that drive the best results, our teams created a high-performance culture that focuses resources on products and markets
with the highest sustainable growth opportunities and best return profiles, while simplifying and improving our
processes. For example, we have been focused on growth opportunities in the data center market. In response to
identified opportunities, we strategically expanded our product offerings in this business and are manufacturing and
selling more data center cooling products in North America. We have also improved our commercial acumen and have
strengthened our business relationships with our best customers. In addition, by applying 80/20 principles and
improving our commercial pricing methodologies, we have improved our profit margins in fiscal 2023, in spite of
significant supply chain challenges and inflationary market conditions.
Looking ahead, our teams remain focused on executing our transformational strategy. We are applying 80/20 principles
throughout our organization, including within our manufacturing facilities to improve efficiencies and further simplify
our businesses. We are also taking steps toward maximizing our share in targeted markets, including data centers,
electric vehicles, and HVAC&R, where we see the best opportunities for profitable growth.
During fiscal 2023, our consolidated net sales were $2.3 billion, a 12 percent increase from $2.1 billion in fiscal 2022.
This increase was primarily due to higher sales in both our Performance Technologies and Climate Solutions segments.
Our operating income of $150 million in fiscal 2023 increased $31 million from the prior year, primarily due to higher
gross profit, partially offset by the absence of a $56 million net impairment reversal recorded in the prior year that
primarily related to the liquid-cooled automotive business, which reverted back to held and used classification upon the
termination of a sale agreement with the prospective buyer during fiscal 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 2023 sales. In fiscal 2023, 56 percent of our total sales were
generated from customers outside of the U.S., with 49 percent of total sales generated by foreign operations and 7
percent generated by exports from the U.S. 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.
Product Groups
We partner with our customers across multiple industries to provide sustainable solutions for a wide range of
applications. The following is a summary of our primary product groups, categorized as a percentage of our net sales:
Air-cooled
Air-cooled
Heat transfer
Heat transfer
Liquid-cooled
Liquid-cooled
HVAC & refrigeration
HVAC & refrigeration
Data center cooling
Data center cooling
Advanced solutions
Advanced solutions
Competitive Position
Fiscal 2023 Fiscal 2022
Fiscal 2023
Fiscal 2022
28%
28%
23%
23%
22%
21%
16%
15%
5%
7%
6%
6%
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. For example, the expansion of electric vehicle
demand has created opportunities to work with our existing OEM customers, as well as emergent customers focused on
zero-emission products. Our OEM customers are faced with significant international competition and maintain 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.
2
Business Segments
2
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 April 1, 2022, we began managing the Company under two operating segments, Climate Solutions and
Performance Technologies. Our new segment structure aligns businesses serving similar or complimentary end markets,
products and technologies under common segment management. This simplified segment structure allows us to better
focus resources on targeted growth opportunities and better enables an efficient application of 80/20 principles across all
product lines to optimize profit margins and cash flow.
The Climate Solutions segment includes the previously-reported Building HVAC Systems (“BHVAC”) and the
Commercial and Industrial Solutions (“CIS”) segments, with the exception of CIS Coatings. The Performance
Technologies segment includes the previously-reported Heavy Duty Equipment and Automotive segments and the CIS
Coatings business.
Climate Solutions Segment
The Climate Solutions segment provides energy-efficient, climate-controlled solutions and components for a wide array
of applications. The Climate Solutions segment sells heat transfer products, heating, ventilating, air conditioning and
refrigeration (“HVAC & refrigeration”) products, and data center cooling solutions.
The Climate Solutions segment has strategically aligned its teams around three primary market-based verticals: i) heat
transfer products; ii) HVAC & refrigeration; and iii) data center cooling.
Heat Transfer Products
The heat transfer products business provides heat transfer coils, including heat recovery and round tube plate fin coils, to
the HVAC&R markets in North America, Europe, and Asia. Its customers include commercial and industrial equipment
manufacturers, distributors, contractors, and end users in a variety of commercial and industrial applications, including
commercial and residential HVAC, mobile air conditioning, refrigeration, data center management, and precision and
industrial cooling.
In fiscal 2023, the primary HVAC&R markets served by the heat transfer products business experienced modest growth.
We expect strong growth in the residential heat pump and data center markets in fiscal 2024, while the commercial and
residential markets are expected to be relatively flat. Trends influencing our primary markets include refrigerant
substitution and energy efficiency requirements, both of which are expected to benefit the commercial HVAC&R
markets. Demand for more efficient HVAC&R systems in buildings and processes is driven by more stringent energy
efficiency regulations. In addition, the adoption of heat pump technology in Europe is expected to contribute to market
growth.
HVAC & Refrigeration
The HVAC & refrigeration business provides a wide array of solutions to heating; indoor air quality; commercial and
industrial refrigeration; and industrial power generation, conversion, and transmission and industrial process markets in
North America, Europe, the Middle East and Africa (“EMEA”), and China.
Heating products, primarily sold to the North American residential and commercial heating markets, include unit heaters
(gas-fired, hydronic, electric and oil-fired); duct furnaces (indoor and outdoor); infrared units (high- and low-intensity);
and perimeter heating products (cabinet unit heaters and convectors). The primary customers for these heating products
are HVAC wholesalers, installers, and end users in a variety of residential, commercial and industrial applications,
including residential garages, warehousing, manufacturing, and greenhouses. In fiscal 2023, the North American heating
market experienced a modest decline, primarily driven by weakness in the residential heating market and the impact of
the relatively mild winter weather this past year. Overall, we expect the North American heating market will be stable in
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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 April 1, 2022, we began managing the Company under two operating segments, Climate Solutions and
Performance Technologies. Our new segment structure aligns businesses serving similar or complimentary end markets,
products and technologies under common segment management. This simplified segment structure allows us to better
focus resources on targeted growth opportunities and better enables an efficient application of 80/20 principles across all
product lines to optimize profit margins and cash flow.
The Climate Solutions segment includes the previously-reported Building HVAC Systems (“BHVAC”) and the
Commercial and Industrial Solutions (“CIS”) segments, with the exception of CIS Coatings. The Performance
Technologies segment includes the previously-reported Heavy Duty Equipment and Automotive segments and the CIS
Coatings business.
Climate Solutions Segment
The Climate Solutions segment provides energy-efficient, climate-controlled solutions and components for a wide array
of applications. The Climate Solutions segment sells heat transfer products, heating, ventilating, air conditioning and
refrigeration (“HVAC & refrigeration”) products, and data center cooling solutions.
The Climate Solutions segment has strategically aligned its teams around three primary market-based verticals: i) heat
transfer products; ii) HVAC & refrigeration; and iii) data center cooling.
Heat Transfer Products
The heat transfer products business provides heat transfer coils, including heat recovery and round tube plate fin coils, to
the HVAC&R markets in North America, Europe, and Asia. Its customers include commercial and industrial equipment
manufacturers, distributors, contractors, and end users in a variety of commercial and industrial applications, including
commercial and residential HVAC, mobile air conditioning, refrigeration, data center management, and precision and
industrial cooling.
In fiscal 2023, the primary HVAC&R markets served by the heat transfer products business experienced modest growth.
We expect strong growth in the residential heat pump and data center markets in fiscal 2024, while the commercial and
residential markets are expected to be relatively flat. Trends influencing our primary markets include refrigerant
substitution and energy efficiency requirements, both of which are expected to benefit the commercial HVAC&R
markets. Demand for more efficient HVAC&R systems in buildings and processes is driven by more stringent energy
efficiency regulations. In addition, the adoption of heat pump technology in Europe is expected to contribute to market
growth.
HVAC & Refrigeration
The HVAC & refrigeration business provides a wide array of solutions to heating; indoor air quality; commercial and
industrial refrigeration; and industrial power generation, conversion, and transmission and industrial process markets in
North America, Europe, the Middle East and Africa (“EMEA”), and China.
Heating products, primarily sold to the North American residential and commercial heating markets, include unit heaters
(gas-fired, hydronic, electric and oil-fired); duct furnaces (indoor and outdoor); infrared units (high- and low-intensity);
and perimeter heating products (cabinet unit heaters and convectors). The primary customers for these heating products
are HVAC wholesalers, installers, and end users in a variety of residential, commercial and industrial applications,
including residential garages, warehousing, manufacturing, and greenhouses. In fiscal 2023, the North American heating
market experienced a modest decline, primarily driven by weakness in the residential heating market and the impact of
the relatively mild winter weather this past year. Overall, we expect the North American heating market will be stable in
fiscal 2024. Longer term, we anticipate that increasing demands for energy efficiency as well as decarbonization and
lower emission initiatives and regulations will benefit the North American heating market.
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Indoor air quality products, primarily sold to the North American school and commercial HVAC markets, include roof-
mounted direct- and indirect-fired makeup air units; unit ventilators; single packaged vertical units; and ceiling cassettes.
Customers for these indoor air quality products include mechanical contractors, HVAC wholesalers, installers, and end
users in a variety of commercial and industrial applications, primarily connected to the North American education
system. In fiscal 2023, the North American school and commercial HVAC markets experienced strong growth, largely
driven by available federal and local government funding for ventilation improvements for schools. We expect the
federal funds available for schools to upgrade facilities, including their HVAC systems, will drive continued strong
market growth in fiscal 2024.
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Refrigeration products, primarily sold to the commercial and industrial refrigeration markets in EMEA, China, and North
America, include evaporator unit coolers, remote condensers, fluid coolers, gas coolers, and dry and brine coolers.
Customers for these coolers and refrigeration products primarily include wholesalers, distributors and resellers,
commercial and industrial OEMs, as well as contractors and end users in a variety of commercial and industrial
applications, including supermarkets, refrigerated warehouses, logistic centers, cold rooms, precision and industrial
cooling, hospitality, hotels, and restaurants. In fiscal 2023, the commercial and industrial refrigeration markets
experienced modest growth. We expect moderate growth in the global refrigeration markets in fiscal 2024, driven by
improving standards of living in emerging countries as well as more stringent energy efficiency regulations, partially
offset by investment delays in connection with general market and economic uncertainties. Regulations focused on
eliminating fluorinated gases, which are man-made gases that contribute to the global greenhouse effect, are shifting
investments from synthetic to natural gas, including carbon dioxide cooling solutions, and are driving growth in mature
markets in Europe and North America.
Power generation and conversion products, primarily sold to the industrial power generation, conversion, and
transmission and industrial process markets in EMEA, China, and North America, include motor and generator cooling
coils, transformer oil coolers, radiators, dryers and industrial heat exchangers. Customers for these products primarily
include industrial OEMs as well as contractors and end users in industrial applications and for capital projects within the
pulp and paper industry, including industrial cooling and industrial power conversion, production, and transmission. In
fiscal 2023, the pulp and paper sector within the industrial power and process market experienced strong growth,
however this growth was tempered by the overall weakness in demand for power transmission products due to delays in
capital investments associated with the impacts of the COVID-19 pandemic, including the shortage of certain
components. We expect these markets overall will be stable in fiscal 2024, with an increase in demand for transformer
oil cooler products, driven by higher electricity demands, offset by a softening demand in the pulp and paper sector after
a strong year of capital investments.
Data Center Cooling
The data center cooling business provides sustainable cooling solutions for data center markets in North America,
EMEA, and Asia, including complete system design, controls, maintenance and monitoring. We provide data center
cooling solutions that feature low global warming potential refrigerants, free cooling technology, and lower water
consumption, enabling our customers and end-users to meet their environmental and sustainability goals. Data center
products consist of 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. In addition, our data center business sells replacement parts, maintenance service and
control solutions for existing equipment and new building management controls and systems. This business serves data
center management customers, including large colocation, cloud service providers and hyperscalers, as well as customers
in the commercial and industrial sectors such as telecommunications, healthcare and commercial real estate.
In fiscal 2023, the data center markets that we serve experienced strong growth. We expect continued strong growth in
these markets in fiscal 2024, driven by the 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 IoT (Internet of
Things) technology, which connects various devices through the internet, artificial intelligence and machine learning,
smart phones, and digital transformation trends. Digital transformation trends driving market demand include employers
offering remote work arrangements, an increased focus on the digital customer experience, as more transactions and
customer interactions are taking place virtually through websites and mobile applications, and the increasing use of 5G
technology and its application across global enterprise opportunities, particularly in the healthcare, manufacturing, and
energy sectors.
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fiscal 2024. Longer term, we anticipate that increasing demands for energy efficiency as well as decarbonization and
lower emission initiatives and regulations will benefit the North American heating market.
Indoor air quality products, primarily sold to the North American school and commercial HVAC markets, include roof-
mounted direct- and indirect-fired makeup air units; unit ventilators; single packaged vertical units; and ceiling cassettes.
Customers for these indoor air quality products include mechanical contractors, HVAC wholesalers, installers, and end
users in a variety of commercial and industrial applications, primarily connected to the North American education
system. In fiscal 2023, the North American school and commercial HVAC markets experienced strong growth, largely
driven by available federal and local government funding for ventilation improvements for schools. We expect the
federal funds available for schools to upgrade facilities, including their HVAC systems, will drive continued strong
market growth in fiscal 2024.
Refrigeration products, primarily sold to the commercial and industrial refrigeration markets in EMEA, China, and North
America, include evaporator unit coolers, remote condensers, fluid coolers, gas coolers, and dry and brine coolers.
Customers for these coolers and refrigeration products primarily include wholesalers, distributors and resellers,
commercial and industrial OEMs, as well as contractors and end users in a variety of commercial and industrial
applications, including supermarkets, refrigerated warehouses, logistic centers, cold rooms, precision and industrial
cooling, hospitality, hotels, and restaurants. In fiscal 2023, the commercial and industrial refrigeration markets
experienced modest growth. We expect moderate growth in the global refrigeration markets in fiscal 2024, driven by
improving standards of living in emerging countries as well as more stringent energy efficiency regulations, partially
offset by investment delays in connection with general market and economic uncertainties. Regulations focused on
eliminating fluorinated gases, which are man-made gases that contribute to the global greenhouse effect, are shifting
investments from synthetic to natural gas, including carbon dioxide cooling solutions, and are driving growth in mature
markets in Europe and North America.
Power generation and conversion products, primarily sold to the industrial power generation, conversion, and
transmission and industrial process markets in EMEA, China, and North America, include motor and generator cooling
coils, transformer oil coolers, radiators, dryers and industrial heat exchangers. Customers for these products primarily
include industrial OEMs as well as contractors and end users in industrial applications and for capital projects within the
pulp and paper industry, including industrial cooling and industrial power conversion, production, and transmission. In
fiscal 2023, the pulp and paper sector within the industrial power and process market experienced strong growth,
however this growth was tempered by the overall weakness in demand for power transmission products due to delays in
capital investments associated with the impacts of the COVID-19 pandemic, including the shortage of certain
components. We expect these markets overall will be stable in fiscal 2024, with an increase in demand for transformer
oil cooler products, driven by higher electricity demands, offset by a softening demand in the pulp and paper sector after
a strong year of capital investments.
Data Center Cooling
The data center cooling business provides sustainable cooling solutions for data center markets in North America,
EMEA, and Asia, including complete system design, controls, maintenance and monitoring. We provide data center
cooling solutions that feature low global warming potential refrigerants, free cooling technology, and lower water
consumption, enabling our customers and end-users to meet their environmental and sustainability goals. Data center
products consist of 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. In addition, our data center business sells replacement parts, maintenance service and
control solutions for existing equipment and new building management controls and systems. This business serves data
center management customers, including large colocation, cloud service providers and hyperscalers, as well as customers
in the commercial and industrial sectors such as telecommunications, healthcare and commercial real estate.
In fiscal 2023, the data center markets that we serve experienced strong growth. We expect continued strong growth in
these markets in fiscal 2024, driven by the 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 IoT (Internet of
Things) technology, which connects various devices through the internet, artificial intelligence and machine learning,
smart phones, and digital transformation trends. Digital transformation trends driving market demand include employers
offering remote work arrangements, an increased focus on the digital customer experience, as more transactions and
customer interactions are taking place virtually through websites and mobile applications, and the increasing use of 5G
technology and its application across global enterprise opportunities, particularly in the healthcare, manufacturing, and
energy sectors.
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Performance Technologies Segment
The Performance Technologies segment provides products and solutions that enhance the performance of customer
applications and develops solutions that increase fuel economy and lower emissions in light of increasingly stringent
government regulations. The Performance Technologies segment designs and manufactures air- and liquid-cooled
technology for vehicular, stationary power, and industrial applications. In addition, the Performance Technologies
segment provides advanced thermal solutions to zero-emission and hybrid commercial vehicle and automotive customers
and coating products and application services.
The Performance Technologies segment has strategically aligned its teams around three primary market-based verticals:
i) air-cooled applications; ii) liquid-cooled applications, and iii) advanced solutions.
Air-Cooled Applications
The air-cooled applications business provides air-cooled heat exchangers and modules for vehicular, stationary power,
and industrial applications. This business primarily serves the commercial vehicle, off-highway and power generation
markets in North America, Brazil, Europe, China, India and South Korea. It primarily sells powertrain cooling products,
such as radiators, condensers, engine cooling modules, charge air coolers, fan shrouds, and surge tanks. Its customers
include commercial, medium- and heavy-duty truck and engine manufacturers; construction, agricultural, and mining
equipment and engine manufacturers; and industrial manufacturers of material handling equipment, generator sets and
compressors.
During fiscal 2023, the commercial vehicle and off-highway markets in North America and Brazil experienced moderate
to strong growth. The European commercial vehicle and off-highway markets remained relatively flat during fiscal
2023, as compared with fiscal 2022, despite market disruptions from the military conflict between Russia and Ukraine.
The off-highway markets in Asia experienced modest declines resulting from cyclical market weakness in fiscal 2023.
The commercial vehicle market in India experienced strong growth during fiscal 2023. Lastly, the power generation
market in North America experienced moderate growth. Global supply chain challenges and rising inflation pressures
also continued in fiscal 2023 and negatively impacted each of these markets.
In fiscal 2024, we expect stability in the North American and European commercial vehicle markets and moderate
growth in the commercial vehicle markets in Brazil and India. Longer term, we expect the continued need by
commercial vehicle manufacturers to meet increasingly stringent emissions and fuel consumption requirements to be a
market growth driver. We expect growth in off-highway markets in fiscal 2024. Specifically for the North American
agriculture market, we believe that elevated commodity prices will drive strong demand, particularly for larger
agricultural equipment. In addition, our OEM order backlogs remain strong as customers look to replenish large
equipment inventory. We also expect growth in the European and Brazilian agriculture markets, but to a lesser extent
than in North America. With regard to construction markets, we expect modest market growth in North America and
stable markets in Europe and Asia. Specific to Asia, we anticipate the construction market will remain relatively weak,
however, we expect it to benefit from increasing export sale opportunities. In addition, construction markets may benefit
from government infrastructure investments in the U.S., China, and India. Finally, in regard to the power generation
market, we expect strong market growth in North America to be driven by demand for backup power for data centers,
power grids, and critical infrastructure, such as hospitals and airports.
Liquid-Cooled Applications
The liquid-cooled applications business provides liquid-cooled heat exchangers for engine, stationary power, and
industrial applications. This business primarily serves the automotive, commercial vehicle and off-highway markets in
North America, Brazil, Europe, China, and India. Its products and solutions include aluminum and stainless steel engine
oil coolers, exhaust gas recirculation (“EGR”) coolers, liquid charge air coolers, transmission and retarder oil coolers,
fuel coolers, and condensers. Its customers include automobile and light truck OEMs; commercial, medium- and heavy-
duty truck and engine manufacturers; Tier-1 filter and front-end module manufacturers and assemblers; and construction
and agricultural equipment manufacturers.
During fiscal 2023, the global commercial vehicle and off-highway markets experienced moderate growth, with the
largest gains in the medium- and heavy-duty truck markets. We expect these markets will be stable in fiscal 2024 based
upon strong OEM order backlogs driven by the need to replace aging truck fleets. In addition, compared with fiscal
2023, we expect the raw material markets will stabilize as supply chain challenges begin to ease.
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During fiscal 2023, the global automotive market experienced further declines, as semiconductor chip shortages
continued to negatively impact the automotive markets, particularly in Europe and North America. In addition, the
automotive market in China was negatively impacted by increased COVID-19 cases and the related lock-downs and
supply chain challenges. In fiscal 2024, we expect the automotive markets in Europe and North America will experience
modest to moderate growth as customers look to replenish inventory levels. While we expect the semiconductor chip
shortages will persist in fiscal 2024, we expect that the limitations associated with the shortages will ease compared with
fiscal 2023. We expect the automotive market in China, however, will decline slightly in fiscal 2024, as we expect the
termination of automotive purchasing incentives by the Chinese government and economic uncertainty will outweigh the
favorable impacts of customers replenishing their inventory levels. Overall, we expect that longer-term growth of the
global automotive market will be supported by government tightening of emissions standards for internal combustion
engines, in-vehicle technology enhancements and growth in emerging markets.
Advanced Solutions
The advanced solutions business provides thermal management systems and components for electric vehicles, and
factory-applied and aftermarket coating products and application services.
Products and solutions for zero-emission and hybrid vehicles, primary sold to the commercial vehicle, bus and specialty
vehicle, off-highway and automotive markets in North America and Europe, include complete battery thermal
management systems, electronics cooling packages, battery chillers, battery cooling plates, coolers and casings for
electronics cooling, and coolers for electric axles (“e-axles”). Customers for these products include commercial vehicle,
bus and specialty vehicle, off-highway, and automotive OEMs, e-axle producers, power electronics providers, and
electric vehicle startup companies. In fiscal 2023, the primary vehicular markets served by the advanced solutions
business experienced strong growth. We expect continued strong growth in fiscal 2024, as government policies in the
U.S. and Europe are driving investments in electric vehicles, as well as the infrastructure necessary for wide-scale
adoption of alternative powertrains.
Our advanced solutions business also provides coatings products and application services to the HVAC&R markets in
North America and Europe. Our coatings products are designed to extend the life of equipment and components by
protecting against corrosion and foreign matter. Customers for these products and services include manufacturers of
commercial and residential HVAC and refrigeration systems, and distributors, contractors, and end users of HVAC&R
equipment. In fiscal 2023, the primary HVAC&R markets served by the advanced solutions business experienced
modest growth. We expect continued modest growth in these commercial and residential HVAC&R markets in fiscal
2024.
Geographic Areas
We maintain administrative organizations in all key geographic 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 2023,
2022, and 2021.
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We believe our international presence positions us to benefit from the anticipated long-term growth of the global
commercial, industrial and building HVAC&R and vehicular markets. We are committed to increasing our involvement
and investment in these 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 2023. In fiscal 2023 and 2022, our largest customer accounted for less than
10 percent of our sales. In fiscal 2021, 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 more than 10 percent of our sales.
Our top customers operate primarily in the commercial vehicle, off-highway, automotive and light vehicle, data center
cooling, and 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; Mercedes-Benz Group AG (including AMG, Athlon, and Maybach); Stellantis (including
Chrysler, Fiat, PSA-Peugeot-Citroen, and VM Motori); Trane Technologies; Volkswagen AG (including Audi, MAN,
Porsche, Scania, and Navistar); and Volvo Group (including Mack Trucks and Renault Trucks). In addition, our Climate
Solutions segment includes significant sales to a single global technology customer with which we are party to
confidentiality agreements. Generally, we supply products to our customers on the basis of individual purchase orders
received from them. When it is in the mutual interest of Modine and our customers, we utilize long-term sales
agreements to minimize investment risks and provide the customer with a proven source of competitively-priced
products. These contracts are typically three to five years in duration.
Backlog of Orders
Our operating segments maintain their own inventories and production schedules. We believe that our current
production capacity is capable of handling our expected sales volume in fiscal 2024 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 worldwide 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.
Research and Development
We are committed to building better products that will, in turn, help create a better world. We focus our engineering and
R&D efforts on innovative solutions to meet the challenging thermal management needs of OEMs and other customers
within the commercial, industrial, building HVAC&R, commercial vehicle, construction, agricultural, powersports, and
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automotive and light vehicle markets. Our products and systems are often aimed at solving difficult and complex heat
transfer challenges requiring advanced thermal management, while meeting the demand for being more efficient, lighter
weight, more compact, and more durable to ensure compliance with increasingly stringent energy efficiency, fuel
economy 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 $44 million,
$50 million, and $46 million in fiscal 2023, 2022, and 2021, respectively. As a percentage of our consolidated net sales,
we spent approximately 2 percent on R&D in fiscal 2023 and 2022, and approximately 3 percent in fiscal 2021. 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 for the HVAC&R markets primarily focus on sustainable solutions that
optimize thermal efficiency and manufacturing, to support decarbonization efforts and the use of next generation
refrigerants, to help minimize global warming potential. Within our data center markets, development projects focus on
product advancements to reduce water and energy consumption. Our vehicular market projects are aimed at providing
advanced thermal solutions for electric vehicles that improve fuel efficiency and reduce overall energy consumption.
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, 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.
Our actions and decisions are driven by our purpose: Engineering a Cleaner, Healthier World™. Our strategic journey
requires a uniting culture that grounds us, inspires us and energizes us as we address the world’s most important
challenges through innovative products and services with superior quality.
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 or
exceed rising customer expectations for products, services and quality.
Our Global Modine Management System supports our mission and values by applying well-defined improvement
principles and leadership behaviors, all based on our 80/20 mindset to facilitate 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™ and are working every day to deliver systems and
solutions that improve air quality and conserve natural resources. We concentrate on the benefits our products deliver,
including reducing water and energy consumption, lowering harmful emissions, and enabling our customers to use
environmentally friendly refrigerants. In addition, we are committed to conducting business at our global locations in an
environmentally conscious manner, specifically by preventing pollution, eliminating waste and reducing environmental
risks. We 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.
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In regard to providing innovative, climate-resilient solutions that enable our customers to meet their sustainability goals,
we are continuously driving energy efficiency across our product portfolio. Our Climate Solutions segment continues to
develop high-efficiency heating and indoor air quality products and data center cooling solutions that reduce both
electrical and water usage. Our Lodronic™ Low-Temperature Hydronic Heater, for example, was designed for use with
high-efficiency boilers, geothermal or air-to-water heat pump systems to maximize efficiency and uses 50 percent less
electricity than the typical hydronic heater. We are also shifting our product portfolios toward lower-emission
propellants and refrigerants which greatly reduce the environmental impact and enhance energy efficiency for our
customers’ heating and cooling systems. Our Performance Technologies segment offerings focus on fuel efficiency and
lower emissions. Our 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 allow both electric vehicle
and internal combustion systems to run at optimal temperatures, which promotes better fuel efficiency, lower emissions,
and improved vehicle lifespans, while still providing the vehicle performance that our customers expect.
In regard to our global business operations, we are working to reduce 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.
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. We have recorded liabilities
for environmental investigative and remediation work at sites in the U.S. and abroad totaling $18 million at March 31,
2023.
Seasonal Nature of Business
Our overall operating performance is generally not subject to a significant degree of seasonality. The Climate Solutions
segment experiences some seasonality, as demand for HVAC & refrigeration products can be affected by heating and
cooling seasons, weather patterns, construction, and other factors. Sales volume for our Climate Solutions heating
products is generally stronger in our second and third fiscal quarters, corresponding with demand for these products. We
generally expect sales volume for our Climate Solutions refrigeration, power generation and conversion, and heat
transfer products to be higher during our first and second fiscal quarters due to the construction seasons in the northern
hemisphere. Sales to Performance Technologies 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 on an as-ordered basis, which makes large inventories of
finished products unnecessary, with the exception of certain products in our Climate Solutions segment. Within our
Climate Solutions segment, we maintain varying levels of finished goods inventory, primarily related to our heating,
indoor air quality, and data center products, due to seasonal demand and the timing of sales programs. In Brazil, within
our Performance Technologies segment, we maintain aftermarket product inventory in order to timely meet customer
needs in the Brazilian automotive and commercial vehicle aftermarkets. We have not experienced a significant number
of returned products within any of our businesses.
Human Capital Resource Management
As of March 31, 2023, we employed approximately 11,300 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.
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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. 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 also encourage our employees to further develop 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 3.3 in 2021, the most
recent year for which data is available. During fiscal 2023, we recorded an RIR of 1.06, well below the manufacturing
sector average.
Diversity and Inclusion
We are committed to a diverse workforce, founded on respect and value for people of different backgrounds,
experiences, and perspectives. Incorporating diverse talent and fostering an inclusive workforce is a key focus of our
talent management strategy. We track and focus on indicators of diversity and inclusion across our global operations,
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:
Code of Conduct, which is applicable to all Modine directors and employees, including our executive
officers;
Guidelines on Corporate Governance;
Audit Committee Charter;
Human Capital and Compensation Committee Charter;
Corporate Governance and Nominating Committee Charter; and
Technology Committee Charter.
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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, results of operations and cash flows. Please
consider each of the risks described below, along with other information contained in this Annual Report on Form 10-K,
when making any investment decisions with respect to our securities.
Our Enterprise Risk Management process seeks to identify and address material risks. We believe that risk-taking is an
inherent aspect of operating a global business and, in particular, one focused on growth and cost-competitiveness. Our
goal is to proactively manage risks in a structured approach in conjunction with strategic planning, while preserving and
enhancing shareholder value. However, the risks set forth below and elsewhere in this report, as well as other risks
currently unknown or deemed immaterial at the date of this report, could adversely affect us and cause our financial
results to vary materially from recent or anticipated future results.
A. MARKET RISKS
Economic Uncertainties
A downturn or recessionary conditions in the global economy could adversely affect our business, financial position,
results of operations and cash flows.
We operate in 15 countries in four continents and serve customers in a wide array of HVAC&R and vehicular markets,
including commercial vehicle, off-highway, automotive and light vehicle. As such, our business is impacted by general
economic and industry conditions globally as well as in the regions and countries in which we conduct business. An
economic downturn or recession in the global economy could have a material adverse effect on our business, financial
position, results of operations and cash flows. Customer demand for our products and system solutions is impacted by
the overall strength of the economy, employment levels, consumer confidence levels, the availability and cost of credit,
and the cost of fuel. For example, rising interest rates associated with inflationary market conditions may drive a higher
cost of capital for our customers, which may have a deteriorating impact on overall economic activity and the financial
condition of our customers which could negatively impact the demand for our products. Prolonged recessionary or
adverse economic conditions, such as disruptions in the global financial system, could result in our customers or
suppliers experiencing significant economic constraints, including potential bankruptcies.
Supply chain disruptions and inflationary market conditions could adversely affect our business, financial position,
results of operations and cash flows.
Market and economic dynamics, including the impacts of the military conflict between Russia and Ukraine and the
COVID-19 pandemic, have contributed to global supply chain challenges and inflationary market conditions. Further
disruptions or significant deterioration in market conditions could have a material adverse effect on our business,
financial position, results of operations and cash flows.
In February 2022, Russian troops invaded Ukraine and the military conflict is ongoing. In response to the military
conflict, governments in the U.S. and abroad have imposed sanctions against Russia and Belarus, which 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, the military conflict has not materially impacted our business or operations. An expansion of the military conflict,
geographically or politically, could result in further market disruptions, including volatility in raw material prices and
credit and capital markets, supply chain challenges, and an increase in the threat of cyberattacks on the global supply
chain, which could adversely affect our business, financial position, results or operations and cash flows.
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Since its onset, the COVID-19 pandemic has broadly impacted the global economy and our key end markets. The direct
effects on our company in fiscal 2023 from the COVID-19 pandemic were relatively limited. However, the pandemic,
along with 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 Performance
Technologies segment has been impacted by lower order volume associated with semiconductor shortages.
At this time, we cannot reasonably estimate the full impact of the ongoing supply chain challenges or inflationary market
conditions. If we, our suppliers, or our customers continue to 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, including a significant resurgence of COVID-19, 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.
Further potential 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 identify and accept a new 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 to a different
supplier. If we experience significant or prolonged shortages of any critical components or materials from our suppliers
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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 negotiated price increases for certain customer contracts in response to the current inflationary market
conditions, we have historically faced price-reduction pressure from our vehicular OEM customers and expect to face
price reduction pressure from them in the future. We have taken, 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.
As part of our application of the 80/20 principles, we have improved our commercial acumen, including our pricing
methodology, and have clear, strategic targets in terms of profit margins for new sales programs. To the extent
contractual price reductions are unavoidable for new sales programs, 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 shorter-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
cash flows.
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 or other market
participants 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.
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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.
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 goals and commitments, which we have not yet released publicly. There
can be no assurance of the extent to which any of our future plans 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 regulatory or legal standards regarding sustainability performance.
Additionally, the enhanced stakeholder focus on ESG matters 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 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
2023, 56 percent of our sales were generated from customers outside the U.S., with 49 percent of these sales generated
by our non-U.S. operations. 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 COVID-19,
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 Ukraine- or
Russian-based customers or suppliers, we are actively monitoring the sanctions requirements and reacting as necessary to
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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
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 toward 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 Performance Technologies 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 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 prevalence of hybrid and/or remote work
arrangements that were first offered in connection with mitigating the spread of COVID-19. Further, the military
conflict in Ukraine and the associated political uncertainty may increase the threat of cyberattacks on the global supply
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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.
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 onboarded seasoned leaders and segmented our
organization, aligning teams led by general managers around specific strategies and market-based verticals. Our
leadership teams have created a high-performance culture and are prioritizing resources on products and markets with the
highest growth opportunities and best return profiles. We plan to continue to employ an 80/20 mindset across our
businesses, including within our manufacturing facilities, to optimize profit margins and cash flow. However, if we are
unable to successfully 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, 2023, we had total outstanding indebtedness of $353 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 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 $20 million as of March 31, 2023. 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 2024. 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 cash flows and 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 $247 million at March 31, 2023. 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
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, 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, 2023, our net deferred tax assets totaled $79 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’ financial
condition and performance 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 demand for our products and
solutions, including those driven by customer production levels, by current and future customers could result in asset
impairment charges and a reduction in our sales, thereby adversely impacting our results of operations, cash flows 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.
18
18
Developments or assertions by or against us relating to intellectual property rights could adversely affect our
business.
We own and license significant intellectual property, including a large number of patents, trademarks, copyrights and
trade secrets. Our intellectual property plays an important role in maintaining our competitive position in a number of
the markets we serve. As we maintain or expand our operations in jurisdictions where the enforcement of intellectual
property rights is less robust, the risk of others duplicating our proprietary technologies increases, despite our efforts to
protect them. Developments or assertions by or against us relating to intellectual property rights could adversely affect
our business and results of operations.
Attracting and Retaining Talent
Our continued success is dependent on being able to attract, develop and retain qualified personnel.
Our ability to sustain and grow our business requires us to hire, develop, and retain skilled and diverse personnel
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 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 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 table below summarizes the number of manufacturing facilities within each of our operating segments as of March
31, 2023. Sixteen of these facilities include leased manufacturing space.
Climate Solutions
Climate Solutions
Performance Technologies
Performance Technologies
Total manufacturing facilities
Total manufacturing facilities
Americas
Americas
Europe
Europe
Asia
Asia
Total
Total
6
7
13
9
7
16
1
6
7
16
20
36
In addition to the manufacturing facilities summarized in the table above, we also operate six coatings facilities in the
U.S. and Europe, which primarily enhance customer-owned products with coatings solutions and operate at a smaller
scale than our other manufacturing facilities.
We consider all of our facilities 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 operating needs.
ITEM 3. LEGAL PROCEEDINGS.
The information required hereunder is incorporated by reference from Note 20 of the Notes to Consolidated Financial
Statements.
19
19
ITEM 4. MINE SAFETY DISCLOSURES.
ITEM 4. MINE SAFETY DISCLOSURES.
ITEM 4. MINE SAFETY DISCLOSURES.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
Not applicable.
Not applicable.
Not applicable.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS.
The following sets forth the name, age (as of March 31, 2023), business experience during at least the last five years, and
certain other information relative to each executive officer of the Company.
The following sets forth the name, age (as of March 31, 2023), business experience during at least the last five years, and
The following sets forth the name, age (as of March 31, 2023), business experience during at least the last five years, and
The following sets forth the name, age (as of March 31, 2023), business experience during at least the last five years, and
certain other information relative to each executive officer of the Company.
certain other information relative to each executive officer of the Company.
certain other information relative to each executive officer of the Company.
Name
Name
Name
Name
Brian J. Agen
Brian J. Agen
Brian J. Agen
Brian J. Agen
Neil D. Brinker
Neil D. Brinker
Neil D. Brinker
Neil D. Brinker
Age
Age
Age
Age
54
54
54
54
47
47
47
47
Michael B. Lucareli
Michael B. Lucareli
Michael B. Lucareli
Michael B. Lucareli
54
54
54
54
Eric S. McGinnis
Eric S. McGinnis
Eric S. McGinnis
Eric S. McGinnis
52
52
52
52
Vice President, Human Resources (October 2012 – Present).
Vice President, Human Resources (October 2012 – Present).
Vice President, Human Resources (October 2012 – Present).
Vice President, Human Resources (October 2012 – Present).
Position
Position
Position
Position
President and Chief Executive Officer (December 2020 – Present). Prior to
President and Chief Executive Officer (December 2020 – Present). Prior to
President and Chief Executive Officer (December 2020 – Present). Prior to
President and Chief Executive Officer (December 2020 – Present). Prior to
joining Modine, Mr. Brinker served as President and Chief Operating
joining Modine, Mr. Brinker served as President and Chief Operating
joining Modine, Mr. Brinker served as President and Chief Operating
joining Modine, Mr. Brinker served as President and Chief Operating
Officer of Advanced Energy Industries, Inc. after serving as its Executive
Officer of Advanced Energy Industries, Inc. after serving as its Executive
Officer of Advanced Energy Industries, Inc. after serving as its Executive
Officer of Advanced Energy Industries, Inc. after serving as its Executive
Vice President and Chief Operating Officer. Prior to joining Advanced
Vice President and Chief Operating Officer. Prior to joining Advanced
Vice President and Chief Operating Officer. Prior to joining Advanced
Vice President and Chief Operating Officer. Prior to joining Advanced
Energy Industries, Inc, Mr. Brinker served as a Group President at IDEX
Energy Industries, Inc, Mr. Brinker served as a Group President at IDEX
Energy Industries, Inc, Mr. Brinker served as a Group President at IDEX
Energy Industries, Inc, Mr. Brinker served as a Group President at IDEX
Corporation.
Corporation.
Corporation.
Corporation.
Executive Vice President, Chief Financial Officer (May 2021 – Present);
Executive Vice President, Chief Financial Officer (May 2021 – Present);
Executive Vice President, Chief Financial Officer (May 2021 – Present);
Executive Vice President, Chief Financial Officer (May 2021 – Present);
previously Vice President, Finance and Chief Financial Officer for the
previously Vice President, Finance and Chief Financial Officer for the
previously Vice President, Finance and Chief Financial Officer for the
previously Vice President, Finance and Chief Financial Officer for the
Company.
Company.
Company.
Company.
President, Climate Solutions (April 2022 – Present); previously Vice
President, Climate Solutions (April 2022 – Present); previously Vice
President, Climate Solutions (April 2022 – Present); previously Vice
President, Climate Solutions (April 2022 – Present); previously Vice
President, Building HVAC upon joining Modine in August 2021. Prior to
President, Building HVAC upon joining Modine in August 2021. Prior to
President, Building HVAC upon joining Modine in August 2021. Prior to
President, Building HVAC upon joining Modine in August 2021. Prior to
joining Modine, Mr. McGinnis served as President, Industrial Systems at
joining Modine, Mr. McGinnis served as President, Industrial Systems at
joining Modine, Mr. McGinnis served as President, Industrial Systems at
joining Modine, Mr. McGinnis served as President, Industrial Systems at
Regal Beloit.
Regal Beloit.
Regal Beloit.
Regal Beloit.
Adrian I. Peace
Adrian I. Peace
Adrian I. Peace
Adrian I. Peace
55
55
55
55
President, Performance Technologies (April 2022 – Present); previously
President, Performance Technologies (April 2022 – Present); previously
President, Performance Technologies (April 2022 – Present); previously
President, Performance Technologies (April 2022 – Present); previously
Vice President, Commercial & Industrial Solutions upon joining Modine in
Vice President, Commercial & Industrial Solutions upon joining Modine in
Vice President, Commercial & Industrial Solutions upon joining Modine in
Vice President, Commercial & Industrial Solutions upon joining Modine in
August 2021. Prior to joining Modine, Mr. Peace served as a Strategy
August 2021. Prior to joining Modine, Mr. Peace served as a Strategy
August 2021. Prior to joining Modine, Mr. Peace served as a Strategy
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
Advisor for AIP LLC. Prior to AIP LLC, Mr. Peace served as Senior Vice
Advisor for AIP LLC. Prior to AIP LLC, Mr. Peace served as Senior Vice
Advisor for AIP LLC. Prior to AIP LLC, Mr. Peace served as Senior Vice
President, Emerging Business Operations for Republic Services.
President, Emerging Business Operations for Republic Services.
President, Emerging Business Operations for Republic Services.
President, Emerging Business Operations for Republic Services.
Sylvia A. Stein
Sylvia A. Stein
Sylvia A. Stein
Sylvia A. Stein
56
56
56
56
Vice President, General Counsel, Corporate Secretary and Chief
Vice President, General Counsel, Corporate Secretary and Chief
Vice President, General Counsel, Corporate Secretary and Chief
Vice President, General Counsel, Corporate Secretary and Chief
Compliance Officer (February 2020 – Present); previously Vice President,
General Counsel and Corporate Secretary for the Company.
Compliance Officer (February 2020 – Present); previously Vice President,
Compliance Officer (February 2020 – Present); previously Vice President,
Compliance Officer (February 2020 – Present); previously Vice President,
General Counsel and Corporate Secretary for the Company.
General Counsel and Corporate Secretary for the Company.
General Counsel and Corporate Secretary for the Company.
Executive officer positions are designated in our Bylaws and the persons holding these positions are elected annually by
Executive officer positions are designated in our Bylaws and the persons holding these positions are elected annually by
Executive officer positions are designated in our Bylaws and the persons holding these positions are elected annually by
Executive officer positions are designated in our Bylaws and the persons holding these positions are elected annually by
the Board. In addition, the Human Capital and Compensation Committee of the Board may recommend and the Board
the Board. In addition, the Human Capital and Compensation Committee of the Board may recommend and the Board
the Board. In addition, the Human Capital and Compensation Committee of the Board may recommend and the Board
the Board. 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
of Directors may approve promotions and other actions with regard to executive officers at any time during the fiscal
of Directors may approve promotions and other actions with regard to executive officers at any time during the fiscal
of Directors may approve promotions and other actions with regard to executive officers at any time during the fiscal
year.
year.
year.
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.
There are no family relationships among the executive officers and directors. There are no arrangements or
There are no family relationships among the executive officers and directors. There are no arrangements or
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
understandings between any of the executive officers and any other person pursuant to which he or she was elected an
understandings between any of the executive officers and any other person pursuant to which he or she was elected an
officer of Modine.
officer of Modine.
officer of Modine.
20
20
20
20
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, 2023,
shareholders of record numbered 2,071.
We did not pay dividends during fiscal 2023 or 2022. 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 defined in our
credit agreements. We currently do not intend to pay dividends in fiscal 2024.
The following describes the Company’s purchases of common stock during the fourth quarter of fiscal 2023:
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, 2023
_______
_______
_______
$47,909,372
February 1 – February 28, 2023
3,562 (b)
$24.64
_______
$47,909,372
March 1 – March 31, 2023
110,750 (b) (c)
$25.48
100,000
$45,372,391
Total
114,312 (b) (c)
$25.46
100,000
(a) Effective November 5, 2022, the Company’s Board of Directors authorized the Company to repurchase up to
$50.0 million of Modine common stock at such times and prices that it deems to be appropriate. This
authorization expires in November 2024.
(b) Includes 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.
(c) Includes shares acquired pursuant to the repurchase program described in (a) above.
21
21
PERFORMANCE GRAPH
The following graph compares the cumulative five-year total return on our common stock with similar returns on the
Russell 2000 Index and the Standard & Poor’s (S&P) SmallCap 600 Industrials Index. 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
03/31/18
03/31/19
03/31/20
03/31/21
03/31/22
03/31/23
Modine Manufacturing Company
Russell 2000 Index
S&P SmallCap 600 Industrials Index
Initial Investment
Initial Investment
March 31, 2018
March 31, 2018
$100
100
100
Indexed Returns
Indexed Returns
Years ended March 31,
Years ended March 31,
2019
2020
2021
2022
$
65.58
$
15.37
$
69.83
$
42.60
102.05
98.85
77.57
76.59
151.14
149.62
142.39
149.63
2023
108.98
$
125.87
156.62
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
ITEM 6. RESERVED.
22
22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Overview
At Modine, we are Engineering a Cleaner, Healthier World ™. We provide trusted products and technologies that help
improve our world. Our broad portfolio of systems and solutions support our mission of improving indoor air quality,
conserving natural resources, lowering harmful emissions, enabling cleaner running vehicles, and using environmentally
friendly refrigerants. We operate in four continents, in 15 countries, and employ approximately 11,300 persons
worldwide.
We sell innovative and environmentally responsible thermal management products and solutions to diversified customers
in a wide array of commercial, industrial, and building 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 OEM
vehicular applications. Our primary product groups include i) heat transfer; ii) HVAC & refrigeration; iii) data center
cooling; iv) air-cooled; v) liquid-cooled; and vi) advanced solutions.
Company Strategy
Our purpose is to engineer a cleaner, healthier world by providing products and services that improve indoor air quality,
reduce water and energy consumption, lower harmful emissions, enable cleaner running vehicles, and use
environmentally friendly refrigerants.
In fiscal 2023, we made significant progress toward transforming Modine. We originally announced our vision for a
“new” Modine in late fiscal 2021. In fiscal 2022, we onboarded seasoned leaders to drive transformative change,
including new segment presidents for our Climate Solutions and Performance Technologies segments. Since that time,
we have simplified and segmented our organization, aligning teams, led by general managers, around specific strategies
and market-based verticals within our company. Our new leadership teams have created a high-performance culture and
are prioritizing resources on products and markets with the highest growth opportunities and best return profiles. We
have been focused on growth opportunities in the data center market and have strategically expanded our product
offerings in this business. We are now manufacturing and selling more data center cooling products in North America.
We have also improved our commercial acumen and have strengthened our business relationships with our best
customers. In addition, by applying 80/20 principles and improving our commercial pricing methodologies, we have
improved our profit margins in fiscal 2023, in spite of significant supply chain challenges and inflationary market
conditions.
Entering fiscal 2024, while a level of uncertainty and the possibility of recessionary conditions exist in the global
marketplace, we are focused on organic and inorganic growth opportunities in the key markets we serve and the
incremental value we believe we can unlock in Modine by applying 80/20 principles across our businesses. We are
strengthening key customer relationships and pursing strategic growth opportunities, particularly in the data center,
electric vehicles, and HVAC&R markets where we see the best opportunities for profitable growth. In addition, we are
utilizing an 80/20 mindset within our manufacturing facilities and expect to achieve production efficiency improvements
as a result.
Our ultimate objective for our transformational strategy is to accelerate profitable growth. 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
Every day, we leverage our technical expertise, building on more than 100 years of excellence in thermal management,
to advance our purpose. We are dedicated to utilizing technology and solutions with sustainable impacts. Our ability to
provide customizable solutions to meet the ever-evolving needs of our customers is one of our greatest competitive
strengths.
23
23
We partner with our customers and use a systems-based approach to ensure our solutions work seamlessly with their
other components. Our thermal solutions enable our customers to stay ahead of new and emerging regulations,
particularly those involving increasingly stringent emissions, fuel economy, and energy efficiency standards.
We maintain numerous state-of-the-art technology centers, dedicated to the development and testing of products and
technologies. The centers are located in Racine, Wisconsin; Leeds, United Kingdom; Grenada, Mississippi; Pocenia,
Italy; and Bonlanden, Germany. Customers know our reputation for innovation and rely on Modine to provide high
quality products and technologies.
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 toward commercial excellence. Through closely analyzing our
customer and product data with our 80/20 mindset, we focus our commercial and operational actions in areas that drive
our profitability and also in areas requiring improvement. Our Climate Solutions and Performance Technologies
segments have strategically aligned their teams around their primary market-based verticals and are driving
transformative change. The general manager for each vertical is working toward strategic objectives specifically tailored
to his or her business and we expect these strategies will continue to generate earnings and cash flow improvements.
While executing on our strategic initiatives, we have faced obstacles including supply chain disruptions and inflationary
market conditions. We have and will continue to address these challenges head-on through commercial actions and close
engagement with our suppliers.
Our fiscal 2023 annual cash incentive plan for our management team was based upon two performance metrics: growth
in net earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”)
and Adjusted EBITDA margin as a percentage of net sales. The incentive plan’s performance goals were established for
each operating segment as well for the consolidated company. 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 awards. The performance-based awards for the fiscal 2023 through 2025
performance period are based upon a target three-year average growth in Adjusted EBITDA and a target three-year
average cash flow return on invested capital.
Segment Information – Strategy, Market Conditions and Trends
Each of our operating segments is managed by a segment president and has separate strategic and financial plans and
financial results which are reviewed by our chief operating decision maker. These plans and results are used by
management to evaluate the performance of each segment and to make decisions on the allocation of resources.
Effective April 1, 2022, we began managing the Company under two operating segments, Climate Solutions and
Performance Technologies. Our segment structure aligns businesses serving similar or complimentary end markets,
products and technologies under common segment management. This simplified segment structure allows us to better
focus resources on targeted growth opportunities and better enables an efficient application of 80/20 principles across all
product lines to optimize profit margins and cash flow.
24
24
The Climate Solutions segment includes the previously-reported BHVAC and CIS segments, with the exception of CIS
Coatings. The Performance Technologies segment includes the previously-reported Heavy Duty Equipment and
Automotive segments and the CIS Coatings business.
Climate Solutions (43 percent of fiscal 2023 net sales)
Our Climate Solutions segment provides energy-efficient, climate-controlled solutions and components for a wide array
of applications. The Climate Solutions segment sells heat transfer, HVAC & refrigeration, and data center cooling
solutions to customers in North America, EMEA, and Asia. Heat transfer products include heat transfer coils used in
commercial and residential HVAC and refrigeration applications. HVAC & refrigeration products include commercial
and residential unit heaters, vertical and horizontal unit ventilators, air conditioning chillers, low global warming
potential unit coolers, air-cooled condensers, and dry coolers. Data center cooling solutions, which are integrated with
system controls, include air- and liquid-cooled chillers, CRAC and CRAH units, and fan walls. We sell our products and
solutions both directly to commercial and industrial OEM and end user customers and through wholesalers, distributors,
consulting engineers, contractors and data center operators for applications such as data centers, schools, greenhouses,
healthcare systems, warehouses, residential garages, manufacturing facilities, and other commercial and industrial
applications.
During fiscal 2023, Climate Solutions segment sales increased compared with the prior year, primarily driven by
increased sales of data center cooling, heat transfer, and HVAC & refrigeration products. We applied 80/20 principles to
each of our businesses within the Climate Solutions segment during fiscal 2023. For example, we simplified our heat
transfer products business by reducing SKUs and have refined our pricing discipline. Through these efforts, we achieved
improvements in the Climate Solutions segment’s profit margins. In addition, as part of our strategic growth initiatives,
we have expanded our data center business and are manufacturing and selling more data center cooling products in North
America.
Looking ahead, while a level of uncertainty and the possibility of recessionary conditions exist in the global marketplace,
we expect growth across the HVAC&R and data center markets we serve during fiscal 2024. These markets are heavily
impacted by construction activity, building regulations, owner/occupant comfort requirements, and the increasing
reliance on digital technologies. We expect particularly strong growth in the data center markets as the need for digital
infrastructure expands. We also expect the North American school and commercial HVAC markets, to which we sell
our indoor air quality products, will experience strong growth during fiscal 2024, driven by federal and local funding for
ventilation improvements for schools. In addition, we expect the rapid adoption of heat pump technology in Europe to
be a market growth driver and are increasing our manufacturing capacity in response.
In fiscal 2024, we will continue to utilize an 80/20 mindset across our Climate Solutions businesses. We are focused on
engaging with key customers to further develop our relationships with them and are pursuing strategic growth
opportunities, particularly for our data center, heating, and indoor air quality products. We are also focused on growing
our refrigeration 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 to these organic growth opportunities, we plan
to pursue acquisitions to further accelerate growth and complement our existing product portfolio. Finally, we are also
focused on applying the 80/20 principles within our manufacturing facilities and expect to achieve production efficiency
improvements as a result.
Performance Technologies (57 percent of fiscal 2023 net sales)
The Performance Technologies segment provides products and solutions that enhance the performance of customer
applications and develops solutions that increase fuel economy and lower emissions in light of increasingly stringent
government regulations. The Performance Technologies segment designs and manufactures air- and liquid-cooled
technology for vehicular, stationary power, and industrial applications. Air-cooled products consist primarily of
powertrain cooling products, such as radiators, condensers, engine cooling modules, charge air coolers, fan shrouds, and
surge tanks. Liquid-cooled products include engine oil coolers, EGR coolers, liquid charge air coolers, transmission and
retarder oil coolers, fuel coolers, and condensers. In addition, the Performance Technologies segment provides advanced
solutions, designed to improve battery range and vehicle life, to zero-emission and hybrid commercial vehicle and
automotive customers. These solutions include battery thermal management systems, electronics cooling packages, and
battery chillers. The advanced solutions provided by the segment also include coating products and application services
that extend the life of equipment and components by protecting against corrosion.
25
25
During fiscal 2023, Performance Technologies segment sales increased compared with the prior year, primarily driven
by higher sales volume and favorable commercial pricing, including adjustments in response to material price increases.
Compared with the prior year, sales of air-cooled, liquid-cooled, and advanced solutions products each increased. In
fiscal 2023, we focused on training our employees on 80/20 principles and began applying them to our businesses.
Looking ahead, while a level of uncertainty and the possibility of recessionary conditions exist in the global marketplace,
we are excited about the growth potential in our key markets and the benefits we expect to achieve as we roll out 80/20
principles across all of our businesses. Our Advanced Solutions team is focused on growing sales of its thermal
management systems and components for electric vehicles and is engaged with numerous current and prospective
customers. We believe government policies in the U.S. and Europe will drive customer investments in electric and
alternative powertrains and will support market growth in this area. In addition, we expect the global automotive
markets to experience moderate growth, as customers look to replenish inventory levels in light of the semiconductor
chip shortage and other supply chain challenges. We are also working to apply our 80/20 mindset to achieve
manufacturing efficiencies and to improve our business mix, focusing on higher profit margin products, applying quoting
filters for new customer programs and reducing complexity across our businesses.
Consolidated Results of Operations
Supply Chain Disruptions and Inflationary Market Conditions
Market and economic dynamics, including the impacts of the military conflict between Russia and Ukraine and the
COVID-19 pandemic, have contributed to global supply chain challenges and inflationary market conditions. We are
focused on mitigating the negative impacts of labor shortages, supply chain challenges and inflationary market
conditions, including changes in raw material, energy, logistic, and interest costs, as well as delays and shortages in
certain purchased commodities and components. We have implemented selling price increases for many of our products
in response to raw material and other cost increases and are engaged with suppliers to ensure availability of key raw
materials. We cannot reasonably estimate the full impact that economic and market dynamics will have on our business,
results of operations, or cash flows in the future.
Fiscal 2023 Highlights
Fiscal 2023 net sales increased $248 million, or 12 percent, from the prior year, primarily due to higher sales in our
Performance Technologies and Climate Solutions segments. Cost of sales increased $168 million, or 10 percent,
primarily due to higher sales volume and higher raw material costs, including underlying metal prices and related
premiums, fabrication, freight, and packaging costs. Gross profit increased $80 million and gross margin improved 180
basis points to 16.9 percent. SG&A expenses increased $19 million, primarily due to higher compensation-related
expenses. Operating income of $150 million during fiscal 2023 increased $31 million from the prior year, primarily due
to higher gross profit, partially offset by the absence of a $56 million net impairment reversal recorded in the prior year
that primarily related to the liquid-cooled automotive business. Upon the termination of a sale agreement with the
prospective buyer during the third quarter of fiscal 2022, the liquid-cooled automotive business reverted back to held and
used classification. See Note 2 of the Notes to Consolidated Financial Statements for further information regarding the
liquid-cooled automotive business, which was classified as held for sale during the first seven months 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
Climate Solutions and Performance Technologies segments. 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
the COVID-19 pandemic. 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 a $56 million net impairment reversal and $167 million of impairment charges, respectively, primarily related to
the automotive businesses that were held for sale.
26
26
The following table presents our consolidated financial results on a comparative basis for fiscal years 2023, 2022 and
2021.
2023
Years ended March 31,
Years ended March 31,
Years ended March 31,
2022
(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 on sale of assets
Loss 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
Benefit (provision) for income taxes
Benefit (provision) for income taxes
Net earnings (loss)
Net earnings (loss)
$'s
$
2,298
1,909
389
234
5
-
-
150
(21)
(4)
125
28
154
$
% of sales
100.0%
83.1%
16.9%
10.2%
0.2%
-
-
6.5%
-0.9%
-0.2%
5.5%
1.2%
6.7%
$'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%
Year Ended March 31, 2023 Compared with Year Ended March 31, 2022
2021
$'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%
Fiscal 2023 net sales of $2,298 million were $248 million, or 12 percent, higher than the prior year, primarily due to
higher sales volume in both of our segments and favorable commercial pricing, including adjustments in response to raw
material price increases. These increases were partially offset by a $111 million unfavorable impact of foreign currency
exchange rates. Sales in the Performance Technologies and Climate Solutions segments increased $144 million and
$101 million, respectively.
Fiscal 2023 cost of sales of $1,909 million increased $168 million, or 10 percent, primarily due to higher sales volume
and higher raw material prices, which increased $34 million. These increases were partially offset by a $95 million
favorable impact of foreign currency exchange rates. As a percentage of sales, cost of sales decreased 180 basis points to
83.1 percent, primarily due to the favorable impact of higher sales volume and favorable commercial pricing, partially
offset by higher material, labor and other inflationary costs.
As a result of higher sales and lower cost of sales as a percentage of sales, fiscal 2023 gross profit increased $80 million
and gross margin improved 180 basis points to 16.9 percent.
Fiscal 2023 SG&A expenses increased $19 million, yet decreased 30 basis points as a percentage of sales. The higher
SG&A expenses were primarily driven by higher compensation-related expenses, which increased $20 million and
included higher incentive compensation and commission-related expenses, and, to a lesser extent, increases in other
general and administrative expenses that have been impacted by inflationary market conditions. These increases were
partially offset by an $8 million favorable impact of foreign currency exchange rates. In addition, strategic
reorganization costs, costs associated with our review of strategic alternatives for our automotive businesses, and
environmental charges related to a previously-closed manufacturing facility in the U.S., which are each recorded at
Corporate, decreased $3 million, $2 million, and $2 million, respectively, during fiscal 2023 compared with the prior
year.
Restructuring expenses of $5 million in fiscal 2023 decreased $19 million compared with the prior year, primarily due to
lower severance-related expenses in the Performance Technologies segment.
The net impairment reversal of $56 million during fiscal 2022 primarily related to the liquid-cooled automotive business.
In connection with the termination of the agreement to sell this business in the third quarter of fiscal 2022, we reversed a
significant amount of previously-recorded impairment charges within the Performance Technologies segment.
We sold our Austrian 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.
27
27
Operating income of $150 million during fiscal 2023 increased $31 million from the prior year, primarily due to an $80
million increase in gross profit, a $19 million decrease in restructuring expenses, and the absence of the $7 million loss
on the sale of the Austrian air-cooled automotive business in the prior year. These drivers, which favorably impacted
operating income in fiscal 2023, were partially offset by the absence of the $56 million net impairment reversal recorded
in the prior year and higher SG&A expenses.
Interest expense in fiscal 2023 increased $5 million compared with the prior year, primarily due to unfavorable changes
in interest rates. In addition, we amended and extended our U.S. credit agreement that provides for a multi-currency
revolving credit facility and U.S. dollar- and euro- denominated term loans maturing in October 2027, along with
shorter-duration swingline loans. In connection with this credit agreement modification, we recorded $1 million of costs
as interest expense during fiscal 2023.
The benefit for income taxes was $28 million in fiscal 2023, compared with a provision for income taxes of $15 million
in fiscal 2022. The $43 million change was primarily due to a $57 million income tax benefit recorded in the current
year related to the reversal of the valuation allowance on certain deferred tax assets in the U.S., partially offset by the
absence of a net $11 million income tax benefit related to valuation allowances on deferred tax assets in foreign
jurisdictions in the prior year.
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 in each of our segments, and favorable commercial pricing, including adjustments in response to
raw material price increases. Sales in the Climate Solutions and Performance Technologies segments increased $180
million and $63 million, respectively.
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 Performance
Technologies 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 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 the prior year, primarily due
to higher severance-related expenses in the Performance Technologies segment, partially offset by lower severance-
related expenses in the Climate Solutions segment.
In fiscal 2021, we recorded $167 million of impairment charges to write down the long-lived assets in the liquid-cooled
and Austrian 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 once they no longer met
the held for sale classification criteria and, as a result, recorded a net impairment reversal of $56 million.
We sold our Austrian 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 Performance Technologies segment. In addition, as
28
28
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 Austrian 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 impairment charges recorded for the
held for sale automotive businesses and $9 million resulting from the allocation of the income tax provision between net
earnings and other comprehensive income.
Segment Results of Operations
Effective April 1, 2022, we began managing the Company under two operating segments, Climate Solutions and
Performance Technologies. Our new segment structure aligns businesses serving similar or complimentary end markets,
products and technologies under common segment management. This simplified segment structure allows us to better
focus resources on targeted growth opportunities and better enables an efficient application of 80/20 principles across all
product lines to optimize profit margins and cash flow.
The Climate Solutions segment includes the previously-reported BHVAC and CIS segments, with the exception of CIS
Coatings. The Performance Technologies segment includes the previously-reported Heavy Duty Equipment and
Automotive segments and the CIS Coatings business.
The segment realignment had no impact on our consolidated financial position, results of operations, and cash flows.
We have recast the segment financial information for fiscal 2022 and 2021 to conform to the fiscal 2023 presentation.
Climate Solutions
(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
2023
Years ended March 31,
Years ended March 31,
2022
2021
$'s
% of sales
$'s
% of sales
$'s
% of sales
$
1,012
100.0%
$
911
100.0%
$
731
100.0%
788
224
97
2
124
$
77.9%
22.1%
9.6%
0.2%
12.3%
744
166
90
2
73
$
81.7%
18.3%
9.9%
0.2%
8.1%
595
137
82
5
50
$
81.3%
18.7%
11.2%
0.7%
6.8%
Year Ended March 31, 2023 Compared with Year Ended March 31, 2022
Climate Solutions net sales increased $101 million, or 11 percent, in fiscal 2023 compared with the prior year, primarily
due to higher sales volume and favorable commercial pricing. These increases were partially offset by a $52 million
unfavorable impact of foreign currency exchange rates. Compared with the prior year, sales of data center cooling, heat
transfer, and HVAC & refrigeration products increased $58 million, $33 million, and $11 million, respectively.
Climate Solutions cost of sales increased $44 million, or 6 percent, in fiscal 2023, primarily due to higher sales volume,
partially offset by a $44 million favorable impact of foreign currency exchange rates. As a percentage of sales, cost of
sales decreased 380 basis points to 77.9 percent, primarily due to the favorable impact of higher sales volume, favorable
commercial pricing, and improved operating efficiencies, partially offset by higher labor and inflationary costs.
As a result of higher sales and lower cost of sales as a percentage of sales, gross profit increased $58 million and gross
margin improved 380 basis points to 22.1 percent.
29
29
Climate Solutions SG&A expenses increased $7 million compared with the prior year, yet decreased 30 basis points as a
percentage of sales. The increase in SG&A expenses was primarily due to a $5 million increase in compensation-related
expenses, including commission expenses, and increases in other general and administrative expenses that have been
impacted by inflationary market conditions. These increases were partially offset by a $4 million favorable impact of
foreign currency exchange rate changes.
Restructuring expenses totaling $2 million during fiscal 2023 were consistent with the prior year and primarily consisted
of severance-related expenses.
Operating income in fiscal 2023 increased $51 million to $124 million, primarily due to higher gross profit, partially
offset by higher SG&A expenses.
Year Ended March 31, 2022 Compared with Year Ended March 31, 2021
Climate Solutions net sales increased $180 million, or 25 percent, in fiscal 2022 compared with the prior year, primarily
due to higher sales volume and, to a lesser extent, favorable commercial pricing, including adjustments in response to
raw material price increases. Sales of heat transfer, HVAC & refrigeration, and data center cooling products increased
$101 million, $46 million, and $32 million, respectively.
Climate Solutions cost of sales increased $149 million, or 25 percent, in fiscal 2022, primarily due to higher sales
volume and higher raw material prices, which increased $67 million. As a percentage of sales, cost of sales increased 40
basis points to 81.7 percent, primarily due to higher material costs, partially offset by favorable impacts of higher sales
volume and improved operating efficiencies.
As a result of higher sales and higher cost of sales as a percentage of sales, gross profit increased $29 million and gross
margin declined 40 basis points to 18.3 percent.
Climate Solutions SG&A expenses increased $8 million compared with the prior year, yet decreased 130 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.
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
severance expenses primarily related to plant consolidation activities in China and targeted headcount reductions in
North America.
Operating income in fiscal 2022 of $73 million increased $23 million, primarily due to higher gross profit, partially
offset by higher SG&A expenses.
30
30
Performance Technologies
(in millions)
(in millions)
Net sales
Net sales
2023
Years ended March 31,
Years ended March 31,
2022
2021
$'s
% of sales
$'s
% of sales
$'s
% of sales
$
1,316
100.0%
$
1,172
100.0%
$
1,109
100.0%
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
Operating income (loss)
Operating income (loss)
1,150
166
98
3
-
66
$
87.4%
12.6%
7.4%
0.2%
-
5.0%
1,030
142
99
22
(56)
77
$
87.9%
12.1%
8.4%
1.9%
-4.8%
6.6%
952
157
93
7
167
(109)
$
85.8%
14.2%
8.4%
0.6%
15.0%
-9.8%
Year Ended March 31, 2023 Compared with Year Ended March 31, 2022
Performance Technologies net sales increased $144 million, or 12 percent, in fiscal 2023 compared with the prior year,
primarily due to higher sales volume and favorable commercial pricing, including adjustments in response to raw
material price increases. These increases were partially offset by a $59 million unfavorable impact of foreign currency
exchange rates and, to a lesser extent, the absence of sales from the Austrian air-cooled automotive business, which we
sold on April 30, 2021. Sales of air-cooled, liquid-cooled, and advanced solutions products increased $86 million, $36
million, and $25 million, respectively.
Performance Technologies cost of sales increased $120 million, or 12 percent, primarily due to higher sales volume and
higher raw material prices, which increased $29 million. In addition, to a lesser extent, higher labor costs and higher
depreciation expenses negatively impacted cost of sales. During fiscal 2022, we did not depreciate the held for sale
property, plant and equipment assets within the liquid-cooled automotive business until they reverted back to held and
used classification during the third quarter of fiscal 2022. These increases were partially offset by a $52 million
favorable impact of foreign currency exchange rates. As a percentage of sales, cost of sales decreased 50 basis points to
87.4 percent, primarily due to the favorable impact of higher sales volume and commercial pricing, partially offset by
higher material, labor and inflationary costs.
As a result of higher sales and lower cost of sales as a percentage of sales, gross profit increased $24 million and gross
margin improved 50 basis points to 12.6 percent.
Performance Technologies SG&A expenses decreased $1 million compared with the prior year. As a percentage of
sales, SG&A expenses decreased by 100 basis points. The decrease in SG&A expenses was primarily due to a $4
million favorable impact of foreign currency exchange rate changes and, to a lesser extent, lower compensation-related
expenses, partially offset by higher general and administrative expenses that have been impacted by inflationary market
conditions.
Restructuring expenses during fiscal 2023 totaled $3 million, a decrease of $19 million compared with the prior year.
This decrease was primarily driven by lower severance expenses in Europe for targeted headcount reductions.
The net impairment reversal of $56 million in fiscal 2022 primarily related to assets in our liquid-cooled automotive
business. See Note 2 of the Notes to Consolidated Financial Statements for further information.
Operating income in fiscal 2023 decreased $11 million to $66 million, primarily due to the absence of the significant net
impairment reversal recorded in the prior year, partially offset by higher gross profit and lower restructuring expenses.
Year Ended March 31, 2022 Compared with Year Ended March 31, 2021
Performance Technologies net sales increased $63 million, or 6 percent, in fiscal 2022 compared with the prior year,
primarily due to favorable commercial pricing, including adjustments in response to raw material price increases, and to
a lesser extent, higher sales volume. In regard to the higher sales volume, sales in the prior year were negatively
impacted by the COVID-19 pandemic in fiscal 2021. Sales increased in fiscal 2022 to off-highway and commercial
vehicle customers, as those underlying markets recovered. Sales to automotive customers, however, decreased in fiscal
31
31
2022, primarily due to $58 million of lower sales from our Austrian air-cooled automotive business, which we sold in the
first quarter of fiscal 2022, and the negative impacts of the semiconductor chip shortage on the global automotive
market. Compared with the prior year, sales of air-cooled and advanced solutions products increased $52 million and
$21 million, respectively. Sales of liquid-cooled products decreased $11 million.
Performance Technologies cost of sales increased $78 million, or 8 percent, primarily due to higher raw material prices,
which increased $81 million, and to a lesser extent, higher sales volume. These drivers, which increased cost of sales,
were partially offset by lower depreciation expenses in the segment’s automotive businesses, which decreased $9
million. We ceased depreciating the property, plant and equipment assets within the liquid-cooled and Austrian 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. As a percentage of sales, cost of sales
increased 210 basis points to 87.9 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 $15 million and gross
margin declined 210 basis points to 12.1 percent.
Performance Technologies SG&A expenses increased $6 million compared with the prior year. The increase in SG&A
expenses was primarily due to higher compensation-related expenses, which increased approximately $7 million,
partially offset by lower development and other administrative costs.
Restructuring expenses during fiscal 2022 totaled $22 million, an increase of $15 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-cooled and Austrian air-cooled automotive businesses, which were first
classified as held for sale in fiscal 2021. See Note 2 of the Notes to Consolidated Financial Statements for further
information.
Operating income of $77 million during fiscal 2022 represents a $186 million improvement from the prior-year operating
loss of $109 million. The operating income and operating loss during fiscal 2022 and 2021 were largely 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.
Liquidity and Capital Resources
Our primary sources of liquidity are cash flow from operating activities, our cash and cash equivalents as of March 31,
2023 of $67 million, and an available borrowing capacity of $270 million under our revolving credit facility. Given our
extensive international operations, approximately $63 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 $42 million as of March 31, 2023. 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. pension plans during fiscal 2024.
Net Cash Provided by Operating Activities
Net cash provided by operating activities in fiscal 2023 was $108 million, an increase of $96 million from $12 million in
the prior year. This increase in operating cash flow was primarily due to the favorable impact of higher earnings and
favorable net changes in working capital, as compared with the prior year. While inventories have increased $44 million
from the prior year, the increase has been less significant than the increase in the prior year. In fiscal 2023, the Company
increased its inventory levels, particularly in the Climate Solutions segment, to meet planned production increases. In
fiscal 2022, the higher inventory levels largely resulted from increased raw material prices and impacts from global
32
32
supply constraints and challenges, which continued to impact our businesses in fiscal 2023. In addition, the favorable
changes in working capital include lower payments for incentive compensation and lower pension plan contributions in
fiscal 2023, as compared with the prior year.
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 prior year. Inventory increased $61 million from March 31, 2021 to March 31, 2022.
Capital Expenditures
Capital expenditures of $51 million during fiscal 2023 increased $11 million compared with fiscal 2022. Our capital
spending in fiscal 2023 in the Performance Technologies and Climate Solutions segments totaled $25 million and $24
million, respectively. Capital expenditures in the Performance Technologies segment include tooling and equipment
purchases in conjunction with new and renewal programs with customers. Capital spending in the Climate Solutions
segment include investments supporting our strategic growth initiatives, including expanding our data center business.
Debt
In October 2022, we executed an amended and restated credit agreement with a syndicate of banks that provides for a
multi-currency $275 million revolving credit facility and term loan facilities maturing in October 2027. This credit
agreement modified our then existing $250 million revolver and term loan facilities, which would have matured in June
2024.
Our total debt outstanding decreased $25 million to $353 million at March 31, 2023 compared with the prior year,
primarily due to repayments during fiscal 2023.
Our credit agreements require us to maintain compliance with various covenants, including a leverage ratio covenant and
an interest expense coverage ratio covenant, which are discussed further below. Indebtedness under our credit agreements
is secured by liens on substantially all domestic assets. These agreements further require compliance with various
covenants that may limit our ability to incur additional indebtedness; grant liens; make investments, loans, or guarantees;
engage in certain transactions with affiliates; or make restricted payments including dividends. Also, the credit agreements
may require prepayments in the event of certain asset sales.
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, 2023, we were in compliance with our
debt covenants. We expect to remain in compliance with our debt covenants during fiscal 2024 and beyond.
See Note 17 of the Notes to Consolidated Financial Statements for additional information regarding our credit
agreements.
Share Repurchase Program
During fiscal 2023, we repurchased $7 million of our common stock. As of March 31, 2023, we had $45 million of
authorized share repurchases remaining under our current repurchase program, which expires in November 2024. Our
decision whether and to what extent to repurchase additional shares depends on a number of factors, including business
conditions, other cash priorities, and stock price.
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
33
33
Statements. In addition, recently issued accounting pronouncements that either have or could materially impact our
financial statements 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 toward 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 $81 million, respectively, at March 31, 2023. 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 Climate Solutions segment. We evaluate impairment at the lowest level of
separately identifiable cash flows, which is generally at the manufacturing plant level. We monitor manufacturing plant
financial performance to determine whether indicators exist that would require an impairment evaluation for the facility.
This includes significant adverse changes in plant profitability metrics; substantial changes in the mix of customer
products manufactured in the plant; changes in manufacturing strategy; and the shifting of programs to other facilities
under a manufacturing realignment strategy. When such indicators are present, we perform an impairment evaluation.
During fiscal 2022, we recorded a net impairment reversal of $56 million, primarily related to assets that were held for
sale in the Performance Technologies 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.
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Determining the fair value of a reporting unit involves judgment and the use of 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
continued inflationary market conditions, including the impacts associated with the military conflict in Ukraine and the
COVID-19 pandemic. We cannot predict the occurrence of certain events or changes in circumstances that might
adversely affect the carrying value of goodwill.
At March 31, 2023, our goodwill totaled $166 million related to our Climate Solutions and Performance Technologies
segments. We conducted goodwill impairment tests as of March 31, 2023 by applying a fair value-based test and
determined the fair value of the reporting units in each of our operating segments exceeded their respective book value.
A 10 percent decrease in the estimated fair value of each reporting unit 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
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,
2023, our pension liabilities totaled $42 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 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 fiscal 2023
and 2022 was 7.0 percent and 7.5 percent, respectively. For fiscal 2024, we have assumed a rate of 6.5 percent. A
change of 25 basis points in the expected rate of return on assets would impact our fiscal 2024 pension expense by less
than $1 million.
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The discount rate reflects rates available on long-term, high-quality fixed-income corporate bonds on the measurement
date of March 31. For fiscal 2023 and 2022, for purposes of determining pension expense, we used a discount rate of 3.9
and 3.2 percent, respectively. We determined these rates based upon a yield curve that was created following an analysis
of the projected cash flows for 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 2024 pension expense
and projected benefit obligation by less than $1 million and approximately $4 million, respectively.
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 legal
entity-by-legal entity 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
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:
The impact of potential adverse developments or disruptions in the global economy and financial markets,
including impacts related to inflation, including rising energy costs, along with supply chain challenges, tariffs,
sanctions and other trade issues or cross-border trade restrictions (and any potential resulting trade war), and
including impacts associated with the military conflict between Russia and Ukraine;
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
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currency exchange rate fluctuations; increases 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;
The impact of potential further 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;
Our ability to mitigate increased labor costs and labor shortages;
The impact of public health threats, such as COVID-19, on the national and global economy, our business,
suppliers (and the supply chain), customers, and employees; and
The impact of current and future environmental laws and regulations on our business and the businesses of our
customers, including our ability to take advantage of opportunities to supply alternative new technologies to
meet environmental and/or energy standards and objectives.
Operational Risks:
The 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;
The overall health of and price-reduction pressure from our vehicular customers in light of economic and
market-specific factors, the potential lower overall win rate for sales programs with contractual price reductions
as a result of pricing strategies to ensure satisfactory profit margins for the duration of the programs, and the
potential impact on us from any deterioration in the stability or performance of any of our major customers;
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;
The impact of product or manufacturing difficulties or operating inefficiencies, including any program launch
and product transfer challenges and warranty claims;
The impact of delays or modifications initiated by major customers with respect to program launches, product
applications or requirements;
Our ability to consistently structure our operations in order to develop and maintain a competitive cost base
with appropriately skilled and stable labor, while also positioning ourselves geographically, so that we can
continue to support our customers with the technical expertise and market-leading products they demand and
expect from Modine;
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;
Costs and other effects of the investigation and remediation of environmental contamination; including when
related to the actions or inactions of others and/or facilities over which we have no control;
Our ability to recruit and maintain talent, including personnel in managerial, leadership, operational and
administrative functions, in light of tight global labor markets;
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Our ability to protect our proprietary information and intellectual property from theft or attack by internal or
external sources;
The impact of a substantial disruption or material breach of our information technology systems, and any
related delays, problems or costs;
Increasingly complex and restrictive laws and regulations, including those associated with being a U.S. public
company and others present in various jurisdictions in which we operate, and the costs associated with
compliance therewith;
Work stoppages or interference at our facilities or those of our major customers and/or suppliers;
The constant and increasing pressures associated with healthcare and associated insurance costs; and
Costs and other effects of litigation, claims, or other obligations.
Strategic Risks:
Our ability to successfully realize anticipated benefits from strategic initiatives and our continued application of
80/20 principles to our business, through which we are focused on reducing complexity and growing businesses
with strong market drivers;
Our ability to identify and execute on organic growth opportunities and acquisitions, and to efficiently and
successfully integrate acquired businesses;
Our ability to successfully execute strategies to reduce costs and improve operating margins; and
The potential impacts from actions by activist shareholders, including disruption of our business and related
costs.
Financial Risks:
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;
The impact of increases in interest rates in relation to our variable-rate debt obligations;
The impact of changes in federal, state or local taxes that could have the effect of increasing our income tax
expense;
Our ability to comply with the financial covenants in our credit agreements, including our leverage ratio (net
debt divided by Adjusted EBITDA, as defined in our credit agreements) and our interest coverage ratio
(Adjusted EBITDA divided by interest expense, as defined in our credit agreements);
The potential unfavorable impact of foreign currency exchange rate fluctuations on our financial results; and
Our ability to effectively realize the benefits of deferred tax assets in various jurisdictions in which we operate.
Forward-looking statements are as of the date of this report; we do not assume any obligation to update any forward-
looking statements.
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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 2023, we recorded
a net gain 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 2023,
approximately 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 2023, changes in foreign currency
exchange rates unfavorably impacted our sales by $111 million; however, the impact on our operating income was only
$7 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
2023, there would not have been a material impact on our fiscal 2023 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 SOFR or EURIBOR, plus 137.5 to 175 basis
points, depending on our leverage ratio. As a result, we are subject to risk of fluctuations in SOFR 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, 2023, our outstanding borrowings on variable-rate term loans totaled $216 million. There were no
outstanding borrowings on our revolving credit facility as of March 31, 2023. Based upon our outstanding debt with
variable interest rates at March 31, 2023, a 100-basis point increase in interest rates would increase our annual interest
expense in fiscal 2024 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), refrigerants, and gases such as natural gas, helium, and nitrogen. In addition, we also purchase
components and parts that are integrated into our end products.
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We seek to mitigate commodity price risk primarily by adjusting product pricing in response to applicable price
We seek to mitigate commodity price risk primarily by adjusting product pricing in response to applicable price
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
increases. Our contracts with certain vehicular customers contain provisions that provide for prospective 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
adjustments based upon changes in raw material prices. These prospective price adjustments generally lag behind the
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
actual raw material price fluctuations by three months or longer, and typically the contract provisions are limited to 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
underlying material cost based upon the London Metal Exchange and exclude additional cost elements, such as related
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
premiums and fabrication. In instances where the risk is not covered contractually, we seek to adjust product pricing in
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.
response to price increases, including through our quotation process and through price list increases.
response to price increases, including through our quotation process and through price list increases.
In fiscal 2023, we continued to experience a significant increase in raw material prices and price increases on other
In fiscal 2023, we continued to experience a significant increase in raw material prices and price increases on other
In fiscal 2023, we continued to experience a significant increase in raw material prices and price increases on other
goods and services in connection with global supply chain challenges and inflationary market conditions. In response,
goods and services in connection with global supply chain challenges and inflationary market conditions. In response,
goods and services in connection with global supply chain challenges and inflationary market conditions. In response,
we implemented selling price increases for our products. Nevertheless, we are still subject to the risk of further price
we implemented selling price increases for our products. Nevertheless, we are still subject to the risk of further price
we implemented selling price increases for our products. Nevertheless, we are still subject to the risk of further price
increases on commodities, components, and other goods and services that we purchase.
increases on commodities, components, and other goods and services that we purchase.
increases on commodities, components, and other goods and services that we purchase.
Regarding supply risk in light of current supply chain challenges, we are engaged with our suppliers to ensure
Regarding supply risk in light of current supply chain challenges, we are engaged with our suppliers to ensure
Regarding supply risk in light of current 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
availability of purchased commodities and components and we have added key suppliers to our supply base during the
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
last year. However, we are still dependent upon limited sources of supply for certain components used in 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
manufacture of our products, including aluminum, copper, steel and stainless steel (nickel). Even with this expanded
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
supply base, we are exposed to the risk of suppliers of certain raw materials not being able or willing to meet strong
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
customer demand, as they may not increase their output capacity as quickly as customers increase their orders, the
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.
impact of trade laws and tariffs, and increased prices being charged by raw material suppliers.
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
We also purchase parts from suppliers that use our tooling to create the parts. In most instances, and for financial
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
reasons, we do not have duplicate tooling for the manufacture of the purchased parts. As a result, we are exposed to the
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
risk of a supplier being unable to provide the quantity or quality of parts that we require. Even in situations where
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-
suppliers are manufacturing parts without the use of our tooling, we face the challenge of obtaining consistently high-
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
quality parts from suppliers that are financially stable. We utilize a supplier risk management program that leverages
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.
internal and third-party tools to identify and mitigate higher-risk supplier situations.
internal and third-party tools to identify and mitigate higher-risk supplier situations.
Credit Risk
Credit Risk
Credit Risk
Credit risk represents the possibility of loss from a customer failing to make payment according to contract terms. Our
Credit risk represents the possibility of loss from a customer failing to make payment according to contract terms. Our
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, 2023, 37 percent of our trade
principal credit risk consists of outstanding trade accounts receivable. At March 31, 2023, 37 percent of our trade
principal credit risk consists of outstanding trade accounts receivable. At March 31, 2023, 37 percent of our trade
accounts receivable was concentrated with our top ten customers. These customers operate primarily in the commercial
accounts receivable was concentrated with our top ten customers. These customers operate primarily in the commercial
accounts receivable was concentrated with our top ten customers. These customers operate primarily in the commercial
vehicle, off-highway, automotive and light vehicle, data center cooling, and commercial air conditioning and
vehicle, off-highway, automotive and light vehicle, data center cooling, and commercial air conditioning and
vehicle, off-highway, automotive and light vehicle, data center cooling, and commercial air conditioning and
refrigeration markets and are influenced by similar market and general economic factors. In the past, credit losses from
refrigeration markets and are influenced by similar market and general economic factors. In the past, credit losses from
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
our customers have not been significant, nor have we experienced a significant increase in credit losses in connection
our customers have not been significant, nor have we experienced a significant increase in credit losses in connection
with the current inflationary market conditions.
with the current inflationary market conditions.
with the current inflationary market conditions.
We manage credit risk through a focus on the following:
We manage credit risk through a focus on the following:
We manage credit risk through a focus on the following:
Cash and investments – We review cash deposits and short-term investments to ensure banks have acceptable
Cash and investments – We review cash deposits and short-term investments to ensure banks have acceptable
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
credit ratings, and short-term investments are maintained in secured or guaranteed instruments. We consider
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, 2023;
our holdings in cash and investments to be stable and secure at March 31, 2023;
our holdings in cash and investments to be stable and secure at March 31, 2023;
Trade accounts receivable – Prior to granting credit, we evaluate each customer, taking into consideration the
Trade accounts receivable – Prior to granting credit, we evaluate each customer, taking into consideration the
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
customer's financial condition, payment experience and credit information. After credit is granted, we
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;
actively monitor the customer's financial condition and applicable business news;
actively monitor the customer's financial condition and applicable business news;
Pension assets – We have retained outside advisors to assist in the management of the assets in our pension
Pension assets – We have retained outside advisors to assist in the management of the assets in our pension
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
plans. In making investment decisions, we utilize an established risk management protocol that focuses on
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
protection of the plan assets against downside risk. We ensure that investments within these plans provide
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
appropriate diversification, the investments are monitored by investment teams, and portfolio managers
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
adhere to the established investment policies. We believe the plan assets are subject to appropriate investment
adhere to the established investment policies. We believe the plan assets are subject to appropriate investment
policies and controls; and
policies and controls; and
policies and controls; and
Insurance – We monitor our insurance providers to ensure they maintain financial ratings that are acceptable
Insurance – We monitor our insurance providers to ensure they maintain financial ratings that are acceptable
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.
to us. We have not identified any concerns in this regard based upon our reviews.
to us. We have not identified any concerns in this regard based upon our reviews.
In addition, we are exposed to risks associated with price reduction pressure applied by OEM customers. If contractual
In addition, we are exposed to risks associated with price reduction pressure applied by OEM customers. If contractual
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
price downs are unavoidable, we contemplate them in our overall strategy and adjust pricing as necessary to provide
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.
profit margins that are acceptable to us.
profit margins that are acceptable to us.
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Economic and Market Risk
Economic risk represents the possibility of loss resulting from economic instability in certain areas of the world, such as
that caused by geopolitical uncertainly or pandemics, or downturns in markets in which we operate. We sell a broad
range of thermal solution systems 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. We periodically
designate certain commodity forward contracts as cash flow hedges for accounting purposes. 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 2023, 2022, and 2021, 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 and designate certain hedges of forecasted transactions as cash flow hedges for
accounting purposes. 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 2023, 2022, and 2021, net gains and losses recognized in sales and cost of sales
related to foreign currency forward contracts were $1 million or less in each year. We have not designated forward
contracts related to foreign currency-denominated assets and liabilities as hedges. Accordingly, for these non-designated
contracts, we record unrealized gains and losses related to the change in the fair value of the contracts in other income
and expense. Gains and losses on these non-designated foreign currency forward contracts are offset by foreign currency
gains and losses associated with the related assets and liabilities.
Counterparty Risks
We manage counterparty risks by ensuring that counterparties to derivative instruments maintain credit ratings
acceptable to us. At March 31, 2023, all counterparties had a sufficient long-term credit rating.
41
41
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended March 31, 2023, 2022 and 2021
For the years ended March 31, 2023, 2022 and 2021
For the years ended March 31, 2023, 2022 and 2021
(In millions, except for per share amounts)
(In millions, except per share amounts)
(In millions, except per share amounts)
2023
2023
2022
2022
2021
2021
Net sales
Net sales
Net sales
Cost of sales
Cost of sales
Cost of sales
Gross profit
Gross profit
Gross profit
Selling, general and administrative expenses
Selling, general and administrative expenses
Selling, general and administrative expenses
Restructuring expenses
Restructuring expenses
Restructuring expenses
Other expense – net
Operating income (loss)
Impairment charges (reversals) – net
Impairment charges (reversals) - net
Impairment charges (reversals) – net
Loss on sale of assets
Loss on sale of assets
Loss on sale of assets
Operating income (loss)
Operating income (loss)
Interest expense
Interest expense
Interest expense
Other expense - net
Other expense – net
Earnings (loss) before income taxes
Earnings (loss) before income taxes
Benefit (provision) for income taxes
Benefit (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)
Net earnings attributable to noncontrolling interest
Net earnings (loss) attributable to Modine
Benefit (provision) for income taxes
Earnings (loss) before income taxes
Net earnings (loss) per share attributable to Modine shareholders:
Net earnings (loss) per share attributable to Modine shareholders:
Net earnings (loss) per share attributable to Modine shareholders:
Basic
Basic
Basic
Diluted
Diluted
Diluted
$
$
2,297.9
2,297.9
$
$
2,050.1
2,050.1
$
$
1,808.4
1,808.4
1,908.5
1,908.5
1,740.8
1,740.8
1,515.0
1,515.0
389.4
389.4
234.0
234.0
5.0
5.0
-
-
-
-
150.4
150.4
(20.7)
(20.7)
(4.4)
(4.4)
125.3
125.3
28.3
28.3
153.6
153.6
(0.5)
(0.5)
309.3
309.3
215.1
215.1
24.1
24.1
(55.7)
(55.7)
6.6
6.6
119.2
119.2
(15.6)
(15.6)
(2.1)
(2.1)
101.5
101.5
(15.2)
(15.2)
86.3
86.3
(1.1)
(1.1)
293.4
293.4
210.9
210.9
13.4
13.4
166.8
166.8
-
-
(97.7)
(97.7)
(19.4)
(19.4)
(2.2)
(2.2)
(119.3)
(119.3)
(90.2)
(90.2)
(209.5)
(209.5)
(1.2)
(1.2)
$
$
153.1
153.1
$
$
85.2
85.2
$
$
2.93
2.93
$
$
1.64
1.64
$
$
2.90
2.90
$
$
1.62
1.62
$
$
(210.7)
(210.7)
$
$
(4.11)
(4.11)
$
$
(4.11)
(4.11)
Weighted-average shares outstanding:
Weighted-average shares outstanding:
Weighted-average shares outstanding:
Basic
Basic
Basic
Diluted
Diluted
Diluted
52.3
52.3
52.8
52.8
52.0
52.0
52.5
52.5
51.3
51.3
51.3
51.3
The notes to consolidated financial statements are an integral part of these statements.
The notes to consolidated financial statements are an integral part of these statements.
The notes to consolidated financial statements are an integral part of these statements.
42
42
42
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
MODINE MANUFACTURING COMPANY
For the years ended March 31, 2023, 2022 and 2021
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
For the years ended March 31, 2023, 2022 and 2021
(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 $1.1, $0 and $10.4 million
Defined benefit plans, net of income taxes of $1.1, $0 and $10.4 million
Cash flow hedges, net of income taxes of $0, $0 and $0.6 million
Cash flow hedges, net of income taxes of $0, $0 and $0.6 million
Total other comprehensive income (loss)
Total other comprehensive income (loss)
Comprehensive income (loss)
Comprehensive income (loss)
Comprehensive income attributable to noncontrolling interest
Comprehensive income attributable to noncontrolling interest
Comprehensive income (loss) attributable to Modine
Comprehensive income (loss) attributable to Modine
2023
153.6
$
2022
86.3
$
2021
(209.5)
$
(18.9)
6.7
0.1
(12.1)
141.5
-
(8.3)
19.7
0.1
11.5
97.8
(0.9)
30.9
30.1
1.6
62.6
(146.9)
(1.7)
$
141.5
$
96.9
$
(148.6)
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.
43
43
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
CONSOLIDATED BALANCE SHEETS
March 31, 2023 and 2022
CONSOLIDATED BALANCE SHEETS
(In millions, except for per share amounts)
March 31, 2023 and 2022
(In millions, except per share amounts)
ASSETS
ASSETS
Cash and cash equivalents
Cash and cash equivalents
Trade accounts receivable – net
Trade accounts receivable – net
Inventories
Inventories
Other current assets
Other current assets
Total current assets
Total current assets
Property, plant and equipment – net
Property, plant and equipment – net
Intangible assets – net
Intangible assets – net
Goodwill
Goodwill
Deferred income taxes
Deferred income taxes
Other noncurrent assets
Other noncurrent assets
Total assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt
Short-term debt
Long-term debt – current portion
Long-term debt – current portion
Accounts payable
Accounts payable
Accrued compensation and employee benefits
Accrued compensation and employee benefits
Other current liabilities
Other current liabilities
Total current liabilities
Total current liabilities
Long-term debt
Long-term debt
Deferred income taxes
Deferred income taxes
Pensions
Pensions
Other noncurrent liabilities
Other noncurrent liabilities
Total liabilities
Total liabilities
Commitments and contingencies (see Note 20)
Commitments and contingencies (see Note 20)
Shareholders’ equity :
Shareholders' equity:
Preferred stock, $0.025 par value, authorized 16.0 million shares, issued – none
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 55.4
Common stock, $0.625 par value, authorized 80.0 million shares, issued 55.4
million and 54.8 million shares
million and 54.8 million shares
Additional paid-in capital
Additional paid-in capital
Retained earnings
Retained earnings
Accumulated other comprehensive loss
Accumulated other comprehensive loss
Treasury stock, at cost, 3.3 million and 2.8 million shares
Treasury stock, at cost, 3.3 million and 2.8 million shares
Total Modine shareholders’ equity
Total Modine shareholders' equity
Noncontrolling interest
Noncontrolling interest
Total equity
Total equity
Total liabilities and equity
Total liabilities and equity
The notes to consolidated financial statements are an integral part of these statements.
The notes to consolidated financial statements are an integral part of these statements.
44
44
2023
2022
$
67.1
$
45.2
398.0
324.9
56.4
846.4
314.5
81.1
165.6
83.7
74.6
367.5
281.2
63.7
757.6
315.4
90.3
168.1
27.2
68.4
$
1,565.9
$
1,427.0
$
3.7
$
7.7
19.7
332.8
89.8
61.1
507.1
329.3
4.8
40.2
84.9
966.3
21.7
325.8
85.1
54.2
494.5
348.4
5.9
47.2
72.9
968.9
-
-
34.6
270.8
497.5
(161.1)
(49.0)
592.8
6.8
599.6
34.2
261.6
344.4
(149.5)
(40.0)
450.7
7.4
458.1
$
1,565.9
$
1,427.0
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended March 31, 2023, 2022 and 2021
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
(In millions)
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended March 31, 2023, 2022 and 2021
For the years ended March 31, 2023, 2022 and 2021
(In millions)
(In millions)
2023
2023
2022
2022
2021
2021
Cash flows from operating activities:
Cash flows from operating activities:
Net earnings (loss)
Net earnings (loss)
Adjustments to reconcile net earnings (loss) to net cash provided
by operating activities:
Adjustments to reconcile net earnings (loss) to net cash provided
by operating activities:
Depreciation and amortization
Depreciation and amortization
Impairment charges (reversals) – net
Impairment charges (reversals) – net
Loss on sale of assets
Loss on sale of assets
Stock-based compensation expense
Stock-based compensation expense
Deferred income taxes
Deferred income taxes
Other – net
Other – net
Changes in operating assets and liabilities:
Changes in operating assets and liabilities:
Trade accounts receivable
Trade accounts receivable
Inventories
Inventories
Accounts payable
Accounts payable
Accrued compensation and employee benefits
Accrued compensation and employee benefits
Other assets
Other assets
Other liabilities
Other liabilities
Net cash provided by operating activities
Net cash provided by operating activities
Cash flows from investing activities:
Cash flows from investing activities:
Expenditures for property, plant and equipment
Expenditures for property, plant and equipment
Proceeds from (payments for) dispositions of assets
Proceeds from (payments for) dispositions of assets
Disbursements for loan origination (see Note 1)
Disbursements for loan origination (see Note 1)
Proceeds from maturities of short-term investments
Proceeds from maturities of short-term investments
Purchases of short-term investments
Purchases of short-term investments
Other – net
Other – net
Net cash used for investing activities
Net cash used for investing activities
Cash flows from financing activities:
Cash flows from financing activities:
Borrowings of debt
Borrowings of debt
Repayments of debt
Repayments of debt
Borrowings (repayments) on bank overdraft facilities – net
Borrowings (repayments) on bank overdraft facilities – net
Purchase of treasury stock under share repurchase program
Purchase of treasury stock under share repurchase program
Dividend paid to noncontrolling interest
Dividend paid to noncontrolling interest
Financing fees paid
Financing fees paid
Other – net
Other – net
$
$
153.6
153.6
$
86.3
$
86.3
$
(209.5)
$
(209.5)
54.5
54.5
-
-
-
-
6.6
6.6
(59.6)
(59.6)
4.8
4.8
(40.7)
(40.7)
(49.4)
(49.4)
10.2
10.2
6.4
6.4
19.6
19.6
1.5
1.5
107.5
107.5
54.8
54.8
(55.7)
(55.7)
6.6
6.6
5.7
5.7
(3.8)
(3.8)
3.1
3.1
(55.6)
(55.6)
(70.7)
(70.7)
55.1
55.1
9.8
9.8
(2.4)
(2.4)
(21.7)
(21.7)
11.5
11.5
68.6
68.6
166.8
166.8
-
-
6.3
6.3
67.9
67.9
6.3
6.3
(17.1)
(17.1)
(5.0)
(5.0)
44.0
44.0
15.7
15.7
27.5
27.5
(21.7)
(21.7)
149.8
149.8
(50.7)
(50.7)
(40.3)
(40.3)
(32.7)
(32.7)
0.3
0.3
-
-
3.4
3.4
(3.4)
(3.4)
-
-
(7.6)
(7.6)
(4.7)
(4.7)
3.6
3.6
(3.9)
(3.9)
1.9
1.9
0.7
0.7
-
-
3.4
3.4
(3.6)
(3.6)
0.9
0.9
(50.4)
(50.4)
(51.0)
(51.0)
(31.3)
(31.3)
374.3
374.3
351.8
351.8
32.7
32.7
(403.4)
(403.4)
(306.7)
(306.7)
(183.6)
(183.6)
3.0
3.0
(7.3)
(7.3)
(0.6)
(0.6)
(0.6)
(0.6)
1.3
1.3
(4.3)
(4.3)
-
-
(0.9)
(0.9)
(0.2)
(0.2)
(0.5)
(0.5)
3.6
3.6
-
-
-
-
(0.8)
(0.8)
3.0
3.0
Net cash (used for) provided by financing activities
Net cash (used for) provided by financing activities
(33.3)
(33.3)
39.2
39.2
(145.1)
(145.1)
Effect of exchange rate changes on cash
Effect of exchange rate changes on cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash – beginning of year
Cash, cash equivalents and restricted cash – beginning of year
Cash, cash equivalents and restricted cash – end of year
Cash, cash equivalents and restricted cash – end of year
The notes to consolidated financial statements are an integral part of these statements.
The notes to consolidated financial statements are an integral part of these statements.
45
45
45
(2.0)
(2.0)
21.8
21.8
45.4
45.4
(0.4)
(0.4)
(0.7)
(0.7)
46.1
46.1
1.4
1.4
(25.2)
(25.2)
71.3
71.3
$
67.2
$
67.2
$
45.4
$
45.4
$
46.1
$
46.1
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
MODINE MANUFACTURING COMPANY
For the years ended March 31, 2023, 2022 and 2021
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In millions)
For the years ended March 31, 2023, 2022 and 2021
(In millions)
Net earnings
Net (loss) earnings
Balance, March 31, 2020
Stock options and awards
Stock options and awards
Purchase of treasury stock
Balance, March 31, 2020
Net (loss) earnings
Other comprehensive income
Other comprehensive income
Stock options and awards
Purchase of treasury stock
Stock-based compensation expense
Stock-based compensation expense
Balance, March 31, 2021
Balance, March 31, 2021
Net earnings
Other comprehensive income (loss)
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
Balance, March 31, 2022
Net earnings
Other comprehensive loss
Stock options and awards
Purchase of treasury stock
Stock-based compensation expense
Dividend paid to noncontrolling interest
Balance, March 31, 2023
Dividend paid to noncontrolling interest
Balance, March 31, 2023
Dividend paid to noncontrolling interest
Stock-based compensation expense
Stock-based compensation expense
Purchase of treasury stock
Purchase of treasury stock
Stock options and awards
Other comprehensive loss
Net earnings
Common stock
Common stock
Shares Amount
Shares Amount
33.3
$
53.4
-
-
0.9
-
-
-
-
0.6
-
-
Additional
Additional
paid-in
paid-in
capital
capital
$
245.1
-
-
3.6
-
6.3
54.3
33.9
255.0
-
-
0.5
-
-
-
-
-
0.3
-
-
-
-
-
0.9
-
5.7
-
54.8
34.2
261.6
-
-
0.6
-
-
-
-
-
0.4
-
-
-
-
-
2.6
-
6.6
-
Retained
Retained
earnings
earnings
469.9
$
(210.7)
-
-
-
-
259.2
85.2
-
-
-
-
-
344.4
153.1
-
-
-
-
-
Accumulated
Accumulated
other
other
comprehensive
comprehensive
loss
loss
$
(223.3)
Treasury
Treasury
stock, at
stock,
at cost
cost
$
(37.1)
Non-
Non-
controlling
controlling
interest
interest
$
5.7
-
62.1
-
-
-
(161.2)
-
11.7
-
-
-
-
(149.5)
-
(11.6)
-
-
-
-
-
-
-
(1.1)
-
(38.2)
-
-
-
(1.8)
-
-
(40.0)
-
-
-
(9.0)
-
-
Total
Total
$
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)
458.1
153.6
1.2
0.5
-
-
-
7.4
1.1
(0.2)
-
-
-
(0.9)
7.4
0.5
(0.5)
(12.1)
-
-
-
(0.6)
3.0
(9.0)
6.6
(0.6)
55.4
$
34.6
$
270.8
$
497.5
$
(161.1)
$
(49.0)
$
6.8
$
599.6
The notes to consolidated financial statements are an integral part of these statements.
The notes to consolidated financial statements are an integral part of these statements.
46
46
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Note 1: Significant Accounting Policies
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.
Nature of Operations
Modine Manufacturing Company (“Modine” or the “Company”) specializes in providing innovative and environmentally
responsible thermal management products and solutions to diversified global markets and customers in a wide array of
Assets Held for Sale
commercial, industrial, and building heating, ventilating, air conditioning, and refrigeration (“HVAC&R”) markets. In
The Company classifies an asset as held for sale when (i) management approves and commits to a formal plan to actively
addition, the Company is a leading provider of engineered heat transfer systems and high-quality heat transfer components for
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
use in on- and off-highway original equipment manufacturer (“OEM”) vehicular applications. The Company’s primary
present condition; (iii) an active program to locate a buyer and other actions required to complete the sale have been initiated;
product groups include i) heat transfer; ii) HVAC & refrigeration; iii) data center cooling; iv) air-cooled; v) liquid-cooled; and
(iv) the sale of the asset is expected to be completed within one year; and (v) it is unlikely that significant changes will be
vi) advanced solutions.
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.
Disposition of Austrian Air-cooled Automotive Business in Fiscal 2022
On April 30, 2021, the Company sold its Austrian 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
Deferred Compensation Trusts
net actuarial losses related to its pension plan. The Company reported this loss within the loss on sale of assets line on the
The Company maintains deferred compensation trusts to fund future obligations under its non-qualified deferred compensation
consolidated statement of operations. Upon transaction closing, $5.9 million of cash within the business transferred to the
plans. The trusts’ investments in third-party debt and equity securities are presented within other noncurrent assets in the
buyer. Later in fiscal 2022, the Company paid the buyer $2.4 million upon the finalization of a purchase price adjustment for
consolidated balance sheets.
net working capital and certain other items. Financial results of this business, prior to the disposition, are reported within the
Performance Technologies segment. See Note 2 for information regarding the accounting for this business while it was held
for sale. Net sales of this business were $63.0 million in fiscal 2021.
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
In connection with the sale of this business, the Company provided the buyer with a 5-year, €4.0 million loan facility.
under-reported claims that fall below various stop-loss limits and deductibles under its insurance policies. The Company
Borrowings under the agreement currently bear interest at 5.4 percent. During fiscal 2022, the Company disbursed €4.0
maintains reserves for the estimated settlement cost of known claims, as well as estimates of incurred but not reported claims.
million ($4.7 million) to the buyer under this facility. At both March 31, 2023 and 2022, the Company recorded the loan
The Company charges costs of claims, including the impact of changes in reserves due to claim experience and severity, to
receivable within other noncurrent assets on its consolidated balance sheet because the Company expects to receive the
cost of sales or SG&A expenses. The Company reviews and updates the amount of its insurance-related reserves on a
principal repayment more than twelve months from the balance sheet date.
quarterly basis.
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 Climate Solutions
segment to write down the property to fair value less costs to sell.
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
Chief Executive Officer (“CEO”) Transition in Fiscal 2021
change. See Note 20 for additional information.
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.
Supplemental Cash Flow Information
As a result of Mr. Burke's departure and in connection with the search for and transition to his successor, the Company
2021
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
17.9
terms of Mr. Burke's transition and separation agreement and costs directly associated with the CEO search, partially offset by
19.7
the impact of Mr. Burke's forfeited stock-based compensation awards.
Years ended March 31,
2022
14.1
21.8
2023
18.4
31.9
Interest paid
Income taxes paid
$
$
$
See Note 16 for supplemental cash flow information related to the Company’s leases.
New Accounting Guidance
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.
Supplier Finance Programs
In September 2022, the Financial Accounting Standards Board (“FASB”) issued new guidance that will require companies that
use supplier finance programs to disclose information about the programs, including key terms, outstanding obligations under
Consolidation Principles
such programs and where outstanding amounts are presented within their financial statements. In addition, a roll forward of
The consolidated financial statements include the accounts of Modine Manufacturing Company and its majority-owned or
obligations under supplier finance programs will be required annually. The new guidance is effective for the Company’s fiscal
Modine-controlled subsidiaries. The Company eliminates intercompany transactions and balances in consolidation.
2024 financial statements, with the exception of the roll forward disclosure requirement, which will become effective one year
later. The Company is currently evaluating the new disclosures, but does not expect the guidance will have a material impact
on its consolidated financial statements.
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
Income Tax Simplification
Company’s revenue is recognized at a point in time, based upon shipment terms. A portion of the Company’s revenue is
In December 2019, the FASB issued new guidance designed to simplify the accounting for income taxes. The new guidance
recognized over time, based upon estimated progress toward satisfaction of the contractual performance obligations. See Note
eliminated certain exceptions related to the approach for intraperiod tax allocations and the methodology for deferred tax
3 for additional information.
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
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.
47
50
47
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, 2023 and 2022, the allowance for credit losses
was $2.2 million and $1.7 million, respectively. The changes to the Company’s allowance for credit losses during fiscal 2023
and 2022 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 2023, 2022, and 2021, the Company sold $150.6 million, $126.4 million, and $88.7
million, respectively, of accounts receivable to accelerate cash receipts. During fiscal 2023, 2022, and 2021, the Company
recorded costs totaling $1.2 million, $0.3 million, and $0.2 million, respectively, related to selling accounts receivable in the
consolidated statements of operations.
Warranty
for additional information.
Tooling
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
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, 2023 and 2022, Company-owned tooling totaled $17.1 million and $18.3 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, 2023 and 2022,
customer-owned tooling receivables totaled $10.9 million and $12.3 million, respectively.
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 2023, 2022, and
2021, research and development costs totaled $44.0 million, $50.3 million, and $46.3 million, respectively.
Translation of Foreign Currencies
The Company translates assets and liabilities of foreign subsidiaries 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.
48
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
recognized over time, based upon estimated progress toward satisfaction of the contractual performance obligations. See Note
3 for additional information.
(In millions, except per share amounts)
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.
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.
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, 2023 and 2022, the allowance for credit losses
was $2.2 million and $1.7 million, respectively. The changes to the Company’s allowance for credit losses during fiscal 2023
and 2022 were not material and primarily consisted of current-period provisions, write-offs charged against the allowance,
recoveries collected, and foreign currency translation.
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.
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
Deferred Compensation Trusts
consolidated balance sheets and the proceeds are included in cash flows from operating activities in the consolidated
The Company maintains deferred compensation trusts to fund future obligations under its non-qualified deferred compensation
statements of cash flows. During fiscal 2023, 2022, and 2021, the Company sold $150.6 million, $126.4 million, and $88.7
plans. The trusts’ investments in third-party debt and equity securities are presented within other noncurrent assets in the
million, respectively, of accounts receivable to accelerate cash receipts. During fiscal 2023, 2022, and 2021, the Company
consolidated balance sheets.
recorded costs totaling $1.2 million, $0.3 million, and $0.2 million, respectively, related to selling accounts receivable in the
consolidated statements of operations.
Self-insurance Reserves
The Company retains a portion of the financial risk for certain insurance coverage, including property, general liability,
Warranty
workers compensation, and employee healthcare, and therefore maintains reserves that estimate the impact of unreported and
The Company provides product warranties for specific product lines and accrues for estimated future warranty costs in the
under-reported claims that fall below various stop-loss limits and deductibles under its insurance policies. The Company
period in which the sale is recorded. The Company records warranty expense, within cost of sales, based upon historical and
maintains reserves for the estimated settlement cost of known claims, as well as estimates of incurred but not reported claims.
current claims data or based upon estimated future claims. Accrual balances, which are recorded within other current
The Company charges costs of claims, including the impact of changes in reserves due to claim experience and severity, to
liabilities, are monitored and adjusted if it is probable that expected claims will differ from previous estimates. See Note 15
cost of sales or SG&A expenses. The Company reviews and updates the amount of its insurance-related reserves on a
for additional information.
quarterly basis.
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, 2023 and 2022, Company-owned tooling totaled $17.1 million and $18.3 million, respectively.
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.
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, 2023 and 2022,
customer-owned tooling receivables totaled $10.9 million and $12.3 million, respectively.
Supplemental Cash Flow Information
Interest paid
Income taxes paid
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.
See Note 16 for supplemental cash flow information related to the Company’s leases.
Years ended March 31,
2022
14.1
21.8
2023
18.4
31.9
$
$
2021
17.9
19.7
$
New Accounting Guidance
Research and Development
The Company expenses research and development costs as incurred within SG&A expenses. During fiscal 2023, 2022, and
2021, research and development costs totaled $44.0 million, $50.3 million, and $46.3 million, respectively.
Supplier Finance Programs
In September 2022, the Financial Accounting Standards Board (“FASB”) issued new guidance that will require companies that
use supplier finance programs to disclose information about the programs, including key terms, outstanding obligations under
Translation of Foreign Currencies
such programs and where outstanding amounts are presented within their financial statements. In addition, a roll forward of
The Company translates assets and liabilities of foreign subsidiaries into U.S. dollars at the period-end exchange rates and
obligations under supplier finance programs will be required annually. The new guidance is effective for the Company’s fiscal
translates income and expense items at the monthly average exchange rate for the period in which the transactions occur. The
2024 financial statements, with the exception of the roll forward disclosure requirement, which will become effective one year
Company reports resulting translation adjustments within accumulated other comprehensive income (loss) within shareholders'
later. The Company is currently evaluating the new disclosures, but does not expect the guidance will have a material impact
equity. The Company includes foreign currency transaction gains or losses in the statement of operations within other income
on its consolidated financial statements.
and expense.
Income Tax Simplification
In December 2019, the 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
48
50
48
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Derivative Instruments
asset with its carrying value. If the asset’s carrying value exceeds expected future cash flows, the Company measures and
The Company enters into derivative financial instruments from time to time to manage certain financial risks. The Company
records an impairment loss, if any, as the amount by which the carrying value of the asset exceeds its fair value. The
enters into forward contracts to reduce exposure to changing future purchase prices for aluminum and copper and into foreign
Company estimates fair value using a variety of valuation techniques, including discounted cash flows, market values and
currency exchange contracts to hedge specific foreign currency-denominated assets and liabilities as well as forecasted
comparison values for similar assets.
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.
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
Income Taxes
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
The Company determines deferred tax assets and liabilities based upon the difference between the amounts reported in the
present condition; (iii) an active program to locate a buyer and other actions required to complete the sale have been initiated;
financial statements and the tax basis of assets and liabilities, using enacted tax rates in effect in the years in which the
(iv) the sale of the asset is expected to be completed within one year; and (v) it is unlikely that significant changes will be
differences are expected to reverse. The Company establishes a valuation allowance if it is more likely than not that a deferred
made to the plan. Upon classification as held for sale, the Company records the carrying value of the asset at the lower of its
tax asset, or portion thereof, will not be realized. The Company records the tax effects of global intangible low-taxed income
carrying value or its estimated fair value, less costs to sell. In addition, the Company ceases to record depreciation for assets
(“GILTI”) as a period expense in the applicable tax year. The Company uses the portfolio approach for releasing income tax
held for sale. See Note 2 for additional information.
effects from accumulated other comprehensive income (loss). See Note 8 for additional information.
Deferred Compensation Trusts
Earnings per Share
The Company maintains deferred compensation trusts to fund future obligations under its non-qualified deferred compensation
The Company calculates basic earnings per share based upon the weighted-average number of common shares outstanding
plans. The trusts’ investments in third-party debt and equity securities are presented within other noncurrent assets in the
during the period, while the calculation of diluted earnings per share includes the dilutive effect of potential common shares
consolidated balance sheets.
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.
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.
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. As of March 31, 2023 and 2022, the Company’s short-term investments totaled $3.5 million and
$3.7 million, respectively.
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.
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
Supplemental Cash Flow Information
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 $13.6 million, $9.0 million, and $7.9 million were accrued
within accounts payable at March 31, 2023, 2022 and 2021, respectively.
Years ended March 31,
2022
14.1
21.8
Interest paid
Income taxes paid
2021
17.9
19.7
2023
18.4
31.9
$
$
$
See Note 16 for supplemental cash flow information related to the Company’s leases.
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 information technology 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.
New Accounting Guidance
Supplier Finance Programs
In September 2022, the Financial Accounting Standards Board (“FASB”) issued new guidance that will require companies that
Goodwill
use supplier finance programs to disclose information about the programs, including key terms, outstanding obligations under
The Company does not amortize goodwill; rather, it tests for impairment annually unless conditions exist that would require a
such programs and where outstanding amounts are presented within their financial statements. In addition, a roll forward of
more frequent evaluation. The Company performs an assessment of the fair value of its reporting units for goodwill
obligations under supplier finance programs will be required annually. The new guidance is effective for the Company’s fiscal
impairment testing based upon, among other things, the present value of expected future cash flows. The Company performed
2024 financial statements, with the exception of the roll forward disclosure requirement, which will become effective one year
its goodwill impairment test as of March 31, 2023 and determined the fair value of each of its reporting units exceeded the
later. The Company is currently evaluating the new disclosures, but does not expect the guidance will have a material impact
respective book value. See Note 14 for additional information.
on its consolidated financial statements.
Impairment of Held and Used Long-lived Assets
Income Tax Simplification
The Company reviews held and used long-lived assets, including property, plant and equipment and intangible assets, for
In December 2019, the FASB issued new guidance designed to simplify the accounting for income taxes. The new guidance
impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully
eliminated certain exceptions related to the approach for intraperiod tax allocations and the methodology for deferred tax
recoverable. In these instances, the Company compares the undiscounted future cash flows expected to be generated from the
50
49
49
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
asset with its carrying value. If the asset’s carrying value exceeds expected future cash flows, the Company measures and
asset with its carrying value. If the asset’s carrying value exceeds expected future cash flows, the Company measures and
records an impairment loss, if any, as the amount by which the carrying value of the asset exceeds its fair value. The
records an impairment loss, if any, as the amount by which the carrying value of the asset exceeds its fair value. The
Company estimates fair value using a variety of valuation techniques, including discounted cash flows, market values and
Company estimates fair value using a variety of valuation techniques, including discounted cash flows, market values and
comparison values for similar assets.
comparison values for similar assets.
Assets Held for Sale
Assets Held for Sale
The Company classifies an asset as held for sale when (i) management approves and commits to a formal plan to actively
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
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;
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
(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
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
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.
held for sale. See Note 2 for additional information.
Deferred Compensation Trusts
Deferred Compensation Trusts
The Company maintains deferred compensation trusts to fund future obligations under its non-qualified deferred compensation
The Company maintains deferred compensation trusts to fund future obligations under its non-qualified deferred compensation
plans. The trusts’ investments in third-party debt and equity securities are presented within other noncurrent assets in the
plans. The trusts’ investments in third-party debt and equity securities are presented within other noncurrent assets in the
consolidated balance sheets.
consolidated balance sheets.
Self-insurance Reserves
Self-insurance Reserves
The Company retains a portion of the financial risk for certain insurance coverage, including property, general liability,
The Company retains a portion of the financial risk for certain insurance coverage, including property, general liability,
workers compensation, and employee healthcare, and therefore maintains reserves that estimate the impact of unreported and
workers compensation, and employee healthcare, and therefore maintains reserves that estimate the impact of unreported and
under-reported claims that fall below various stop-loss limits and deductibles under its insurance policies. The Company
under-reported claims that fall below various stop-loss limits and deductibles under its insurance policies. The Company
maintains reserves for the estimated settlement cost of known claims, as well as estimates of incurred but not reported claims.
maintains reserves for the estimated settlement cost of known claims, as well as estimates of incurred but not reported claims.
The Company charges costs of claims, including the impact of changes in reserves due to claim experience and severity, to
The Company charges costs of claims, including the impact of changes in reserves due to claim experience and severity, to
cost of sales or SG&A expenses. The Company reviews and updates the amount of its insurance-related reserves on a
cost of sales or SG&A expenses. The Company reviews and updates the amount of its insurance-related reserves on a
quarterly basis.
quarterly basis.
Environmental Liabilities
Environmental Liabilities
The Company records liabilities for environmental assessments and remediation activities in the period in which its
The Company records liabilities for environmental assessments and remediation activities in the period in which its
responsibility is probable and the costs can be reasonably estimated. The Company records environmental indemnification
responsibility is probable and the costs can be reasonably estimated. The Company records environmental indemnification
assets from third parties, including prior owners, when recovery is probable. To the extent that the required remediation
assets from third parties, including prior owners, when recovery is probable. To the extent that the required remediation
procedures change, or additional contamination is identified, the Company’s estimated environmental liabilities may also
procedures change, or additional contamination is identified, the Company’s estimated environmental liabilities may also
change. See Note 20 for additional information.
change. See Note 20 for additional information.
Supplemental Cash Flow Information
Supplemental Cash Flow Information
Interest paid
Interest paid
Interest paid
Income taxes paid
Income taxes paid
Income taxes paid
Years ended March 31,
Years ended March 31,
Years ended March 31,
2021
2022
2023
2022
2023
2021
$
17.9
$
14.1
$
18.4
17.9
14.1
18.4
19.7
21.8
31.9
19.7
21.8
31.9
$
$
$
See Note 16 for supplemental cash flow information related to the Company’s leases.
See Note 16 for supplemental cash flow information related to the Company’s leases.
New Accounting Guidance
New Accounting Guidance
Supplier Finance Programs
Supplier Finance Programs
In September 2022, the Financial Accounting Standards Board (“FASB”) issued new guidance that will require companies that
In September 2022, the Financial Accounting Standards Board (“FASB”) issued new guidance that will require companies that
use supplier finance programs to disclose information about the programs, including key terms, outstanding obligations under
use supplier finance programs to disclose information about the programs, including key terms, outstanding obligations under
such programs and where outstanding amounts are presented within their financial statements. In addition, a roll forward of
such programs and where outstanding amounts are presented within their financial statements. In addition, a roll forward of
obligations under supplier finance programs will be required annually. The new guidance is effective for the Company’s fiscal
obligations under supplier finance programs will be required annually. The new guidance is effective for the Company’s fiscal
2024 financial statements, with the exception of the roll forward disclosure requirement, which will become effective one year
2024 financial statements, with the exception of the roll forward disclosure requirement, which will become effective one year
later. The Company is currently evaluating the new disclosures, but does not expect the guidance will have a material impact
later. The Company is currently evaluating the new disclosures, but does not expect the guidance will have a material impact
on its consolidated financial statements.
on its consolidated financial statements.
Income Tax Simplification
Income Tax Simplification
In December 2019, the FASB issued new guidance designed to simplify the accounting for income taxes. The new guidance
In December 2019, the 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
eliminated certain exceptions related to the approach for intraperiod tax allocations and the methodology for deferred tax
50
50
50
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
liabilities. The Company adopted this guidance as of April 1, 2021. The adoption did not have a material impact on the
value of the disposal group’s long-lived assets, which primarily consisted of property, plant and equipment assets. As a result,
Company’s consolidated financial statements.
the Company recorded a $26.8 million impairment charge related to this 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 Performance Technologies segment. See Note 1 for additional information regarding the accounting for
the sale of the Austrian air-cooled automotive business, which was completed in fiscal 2022.
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.
Note 3: Revenue Recognition
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.
Note 2: Assets Held for Sale
The following is a description of the Company’s principal revenue-generating activities:
The Company generates revenue from selling innovative thermal management products and solutions to diversified global
On November 2, 2020, the Company signed a definitive agreement to sell its liquid-cooled automotive business to Dana
markets and customers. The Company recognizes revenue based upon consideration specified in a contract and as it satisfies
Incorporated (“Dana”). Beginning at that time, the Company classified this business as held for sale and ceased recording
performance obligations by transferring control over its products to its customers, which may be at a point in time or over
depreciation expense for its long-lived assets. On October 25, 2021, the Company announced that it agreed with Dana to
time. The majority of the Company’s revenue is recognized at a point in time, based upon shipment terms. The Company
terminate the sale agreement. Both companies had been actively engaged in the regulatory review process in Germany for
records an allowance for credit losses and accrues for estimated warranty costs at the time of sale. These estimates are based
many months and agreed that it was no longer in the best interest of either party to pursue the sale transaction further.
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
In connection with the termination of the sale agreement, the Company determined that the liquid-cooled automotive business
cost of sales and related amounts billed to customers in net sales. The Company establishes payment terms with its customers
no longer met the requirements to be classified as held for sale. As a result, the Company remeasured the long-lived assets
based upon industry and regional practices, which typically do not exceed 90 days. As the Company expects to receive
reverting back to held and used classification at the lower of their (i) carrying value, as if held for sale classification had not
payment from its customers within one year from the time of sale, it disregards the effects of the time value of money in its
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
determination of the transaction price. The Company has not disclosed the value of unsatisfied performance obligations
during the third quarter of fiscal 2022. The long-lived assets primarily consisted of property, plant and equipment assets and
because the revenue associated with customer contracts for which the original expected performance period is greater than one
were fully impaired while classified as held for sale. For purposes of the remeasurement, the Company engaged third-party
year is immaterial.
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
Heating products are manufactured in the U.S. and are largely sold to independent distributors, who in turn market the heating
classification, the Company compared the fair value for each asset to its carrying value. Carrying value represented each
products to end customers. Because these products are sold to many different customers without contractual or practical
asset’s carrying value before the initial impairment charge, reduced for depreciation that would have been recorded if the asset
limitations, the Climate Solutions segment recognizes revenue at the time control is transferred to the customer, generally the
had not been classified as held for sale. The Company then adjusted each asset to the lower of fair value or carrying value,
independent distributor, based upon shipping terms, which is generally upon shipment.
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.
Climate Solutions
The Climate Solutions segment principally generates revenue from selling heat transfer products, heating, ventilating, air
conditioning, and refrigeration (“HVAC & refrigeration”) products, and data center cooling solutions.
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 Climate Solutions 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.
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
For the sale of heat transfer products, refrigeration products, and data center cooling solutions, individual customer purchase
costs to sell. As a result of these evaluations, the Company recorded a total of $8.6 million of impairment charges during
orders generally represent the Company’s contract with its customers. With the exception of a small number of customers, the
the first and second quarters of fiscal 2022. These impairment charges reduced the net carrying value of property, plant and
applicable customer contracts do not provide the Company with an enforceable right to payment for performance completed to
equipment additions during each quarter to zero. In addition, in connection with a modification of the sale perimeter in
date. As a result, the Climate Solutions segment recognizes revenue for these products primarily at the time control is
the first quarter of fiscal 2022, the Company determined that certain manufacturing operations no longer met the requirements
transferred to the customer based upon shipping terms, which is generally upon shipment.
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
For sales to customers whose contract cancellation terms provide an enforceable right to payment, the Climate Solutions
determination of fair value for the long-lived assets within the businesses impacted by the sale perimeter change in the first
segment recognizes revenue over time based upon its estimated progress toward satisfaction of the performance obligations.
quarter involved judgement and the use of significant estimates and assumptions, including assumptions regarding future
The segment measures progress by evaluating the production status toward completion of ordered products not yet shipped to
revenue projections and operating profit margins and risk-adjusted discount rates.
its customers.
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.
Performance Technologies
The Performance Technologies segment provides products and solutions that enhance the performance of customer
applications. The Performance Technologies segment designs and manufactures air- and liquid-cooled technology for
vehicular, stationary power, and industrial applications. Air-cooled products include radiators, charge air coolers, condensers,
and engine cooling modules. Liquid-cooled products include engine oil coolers, charge air coolers, condensers, and exhaust
Also during fiscal 2021, the Company signed a definitive agreement to sell its Austrian air-cooled automotive business to
gas recirculation coolers. In addition, the Performance Technologies segment provides advanced solutions, which are
Schmid Metall GmbH. Upon classification as held for sale, the Company estimated an implied loss in excess of the carrying
designed to improve battery range and vehicle life, to zero-emission and hybrid commercial vehicle, automotive, bus and
52
51
51
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
value of the disposal group’s long-lived assets, which primarily consisted of property, plant and equipment assets. As a result,
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 this business, reducing the carrying value of the disposal
the Company recorded a $26.8 million impairment charge related to this 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
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 Performance Technologies segment. See Note 1 for additional information regarding the accounting for
equipment within the Performance Technologies segment. See Note 1 for additional information regarding the accounting for
the sale of the Austrian air-cooled automotive business, which was completed in fiscal 2022.
the sale of the Austrian 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.
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.
Note 3: Revenue Recognition
Note 3: Revenue Recognition
The Company generates revenue from selling innovative thermal management products and solutions to diversified global
The Company generates revenue from selling innovative thermal management products and solutions to diversified global
markets and customers. The Company recognizes revenue based upon consideration specified in a contract and as it satisfies
markets and customers. The Company recognizes revenue based upon consideration specified in a contract and as it satisfies
performance obligations by transferring control over its products to its customers, which may be at a point in time or over
performance obligations by transferring control over its products to its customers, which may be at a point in time or over
time. The majority of the Company’s revenue is recognized at a point in time, based upon shipment terms. The Company
time. The majority of the Company’s revenue is recognized at a point in time, based upon shipment terms. The Company
records an allowance for credit losses and accrues for estimated warranty costs at the time of sale. These estimates are based
records an allowance for credit losses and accrues for estimated warranty costs at the time of sale. These estimates are based
upon historical experience, current business trends, and current economic conditions. The Company accounts for shipping and
upon historical experience, current business trends, and current economic conditions. The Company accounts for shipping and
handling activities as fulfilment costs rather than separate performance obligations and records shipping and handling costs in
handling activities as fulfilment costs rather than separate performance obligations and records shipping and handling costs in
cost of sales and related amounts billed to customers in net sales. The Company establishes payment terms with its customers
cost of sales and related amounts billed to customers in net sales. The Company establishes payment terms with its customers
based upon industry and regional practices, which typically do not exceed 90 days. As the Company expects to receive
based upon industry and regional practices, which typically do not exceed 90 days. As the Company expects to receive
payment from its customers within one year from the time of sale, it disregards the effects of the time value of money in its
payment from its customers within one year from the time of sale, it disregards the effects of the time value of money in its
determination of the transaction price. The Company has not disclosed the value of unsatisfied performance obligations
determination of the transaction price. The Company has not disclosed the value of unsatisfied performance obligations
because the revenue associated with customer contracts for which the original expected performance period is greater than one
because the revenue associated with customer contracts for which the original expected performance period is greater than one
year is immaterial.
year is immaterial.
The following is a description of the Company’s principal revenue-generating activities:
The following is a description of the Company’s principal revenue-generating activities:
Climate Solutions
The Climate Solutions segment principally generates revenue from selling heat transfer products, heating, ventilating, air
conditioning, and refrigeration (“HVAC & refrigeration”) products, and data center cooling solutions.
Climate Solutions
The Climate Solutions segment principally generates revenue from selling heat transfer products, heating, ventilating, air
conditioning, and refrigeration (“HVAC & refrigeration”) products, and data center cooling solutions.
Heating products are manufactured in the U.S. and are largely sold to independent distributors, who in turn market the heating
Heating products are manufactured in the U.S. and are largely sold to independent distributors, who in turn market the heating
products to end customers. Because these products are sold to many different customers without contractual or practical
products to end customers. Because these products are sold to many different customers without contractual or practical
limitations, the Climate Solutions segment recognizes revenue at the time control is transferred to the customer, generally the
limitations, the Climate Solutions 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.
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
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,
contracts do not provide the Company with an enforceable right to payment for performance completed to date. As a result,
the Climate Solutions segment recognizes revenue for the majority of its products at the time control is transferred to the
the Climate Solutions 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.
customer based upon shipping terms, which is generally upon shipment.
For the sale of heat transfer products, refrigeration products, and data center cooling solutions, individual customer purchase
For the sale of heat transfer products, refrigeration products, and data center cooling solutions, individual customer purchase
orders generally represent the Company’s contract with its customers. With the exception of a small number of customers, the
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
applicable customer contracts do not provide the Company with an enforceable right to payment for performance completed to
date. As a result, the Climate Solutions segment recognizes revenue for these products primarily at the time control is
date. As a result, the Climate Solutions segment recognizes revenue for these products primarily at the time control is
transferred to the customer based upon shipping terms, which is generally upon shipment.
transferred to the customer based upon shipping terms, which is generally upon shipment.
For sales to customers whose contract cancellation terms provide an enforceable right to payment, the Climate Solutions
For sales to customers whose contract cancellation terms provide an enforceable right to payment, the Climate Solutions
segment recognizes revenue over time based upon its estimated progress toward satisfaction of the performance obligations.
segment recognizes revenue over time based upon its estimated progress toward satisfaction of the performance obligations.
The segment measures progress by evaluating the production status toward completion of ordered products not yet shipped to
The segment measures progress by evaluating the production status toward completion of ordered products not yet shipped to
its customers.
its customers.
Performance Technologies
Performance Technologies
The Performance Technologies segment provides products and solutions that enhance the performance of customer
The Performance Technologies segment provides products and solutions that enhance the performance of customer
applications. The Performance Technologies segment designs and manufactures air- and liquid-cooled technology for
applications. The Performance Technologies segment designs and manufactures air- and liquid-cooled technology for
vehicular, stationary power, and industrial applications. Air-cooled products include radiators, charge air coolers, condensers,
vehicular, stationary power, and industrial applications. Air-cooled products include radiators, charge air coolers, condensers,
and engine cooling modules. Liquid-cooled products include engine oil coolers, charge air coolers, condensers, and exhaust
and engine cooling modules. Liquid-cooled products include engine oil coolers, charge air coolers, condensers, and exhaust
gas recirculation coolers. In addition, the Performance Technologies segment provides advanced solutions, which are
gas recirculation coolers. In addition, the Performance Technologies segment provides advanced solutions, which are
designed to improve battery range and vehicle life, to zero-emission and hybrid commercial vehicle, automotive, bus and
designed to improve battery range and vehicle life, to zero-emission and hybrid commercial vehicle, automotive, bus and
52
52
52
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
specialty vehicle customers. These solutions include battery thermal management systems, electronics cooling packages, and
battery chillers. The advanced solutions provided by the segment also include coating products and application services that
extend the life of equipment and components by protecting against corrosion.
specialty vehicle customers. These solutions include battery thermal management systems, electronics cooling packages, and
battery chillers. The advanced solutions provided by the segment also include coating products and application services that
extend the life of equipment and components by protecting against corrosion.
While the Performance Technologies segment provides customized production and service parts to customers under multi-year
While the Performance Technologies segment provides 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
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
result, individual purchase orders typically represent the quantities ordered by the customer. With the exception of a small
number of customers, the terms within the customer agreement, purchase order, or customer-owned tooling contract do not
number of 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, the Performance
provide the Company with an enforceable right to payment for performance completed to date. As a result, the Performance
Technologies segment recognizes revenue primarily at the time control is transferred to the customer based upon shipping
Technologies segment recognizes revenue primarily at the time control is transferred to the customer based upon shipping
terms, which is generally upon shipment.
terms, which is generally upon shipment.
In regard to the Performance Technologies customers with contractual cancellation terms that provide an enforceable right to
In regard to the Performance Technologies 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
payment for performance completed to date, the Company recognizes revenue over time based upon its estimated progress
toward satisfaction of the performance obligations. The Performance Technologies segment measures progress by evaluating
toward satisfaction of the performance obligations. The Performance Technologies segment measures progress by evaluating
the production status of ordered products not yet shipped to the customer.
the production status of ordered products not yet shipped to the customer.
For sales of coatings products, in which the customers control the equipment being enhanced by the coating application, the
For sales of coatings products, in which the customers control the equipment being enhanced by the coating application, the
Performance Technologies segment recognizes revenue over time based upon its estimated progress toward satisfaction of the
Performance Technologies segment recognizes revenue over time based upon its estimated progress toward satisfaction of the
performance obligations. The segment measures progress by evaluating the production status toward completion of ordered
performance obligations. The segment measures progress by evaluating the production status toward completion of ordered
products or services not yet shipped to its customers.
products or services not yet shipped to its customers.
For certain customer programs, the Company agrees to provide annual price reductions based upon contract terms. For these
scheduled price reductions, the Company evaluates whether the provisions represent a material right to the customer, and if so,
defers associated revenue as a result.
For certain customer programs, the Company agrees to provide annual price reductions based upon contract terms. For these
scheduled price reductions, the Company evaluates whether the provisions represent a material right to the customer, and if so,
defers associated revenue as a result.
At times, the Company makes up-front incentive payments to certain customers related to future sales under multi-year
At times, the Company makes up-front incentive payments to certain customers related to future sales under multi-year
programs. The Company capitalizes these incentive payments, which it expects to recover through future sales, and amortizes
programs. The Company capitalizes these incentive payments, which it expects to recover through future sales, and amortizes
the assets as a reduction to revenue when the related products are sold to customers.
the assets as a reduction to revenue when the related products are sold to customers.
Disaggregation of Revenue
Disaggregation of Revenue
The tables below present revenue for each of the Company’s operating segments, Climate Solutions and Performance
The tables below present revenue for each of the Company’s operating segments, Climate Solutions and Performance
Technologies. Each segment’s revenue is disaggregated by product group, by geographic location and based upon the timing
Technologies. Each segment’s revenue is disaggregated by product group, by geographic location and based upon the timing
of revenue recognition.
of revenue recognition.
Effective April 1, 2022, the Company began managing its operations under two operating segments, Climate Solutions and
Effective April 1, 2022, the Company began managing its operations under two operating segments, Climate Solutions and
Performance Technologies. The Climate Solutions segment includes the previously-reported Building HVAC Systems
Performance Technologies. The Climate Solutions segment includes the previously-reported Building HVAC Systems
(“BHVAC”) and the Commercial and Industrial Solutions (“CIS”) segments, with the exception of CIS Coatings. The
(“BHVAC”) and the Commercial and Industrial Solutions (“CIS”) segments, with the exception of CIS Coatings. The
Performance Technologies segment includes the previously-reported Heavy Duty Equipment (“HDE”) and Automotive
Performance Technologies segment includes the previously-reported Heavy Duty Equipment (“HDE”) and Automotive
segments and the CIS Coatings business. See Note 22 for additional information regarding the Company’s operating segments.
segments and the CIS Coatings business. See Note 22 for additional information regarding the Company’s operating segments.
The disaggregated revenue information presented in the tables below for fiscal 2022 and 2021 has been recast to be
The disaggregated revenue information presented in the tables below for fiscal 2022 and 2021 has been recast to be
comparable with the fiscal 2023 presentation.
comparable with the fiscal 2023 presentation.
53
53
53
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
(In millions, except per share amounts)
Year ended March 31, 2023
Year ended March 31, 2023
Year ended March 31, 2023
Performance
Segment
Performance
Performance
Technologies
Total
Technologies
Technologies
Climate
Climate
Solutions
Solutions
Climate
Solutions
Segment
Segment
Total
Total
Product Groups:
Product groups:
Product groups:
Heat transfer
Heat transfer
Heat transfer
HVAC & refrigeration
HVAC & refrigeration
HVAC & refrigeration
Data center cooling
Data center cooling
Data center cooling
Air-cooled
Air-cooled
Air-cooled
Liquid-cooled
Liquid-cooled
Liquid-cooled
Advanced solutions
Advanced solutions
Advanced solutions
Inter-segment sales
Inter-segment sales
Inter-segment sales
Net sales
Net sales
Net sales
Geographic location:
Geographic location:
Geographic location:
Americas
Americas
Americas
Europe
Europe
Europe
Asia
Asia
Asia
Net sales
Net sales
Net sales
$
$
521.2
336.3
154.0
-
-
-
0.4
1,011.9
$
$
521.2
$
-
336.3
-
154.0
-
-
658.6
-
483.9
-
143.9
29.8
0.4
$
1,316.2
$
1,011.9
$
-
$
-
-
658.6
483.9
143.9
29.8
$
1,316.2
521.2
336.3
154.0
658.6
483.9
143.9
30.2
2,328.1
$
521.2
336.3
154.0
658.6
483.9
143.9
30.2
2,328.1
$
$
$
580.9
406.0
25.0
$
1,011.9
580.9
$
406.0
25.0
1,011.9
$
$
702.0
408.5
205.7
$
1,316.2
702.0
$
408.5
205.7
1,316.2
$
1,282.9
814.5
230.7
2,328.1
$
$
1,282.9
814.5
230.7
2,328.1
$
Timing of revenue recognition:
Timing of revenue recognition:
Timing of revenue recognition:
Products transferred at a point in time
Products transferred at a point in time
Products transferred at a point in time
Products transferred over time
Products transferred over time
Products transferred over time
Net sales
Net sales
Net sales
$
$
$
959.8
52.1
1,011.9
$
$
959.8
52.1
$
1,011.9
$
1,242.3
73.9
1,316.2
$
$
1,242.3
73.9
$
1,316.2
2,202.1
126.0
2,328.1
$
$
2,202.1
126.0
2,328.1
Year ended March 31, 2022
Year ended March 31, 2022
Year ended March 31, 2022
Performance
Performance
Segment
Performance
Technologies
Total
Technologies
Technologies
Climate
Climate
Solutions
Solutions
Climate
Solutions
Segment
Segment
Total
Total
Product Groups:
Product groups:
Product groups:
Heat transfer
Heat transfer
Heat transfer
HVAC & refrigeration
HVAC & refrigeration
HVAC & refrigeration
Data center cooling
Data center cooling
Data center cooling
Air-cooled
Air-cooled
Air-cooled
Liquid-cooled
Liquid-cooled
Liquid-cooled
Advanced solutions
Advanced solutions
Advanced solutions
Inter-segment sales
Inter-segment sales
Inter-segment sales
Net sales
Net sales
Net sales
Geographic location:
Geographic location:
Geographic location:
Americas
Americas
Americas
Europe
Europe
Europe
Asia
Asia
Asia
Net sales
Net sales
Net sales
$
$
$
$
488.3
325.5
96.3
-
-
-
0.4
$
910.5
$
488.3
-
325.5
-
96.3
-
-
572.3
-
448.3
-
119.4
32.4
0.4
$
910.5
$
1,172.4
$
$
-
-
-
572.3
448.3
119.4
32.4
1,172.4
$
488.3
325.5
96.3
572.3
448.3
119.4
32.8
$
2,082.9
488.3
325.5
96.3
572.3
448.3
119.4
32.8
2,082.9
$
$
$
485.9
396.7
27.9
$
910.5
$
485.9
396.7
27.9
910.5
$
$
585.6
375.7
211.1
$
1,172.4
$
585.6
375.7
211.1
1,172.4
$
1,071.5
772.4
239.0
2,082.9
$
$
1,071.5
772.4
239.0
2,082.9
Timing of revenue recognition:
Timing of revenue recognition:
Timing of revenue recognition:
Products transferred at a point in time
Products transferred at a point in time
Products transferred at a point in time
Products transferred over time
Products transferred over time
Products transferred over time
Net sales
Net sales
Net sales
$
$
$
889.3
21.2
$
910.5
889.3
$
21.2
910.5
$
$
1,093.7
78.7
$
1,172.4
1,093.7
$
78.7
1,172.4
$
$
1,983.0
99.9
$
2,082.9
1,983.0
99.9
2,082.9
54
54
54
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Year ended March 31, 2021
Year ended March 31, 2021
Year ended March 31, 2021
Performance
Segment
Performance
Performance
Technologies
Total
Technologies
Technologies
Year ended March 31, 2021
Performance
Technologies
Climate
Climate
Solutions
Solutions
Segment
Total
Segment
Segment
Total
Total
Climate
Solutions
Climate
Solutions
Product groups:
Product groups:
Product Groups:
Product groups:
Heat transfer
Heat transfer
Heat transfer
Heat transfer
HVAC & refrigeration
HVAC & refrigeration
HVAC & refrigeration
HVAC & refrigeration
Data center cooling
Data center cooling
Data center cooling
Data center cooling
Air-cooled
Air-cooled
Air-cooled
Air-cooled
Liquid-cooled
Liquid-cooled
Liquid-cooled
Liquid-cooled
Advanced solutions
Advanced solutions
Advanced solutions
Advanced solutions
Inter-segment sales
Inter-segment sales
Inter-segment sales
Inter-segment sales
Net sales
Net sales
Net sales
Net sales
Geographic location:
Geographic location:
Geographic location:
Geographic location:
Americas
Americas
Americas
Americas
Europe
Europe
Europe
Europe
Asia
Asia
Asia
Asia
Net sales
Net sales
Net sales
Net sales
$
$
386.9
$
386.9
279.7
279.7
64.5
64.5
-
-
-
-
-
-
0.1
0.1
$
$
731.2
731.2
$
-
386.9
$
-
$
$
-
-
279.7
-
-
64.5
-
-
-
520.3
-
520.3
520.3
458.9
-
458.9
458.9
98.1
-
98.1
98.1
31.5
0.1
31.5
31.5
$
1,108.8
731.2
1,108.8
$
$
1,108.8
$
386.9
$
386.9
279.7
279.7
64.5
64.5
520.3
520.3
458.9
458.9
98.1
98.1
31.6
31.6
$
1,840.0
1,840.0
386.9
279.7
64.5
520.3
458.9
98.1
31.6
1,840.0
$
$
$
$
$
379.7
$
379.7
307.0
307.0
44.5
44.5
$
$
731.2
731.2
379.7
$
307.0
44.5
731.2
$
$
472.0
$
472.0
411.1
411.1
225.7
225.7
$
1,108.8
1,108.8
472.0
$
411.1
225.7
1,108.8
$
$
851.7
718.1
270.2
1,840.0
$
851.7
718.1
270.2
$
1,840.0
851.7
718.1
270.2
1,840.0
$
$
$
Timing of revenue recognition:
Timing of revenue recognition:
Timing of revenue recognition:
Timing of revenue recognition:
Products transferred at a point in time
Products transferred at a point in time
Products transferred at a point in time
Products transferred at a point in time
Products transferred over time
Products transferred over time
Products transferred over time
Products transferred over time
Net sales
Net sales
Net sales
Net sales
$
$
$
$
722.7
$
722.7
8.5
8.5
$
$
731.2
731.2
722.7
$
8.5
731.2
$
$
$
1,044.7
1,044.7
64.1
64.1
$
1,108.8
1,108.8
1,044.7
$
64.1
1,108.8
$
$
1,767.4
1,767.4
72.6
72.6
$
1,840.0
1,840.0
1,767.4
72.6
1,840.0
$
$
Contract Balances
Contract assets and contract liabilities from contracts with customers were as follows:
Contract Balances
Contract assets and contract liabilities from contracts with customers were as follows:
Contract Balances
Contract assets and contract liabilities from contracts with customers were as follows:
Contract assets
Contract liabilities
Contract assets
Contract assets
Contract liabilities
Contract liabilities
Contract assets
Contract liabilities
March 31, 2022
March 31, 2023
March 31, 2023
March 31, 2022
March 31, 2022
March 31, 2023
26.8
$
$
19.3
19.3
$
26.8
$
$
19.3
$
26.8
11.8
21.5
21.5
11.8
21.5
11.8
Contract assets, included within other current assets in the consolidated balance sheets, primarily consist of capitalized costs
Contract assets, included within other current assets in the consolidated balance sheets, primarily consist of capitalized costs
related to customer-owned tooling contracts, wherein the customer has guaranteed reimbursement, and assets recorded for
related to customer-owned tooling contracts, wherein the customer has guaranteed reimbursement, and assets recorded for
revenue recognized over time, which represent the Company’s rights to consideration for work completed but not yet billed.
revenue recognized over time, which represent the Company’s rights to consideration for work completed but not yet billed.
The $7.5 million decrease in contract assets during fiscal 2023 primarily resulted from a decrease in contract assets for revenue
The $7.5 million decrease in contract assets during fiscal 2023 primarily resulted from a decrease in contract assets for revenue
recognized over time.
recognized over time.
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 $7.5 million decrease in contract assets during fiscal 2023 primarily resulted from a decrease in contract assets for revenue
recognized over time.
Contract liabilities, included within other current liabilities in the consolidated balance sheets, consist of payments received in
Contract liabilities, included within other current liabilities in the consolidated balance sheets, consist of payments received in
Contract liabilities, included within other current liabilities in the consolidated balance sheets, consist of payments received in
advance of satisfying performance obligations under customer contracts, including contracts for customer-owned tooling. The
advance of satisfying performance obligations under customer contracts, including contracts for customer-owned tooling. The
advance of satisfying performance obligations under customer contracts, including contracts for customer-owned tooling. The
$9.7 million increase in contract liabilities during fiscal 2023 primarily resulted from payments received in advance of the
$9.7 million increase in contract liabilities during fiscal 2023 primarily resulted from payments received in advance of the
$9.7 million increase in contract liabilities during fiscal 2023 primarily resulted from payments received in advance of the
Company’s satisfaction of performance obligations.
Company’s satisfaction of performance obligations.
Company’s satisfaction of performance obligations.
Note 4: Fair Value Measurements
Note 4: Fair Value Measurements
Note 4: Fair Value Measurements
Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principal or most
Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principal or most
Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants. Fair value measurements
advantageous market for the asset or liability in an orderly transaction between market participants. Fair value measurements
advantageous market for the asset or liability in an orderly transaction between market participants. Fair value measurements
are classified under the following hierarchy:
are classified under the following hierarchy:
are classified under the following hierarchy:
Level 1 – Quoted prices for identical instruments in active markets.
Level 1 – Quoted prices for identical instruments in active markets.
Level 1 – Quoted prices for identical instruments in active markets.
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in
markets that are not active; and model-derived valuations in which all significant inputs are observable in active
markets that are not active; and model-derived valuations in which all significant inputs are observable in active
markets that are not active; and model-derived valuations in which all significant inputs are observable in active
markets.
markets.
markets.
Level 3 – Model-derived valuations in which one or more significant inputs are not observable.
Level 3 – Model-derived valuations in which one or more significant inputs are not observable.
Level 3 – Model-derived valuations in which one or more significant inputs are not observable.
55
55
55
55
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
(In millions, except per share amounts)
When available, the Company uses quoted market prices to determine fair value and classifies such measurements as Level 1.
When available, the Company uses quoted market prices to determine fair value and classifies such measurements as Level 1.
When available, the Company uses quoted market prices to determine fair value and classifies such measurements as Level 1.
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 some cases, where market prices are not available, the Company uses observable market-based inputs to calculate fair value,
In some cases, where market prices are not available, the Company uses observable market-based inputs to calculate fair value,
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
in which case the measurements are classified as Level 2. If quoted or observable market prices are not available, the
in which case the measurements are classified as Level 2. If quoted or observable market prices are not available, the
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,
Company determines fair value based upon valuation models that use, where possible, market-based data such as interest rates,
Company determines fair value based upon valuation models that use, where possible, market-based data such as interest rates,
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.
yield curves or currency rates. These measurements are classified as Level 3.
yield curves or currency rates. These measurements are classified as Level 3.
yield curves or currency rates. These measurements are classified as Level 3.
The carrying values of cash, cash equivalents, restricted cash, short-term investments, trade accounts receivable, accounts
The carrying values of cash, cash equivalents, restricted cash, short-term investments, trade accounts receivable, accounts
The carrying values of cash, cash equivalents, restricted cash, short-term investments, trade accounts receivable, accounts
The carrying values of cash, cash equivalents, restricted cash, short-term investments, trade accounts receivable, accounts
payable, and short-term debt approximate fair value due to the short-term nature of these instruments. In addition, the
payable, and short-term debt approximate fair value due to the short-term nature of these instruments. In addition, the
payable, and short-term debt approximate fair value due to the short-term nature of these instruments. In addition, the
payable, and short-term debt approximate fair value due to the short-term nature of these instruments. In addition, the
Company assesses the fair value of a disposal group for each reporting period it is held for sale. See Note 2 for additional
Company assesses the fair value of a disposal group for each reporting period it is held for sale. See Note 2 for additional
Company assesses the fair value of a disposal group for each reporting period it is held for sale. See Note 2 for additional
Company assesses the fair value of a disposal group for each reporting period it is held for sale. See Note 2 for additional
information regarding assets held for sale. The fair value of the Company’s long-term debt is disclosed in Note 17.
information regarding assets held for sale. The fair value of the Company’s long-term debt is disclosed in Note 17.
information regarding assets held for sale. The fair value of the Company’s long-term debt is disclosed in Note 17.
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
The Company holds investments in deferred compensation trusts to fund obligations under certain non-qualified deferred
The Company holds investments in deferred compensation trusts to fund obligations under certain non-qualified deferred
The Company holds investments in deferred compensation trusts to fund obligations under certain non-qualified deferred
compensation plans. The Company records the fair value of these investments within other noncurrent assets on its
compensation plans. The Company records the fair value of these investments within other noncurrent assets on its
compensation plans. The Company records the fair value of these investments within other noncurrent assets on its
compensation plans. The Company records the fair value of these investments within other noncurrent assets on its
consolidated balance sheets. The Company classifies money market investments held by the trusts within Level 2 of the
consolidated balance sheets. The Company classifies money market investments held by the trusts within Level 2 of the
consolidated balance sheets. The Company classifies money market investments held by the trusts within Level 2 of the
consolidated balance sheets. The Company classifies money market investments held by the trusts within Level 2 of the
valuation hierarchy. The Company classifies all other investments held by the trusts within Level 1 of the valuation hierarchy,
valuation hierarchy. The Company classifies all other investments held by the trusts within Level 1 of the valuation hierarchy,
valuation hierarchy. The Company classifies all other investments held by the trusts within Level 1 of the valuation hierarchy,
valuation hierarchy. The Company classifies all other investments held by the trusts within Level 1 of the valuation hierarchy,
as it uses quoted market prices to determine the investments’ fair value. The Company’s deferred compensation obligations,
as it uses quoted market prices to determine the investments’ fair value. The Company’s deferred compensation obligations,
as it uses quoted market prices to determine the investments’ fair value. The Company’s deferred compensation obligations,
as it uses quoted market prices to determine the investments’ fair value. The Company’s deferred compensation obligations,
which are recorded as other noncurrent liabilities, are recorded at the fair values of the investments held by the trust. At March
which are recorded as other noncurrent liabilities, are recorded at the fair values of the investments held by the trust. At March
which are recorded as other noncurrent liabilities, are recorded at the fair values of the investments held by the trust. At March
which are recorded as other noncurrent liabilities, are recorded at the fair values of the investments held by the trust. At March
31, 2023 and 2022, the fair values of the investments and obligations for the Company’s deferred compensation plans each
31, 2023 and 2022, the fair values of the investments and obligations for the Company’s deferred compensation plans each
31, 2023 and 2022, the fair values of the investments and obligations for the Company’s deferred compensation plans each
31, 2023 and 2022, the fair values of the investments and obligations for the Company’s deferred compensation plans each
totaled $2.3 million and $2.9 million, respectively.
totaled $2.3 million and $2.9 million, respectively.
totaled $2.3 million and $2.9 million, respectively.
totaled $2.3 million and $2.9 million, respectively.
Plan assets related to the Company’s pension plans were classified as follows:
Plan assets related to the Company’s pension plans were classified as follows:
Plan assets related to the Company’s pension plans were classified as follows:
Plan assets related to the Company’s pension plans were classified as follows:
March 31, 2023
Level 1
Level 1
March 31, 2023
March 31, 2023
Level 2
March 31, 2023
March 31, 2023
Level 2
Level 2
Level 2
Level 2
Level 1
Level 1
Level 1
Total
Total
Total
Total
Total
Money market investments
Money market investments
Money market investments
Money market investments
Money market investments
Pooled equity funds
Pooled equity funds
Pooled equity funds
Pooled equity funds
Pooled equity funds
Other
Other
Other
Other
Other
Fair value excluding investments measured at net asset value
Fair value excluding investments measured at net asset value
Fair value excluding investments measured at net asset value
Investments measured at net asset value
Investments measured at net asset value
Investments measured at net asset value
Total fair value
Total fair value
Total fair value
Investments measured at net asset value
Total fair value
Fair value excluding investments measured at net asset value
Fair value excluding investments measured at net asset value
Investments measured at net asset value
Total fair value
$
$
$
-
-
$
-
$
$
-
$
34.9
34.9
34.9
34.9
-
-
-
-
34.9
34.9
34.9
34.9
1.9
1.9
1.9
$
-
-
-
0.4
0.4
0.4
2.3
2.3
2.3
$
1.9
$
1.9
1.9
$
1.9
$
-
34.9
34.9
34.9
0.4
0.4
0.4
0.4
2.3
37.2
37.2
37.2
116.1
116.1
116.1
$
$
153.3
153.3
$
153.3
1.9
34.9
0.4
37.2
116.1
153.3
$
March 31, 2022
Level 1
Level 1
March 31, 2022
March 31, 2022
Level 2
March 31, 2022
March 31, 2022
Level 2
Level 2
Level 2
Level 2
Level 1
Level 1
Level 1
Total
Total
Total
Total
Total
Money market investments
Money market investments
Money market investments
Money market investments
Money market investments
Fixed income securities
Fixed income securities
Fixed income securities
Fixed income securities
Fixed income securities
Pooled equity funds
Pooled equity funds
Pooled equity funds
Pooled equity funds
Pooled equity funds
U.S. government and agency securities
U.S. government and agency securities
U.S. government and agency securities
U.S. government and agency securities
U.S. government and agency securities
Other
Other
Other
Other
Other
Fair value excluding investment measured at net asset value
Fair value excluding investment measured at net asset value
Fair value excluding investment measured at net asset value
Investments measured at net asset value
Investments measured at net asset value
Investments measured at net asset value
Total fair value
Total fair value
Total fair value
Fair value excluding investment measured at net asset value
Investments measured at net asset value
Investments measured at net asset value
Total fair value
Fair value excluding investment measured at net asset value
Total fair value
$
-
$
$
$
-
$
-
$
$
-
-
-
-
-
40.4
40.4
40.4
40.4
-
-
-
-
0.1
0.1
0.1
0.1
40.5
40.5
40.5
40.5
$
2.2
2.2
2.2
9.1
9.1
9.1
-
-
-
11.8
11.8
11.8
1.4
1.4
1.4
24.5
24.5
24.5
2.2
$
$
$
9.1
-
11.8
1.4
24.5
$
2.2
2.2
2.2
9.1
9.1
9.1
40.4
40.4
40.4
11.8
11.8
11.8
1.5
1.5
1.5
65.0
65.0
65.0
114.9
114.9
114.9
$
$
179.9
179.9
$
179.9
2.2
9.1
40.4
11.8
1.5
65.0
114.9
179.9
$
The Company determined the fair value of money market investments to approximate their net asset values, without discounts
The Company determined the fair value of money market investments to approximate their net asset values, without discounts
The Company determined the fair value of money market investments to approximate their net asset values, without discounts
for credit quality or liquidity restrictions, and classified them within Level 2 of the valuation hierarchy. The Company
for credit quality or liquidity restrictions, and classified them within Level 2 of the valuation hierarchy. The Company
for credit quality or liquidity restrictions, and classified them within Level 2 of the valuation hierarchy. The Company
determined the fair value of pooled equity funds based upon quoted prices from active markets and classified them within
determined the fair value of pooled equity funds based upon quoted prices from active markets and classified them within
determined the fair value of pooled equity funds based upon quoted prices from active markets and classified them within
Level 1 of the valuation hierarchy. The Company determined the fair value of fixed income securities and U.S. government
Level 1 of the valuation hierarchy. The Company determined the fair value of fixed income securities and U.S. government
Level 1 of the valuation hierarchy. The Company determined the fair value of fixed income securities and U.S. government
and agency securities based upon recent bid prices or the average of recent bid and asking prices when available and, if not
and agency securities based upon recent bid prices or the average of recent bid and asking prices when available and, if not
and agency securities based upon recent bid prices or the average of recent bid and asking prices when available and, if not
available, the Company valued them through matrix pricing models developed by sources considered by management to be
available, the Company valued them through matrix pricing models developed by sources considered by management to be
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, 2023 and 2022, the
reliable. The Company classified these assets within Level 2 of the valuation hierarchy. As of March 31, 2023 and 2022, the
reliable. The Company classified these assets within Level 2 of the valuation hierarchy. As of March 31, 2023 and 2022, the
Company held no Level 3 assets within its pension plans.
Company held no Level 3 assets within its pension plans.
Company held no Level 3 assets within its pension plans.
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, 2023 and 2022, 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 real estate funds,
As a practical expedient, the Company valued certain investments, including pooled equity, fixed income and real estate funds,
As a practical expedient, the Company valued certain investments, including pooled equity, fixed income and real estate funds,
using their net asset value (“NAV”) per unit, and therefore, has not classified these investments within the fair value hierarchy.
using their net asset value (“NAV”) per unit, and therefore, has not classified these investments within the fair value hierarchy.
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 investment fund may be
The terms and conditions for redemptions vary for the investments valued at NAV. The real estate investment fund may be
The terms and conditions for redemptions vary for the investments valued at NAV. The real estate investment fund may be
As a practical expedient, the Company valued certain investments, including pooled equity, fixed income and real estate funds,
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 investment fund may be
56
56
56
56
56
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
redeemed quarterly with a 90-day notice period. 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.
redeemed quarterly with a 90-day notice period. 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
Note 5: Stock-Based Compensation
The Company’s stock-based incentive programs consist of the following: (1) a long-term incentive plan (“LTIP”) for officers
The Company’s stock-based incentive programs consist of the following: (1) a long-term incentive plan (“LTIP”) for officers
and other executives that consists of stock awards, stock options, and performance-based awards granted for retention and
and other executives that consists of stock awards, stock options, and performance-based awards granted for retention and
performance, (2) a discretionary equity program for other management and key employees, and (3) stock awards for non-
performance, (2) a discretionary equity program for other management and key employees, and (3) stock awards for non-
employee directors. The Company’s Board of Directors and the Human Capital and Compensation Committee, as applicable,
employee directors. The Company’s Board of Directors and the Human Capital and Compensation Committee, as applicable,
have discretionary authority to set the terms of the stock-based awards. Grants to employees during fiscal 2023 were issued
have discretionary authority to set the terms of the stock-based awards. Grants to employees during fiscal 2023 were issued
under the Company’s Amended and Restated 2020 Incentive Compensation Plan. In lieu of performance-based stock awards,
under the Company’s Amended and Restated 2020 Incentive Compensation Plan. In lieu of performance-based stock awards,
the Company granted performance cash awards to the LTIP participants in fiscal 2023, 2022, and 2021. At present, the
the Company granted performance cash awards to the LTIP participants in fiscal 2023, 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,
Company accomplishes the fulfillment of equity-based grants through the issuance of new common shares. As of March 31,
2023, approximately 2.2 million shares authorized under the Amended and Restated 2020 Incentive Compensation Plan
2023, approximately 2.2 million shares authorized under the Amended and Restated 2020 Incentive Compensation Plan
remain available for future grants. Employee participants have the opportunity to deliver back to the Company the number of
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 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 $6.6 million, $5.7 million,
shares are held as treasury shares. The Company recorded stock-based compensation expense of $6.6 million, $5.7 million,
and $6.3 million in fiscal 2023, 2022, and 2021, respectively.
and $6.3 million in fiscal 2023, 2022, and 2021, respectively.
Stock Options
Stock Options
The Company recorded $1.2 million, $1.1 million, and $0.9 million of compensation expense related to stock options in fiscal
The Company recorded $1.2 million, $1.1 million, and $0.9 million of compensation expense related to stock options in fiscal
2023, 2022, and 2021, respectively. The grant date fair value of stock options that vested during fiscal 2023, 2022, and 2021,
2023, 2022, and 2021, respectively. The grant date fair value of stock options that vested during fiscal 2023, 2022, and 2021,
was $1.0 million, $0.9 million, and $1.3 million, respectively. As of March 31, 2023, the total compensation expense not yet
was $1.0 million, $0.9 million, and $1.3 million, respectively. As of March 31, 2023, the total compensation expense not yet
recognized related to non-vested stock options was $2.3 million and the weighted-average period in which the remaining
recognized related to non-vested stock options was $2.3 million and the weighted-average period in which the remaining
expense is expected to be recognized was 2.1 years.
expense is expected to be recognized was 2.1 years.
The Company estimated the fair value of option awards on the date of grant using the Black-Scholes option valuation model
and the following assumptions:
The Company estimated the fair value of option awards on the date of grant using the Black-Scholes option valuation model
and the following assumptions:
Fair value of options
Fair value of options
Fair value of options
Expected life of awards in years
Expected life of awards in years
Expected life of awards in years
Risk-free interest rate
Risk-free interest rate
Risk-free interest rate
Expected volatility of the Company's stock
Expected volatility of the Company’s stock
Expected volatility of the Company's stock
Years ended March 31,
Years ended March 31,
Years ended March 31,
2022
$
8.79
2022
8.79
2023
6.99
$
2021
$
3.46
2021
3.46
$
2023
$
6.99
$
6.0
6.0
3.0%
3.0%
6.1
6.1
1.1%
1.1%
6.1
6.1
0.4%
0.4%
57.8%
57.8%
56.5%
56.5%
54.1%
54.1%
Expected dividend yield on the Company's stock
Expected dividend yield on the Company’s stock
Expected dividend yield on the Company's stock
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Stock options expire no later than 10 years after the grant date and have an exercise price equal to the fair market value of
Stock options expire no later than 10 years after the grant date and have an exercise price equal to the fair market value of
Modine’s common stock on the date of grant. The risk-free interest rate was based upon yields of U.S. Treasury zero-coupon
Modine’s common stock on the date of grant. The risk-free interest rate was based upon yields of U.S. Treasury zero-coupon
issues with a term corresponding to the expected life of the options. The expected volatility assumption was based upon
issues with a term corresponding to the expected life of the options. The expected volatility assumption was based upon
changes in the Company’s historical common stock prices over the same time period as the expected life of the awards. The
changes in the Company’s historical common stock prices over the same time period as the expected life of the awards. The
expected dividend yield is zero, as the Company currently does not anticipate paying dividends over the expected life of the
expected dividend yield is zero, as the Company currently does not anticipate paying dividends over the expected life of the
options. The expected lives of the awards are based upon historical patterns and the terms of the options. Based upon 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 fiscal 2023 annual awards, stock options vest 33 percent, 33 percent, and 34 percent per year for three years,
terms of the fiscal 2023 annual awards, stock options vest 33 percent, 33 percent, and 34 percent per year for three years,
respectively. Stock option grants preceding the fiscal 2023 grant vest 25 percent per year for four years.
respectively. Stock option grants preceding the fiscal 2023 grant vest 25 percent per year for four years.
57
57
57
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
A summary of stock option activity for fiscal 2023 was as follows:
A summary of stock option activity for fiscal 2023 was as follows:
A summary of stock option activity for fiscal 2023 was as follows:
Weighted-average
Weighted-average
Weighted-average
Weighted-average
exercise price
exercise price
exercise price
exercise price
1.0
$
$
12.12
$
12.12
12.12
Shares
Shares
Shares
Shares
1.0
1.0
Weighted-average
Weighted-average
Weighted-average
Weighted-average
remaining contractual
remaining contractual
remaining contractual
remaining contractual
term (years)
term (years)
term (years)
term (years)
Aggregate
Aggregate
intrinsic value
intrinsic value
Aggregate
Aggregate
intrinsic value
intrinsic value
Granted
Granted
Outstanding, beginning of year
Outstanding, beginning of year
Outstanding, beginning of year
Outstanding, beginning of year
Granted
Granted
Exercised
Exercised
Forfeited or expired
Forfeited or expired
Forfeited or expired
Forfeited or expired
Outstanding, ending of year
Outstanding, end of year
Outstanding, end of year
Outstanding, end of year
Exercised
Exercised
0.2
0.2
0.2
(0.2)
(0.2)
(0.2)
12.40
12.40
12.40
11.77
11.77
11.77
(0.1)
(0.1)
0.9
0.9
(0.1)
0.9
12.26
12.26
12.28
$
12.28
$
$
12.26
12.28
Exercisable, March 31, 2023
Exercisable, March 31, 2023
Exercisable, March 31, 2023
Exercisable, March 31, 2023
0.4
0.4
0.4
$
$
12.46
$
12.46
12.46
7.1
7.1
7.1
5.5
5.5
5.5
$
$
$
9.6
9.6
9.6
$
$
$
4.3
4.3
4.3
The aggregate intrinsic value represents the difference between the closing price of Modine’s common shares on the last
The aggregate intrinsic value represents the difference between the closing price of Modine’s common shares on the last
The aggregate intrinsic value represents the difference between the closing price of Modine’s common shares on the last
trading day of fiscal 2023 over the exercise price of the stock options, multiplied by the number of options outstanding or
trading day of fiscal 2023 over the exercise price of the stock options, multiplied by the number of options outstanding or
trading day of fiscal 2023 over the exercise price of the stock options, multiplied by the number of options outstanding or
exercisable. The aggregate intrinsic value is not recorded for financial statement purposes, and this value will change based
exercisable. The aggregate intrinsic value is not recorded for financial statement purposes, and this value will change based
exercisable. The aggregate intrinsic value is not recorded for financial statement purposes, and this value will change based
upon daily changes in the price of Modine’s common shares.
upon daily changes in the price of Modine’s common shares.
upon daily changes in the price of Modine’s common shares.
Additional information related to stock options exercised is as follows:
Additional information related to stock options exercised is as follows:
Additional information related to stock options exercised is as follows:
Intrinsic value of stock options exercised
Intrinsic value of stock options exercised
Intrinsic value of stock options exercised
Intrinsic value of stock options exercised
$
$
Years ended March 31,
Years ended March 31,
Years ended March 31,
Years ended March 31,
2023
2022
2022
$
1.5
0.1
0.1
2022
0.1
$
$
$
$
2023
2023
$
1.5
1.5
2021
2021
$
1.4
1.4
2021
1.4
Proceeds from stock options exercised
Proceeds from stock options exercised
Proceeds from stock options exercised
Proceeds from stock options exercised
2.9
2.9
2.9
1.4
1.4
1.4
4.1
4.1
4.1
Restricted Stock
Restricted Stock
Restricted Stock
The Company recorded $5.4 million, $5.0 million, and $4.3 million of compensation expense related to restricted stock in
The Company recorded $5.4 million, $5.0 million, and $4.3 million of compensation expense related to restricted stock in
The Company recorded $5.4 million, $5.0 million, and $4.3 million of compensation expense related to restricted stock in
fiscal 2023, 2022, and 2021, respectively. The grant date fair value of restricted stock awards that vested during fiscal 2023,
fiscal 2023, 2022, and 2021, respectively. The grant date fair value of restricted stock awards that vested during fiscal 2023,
fiscal 2023, 2022, and 2021, respectively. The grant date fair value of restricted stock awards that vested during fiscal 2023,
2022, and 2021 was $4.7 million, $4.4 million, and $4.5 million, respectively. At March 31, 2023, the Company had $6.4
2022, and 2021 was $4.7 million, $4.4 million, and $4.5 million, respectively. At March 31, 2023, the Company had $6.4
2022, and 2021 was $4.7 million, $4.4 million, and $4.5 million, respectively. At March 31, 2023, the Company had $6.4
million of unrecognized compensation expense related to non-vested restricted stock, which it expects to recognize over a
million of unrecognized compensation expense related to non-vested restricted stock, which it expects to recognize over a
million of unrecognized compensation expense related to non-vested restricted stock, which it expects to recognize over a
weighted-average period of 1.8 years. The Company values restricted stock awards using the closing market price of its
weighted-average period of 1.8 years. The Company values restricted stock awards using the closing market price of its
weighted-average period of 1.8 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 fiscal 2023 annual awards, restricted stock awards vest 33
common shares on the date of grant. Based upon the terms of the fiscal 2023 annual awards, restricted stock awards vest 33
common shares on the date of grant. Based upon the terms of the fiscal 2023 annual awards, restricted stock awards vest 33
percent, 33 percent, and 34 percent per year for three years, respectively. Restricted stock award grants preceding the fiscal
percent, 33 percent, and 34 percent per year for three years, respectively. Restricted stock award grants preceding the fiscal
percent, 33 percent, and 34 percent per year for three years, respectively. Restricted stock award grants preceding the fiscal
2023 grant vest 25 percent per year for four years. Restricted stock awards granted to non-employee directors in fiscal 2023
2023 grant vest 25 percent per year for four years. Restricted stock awards granted to non-employee directors in fiscal 2023
2023 grant vest 25 percent per year for four years. Restricted stock awards granted to non-employee directors in fiscal 2023
vest one year from the time of grant.
vest one year from the time of grant.
vest one year from the time of grant.
A summary of restricted stock activity for fiscal 2023 was as follows:
A summary of restricted stock activity for fiscal 2023 was as follows:
A summary of restricted stock activity for fiscal 2023 was as follows:
Granted
Granted
Non-vested balance, beginning of year
Non-vested balance, beginning of year
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
Forfeited
Forfeited
Non-vested balance, end of year
Non-vested balance, end of year
Vested
Vested
Weighted-average
Weighted-average
Weighted-average
Weighted-average
price
price
price
price
$
$
11.61
$
11.61
11.61
Shares
Shares
Shares
Shares
0.7
0.7
0.7
0.5
0.5
0.5
(0.3)
(0.3)
(0.3)
13.60
13.60
13.60
11.85
11.85
11.85
(0.1)
(0.1)
0.8
0.8
(0.1)
0.8
10.58
10.58
12.95
$
12.95
$
$
10.58
12.95
Restricted Stock – Performance-Based Shares
Restricted Stock – Performance-Based Shares
Restricted Stock – Performance-Based Shares
The Company granted performance-based cash awards in fiscal 2023, 2022, and 2021 in lieu of performance-based stock
The Company granted performance-based cash awards in fiscal 2023, 2022, and 2021 in lieu of performance-based stock
The Company granted performance-based cash awards in fiscal 2023, 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
awards. For performance-based stock awards, the Company values the awards using the closing market price of its common
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. During fiscal 2023 all performance-based awards were cash-based, therefore, the Company did not
shares on the date of grant. During fiscal 2023 all performance-based awards were cash-based, therefore, the Company did not
shares on the date of grant. During fiscal 2023 all performance-based awards were cash-based, therefore, the Company did not
recognize compensation expense related to performance-based stock awards. In fiscal 2022, the Company recorded a $0.4
recognize compensation expense related to performance-based stock awards. In fiscal 2022, the Company recorded a $0.4
recognize compensation expense related to performance-based stock awards. 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
million benefit related to the performance-based stock awards granted in fiscal 2020. The payout earned for the fiscal 2020
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, the Company recorded $1.1 million of compensation expense
awards was less than previously estimated. In fiscal 2021, the Company recorded $1.1 million of compensation expense
awards was less than previously estimated. In fiscal 2021, the Company recorded $1.1 million of compensation expense
related to performance-based stock awards.
related to performance-based stock awards.
related to performance-based stock awards.
58
58
58
58
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
The payouts earned under the performance portion of the award program are based upon the attainment of certain financial
The payouts earned under the performance portion of the award program are based upon the attainment of certain financial
targets over a three-year period and are paid after the end of that three-year performance period, if the performance targets
targets 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 cash awards granted in fiscal 2021 are based upon
have been achieved. The performance metrics for 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
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 the three-year performance period, commencing with the fiscal year of grant. The performance
revenue growth at the end of the three-year performance period, commencing with the fiscal year of grant. The performance
metrics for the performance-based cash awards granted in fiscal 2022 and fiscal 2023 are based upon both a target three-year
metrics for the performance-based cash awards granted in fiscal 2022 and fiscal 2023 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
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-
before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”) at the end of the three-
year performance period, commencing with the fiscal year of grant.
year performance period, commencing with the fiscal year of grant.
Note 6: Restructuring Activities
Note 6: Restructuring Activities
During fiscal 2023, restructuring and repositioning expenses primarily consisted of severance-related expenses for targeted
During fiscal 2023, restructuring and repositioning expenses primarily consisted of severance-related expenses for targeted
headcount reductions in each the Climate Solutions and Performance Technologies segments and supported the Company’s
headcount reductions in each the Climate Solutions and Performance Technologies segments and supported the Company’s
objective of reducing operational and SG&A cost structures. In addition, the Performance Technologies and Climate
objective of reducing operational and SG&A cost structures. In addition, the Performance Technologies and Climate
Solutions segments incurred equipment transfer costs in Europe and closure costs related to a previously-leased facility in the
Solutions segments incurred equipment transfer costs in Europe and closure costs related to a previously-leased facility in the
U.S., respectively.
U.S., respectively.
During fiscal 2022, the Company committed to restructuring actions intended to reduce SG&A and operational expenses,
During fiscal 2022, the Company committed to restructuring actions intended to reduce SG&A and operational expenses,
particularly within the Performance Technologies segment. During fiscal 2022, the Company recorded $22.1 million of
particularly within the Performance Technologies segment. During fiscal 2022, the Company recorded $22.1 million of
severance expenses, of which $20.3 million were recorded in the Performance Technologies segment and primarily related to
severance expenses, of which $20.3 million were recorded in the Performance Technologies segment and primarily related to
targeted headcount reductions in Europe. In addition, the Company implemented targeted headcount reductions in the Climate
targeted headcount reductions in Europe. In addition, the Company implemented targeted headcount reductions in the Climate
Solutions segment. Also in fiscal 2022, the Company incurred equipment transfer costs within the Performance Technologies
Solutions segment. Also in fiscal 2022, the Company incurred equipment transfer costs within the Performance Technologies
segment.
segment.
During fiscal 2021, restructuring actions consisted primarily of targeted headcount reductions and plant consolidation
During fiscal 2021, restructuring actions consisted primarily of targeted headcount reductions and plant consolidation
activities. The headcount reductions were primarily in Europe and in the Americas within the Performance Technologies
activities. The headcount reductions were primarily in Europe and in the Americas within the Performance Technologies
segment and supported the Company’s objective of reducing operational and SG&A cost structures. During fiscal 2021, the
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 Climate Solutions segment
Company transferred production from its manufacturing facility in Zhongshan, China to another Climate Solutions segment
manufacturing facility in China. As a result of this plant consolidation, the Company recorded $3.7 million of severance
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 included transferring product lines to the
expenses during fiscal 2021. Other plant consolidation activities in fiscal 2021 included transferring product lines to the
Company’s Climate Solutions manufacturing facility in Mexico.
Company’s Climate Solutions manufacturing facility in Mexico.
Restructuring and repositioning expenses were as follows:
Restructuring and repositioning expenses were as follows:
Years ended March 31,
Years ended March 31,
Years ended March 31,
2023
2023
2022
2022
2021
2021
Employee severance and related benefits
Employee severance and related benefits
Employee severance and related benefits
Other restructuring and repositioning expenses
Other restructuring and repositioning expenses
Other restructuring and repositioning expenses
Total
Total
Total
$
$
3.5
3.5
1.5
$
5.0
1.5
5.0
$
$
$
22.1
22.1
$
$
11.7
11.7
2.0
$
24.1
2.0
24.1
$
1.7
$
13.4
1.7
13.4
$
Other restructuring and repositioning expenses primarily consist of equipment transfer and plant consolidation costs.
Other restructuring and repositioning expenses primarily consist of equipment transfer and plant consolidation costs.
The Company accrues severance in accordance with its written plans, procedures, and relevant statutory requirements.
Changes in accrued severance were as follows:
The Company accrues severance in accordance with its written plans, procedures, and relevant statutory requirements.
Changes in accrued severance were as follows:
Payments
Additions
Beginning balance
Beginning balance
Beginning balance
Additions
Additions
Payments
Payments
Reclassified from held for sale
Reclassified from held for sale
Effect of exchange rate changes
Effect of exchange rate changes
Ending balance
Ending balance
Effect of exchange rate changes
Ending balance
Reclassified from held for sale
Years ended March 31,
Years ended March 31,
Years ended March 31,
2023
2022
2022
2023
4.0
$
20.2
$
$
20.2
$
4.0
3.5
3.5
(12.4)
(12.4)
-
-
(0.7)
(0.7)
22.1
22.1
(5.7)
(5.7)
0.4
0.4
(0.6)
(0.6)
$
10.6
$
10.6
$
20.2
$
20.2
59
59
59
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
During fiscal 2022 and 2021, the Company recorded $56.0 million of a net asset impairment reversal and $166.8 million of
During fiscal 2022 and 2021, the Company recorded $56.0 million of a net asset impairment reversal and $166.8 million of
impairment charges, respectively, within its Performance Technologies segment. See Note 2 for additional information.
impairment charges, respectively, within its Performance Technologies 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 Climate Solutions facility to its estimated fair value, less costs to sell.
Also during fiscal 2022, the Company recorded an impairment charge of $0.3 million to reduce the carrying value of a
previously closed Climate Solutions facility to its estimated fair value, less costs to sell.
Note 7: Other Income and Expense
Note 7: Other Income and Expense
Other income and expense consisted of the following:
Other income and expense consisted of the following:
Interest income
Interest income
Interest income
Foreign currency transactions (a)
Foreign currency transactions (a)
Foreign currency transactions (a)
Net periodic benefit cost (b)
Net periodic benefit cost (b)
Net periodic benefit cost (b)
Total other expense - net
Total other expense - net
Total other expense - net
Years ended March 31,
Years ended March 31,
Years ended March 31,
2023
2023
1.3
$
1.3
$
2022
2022
0.4
$
0.4
$
2021
2021
0.5
$
0.5
$
(3.7)
(3.7)
(2.0)
(2.0)
(1.4)
(1.4)
(1.1)
(1.1)
0.6
0.6
(3.3)
(3.3)
$
(4.4)
$
(4.4)
$
(2.1)
$
(2.1)
$
(2.2)
$
(2.2)
(a) Foreign currency transactions primarily consist of foreign currency transaction gains and losses on the re-
(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 transactions denominated
measurement or settlement of foreign currency-denominated assets and liabilities, including transactions denominated
in a foreign currency and intercompany loans, along with gains and losses on foreign currency exchange contracts.
in a foreign currency and intercompany loans, along with gains and losses on foreign currency exchange contracts.
(b) Net periodic benefit cost for the Company’s pension and postretirement plans is exclusive of service cost.
(b) Net periodic benefit cost for the Company’s pension and postretirement plans is exclusive of service cost.
Note 8: Income Taxes
Note 8: Income Taxes
The U.S. and foreign components of earnings or loss before income taxes and the benefit or provision for income taxes
consisted of the following:
The U.S. and foreign components of earnings or loss before income taxes and the benefit or provision for income taxes
consisted of the following:
Years ended March 31,
2023
2022
Years ended March 31,
Years ended March 31,
2022
2021
2023
2021
$
$
$
12.5
$
112.8
125.3
$
12.5
112.8
125.3
0.4
$
101.1
101.5
$
0.4
101.1
101.5
(48.7)
$
(70.6)
(119.3)
$
(48.7)
(70.6)
(119.3)
$
$
$
$
1.5
$
(47.5)
1.5
(47.5)
$
0.1
$
-
0.1
-
$
(0.1)
$
58.3
(0.1)
58.3
2.3
(11.4)
2.3
(11.4)
1.1
-
1.1
-
0.4
9.2
0.4
9.2
27.5
(0.7)
(28.3)
$
27.5
(0.7)
(28.3)
17.8
(3.8)
15.2
$
17.8
(3.8)
15.2
22.0
0.4
90.2
$
22.0
0.4
90.2
$
$
$
Components of earnings (loss) before income taxes:
Components of earnings (loss) before income taxes:
Components of earnings (loss) before income taxes:
United States
United States
United States
Foreign
Foreign
Foreign
Total earnings (loss) before income taxes
Total earnings (loss) before income taxes
Total earnings (loss) before income taxes
State:
Income tax (benefit) provision:
Income tax (benefit) provision:
Income tax (benefit) provision:
Federal:
Federal:
Federal:
Current
Current
Current
Deferred
Deferred
Deferred
State:
State:
Current
Current
Current
Deferred
Deferred
Deferred
Foreign:
Foreign:
Foreign:
Current
Current
Current
Deferred
Deferred
Deferred
Total income tax (benefit) provision
Total income tax (benefit) provision
Total income tax (benefit) provision
60
60
60
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
The reconciliation between the U.S. federal statutory rate and the Company’s effective tax rate was as follows:
The reconciliation between the U.S. federal statutory rate and the Company’s effective tax rate was as follows:
Tax credits
Compensation
Statutory federal tax
State taxes, net of federal benefit
Taxes on non-U.S. earnings and losses
Statutory federal tax
Statutory federal tax
State taxes, net of federal benefit
State taxes, net of federal benefit
Taxes on non-U.S. earnings and losses
Taxes on non-U.S. earnings and losses
Valuation allowances
Valuation allowances
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
Dividends and taxable foreign inclusions
Other
Other
Effective tax rate
Effective tax rate
Uncertain tax positions, net of settlements
Notional interest deductions
Other
Effective tax rate
Tax rate or law changes
Years ended March 31,
Years ended March 31,
Years ended March 31,
2022
2021
21.0%
21.0%
0.9
1.4
2022
21.0%
1.4
2023
21.0%
(0.1)
2023
21.0%
(0.1)
2021
21.0%
0.9
5.8
5.8
3.5
3.5
(9.1)
(9.1)
(42.9)
(42.9)
(8.8)
(8.8)
(92.9)
(92.9)
(4.5)
(4.5)
(3.4)
(3.4)
0.7
0.7
(0.2)
(0.2)
0.4
0.4
(1.7)
0.9
(1.7)
0.9
(2.0)
(2.0)
0.6
0.6
0.6
0.6
(0.2)
(0.2)
(2.7)
1.6
(2.7)
1.6
1.4
1.4
2.2
2.2
(1.3)
(1.3)
(0.2)
(0.2)
0.1
0.1
1.3
3.0
1.3
3.0
(0.6)
(0.6)
(22.6%)
(22.6%)
15.0%
15.0%
(75.6%)
(75.6%)
The Company’s fiscal 2023 effective tax rate was favorably impacted by an income tax benefit related to the valuation
The Company’s fiscal 2023 effective tax rate was favorably impacted by an income tax benefit related to the valuation
allowance on deferred tax assets in the U.S. The effective tax rates in both fiscal 2022 and 2021 were significantly impacted
allowance on deferred tax assets in the U.S. 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
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
benefits related to valuation allowances. See Note 2 for information regarding the impairment charges and reversals. The
income tax charges or benefits related to valuation allowances are described below.
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
The Company records valuation allowances against its net deferred tax assets to the extent it determines it is more likely than
not that such assets will not be realized in the future. Each quarter, the Company evaluates the probability that its deferred tax
not that such assets will not be realized in the future. Each quarter, the Company evaluates the probability that its deferred tax
assets will be realized and determines whether valuation allowances or adjustments thereto are needed. This determination
assets will be realized and determines whether valuation allowances or adjustments thereto are needed. This determination
involves judgement and the use of significant estimates and assumptions, including expectations of future taxable income and
involves judgement and the use of significant estimates and assumptions, including expectations of future taxable income and
tax planning strategies. In addition, the Company considers the duration of statutory carryforward periods and historical
tax planning strategies. In addition, the Company considers the duration of statutory carryforward periods and historical
financial results.
financial results.
Since the third quarter of fiscal 2021, the Company has maintained a full valuation allowance against net deferred tax assets in
Since the third quarter of fiscal 2021, the Company has maintained a full valuation allowance against net deferred tax assets in
the U.S. since the Company determined, at that time, it was more likely than not that the net deferred tax assets would not be
the U.S. since the Company determined, at that time, it was more likely than not that the net deferred tax assets would not be
realized. In the fourth quarter of fiscal 2023, based on the Company’s recent history of earnings, coupled with its forecasted
realized. In the fourth quarter of fiscal 2023, based on the Company’s recent history of earnings, coupled with its forecasted
profitability, the Company determined it was more likely than not that certain deferred tax assets in the U.S. will be realized.
profitability, the Company determined it was more likely than not that certain deferred tax assets in the U.S. will be realized.
As a result, the Company reversed the valuation allowance related to these deferred tax assets and recorded an income tax
As a result, the Company reversed the valuation allowance related to these deferred tax assets and recorded an income tax
benefit of $57.3 million. The Company evaluated both positive and negative objectively verifiable evidence and placed
benefit of $57.3 million. The Company evaluated both positive and negative objectively verifiable evidence and placed
substantial weight on its fiscal 2022 and 2023 earnings, which resulted in a significant cumulative three-year income position.
substantial weight on its fiscal 2022 and 2023 earnings, which resulted in a significant cumulative three-year income position.
The Company also considered its forecasts for future earnings in certain key businesses. The Company has determined it is
The Company also considered its forecasts for future earnings in certain key businesses. The Company has determined it is
more likely than not that a portion of the deferred tax assets in the U.S. related to certain federal and state tax attributes will
more likely than not that a portion of the deferred tax assets in the U.S. related to certain federal and state tax attributes will
not be realized prior to expiration and, as such, has maintained a valuation allowance against these assets. In addition, the
not be realized prior to expiration and, as such, has maintained a valuation allowance against these assets. In addition, the
Company recorded a net increase of other deferred tax asset valuation allowances totaling $3.6 million.
Company recorded a net increase of other deferred tax asset valuation allowances totaling $3.6 million.
Based upon its analyses during fiscal 2022, the Company determined it was more likely than not that the deferred tax assets in
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 would be realized. As a result, the Company reversed the valuation allowances related to these
certain foreign jurisdictions would 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
deferred tax assets and recorded income tax benefits totaling $13.0 million. The Company’s analyses included consideration
of the transaction perimeter modification and the termination of the sale agreement for the liquid-cooled automotive business
of the transaction perimeter modification and the termination of the sale agreement 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
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.
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
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 other deferred tax asset valuation allowances totaling $2.5 million.
2022. In addition, the Company recorded a net increase of other 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
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
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
totaling $116.5 million to increase the valuation allowances on deferred tax assets in the U.S. ($103.3 million) and in certain
61
61
61
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
foreign jurisdictions ($13.2 million). The Company’s analyses during fiscal 2021 included consideration of the impairment
foreign jurisdictions ($13.2 million). The Company’s analyses during 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
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
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 other deferred tax asset valuation allowances totaling $22.0 million and recorded a $9.3
Company recorded a net increase of other 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
million income tax benefit resulting from allocation of the income tax provision between net earnings and other
comprehensive income.
comprehensive income.
At March 31, 2023, valuation allowances against deferred tax assets in the U.S. and in certain foreign jurisdictions totaled
At March 31, 2023, valuation allowances against deferred tax assets in the U.S. and in certain foreign jurisdictions totaled
$33.9 million and $27.7 million, respectively. The Company will maintain the valuation allowances in each applicable tax
$33.9 million and $27.7 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
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
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 jurisdictions, could necessitate the establishment of further valuation
financial outlook of the Company’s operations in certain jurisdictions, could necessitate the establishment of further valuation
allowances.
allowances.
The tax effects of temporary differences that gave rise to deferred tax assets and liabilities were as follows:
The tax effects of temporary differences that gave rise to deferred tax assets and liabilities were as follows:
March 31,
March 31,
March 31,
2023
2023
2022
2022
Deferred tax assets:
Deferred tax assets:
Deferred tax assets:
Accounts receivable
Accounts receivable
Accounts receivable
Inventories
Inventories
Inventories
Plant and equipment
Plant and equipment
Plant and equipment
Lease liabilities
Lease liabilities
Lease liabilities
Pension and employee benefits
Pension and employee benefits
Pension and employee benefits
Net operating and capital losses
Net operating and capital losses
Net operating and capital losses
Credit carryforwards
Credit carryforwards
Credit carryforwards
Research and experimental expenditures
Research and experimental expenditures
Research and experimental expenditures
Other, principally accrued liabilities
Other, principally accrued liabilities
Other, principally accrued liabilities
Total gross deferred tax assets
Total gross deferred tax assets
Total gross deferred tax assets
Less: valuation allowances
Less: valuation allowances
Less: valuation allowances
Net deferred tax assets
Net deferred tax assets
Net deferred tax assets
Deferred tax liabilities:
Deferred tax liabilities:
Deferred tax liabilities:
Plant and equipment
Plant and equipment
Plant and equipment
Lease assets
Lease assets
Lease assets
Goodwill
Goodwill
Intangible assets
Intangible assets
Intangible assets
Other
Other
Other
Goodwill
Total gross deferred tax liabilities
Total gross deferred tax liabilities
Total gross deferred tax liabilities
Net deferred tax assets
Net deferred tax assets
Net deferred tax assets
Unrecognized tax benefits were as follows:
Unrecognized tax benefits were as follows:
Beginning balance
Gross increases - tax positions in prior period
Gross decreases - tax positions in prior period
Gross increases - tax positions in current period
Lapse of statute of limitations
Ending balance
Beginning balance
Beginning balance
Gross increases - tax positions in prior period
Gross increases - tax positions in prior period
Gross decreases - tax positions in prior period
Gross decreases - tax positions in prior period
Gross increases - tax positions in current period
Gross increases - tax positions in current period
Lapse of statute of limitations
Lapse of statute of limitations
Ending balance
Ending balance
$
$
$
$
0.9
6.0
17.2
15.9
24.1
55.4
49.0
8.0
13.2
189.7
(61.6)
128.1
0.9
6.0
17.2
15.9
24.1
55.4
49.0
8.0
13.2
189.7
(61.6)
128.1
0.8
6.5
19.9
13.5
27.5
53.9
48.5
-
13.5
184.1
(112.2)
71.9
0.8
6.5
19.9
13.5
27.5
53.9
48.5
-
13.5
184.1
(112.2)
71.9
7.5
15.7
4.8
20.1
1.1
49.2
78.9
$
7.5
15.7
4.8
20.1
1.1
49.2
78.9
$
8.6
13.2
4.9
22.4
1.5
50.6
21.3
$
8.6
13.2
4.9
22.4
1.5
50.6
21.3
$
$
$
Years ended March 31,
Years ended March 31,
Years ended March 31,
2023
2022
2023
2022
$
$
9.6
9.3
9.6
9.3
0.1
0.2
0.1
0.2
(0.2)
(0.1)
(0.2)
(0.1)
1.0
0.9
1.0
0.9
(1.2)
(0.6)
(1.2)
(0.6)
$
$
9.3
9.7
9.3
9.7
$
$
The Company’s liability for unrecognized tax benefits as of March 31, 2023 was $9.7 million and, if recognized, $7.8 million
The Company’s liability for unrecognized tax benefits as of March 31, 2023 was $9.7 million and, if recognized, $7.8 million
would have an effective tax rate impact. The Company estimates a $2.0 million net decrease in unrecognized tax benefits
would have an effective tax rate impact. The Company estimates a $2.0 million net decrease in unrecognized tax benefits
during fiscal 2024 mainly due to lapses in statutes of limitations. If recognized, these reductions would have an impact on the
during fiscal 2024 mainly due to lapses in statutes of limitations. If recognized, these reductions would have an impact on the
Company’s effective tax rate.
Company’s effective tax rate.
62
62
62
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.
The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.
During fiscal 2023, 2022 and 2021, interest and penalties included within income tax expense in the consolidated statements of
During fiscal 2023, 2022 and 2021, interest and penalties included within income tax expense in the consolidated statements of
operations were not significant. At March 31, 2023 and 2022, accrued interest and penalties totaled $0.8 million and $0.7
operations were not significant. At March 31, 2023 and 2022, accrued interest and penalties totaled $0.8 million and $0.7
million, respectively.
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, 2023, the Company was under income tax examination in a number of jurisdictions. The following
tax years remain subject to examination for the Company’s major tax jurisdictions:
The Company files income tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout
the world. At March 31, 2023, the Company was under income tax examination in a number of jurisdictions. The following
tax years remain subject to examination for the Company’s major tax jurisdictions:
Germany
Germany
Italy
Italy
United States
United States
Fiscal 2017 - Fiscal 2022
Fiscal 2018 - Fiscal 2022
Fiscal 2020 - Fiscal 2022
Fiscal 2017 - Fiscal 2022
Fiscal 2018 - Fiscal 2022
Fiscal 2020 - Fiscal 2022
At March 31, 2023, the Company had federal and state tax credits of $60.4 million that, if not utilized against U.S. taxes, will
At March 31, 2023, the Company had federal and state tax credits of $60.4 million that, if not utilized against U.S. taxes, will
expire between fiscal 2024 and 2043. The Company also had state and local tax loss carryforwards totaling $136.7 million. If
expire between fiscal 2024 and 2043. The Company also had state and local tax loss carryforwards totaling $136.7 million. If
not utilized against state apportioned taxable income, certain state and local carryforwards will expire between fiscal 2024 and
not utilized against state apportioned taxable income, certain state and local carryforwards will expire between fiscal 2024 and
2042, while some will not expire due to an unlimited carryforward period. In addition, the Company had tax loss and foreign
2042, while some will not expire due to an unlimited carryforward period. In addition, the Company had tax loss and foreign
attribute carryforwards totaling $285.0 million in various tax jurisdictions throughout the world. Certain of the carryforwards
attribute carryforwards totaling $285.0 million in various tax jurisdictions throughout the world. Certain of the carryforwards
in foreign jurisdictions are offset by valuation allowances. If not utilized against taxable income, $54.9 million of these
in foreign jurisdictions are offset by valuation allowances. If not utilized against taxable income, $54.9 million of these
carryforwards will expire between fiscal 2024 and 2034, and $230.1 million, mainly related to Germany and Italy, will not
carryforwards will expire between fiscal 2024 and 2034, and $230.1 million, mainly related to Germany and Italy, will not
expire due to an unlimited carryforward period.
expire due to an unlimited carryforward period.
The Company’s practice and intention is to reinvest, with certain insignificant exceptions, the earnings of its non-U.S.
The Company’s practice and intention is to reinvest, with certain insignificant exceptions, the earnings of its non-U.S.
subsidiaries outside of the U.S., and therefore, the Company has not recorded foreign withholding taxes or deferred income
subsidiaries outside of the U.S., and therefore, the Company has not recorded foreign withholding taxes or deferred income
taxes for these earnings. The Company has estimated the net amount of unrecognized foreign withholding tax and deferred tax
taxes for these earnings. The Company has estimated the net amount of unrecognized foreign withholding tax and deferred tax
liabilities would total approximately $12.0 million if the accumulated foreign earnings were distributed; however, the actual
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.
tax cost would be dependent on circumstances existing when remittance occurs.
Note 9: Earnings Per Share
Note 9: Earnings Per Share
The components of basic and diluted earnings per share were as follows:
The components of basic and diluted earnings per share were as follows:
Years ended March 31,
Years ended March 31,
Years ended March 31,
2022
2022
2023
2023
2021
2021
Basic Earnings Per S hare:
Net earnings (loss) attributable to M odine
Basic Earnings Per S hare:
Net earnings (loss) attributable to M odine
Weighted-average shares outstanding – basic
Weighted-average shares outstanding – basic
Net earnings (loss) per share – basic
Net earnings (loss) per share – basic
Diluted Earnings Per Share:
Net earnings (loss) attributable to M odine
Diluted Earnings Per Share:
Net earnings (loss) attributable to M odine
Weighted-average shares outstanding – basic
Effect of dilutive securities
Weighted-average shares outstanding – diluted
Weighted-average shares outstanding – basic
Effect of dilutive securities
Weighted-average shares outstanding – diluted
Net earnings (loss) per share – diluted
Net earnings (loss) per share – diluted
$ 153.1
$ 153.1
$ 85.2
$ 85.2
$ (210.7)
$ (210.7)
52.3
52.3
52.0
52.0
51.3
51.3
$ 2.93
$ 2.93
$ 1.64
$ 1.64
$ (4.11)
$ (4.11)
$ 153.1
$ 153.1
$ 85.2
$ 85.2
$ (210.7)
$ (210.7)
52.3
0.5
52.8
52.3
0.5
52.8
52.0
0.5
52.5
52.0
0.5
52.5
51.3
-
51.3
51.3
-
51.3
$ 2.90
$ 2.90
$ 1.62
$ 1.62
$ (4.11)
$ (4.11)
For fiscal 2023, 2022 and 2021, the calculation of diluted earnings per share excluded 0.5 million, 0.5 million, and 1.0 million,
For fiscal 2023, 2022 and 2021, the calculation of diluted earnings per share excluded 0.5 million, 0.5 million, and 1.0 million,
stock options, respectively, because they were anti-dilutive. For fiscal 2023, 2022 and 2021, the calculation of diluted
stock options, respectively, because they were anti-dilutive. For fiscal 2023, 2022 and 2021, the calculation of diluted
earnings per share excluded 0.2 million, 0.2 million, and 0.4 million restricted stock awards, respectively, because they were
earnings per share excluded 0.2 million, 0.2 million, and 0.4 million restricted stock awards, respectively, because they were
anti-dilutive. For fiscal 2021 the total number of potentially-dilutive securities was 0.2 million. However, these securities
anti-dilutive. For fiscal 2021 the total number of potentially-dilutive securities was 0.2 million. 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.
were not included in the computation of diluted net loss per share since to do so would have decreased the loss per share.
63
63
63
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Note 10: Cash, Cash Equivalents and Restricted Cash
Note 10: Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash consisted of the following:
Cash, cash equivalents and restricted cash consisted of the following:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents
Restricted cash
Restricted cash
Total cash, cash equivalents and restricted cash
Total cash, cash equivalents and restricted cash
Restricted cash
Total cash, cash equivalents and restricted cash
March 31,
March 31,
March 31,
2023
2023
$ 67.1
$ 67.1
2022
2022
$ 45.2
$ 45.2
0.1
0.1
0.2
0.2
$ 67.2
$ 67.2
$ 45.4
$ 45.4
Restricted cash, which is reported within other current assets and other noncurrent assets in the consolidated balance sheets,
Restricted cash, which is reported within other current assets and other noncurrent assets in the consolidated balance sheets,
consists primarily of deposits for contractual guarantees or commitments required for rents, import and export duties, and
consists primarily of deposits for contractual guarantees or commitments required for rents, import and export duties, and
commercial agreements.
commercial agreements.
Note 11: Inventories
Note 11: Inventories
Inventories consisted of the following:
Inventories consisted of the following:
March 31,
March 31,
March 31,
Raw materials
Raw materials
Raw materials
Work in process
Work in process
Work in process
Finished goods
Finished goods
Total inventories
Total inventories
Total inventories
Finished goods
2023
2023
$ 218.3
$ 218.3
2022
2022
$ 186.7
$ 186.7
49.9
49.9
55.1
55.1
56.7
56.7
39.4
39.4
$ 324.9
$ 324.9
$ 281.2
$ 281.2
Note 12: Property, Plant and Equipment
Note 12: Property, Plant and Equipment
Property, plant and equipment, including depreciable lives, consisted of the following:
Property, plant and equipment, including depreciable lives, consisted of the following:
March 31,
March 31,
March 31,
Land
Machinery and equipment (3-15 years)
Buildings and improvements (10-40 years)
Land
Land
Buildings and improvements (10-40 years)
Buildings and improvements (10-40 years)
Machinery and equipment (3-15 years)
Machinery and equipment (3-15 years)
Office equipment (3-10 years)
Office equipment (3-10 years)
Construction in progress
Construction in progress
Office equipment (3-10 years)
Construction in progress
Less: accumulated depreciation
Less: accumulated depreciation
Less: accumulated depreciation
Net property, plant and equipment
Net property, plant and equipment
Net property, plant and equipment
2023
$
16.4
2023
16.4
$
2022
$
16.8
2022
16.8
$
264.0
264.0
853.3
853.3
93.6
93.6
47.5
47.5
264.6
264.6
869.4
869.4
96.2
96.2
31.2
31.2
1,274.8
1,274.8
1,278.2
1,278.2
(960.3)
(960.3)
(962.8)
(962.8)
$
$
314.5
314.5
$
$
315.4
315.4
Depreciation expense totaled $46.5 million, $46.4 million, and $60.1 million for fiscal 2023, 2022, and 2021, respectively.
Depreciation expense totaled $46.5 million, $46.4 million, and $60.1 million for fiscal 2023, 2022, and 2021, respectively.
Gains and losses related to the disposal of property, plant and equipment are recorded within SG&A expenses. For fiscal 2023
and 2021, losses related to the disposal of property, plant and equipment totaled $0.1 million and $0.7 million, respectively.
For fiscal 2022, gains related to the disposal of property, plant and equipment totaled $0.1 million.
Gains and losses related to the disposal of property, plant and equipment are recorded within SG&A expenses. For fiscal 2023
and 2021, losses related to the disposal of property, plant and equipment totaled $0.1 million and $0.7 million, respectively.
For fiscal 2022, gains related to the disposal of property, plant and equipment totaled $0.1 million.
64
64
64
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Note 13: Intangible Assets
Note 13: Intangible Assets
Intangible assets consisted of the following:
Intangible assets consisted of the following:
March 31, 2023
March 31, 2023
March 31, 2023
March 31, 2022
March 31, 2022
March 31, 2022
Gross
Gross
Net
Net
Gross
Gross
Net
Net
Carrying
Carrying
Accumulated
Accumulated
Intangible
Intangible
Carrying
Carrying
Accumulated
Accumulated
Intangible
Intangible
Value
Value
Amortization
Amortization
Assets
Assets
Value
Value
Amortization
Amortization
Assets
Assets
Trade names
Customer relationships
Customer relationships
Customer relationships
Trade names
Trade names
Acquired technology
Acquired technology
Total intangible assets
Total intangible assets
Total intangible assets
Acquired technology
$
60.3
$
60.3
$
(23.4)
$
(23.4)
$
36.9
$
36.9
$
61.2
$
61.2
$
(20.1)
$
(20.1)
$
41.1
$
41.1
50.1
50.1
22.6
22.6
(15.9)
(15.9)
(12.6)
(12.6)
34.2
34.2
10.0
10.0
50.8
50.8
23.1
23.1
(13.8)
(13.8)
(10.9)
(10.9)
37.0
37.0
12.2
12.2
$
133.0
$
133.0
$
(51.9)
$
(51.9)
$
81.1
$
81.1
$
135.1
$
135.1
$
(44.8)
$
(44.8)
$
90.3
$
90.3
The Company recorded $8.0 million, $8.4 million, and $8.5 million of amortization expense during fiscal 2023, 2022, and
The Company recorded $8.0 million, $8.4 million, and $8.5 million of amortization expense during fiscal 2023, 2022, and
2021, respectively. The Company estimates that it will record approximately $8.0 million of annual amortization expense in
2021, respectively. The Company estimates that it will record approximately $8.0 million of annual amortization expense in
fiscal 2024 through 2028.
fiscal 2024 through 2028.
Note 14: Goodwill
Note 14: Goodwill
The following table presents a roll forward of the carrying value of goodwill from March 31, 2021 to March 31, 2023. The
Company has recast the March 31, 2022 and 2021 goodwill balances to be comparable with the current segment structure.
There was no impact to the underlying reporting units as a result of the segment realignment during fiscal 2023.
The following table presents a roll forward of the carrying value of goodwill from March 31, 2021 to March 31, 2023. The
Company has recast the March 31, 2022 and 2021 goodwill balances to be comparable with the current segment structure.
There was no impact to the underlying reporting units as a result of the segment realignment during fiscal 2023.
Balance, March 31, 2021
Balance, March 31, 2021
Balance, March 31, 2021
Effect of exchange rate changes
Effect of exchange rate changes
Effect of exchange rate changes
Balance, March 31, 2022
Balance, March 31, 2022
Balance, March 31, 2022
Effect of exchange rate changes
Effect of exchange rate changes
Effect of exchange rate changes
Balance, March 31, 2023
Balance, March 31, 2023
Balance, March 31, 2023
Climate
Climate
Solutions
Solutions
$
110.5
$
(2.4)
108.1
(2.4)
105.7
$
110.5
(2.4)
108.1
(2.4)
105.7
$
Performance
Performance
Technologies
Technologies
$
60.2
$
(0.2)
60.0
(0.1)
59.9
$
60.2
(0.2)
60.0
(0.1)
59.9
$
$
Total
Total
170.7
$
(2.6)
168.1
(2.5)
165.6
$
170.7
(2.6)
168.1
(2.5)
165.6
$
The Company tests goodwill for impairment annually, as of March 31, or more frequently if events or circumstances change
The Company tests goodwill for impairment annually, as of March 31, or more frequently if events or circumstances change
that would, more likely than not, reduce the fair value of a reporting unit below its carrying value. To test goodwill for
that would, more likely than not, reduce the fair value of a reporting unit below its carrying value. To test goodwill for
impairment, the Company determines the fair value of each reporting unit based upon the present value of estimated future
impairment, the Company determines the fair value of each reporting unit based upon the present value of estimated future
cash flows and compares the fair value of each reporting unit with its carrying value. The Company’s determination of fair
cash flows and compares the fair value of each reporting unit with its carrying value. The Company’s determination of fair
value involves judgment and the use of estimates and assumptions, including assumptions regarding the revenue growth rates
value involves judgment and the use of 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.
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, 2023, the Company determined that the fair
value of each of the reporting units within its Climate Solutions and Performance Technologies segments exceeded their
respective book values.
As a result of its annual goodwill impairment tests performed as of March 31, 2023, the Company determined that the fair
value of each of the reporting units within its Climate Solutions and Performance Technologies segments exceeded their
respective book values.
At both March 31, 2023 and 2022, accumulated goodwill impairment losses totaled $40.8 million within the Performance
Technologies segment.
At both March 31, 2023 and 2022, accumulated goodwill impairment losses totaled $40.8 million within the Performance
Technologies segment.
Note 15: Product Warranties and Other Commitments
Note 15: Product Warranties and Other Commitments
Product Warranties
Product Warranties
Many of the Company’s products are covered under a warranty period ranging from one to five years. The Company records a
Many of the Company’s products are covered under a warranty period ranging from one to five years. The Company records a
liability for product warranty obligations at the time of sale and adjusts its warranty accruals if it becomes probable that
liability for product warranty obligations at the time of sale and adjusts its warranty accruals if it becomes probable that
expected claims will differ from previous estimates.
expected claims will differ from previous estimates.
65
65
65
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Changes in accrued warranty costs were as follows:
Changes in accrued warranty costs were as follows:
Beginning balance
Beginning balance
Beginning balance
Warranties recorded at time of sale
Warranties recorded at time of sale
Warranties recorded at time of sale
Settlements
Reclassified from held for sale
Adjustments to pre-existing warranties
Adjustments to pre-existing warranties
Adjustments to pre-existing warranties
Settlements
Settlements
Reclassified from held for sale
Reclassified from held for sale
Effect of exchange rate changes
Effect of exchange rate changes
Effect of exchange rate changes
Ending balance
Ending balance
Ending balance
Years ended March 31,
Years ended March 31,
Years ended March 31,
2022
2023
$
$
5.2
6.3
2023
6.3
$
2022
5.2
$
5.4
5.4
0.9
0.9
(5.6)
(5.6)
-
-
(0.1)
(0.1)
5.5
5.5
(1.3)
(1.3)
(4.4)
(4.4)
1.3
1.3
-
-
$
$
6.9
6.9
$
$
6.3
6.3
Indemnification Agreements
Indemnification Agreements
From time to time, the Company provides indemnification agreements related to the sale or purchase of an entity or facility.
From time to time, the Company provides indemnification agreements related to the sale or purchase of an entity or facility.
These indemnification agreements cover customary representations and warranties typically provided in conjunction with such
These indemnification agreements cover customary representations and warranties typically provided in conjunction with such
transactions, including income, sales, excise or other tax matters, environmental matters and other third-party claims. The
transactions, including income, sales, excise or other tax matters, environmental matters and other third-party claims. The
indemnification periods provided generally range from less than one year to fifteen years. In addition, standard
indemnification periods provided generally range from less than one year to fifteen years. In addition, standard
indemnification provisions reside in many commercial agreements to which the Company is a party and relate to responsibility
indemnification provisions reside in many commercial agreements to which the Company is a party and relate to responsibility
in the event of potential third-party claims. The fair value of the Company’s outstanding indemnification obligations at March
in the event of potential third-party claims. The fair value of the Company’s outstanding indemnification obligations at March
31, 2023 was not material.
31, 2023 was not material.
Commitments
Commitments
At March 31, 2023, the Company had capital expenditure commitments of $25.3 million. Significant commitments include
At March 31, 2023, the Company had capital expenditure commitments of $25.3 million. Significant commitments include
equipment expenditures to support expanding manufacturing capacity in the Climate Solutions segment and tooling and
equipment expenditures to support expanding manufacturing capacity in the Climate Solutions segment and tooling and
equipment expenditures for new and renewal programs with vehicular customers in the Performance Technologies segment.
equipment expenditures for new and renewal programs with vehicular customers in the Performance Technologies segment.
The Company utilizes inventory arrangements with certain vendors in the normal course of business under which the vendors
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
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
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
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
inventory against damage and/or theft. This inventory is included within the Company’s consolidated balance sheets as raw
materials inventory.
materials inventory.
Note 16: Leases
Note 16: Leases
The Company determines if an arrangement is a lease at contract inception. The lease term begins upon lease commencement,
The Company determines if an arrangement is a lease at contract inception. The lease term begins upon lease commencement,
which is when the Company takes possession of the asset, and may include options to extend or terminate the lease when it is
which is when the Company takes possession of the asset, and may include options to extend or terminate the lease when it is
reasonably certain that such options will be exercised. The Company uses the lease term within its determination of the
reasonably certain that such options will be exercised. The Company uses the lease term within its determination of the
appropriate lease classification, either as an operating lease or as a finance lease, and to calculate straight-line lease expense
appropriate lease classification, either as an operating lease or as a finance lease, and to calculate straight-line lease expense
for its operating leases.
for its operating leases.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the
Company’s obligation to make lease payments arising from the lease. The Company recognizes ROU assets and lease
Company’s obligation to make lease payments arising from the lease. The Company recognizes ROU assets and lease
liabilities at the lease commencement date, based upon the present value of lease payments over the lease term. As its lease
liabilities at the lease commencement date, based upon the present value of lease payments over the lease term. As its lease
agreements typically do not provide an implicit interest rate, the Company primarily uses an incremental borrowing rate to
agreements typically do not provide an implicit interest rate, the Company primarily uses an incremental borrowing rate to
calculate the ROU asset and lease liability. In determining the incremental borrowing rate, the Company considers its current
calculate the ROU asset and lease liability. In determining the incremental borrowing rate, the Company considers its current
collateralized borrowing rate, the term of the lease, and the economic environment where the lease activity is concentrated.
collateralized borrowing rate, the term of the lease, and the economic environment where the lease activity is concentrated.
The Company believes this method effectively estimates a borrowing rate that it could obtain for a debt instrument with
The Company believes this method effectively estimates a borrowing rate that it could obtain for a debt instrument with
similar terms as the lease agreement.
similar terms as the lease agreement.
Based upon its accounting policy, the Company does not separate lease and non-lease components for any asset class. In
Based upon its accounting policy, the Company does not separate lease and non-lease components for any asset class. In
addition, the Company does not record short-term leases (i.e. leases with an initial term of 12 months or less) on its
addition, the Company does not record short-term leases (i.e. leases with an initial term of 12 months or less) on its
consolidated balance sheets.
consolidated balance sheets.
Certain leases require the Company to pay taxes, insurance, maintenance, and other operating expenses associated with the
Certain leases require the Company to pay taxes, insurance, maintenance, and other operating expenses associated with the
leased asset. Such amounts are not included in the measurement of the lease liability to the extent they are variable in nature.
leased asset. Such amounts are not included in the measurement of the lease liability to the extent they are variable in nature.
66
66
66
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
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.
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
The Company’s most significant leases represent leases of real estate, such as manufacturing facilities, warehouses, and
offices. In addition, the Company leases manufacturing and IT equipment and vehicles. The Company’s most significant
offices. In addition, the Company leases manufacturing and IT equipment and vehicles. The Company’s most significant
leases have remaining lease terms of 1 to 11 years. Certain leases contain renewal options for varying periods, which are at
leases have remaining lease terms of 1 to 11 years. Certain leases contain renewal options for varying periods, which are at
the Company’s discretion. If reasonably certain of exercise, the Company includes the renewal periods within the calculation
the Company’s discretion. If reasonably certain of exercise, the Company includes the renewal periods within the calculation
of ROU assets and lease liabilities. The Company’s lease agreements do not contain material residual value guarantees or
of ROU assets and lease liabilities. The Company’s lease agreements do not contain material residual value guarantees or
material restrictive covenants.
material restrictive covenants.
Lease Assets and Liabilities
The following table provides a summary of leases recorded on the consolidated balance sheets.
Lease Assets and Liabilities
The following table provides a summary of leases recorded on the consolidated balance sheets.
Lease Assets
Lease Assets
Lease Assets
Balance Sheet Location
Balance Sheet Location
March 31, 2023 March 31, 2022
March 31, 2023 March 31, 2022
Other noncurrent assets
Operating lease ROU assets
Other noncurrent assets
Property, plant and equipment - net
Finance lease ROU assets (a) Property, plant and equipment - net
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
$
59.1
$
7.1
59.1
7.1
$
52.1
$
7.7
52.1
7.7
Lease Liabilities
Lease Liabilities
Lease Liabilities
Operating lease liabilities
Operating 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
Finance lease liabilities
Finance lease liabilities
Other current liabilities
Other current liabilities
Other current liabilities
Other noncurrent liabilities
Other noncurrent liabilities
Other noncurrent liabilities
Long-term debt - current portion
Long-term debt - current portion
Long-term debt - current portion
Long-term debt
Long-term debt
Long-term debt
$
11.8
$
48.9
0.4
2.3
11.8
48.9
0.4
2.3
$
12.7
$
41.2
0.4
2.8
12.7
41.2
0.4
2.8
(a) Finance lease ROU assets were recorded net of accumulated amortization of $3.2 million and $2.8 million as of
(a) Finance lease ROU assets were recorded net of accumulated amortization of $3.2 million and $2.8 million as of
March 31, 2023 and 2022, respectively.
March 31, 2023 and 2022, respectively.
Components of Lease Expense
The Company records operating lease expense as either cost of sales or SG&A expenses within its consolidated statements of
operations, depending upon the nature and use of the ROU assets. The Company records finance lease expense as depreciation
expense within cost of sales or SG&A expenses, depending upon the nature and use of the ROU assets, and as interest expense
in its consolidated statements of operations.
Components of Lease Expense
The Company records operating lease expense as either cost of sales or SG&A expenses within its consolidated statements of
operations, depending upon the nature and use of the ROU assets. The Company records finance lease expense as depreciation
expense within cost of sales or SG&A expenses, depending upon the nature and use of the ROU assets, and as interest expense
in its consolidated statements of operations.
The components of lease expense were as follows:
The components of lease expense were as follows:
Operating lease expense (a)
Operating lease expense (a)
Operating lease expense (a)
Finance lease expense:
Finance lease expense:
Finance lease expense:
Depreciation of ROU assets
Depreciation of ROU assets
Depreciation of ROU assets
Interest on lease liabilities
Interest on lease liabilities
Interest on lease liabilities
Total lease expense
Total lease expense
Total lease expense
2023
21.9
$
$
Years ended March 31,
2023
21.9
Years ended March 31,
Years ended March 31,
2022
20.0
$
2022
20.0
$
2021
19.5
$
2021
19.5
$
0.5
0.1
22.5
$
0.5
0.1
22.5
$
0.5
0.2
20.7
$
0.5
0.2
20.7
$
0.5
0.2
20.2
$
0.5
0.2
20.2
$
(a) In fiscal 2023, 2022, and 2021 operating lease expense included short-term lease expense of $5.7 million, $4.2
(a) In fiscal 2023, 2022, and 2021 operating lease expense included short-term lease expense of $5.7 million, $4.2
million, and $3.5 million respectively. Variable lease expense was not significant.
million, and $3.5 million respectively. Variable lease expense was not significant.
67
67
67
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
(In millions, except per share amounts)
(In millions, except per share amounts)
(In millions, except per share amounts)
(In millions, except per share amounts)
Supplemental Cash Flow Information
Supplemental Cash Flow Information
Supplemental Cash Flow Information
Supplemental Cash Flow Information
Supplemental Cash Flow Information
Supplemental Cash Flow Information
Supplemental Cash Flow Information
Years ended March 31,
Years ended March 31,
Years ended March 31,
Years ended March 31,
Years ended March 31,
Years ended March 31,
Years ended March 31,
Years ended March 31,
2022
2023
2022
2022
2023
2023
2023
2022
2022
2023
2022
2022
2023
2023
2021
2021
2021
2021
2021
2021
2021
Cash paid for amounts included in the measurement of lease liabilities:
Cash paid for amounts included in the measurement of lease liabilities:
Cash paid for amounts included in the measurement of lease liabilities:
Cash paid for amounts included in the measurement of lease liabilities:
Cash paid for amounts included in the measurement of lease liabilities:
Cash paid for amounts included in the measurement of lease liabilities:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
Operating cash flows for operating leases
Operating cash flows for operating leases
Operating cash flows for operating leases
Operating cash flows for operating leases
Operating cash flows for operating leases
Operating cash flows for operating leases
Financing cash flows for finance leases
Financing cash flows for finance leases
Financing cash flows for finance leases
Financing cash flows for finance leases
Financing cash flows for finance leases
Financing cash flows for finance leases
Financing cash flows for finance leases
ROU assets obtained in exchange for lease liabilities:
ROU assets obtained in exchange for lease liabilities:
ROU assets obtained in exchange for lease liabilities:
ROU assets obtained in exchange for lease liabilities:
ROU assets obtained in exchange for lease liabilities:
ROU assets obtained in exchange for lease liabilities:
ROU assets obtained in exchange for lease liabilities:
Operating leases
Operating leases
Operating leases
Operating leases
Operating leases
Operating leases
Operating leases
$
$
14.6
$
$
$
$
$
14.6
14.6
14.6
14.6
14.6
14.6
$
$
15.7
$
$
$
$
$
15.7
15.7
15.7
15.7
15.7
15.7
$
$
14.2
$
$
14.2
$
$
$
14.2
14.2
14.2
14.2
14.2
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.6
0.6
0.6
0.6
0.6
0.6
0.6
0.6
0.6
0.6
0.6
0.6
0.6
0.6
$
$
$
$
$
$
21.2
21.2
$
-
-
21.2
21.2
21.2
21.2
21.2
-
-
-
-
-
$
$
7.8
$
7.8
7.8
$
$
$
7.8
7.8
7.8
$
7.8
0.1
0.1
0.1
0.1
0.1
0.1
0.1
$
$
9.8
$
9.8
9.8
9.8
$
$
$
9.8
9.8
$
9.8
0.1
0.1
0.1
0.1
0.1
0.1
0.1
Finance leases
Finance leases
Finance leases
Finance leases
Finance leases
Finance leases
Finance leases
Lease Term and Discount Rates
Lease Term and Discount Rates
Lease Term and Discount Rates
Lease Term and Discount Rates
Lease Term and Discount Rates
Lease Term and Discount Rates
Lease Term and Discount Rates
Weighted-average remaining lease term:
Weighted-average remaining lease term:
Weighted-average remaining lease term:
Weighted-average remaining lease term:
Weighted-average remaining lease term:
Weighted-average remaining lease term:
Weighted-average remaining lease term:
Operating leases
Operating leases
Operating leases
Operating leases
Operating leases
Operating leases
Operating leases
Finance leases
Finance leases
Finance leases
Finance leases
Finance leases
Finance leases
Finance leases
Weighted-average discount rate:
Weighted-average discount rate:
Weighted-average discount rate:
Weighted-average discount rate:
Weighted-average discount rate:
Weighted-average discount rate:
Weighted-average discount rate:
Operating leases
Operating leases
Operating leases
Operating leases
Operating leases
Operating leases
Operating leases
Finance leases
Finance leases
Finance leases
Finance leases
Finance leases
Finance leases
Finance leases
March 31, 2023 March 31, 2022
March 31, 2023 March 31, 2022
March 31, 2023 March 31, 2022
March 31, 2023 March 31, 2022
March 31, 2023 March 31, 2022
March 31, 2023 March 31, 2022
March 31, 2023 March 31, 2022
March 31, 2023 March 31, 2022
8.3 years
8.3 years
8.3 years
8.3 years
8.3 years
8.3 years
8.3 years
8.5 years
8.5 years
8.5 years
8.5 years
8.5 years
8.5 years
8.5 years
5.8 years
5.8 years
5.8 years
5.8 years
5.8 years
5.8 years
5.8 years
6.8 years
6.8 years
6.8 years
6.8 years
6.8 years
6.8 years
6.8 years
3.7%
3.7%
3.7%
3.7%
3.7%
3.7%
3.7%
4.6%
4.6%
4.6%
4.6%
4.6%
4.6%
4.6%
3.4%
3.4%
3.4%
3.4%
3.4%
3.4%
3.4%
4.6%
4.6%
4.6%
4.6%
4.6%
4.6%
4.6%
Maturity of Lease Liabilities
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
Future minimum rental payments for leases with initial non-cancellable lease terms in excess of one year were as follows at
March 31, 2023:
March 31, 2023:
Maturity of Lease Liabilities
Maturity of Lease Liabilities
Maturity of Lease Liabilities
Maturity of Lease Liabilities
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
Future minimum rental payments for leases with initial non-cancellable lease terms in excess of one year were as follows at
Future minimum rental payments for leases with initial non-cancellable lease terms in excess of one year were as follows at
Future minimum rental payments for leases with initial non-cancellable lease terms in excess of one year were as follows at
Future minimum rental payments for leases with initial non-cancellable lease terms in excess of one year were as follows at
March 31, 2023:
March 31, 2023:
March 31, 2023:
March 31, 2023:
March 31, 2023:
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
2024
2024
2024
2024
2024
2024
2024
2025
2025
2025
2025
2025
2025
2025
2026
2026
2026
2026
2026
2026
2026
2027
2027
2027
2027
2027
2027
2027
2028
2028
2028
2028
2028
2028
2028
2029 and beyond
2029 and beyond
2029 and beyond
2029 and beyond
2029 and beyond
2029 and beyond
2029 and beyond
Total lease payments
Total lease payments
Total lease payments
Total lease payments
Total lease payments
Total lease payments
Total lease payments
Less: Interest
Less: Interest
Less: Interest
Less: Interest
Less: Interest
Less: Interest
Less: Interest
Present value of lease liabilities
Present value of lease liabilities
Present value of lease liabilities
Present value of lease liabilities
Present value of lease liabilities
Present value of lease liabilities
Present value of lease liabilities
Operating Leases
Operating Leases
Operating Leases
Operating Leases
Operating Leases
Operating Leases
Operating Leases
Operating Leases
$
13.8
13.8
$
$
13.8
$
13.8
$
$
13.8
$
13.8
13.8
Finance Leases
Finance Leases
$
$
Finance Leases
Finance Leases
Finance Leases
Finance Leases
Finance Leases
Finance Leases
$
0.5
0.5
$
0.5
$
0.5
$
0.5
$
0.5
0.5
11.5
11.5
11.5
11.5
11.5
11.5
11.5
10.1
10.1
10.1
10.1
10.1
10.1
10.1
8.4
8.4
8.4
8.4
8.4
8.4
8.4
7.3
7.3
7.3
7.3
7.3
7.3
7.3
19.2
19.2
19.2
19.2
19.2
19.2
19.2
70.3
70.3
70.3
70.3
70.3
70.3
70.3
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.6
0.6
0.6
0.6
0.6
0.6
0.6
3.1
3.1
3.1
3.1
3.1
3.1
3.1
(9.6)
(9.6)
$
$
$
$
60.7
60.7
$
$
$
(9.6)
(9.6)
(9.6)
(9.6)
(9.6)
60.7
60.7
60.7
60.7
60.7
(0.4)
(0.4)
(0.4)
(0.4)
(0.4)
(0.4)
(0.4)
$
$
2.7
2.7
$
$
2.7
2.7
$
2.7
2.7
2.7
$
$
Note 17: Indebtedness
Note 17: Indebtedness
Note 17: Indebtedness
Note 17: Indebtedness
Note 17: Indebtedness
Note 17: Indebtedness
Note 17: Indebtedness
In October 2022, the Company executed an amended and restated credit agreement with a syndicate of banks that provides for
In October 2022, the Company executed an amended and restated credit agreement with a syndicate of banks that provides for
In October 2022, the Company executed an amended and restated credit agreement with a syndicate of banks that provides for
In October 2022, the Company executed an amended and restated credit agreement with a syndicate of banks that provides for
In October 2022, the Company executed an amended and restated credit agreement with a syndicate of banks that provides for
In October 2022, the Company executed an amended and restated credit agreement with a syndicate of banks that provides for
In October 2022, the Company executed an amended and restated credit agreement with a syndicate of banks that provides for
a multi-currency $275.0 million revolving credit facility and U.S. dollar- and euro-denominated term loan facilities maturing
a multi-currency $275.0 million revolving credit facility and U.S. dollar- and euro-denominated term loan facilities maturing
a multi-currency $275.0 million revolving credit facility and U.S. dollar- and euro-denominated term loan facilities maturing
a multi-currency $275.0 million revolving credit facility and U.S. dollar- and euro-denominated term loan facilities maturing
a multi-currency $275.0 million revolving credit facility and U.S. dollar- and euro-denominated term loan facilities maturing
a multi-currency $275.0 million revolving credit facility and U.S. dollar- and euro-denominated term loan facilities maturing
a multi-currency $275.0 million revolving credit facility and U.S. dollar- and euro-denominated term loan facilities maturing
in October 2027. In addition, the credit agreement provides for shorter-duration swingline loans. This credit agreement
in October 2027. In addition, the credit agreement provides for shorter-duration swingline loans. This credit agreement
in October 2027. In addition, the credit agreement provides for shorter-duration swingline loans. This credit agreement
in October 2027. In addition, the credit agreement provides for shorter-duration swingline loans. This credit agreement
in October 2027. In addition, the credit agreement provides for shorter-duration swingline loans. This credit agreement
in October 2027. In addition, the credit agreement provides for shorter-duration swingline loans. This credit agreement
in October 2027. In addition, the credit agreement provides for shorter-duration swingline loans. This credit agreement
modified the Company’s then existing $250.0 million revolver and term loan facilities, which would have matured in June
modified the Company’s then existing $250.0 million revolver and term loan facilities, which would have matured in June
modified the Company’s then existing $250.0 million revolver and term loan facilities, which would have matured in June
modified the Company’s then existing $250.0 million revolver and term loan facilities, which would have matured in June
modified the Company’s then existing $250.0 million revolver and term loan facilities, which would have matured in June
modified the Company’s then existing $250.0 million revolver and term loan facilities, which would have matured in June
modified the Company’s then existing $250.0 million revolver and term loan facilities, which would have matured in June
2024.
2024.
2024.
2024.
2024.
2024.
2024.
In connection with the credit agreement modification during fiscal 2023, the Company incurred $2.2 million of debt issuance
In connection with the credit agreement modification during fiscal 2023, the Company incurred $2.2 million of debt issuance
In connection with the credit agreement modification during fiscal 2023, the Company incurred $2.2 million of debt issuance
In connection with the credit agreement modification during fiscal 2023, the Company incurred $2.2 million of debt issuance
In connection with the credit agreement modification during fiscal 2023, the Company incurred $2.2 million of debt issuance
In connection with the credit agreement modification during fiscal 2023, the Company incurred $2.2 million of debt issuance
In connection with the credit agreement modification during fiscal 2023, the Company incurred $2.2 million of debt issuance
costs. Of these costs, the Company deferred $1.5 million, which will be amortized as interest expense over the term of the
costs. Of these costs, the Company deferred $1.5 million, which will be amortized as interest expense over the term of the
costs. Of these costs, the Company deferred $1.5 million, which will be amortized as interest expense over the term of the
costs. Of these costs, the Company deferred $1.5 million, which will be amortized as interest expense over the term of the
costs. Of these costs, the Company deferred $1.5 million, which will be amortized as interest expense over the term of the
costs. Of these costs, the Company deferred $1.5 million, which will be amortized as interest expense over the term of the
costs. Of these costs, the Company deferred $1.5 million, which will be amortized as interest expense over the term of the
debt, and recorded $0.7 million as interest expense on the consolidated statement of operations. The Company paid $0.6
debt, and recorded $0.7 million as interest expense on the consolidated statement of operations. The Company paid $0.6
debt, and recorded $0.7 million as interest expense on the consolidated statement of operations. The Company paid $0.6
debt, and recorded $0.7 million as interest expense on the consolidated statement of operations. The Company paid $0.6
debt, and recorded $0.7 million as interest expense on the consolidated statement of operations. The Company paid $0.6
debt, and recorded $0.7 million as interest expense on the consolidated statement of operations. The Company paid $0.6
debt, and recorded $0.7 million as interest expense on the consolidated statement of operations. The Company paid $0.6
68
68
68
68
68
68
68
68
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
(In millions, except per share amounts)
million for debt issuance costs during fiscal 2023 and the remaining issuance costs were added to the new term loan principal
at the time of the modification.
million for debt issuance costs during fiscal 2023 and the remaining issuance costs were added to the new term loan principal
million for debt issuance costs during fiscal 2023 and the remaining issuance costs were added to the new term loan principal
at the time of the modification.
at the time of the modification.
million for debt issuance costs during fiscal 2023 and the remaining issuance costs were added to the new term loan principal
at the time of the modification.
Long-term debt consisted of the following:
Long-term debt consisted of the following:
Long-term debt consisted of the following:
Long-term debt consisted of the following:
Fiscal year
of maturity March 31, 2023 March 31, 2022
Fiscal year
Fiscal year
of maturity March 31, 2023 March 31, 2022
of maturity March 31, 2023 March 31, 2022
Fiscal year
Fiscal year
of maturity March 31, 2023 March 31, 2022
of maturity March 31, 2023 March 31, 2022
Term loans
Term loans
Term loans
Term loans
Term loans
2028
2028
2028
2028
$
$
$
215.7
215.7
215.7
$
$
215.7
$
$
163.7
163.7
163.7
$
163.7
5.9% Senior Notes
5.9% Senior Notes
5.9% Senior Notes
5.9% Senior Notes
5.9% Senior Notes
5.8% Senior Notes
5.8% Senior Notes
5.8% Senior Notes
5.8% Senior Notes
5.8% Senior Notes
Revolving credit facility
Revolving credit facility
Revolving credit facility
Revolving credit facility
Revolving credit facility
2029
2029
2029
2029
2027
2027
2027
2027
2028
2028
2028
2028
Other (a)
Other (a)
Other (a)
Other (a)
Other (a)
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
33.3
33.3
33.3
33.3
41.7
41.7
41.7
41.7
-
-
-
-
64.9
64.9
64.9
64.9
2.7
2.7
2.7
2.7
3.2
3.2
3.2
3.2
351.7
351.7
351.7
351.7
373.5
373.5
373.5
373.5
(19.7)
(19.7)
(19.7)
(19.7)
(21.7)
(21.7)
(21.7)
(21.7)
Less: current portion
Less: current portion
Less: current portion
Less: current portion
Less: current portion
Less: unamortized debt issuance costs
Less: unamortized debt issuance costs
Less: unamortized debt issuance costs
Total long-term debt
Total long-term debt
Total long-term debt
Less: unamortized debt issuance costs
Less: unamortized debt issuance costs
Total long-term debt
Total long-term debt
(2.7)
(2.7)
(2.7)
$
$
$
329.3
329.3
329.3
(2.7)
329.3
$
(3.4)
(3.4)
(3.4)
$
$
$
348.4
348.4
348.4
(3.4)
348.4
$
(a) Other long-term debt primarily includes finance lease obligations.
(a) Other long-term debt primarily includes finance lease obligations.
(a) Other long-term debt primarily includes finance lease obligations.
(a) Other long-term debt primarily includes finance lease obligations.
Long-term debt, including the current portion of long-term debt, matures as follows:
Long-term debt, including the current portion of long-term debt, matures as follows:
Long-term debt, including the current portion of long-term debt, matures as follows:
Long-term debt, including the current portion of long-term debt, matures as follows:
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
2024
2024
2024
2024
2025
2025
2025
2025
2026
2026
2026
2026
2027
2027
2027
2027
2028
2028
2028
2028
2029 and beyond
2029 and beyond
2029 and beyond
2029 and beyond
Total
Total
Total
Total
$ 19.7
19.7
44.7
44.7
197.4
25.5
$ 351.7
$ 19.7
$ 19.7
19.7
19.7
44.7
44.7
44.7
44.7
197.4
197.4
25.5
25.5
$ 351.7
$ 351.7
$ 19.7
19.7
44.7
44.7
197.4
25.5
$ 351.7
Borrowings under the revolving credit, swingline and term loan facilities bear interest at a variable rate, based upon the
Borrowings under the revolving credit, swingline and term loan facilities bear interest at a variable rate, based upon the
Borrowings under the revolving credit, swingline and term loan facilities bear interest at a variable rate, based upon the
Borrowings under the revolving credit, swingline and term loan facilities bear interest at a variable rate, based upon the
applicable reference rate and including a margin percentage dependent upon the Company’s leverage ratio, as described
applicable reference rate and including a margin percentage dependent upon the Company’s leverage ratio, as described
applicable reference rate and including a margin percentage dependent upon the Company’s leverage ratio, as described
applicable reference rate and including a margin percentage dependent upon the Company’s leverage ratio, as described
below. At March 31, 2023, the weighted-average interest rate for the term loans was 6.0 percent. Based upon the terms of the
below. At March 31, 2023, the weighted-average interest rate for the term loans was 6.0 percent. Based upon the terms of the
below. At March 31, 2023, the weighted-average interest rate for the term loans was 6.0 percent. Based upon the terms of the
below. At March 31, 2023, the weighted-average interest rate for the term loans was 6.0 percent. Based upon the terms of the
credit agreement, the Company classifies borrowings under its revolving credit and swingline facilities as long-term and short-
credit agreement, the Company classifies borrowings under its revolving credit and swingline facilities as long-term and short-
credit agreement, the Company classifies borrowings under its revolving credit and swingline facilities as long-term and short-
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.
term debt, respectively, on its consolidated balance sheets.
term debt, respectively, on its consolidated balance sheets.
term debt, respectively, on its consolidated balance sheets.
At March 31, 2023, the Company had no outstanding borrowings related to the revolving credit and swingling facilities and
At March 31, 2023, the Company had no outstanding borrowings related to the revolving credit and swingling facilities and
At March 31, 2023, the Company had no outstanding borrowings related to the revolving credit and swingling facilities and
domestic letters of credit totaled $5.4 million. As a result, available borrowing capacity under the Company’s revolving credit
domestic letters of credit totaled $5.4 million. As a result, available borrowing capacity under the Company’s revolving credit
domestic letters of credit totaled $5.4 million. As a result, available borrowing capacity under the Company’s revolving credit
facility was $269.6 million as of March 31, 2023. At March 31, 2022, the Company’s borrowings under its revolving credit
facility was $269.6 million as of March 31, 2023. At March 31, 2022, the Company’s borrowings under its revolving credit
facility was $269.6 million as of March 31, 2023. 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 swingline facilities totaled $64.9 million and $7.0 million, respectively.
and swingline facilities totaled $64.9 million and $7.0 million, respectively.
At March 31, 2023, the Company had no outstanding borrowings related to the revolving credit and swingling facilities and
domestic letters of credit totaled $5.4 million. As a result, available borrowing capacity under the Company’s revolving credit
facility was $269.6 million as of March 31, 2023. At March 31, 2022, the Company’s borrowings under its revolving credit
and swingline facilities totaled $64.9 million and $7.0 million, respectively.
The Company also maintains credit agreements for its foreign subsidiaries. The outstanding short-term borrowings related to
The Company also maintains credit agreements for its foreign subsidiaries. The outstanding short-term borrowings related to
The Company also maintains credit agreements for its foreign subsidiaries. The outstanding short-term borrowings related to
these foreign credit agreements totaled $3.7 million and $0.7 million at March 31, 2023 and March 31, 2022, respectively.
these foreign credit agreements totaled $3.7 million and $0.7 million at March 31, 2023 and March 31, 2022, respectively.
these foreign credit agreements totaled $3.7 million and $0.7 million at March 31, 2023 and March 31, 2022, respectively.
The Company also maintains credit agreements for its foreign subsidiaries. The outstanding short-term borrowings related to
these foreign credit agreements totaled $3.7 million and $0.7 million at March 31, 2023 and March 31, 2022, respectively.
Indebtedness under the Company’s credit agreement and Senior Note agreements is secured by liens on substantially all
Indebtedness under the Company’s credit agreement and Senior Note agreements is secured by liens on substantially all
Indebtedness under the Company’s credit agreement and Senior Note agreements is secured by liens on substantially all
Indebtedness under the Company’s credit agreement and Senior Note agreements is secured by liens on substantially all
domestic assets. These agreements further require compliance with various covenants that may limit the Company’s ability to
domestic assets. These agreements further require compliance with various covenants that may limit the Company’s ability to
domestic assets. These agreements further require compliance with various covenants that may limit the Company’s ability to
domestic assets. These agreements further require compliance with various covenants that may limit the Company’s ability to
incur additional indebtedness; grant liens; make investments, loans, or guarantees; engage in certain transactions with
incur additional indebtedness; grant liens; make investments, loans, or guarantees; engage in certain transactions with
incur additional indebtedness; grant liens; make investments, loans, or guarantees; engage in certain transactions with
incur additional indebtedness; grant liens; make investments, loans, or guarantees; engage in certain transactions with
affiliates; and make restricted payments including dividends. In addition, the agreements may require prepayment in the event
affiliates; and make restricted payments including dividends. In addition, the agreements may require prepayment in the event
affiliates; and make restricted payments including dividends. In addition, the agreements may require prepayment in the event
affiliates; and make restricted payments including dividends. In addition, the agreements may require prepayment in the event
of certain asset sales.
of certain asset sales.
of certain asset sales.
of certain asset sales.
69
69
69
69
69
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Financial covenants within its credit agreements require the Company to limit its consolidated indebtedness, less a portion of
Financial covenants within its credit agreements require 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
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
earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”.) The
Company must also maintain a ratio of Adjusted EBITDA of at least three times consolidated interest expense. As of March
Company must also maintain a ratio of Adjusted EBITDA of at least three times consolidated interest expense. As of March
31, 2023, the Company was in compliance with its debt covenants.
31, 2023, the Company was in compliance with its debt covenants.
The Company estimates the fair value of long-term debt using discounted future cash flows at rates offered to the Company for
The Company estimates the fair value of long-term debt using discounted future cash flows at rates offered to the Company for
similar debt instruments of comparable maturities. As of March 31, 2023 and 2022, the carrying value of the Company’s long-
similar debt instruments of comparable maturities. As of March 31, 2023 and 2022, the carrying value of the Company’s long-
term debt approximated fair value, with the exception of the Senior Notes, which had an aggregate fair value of approximately
term debt approximated fair value, with the exception of the Senior Notes, which had an aggregate fair value of approximately
$125.9 million and $138.9 million, respectively. The fair value of the Company’s long-term debt is categorized as Level 2
$125.9 million and $138.9 million, respectively. The fair value of the Company’s long-term debt is categorized as Level 2
within the fair value hierarchy. Refer to Note 4 for the definition of a Level 2 fair value measurement.
within the fair value hierarchy. Refer to Note 4 for the definition of a Level 2 fair value measurement.
Note 18: Pension and Employee Benefit Plans
Note 18: Pension and Employee Benefit Plans
Defined Contribution Employee Benefit Plans
Defined Contribution Employee Benefit Plans
The Company maintains a domestic 401(k) plan that allows employees to contribute a portion of their salary to help them save
The Company maintains a domestic 401(k) plan that allows employees to contribute a portion of their salary to help them save
for retirement. The Company currently matches employee contributions up to 4.5 percent of their compensation. During
for retirement. The Company currently matches employee contributions up to 4.5 percent of their compensation. During
fiscal 2021, as part of its response to the negative impacts of the COVID-19 pandemic, the Company suspended matching
fiscal 2021, as part of its response to the negative impacts of the COVID-19 pandemic, the Company suspended matching
employee contributions for part of the year. The Company’s expense for defined contribution employee benefit plans during
employee contributions for part of the year. The Company’s expense for defined contribution employee benefit plans during
fiscal 2023, 2022, and 2021 was $6.9 million, $6.4 million, and $3.0 million, respectively.
fiscal 2023, 2022, and 2021 was $6.9 million, $6.4 million, and $3.0 million, respectively.
In addition, the Company maintains non-qualified deferred compensation plans for eligible employees, and various non-U.S.
In addition, the Company maintains non-qualified deferred compensation plans for eligible employees, and various non-U.S.
subsidiaries have government-required defined contribution plans in place, under which they contribute a percentage of
subsidiaries have government-required defined contribution plans in place, under which they contribute a percentage of
employee earnings into accounts, consistent with local laws.
employee earnings into accounts, consistent with local laws.
Statutory Termination Plans
Certain non-U.S. subsidiaries have statutory termination indemnity plans covering eligible employees. The benefits under
these plans are based upon years of service and final average compensation levels or a monthly retirement benefit amount.
These programs are substantially unfunded in accordance with local laws.
Statutory Termination Plans
Certain non-U.S. subsidiaries have statutory termination indemnity plans covering eligible employees. The benefits under
these plans are based upon years of service and final average compensation levels or a monthly retirement benefit amount.
These programs are substantially unfunded in accordance with local laws.
Pension Plans
Pension Plans
The Company maintains non-contributory defined benefit pension plans that cover eligible domestic employees. These plans
The Company maintains non-contributory defined benefit pension plans that cover eligible domestic employees. These plans
are closed to new participants. The primary domestic plans cover most domestic employees hired on or before December 31,
are closed to new participants. The primary domestic plans cover most domestic employees hired on or before December 31,
2003 and provide benefits based primarily upon years of service and average compensation for salaried and some hourly
2003 and provide benefits based primarily upon years of service and average compensation for salaried and some hourly
employees. Benefits for other hourly employees are based upon a monthly retirement benefit amount. Currently, the
employees. Benefits for other hourly employees are based upon a monthly retirement benefit amount. Currently, the
Company’s domestic pension plans do not include increases in annual earnings or future service in calculating the average
Company’s domestic pension plans do not include increases in annual earnings or future service in calculating the average
annual earnings and years of credited service under the pension plan benefit formula. Certain non-U.S. subsidiaries of the
annual earnings and years of credited service under the pension plan benefit formula. Certain non-U.S. subsidiaries of the
Company also have legacy defined benefit plans which cover a smaller number of active employees and are substantially
Company also have legacy defined benefit plans which cover a smaller number of active employees and are substantially
unfunded. The primary non-U.S. plans are maintained in Germany and Italy and are closed to new participants. The
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
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.
during fiscal 2022; see Note 1 for additional information.
In connection with funding relief provisions within the American Rescue Plan Act of 2021, the Company did not make cash
In connection with funding relief provisions within the American Rescue Plan Act of 2021, the Company did not make cash
contributions to its U.S. pension plans during fiscal 2023. The Company contributed $3.5 million and $19.3 million to its U.S.
contributions to its U.S. pension plans during fiscal 2023. The Company contributed $3.5 million and $19.3 million to its U.S.
pension plans during fiscal 2022 and 2021, respectively. In addition, the Company contributed $1.5 million, $1.5 million, and
pension plans during fiscal 2022 and 2021, respectively. In addition, the Company contributed $1.5 million, $1.5 million, and
$2.2 million to its non-U.S. pension plans during fiscal 2023, 2022, and 2021, respectively. These contributions are reported
$2.2 million to its non-U.S. pension plans during fiscal 2023, 2022, and 2021, respectively. These contributions are reported
in the change in other liabilities in the consolidated statements of cash flows.
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 2023, 2022, and 2021 was $0.3 million.
Postretirement Plans
The Company provides selected healthcare and life insurance benefits for eligible retired domestic employees. The Company
periodically amends these unfunded plans to change the contribution rate of retirees and the amounts and forms of coverage.
An annual limit on the Company’s cost is defined for the majority of these plans. The Company’s net periodic income for its
postretirement plans in each of fiscal 2023, 2022, and 2021 was $0.3 million.
Measurement Date
The Company uses March 31 as the measurement date for its pension and postretirement plans.
Measurement Date
The Company uses March 31 as the measurement date for its pension and postretirement plans.
70
70
70
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Changes in benefit obligations and plan assets, as well as the funded status of the Company’s global pension plans, were as
follows:
Changes in benefit obligations and plan assets, as well as the funded status of the Company’s global pension plans, were as
follows:
Years ended March 31,
2022
2023
Years ended March 31,
Years ended March 31,
2022
2023
Change in benefit obligation:
Change in benefit obligation:
Benefit obligation at beginning of year
Benefit obligation at beginning of year
Service cost
Service cost
Interest cost
Interest cost
Actuarial gain
Actuarial gain
Benefits paid
Benefits paid
Disposition of air-cooled automotive business
Disposition of air-cooled automotive business
Effect of exchange rate changes
Effect of exchange rate changes
Benefit obligation at end of year
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Benefits paid
Employer contributions
Fair value of plan assets at end of year
Funded status at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Benefits paid
Employer contributions
Fair value of plan assets at end of year
Funded status at end of year
Amounts recognized in the consolidated balance sheets:
Amounts recognized in the consolidated balance sheets:
Current liability
Current liability
Noncurrent liability
Noncurrent liability
$
$
228.6
$
228.6
0.2
0.2
8.1
8.1
(25.8)
(25.8)
(16.1)
(16.1)
-
-
(0.1)
(0.1)
$
194.9
194.9
$
260.6
0.3
7.3
(16.5)
(16.0)
(5.5)
(1.6)
$
228.6
260.6
0.3
7.3
(16.5)
(16.0)
(5.5)
(1.6)
228.6
$
$
$
$
$
179.9
179.9
(12.0)
(12.0)
(16.1)
(16.1)
1.5
1.5
153.3
$
153.3
$
(41.6)
(41.6)
$
$
$
183.3
183.3
7.6
7.6
(16.0)
(16.0)
5.0
5.0
$
179.9
179.9
$
(48.7)
(48.7)
$
$
$
$
(1.4)
(40.2)
(41.6)
(1.4)
(40.2)
(41.6)
$
$
$
(1.5)
(47.2)
(48.7)
(1.5)
(47.2)
(48.7)
$
$
$
As of March 31, 2023, 2022, and 2021, the benefit obligation associated with the Company’s non-U.S. pension plans totaled
As of March 31, 2023, 2022, and 2021, the benefit obligation associated with the Company’s non-U.S. pension plans totaled
$21.2 million, $26.5 million, and $36.4 million, respectively. The $5.3 million decrease in the benefit obligation associated
$21.2 million, $26.5 million, and $36.4 million, respectively. The $5.3 million decrease in the benefit obligation associated
with non-U.S. pension plans as of March 31, 2023, compared with the prior year, was primarily due to net actuarial gains
with non-U.S. pension plans as of March 31, 2023, compared with the prior year, was primarily due to net actuarial gains
during the year from an increase in discount rates and employer contributions for benefits paid to plan participants which
during the year from an increase in discount rates and employer contributions for benefits paid to plan participants which
decreased the obligation by $4.4 million and $1.5 million, respectively, and to a lesser extent, the impact of foreign currency
decreased the obligation by $4.4 million and $1.5 million, respectively, and to a lesser extent, the impact of foreign currency
exchange rates. The decreases were partially offset by service and interest cost totaling $0.7 million. In fiscal 2022, the $9.9
exchange rates. The decreases were partially offset by service and interest cost totaling $0.7 million. In fiscal 2022, the $9.9
million decrease was primarily due to the sale of the air-cooled automotive business in Austria, which resulted in a $5.5
million decrease 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
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
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.
million, respectively. The decreases were partially offset by service and interest cost totaling $0.6 million.
The accumulated benefit obligation for pension plans was $194.4 million and $228.1 million as of March 31, 2023 and 2022,
The accumulated benefit obligation for pension plans was $194.4 million and $228.1 million as of March 31, 2023 and 2022,
respectively. The net actuarial loss related to the pension plans recognized in accumulated other comprehensive loss was
respectively. The net actuarial loss related to the pension plans recognized in accumulated other comprehensive loss was
$123.5 million and $131.5 million as of March 31, 2023 and 2022, respectively.
$123.5 million and $131.5 million as of March 31, 2023 and 2022, respectively.
71
71
71
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Costs for the Company’s global pension plans included the following components:
Costs for the Company’s global pension plans included the following components:
Years ended March 31,
Years ended March 31,
Years ended March 31,
2023
2022
2022
2023
2021
2021
Service cost
Interest cost
Components of net periodic benefit cost:
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
Net periodic benefit cost
Amortization of net actuarial loss
Expected return on plan assets
Settlements (a)
Other changes in benefit obligation recognized in other comprehensive income:
Other changes in benefit obligation recognized in other comprehensive income:
Other changes in benefit obligation recognized in other comprehensive income:
Net actuarial gain
Amortization of net actuarial loss (b)
Net actuarial gain
Net actuarial gain
Amortization of net actuarial loss (b)
Amortization of net actuarial loss (b)
Total recognized in other comprehensive income
Total recognized in other comprehensive income
Total recognized in other comprehensive income
$
$
0.2
0.2
$
$
0.3
0.3
$
$
0.4
0.4
8.1
8.1
7.3
7.3
7.9
7.9
(11.6)
(11.6)
(12.9)
(12.9)
(11.5)
(11.5)
5.7
-
$
2.4
5.7
-
2.4
$
$
$
2.1
2.1
6.9
-
$
1.6
6.9
-
1.6
$
6.9
0.2
$
3.9
6.9
0.2
3.9
$
$
$
11.4
11.4
$
$
33.8
33.8
5.7
$
7.8
5.7
7.8
$
8.6
$
20.0
8.6
20.0
$
7.1
$
40.9
7.1
40.9
$
(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 Austrian
(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 Austrian
air-cooled automotive business. See Note 1 for additional information.
air-cooled automotive business. See Note 1 for additional information.
The Company amortized $5.7 million, $8.6 million, and $7.1 million of net actuarial loss in fiscal 2023, 2022, and 2021,
respectively. Exclusive of the $1.7 million written-off in fiscal 2022 upon the sale of the Austrian 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 amortized $5.7 million, $8.6 million, and $7.1 million of net actuarial loss in fiscal 2023, 2022, and 2021,
respectively. Exclusive of the $1.7 million written-off in fiscal 2022 upon the sale of the Austrian 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 5.2% and 3.9% as of March 31, 2023 and 2022, respectively, for determining its benefit
The Company used a discount rate of 5.2% and 3.9% as of March 31, 2023 and 2022, respectively, for determining its benefit
obligations under its U.S. pension plans. The Company used a weighted-average discount rate of 3.8% and 1.8% as of March
obligations under its U.S. pension plans. The Company used a weighted-average discount rate of 3.8% and 1.8% as of March
31, 2023 and 2022, respectively, for determining its benefit obligations under its non-U.S. pension plans. The Company used
31, 2023 and 2022, respectively, for determining its benefit obligations under its non-U.S. pension plans. The Company used
a discount rate of 3.9%, 3.2%, and 3.4% to determine its costs under its U.S. pension plans for fiscal 2023, 2022, and 2021,
a discount rate of 3.9%, 3.2%, and 3.4% to determine its costs under its U.S. pension plans for fiscal 2023, 2022, and 2021,
respectively. The Company used a weighted-average discount rate of 2.9%, 1.6%, and 1.4% to determine its costs under its
respectively. The Company used a weighted-average discount rate of 2.9%, 1.6%, and 1.4% to determine its costs under its
non-U.S. pension plans for fiscal 2023, 2022, and 2021, respectively. The Company determined the discount rates used for its
non-U.S. pension plans for fiscal 2023, 2022, and 2021, respectively. The Company determined the discount rates used for its
U.S. pension plans by modeling a portfolio of high-quality corporate bonds, with appropriate consideration given to expected
U.S. pension plans by modeling a portfolio of high-quality corporate bonds, with appropriate consideration given to expected
defined benefit payment terms and duration of the respective pension obligations. The Company used a similar process to
defined benefit payment terms and duration of the respective pension obligations. The Company used a similar process to
determine the discount rate for its non-U.S. pension obligations.
determine the discount rate for its non-U.S. pension obligations.
Plan assets in the Company’s U.S. pension plans comprise 100 percent of the Company’s world-wide pension plan assets. The
Company’s U.S. pension plan weighted-average asset allocations at the measurement dates of March 31, 2023 and 2022 were
as follows:
Plan assets in the Company’s U.S. pension plans comprise 100 percent of the Company’s world-wide pension plan assets. The
Company’s U.S. pension plan weighted-average asset allocations at the measurement dates of March 31, 2023 and 2022 were
as follows:
Debt securities
Equity securities
Equity securities
Equity securities
Debt securities
Debt securities
Real estate investments
Real estate investments
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents
Real estate investments
Target allocation
Target allocation
76%
76%
18%
18%
5%
5%
1%
1%
Plan assets
Plan assets
2023
2023
76%
76%
15%
15%
8%
8%
1%
1%
2022
74%
2022
74%
17%
17%
8%
8%
1%
1%
100%
100%
100%
100%
100%
100%
Due to market conditions and other factors, including timing of benefit payments and other transactions, actual asset allocation
Due to market conditions and other factors, including timing of benefit payments and other transactions, actual asset allocation
may vary from the target allocation outlined above. The Company periodically rebalances the assets to the target allocations.
may vary from the target allocation outlined above. The Company periodically rebalances the assets to the target allocations.
As of March 31, 2023 and 2022, the Company’s pension plans did not directly own shares of Modine common stock.
As of March 31, 2023 and 2022, the Company’s pension plans did not directly own shares of Modine common stock.
72
72
72
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
The Company employs a total return investment approach, whereby a mix of investments are used to maximize the long-term
The Company employs a total return investment approach, whereby a mix of investments are used to maximize the long-term
growth of principal, while avoiding excessive risk. The Company has established pension plan guidelines based upon an
growth of principal, while avoiding excessive risk. The Company has established pension plan guidelines based upon an
evaluation of market conditions, tolerance for risk and cash requirements for benefit payments. The Company measures and
evaluation of market conditions, tolerance for risk and cash requirements for benefit payments. The Company measures and
monitors investment risk on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements
monitors investment risk on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements
and periodic asset/liability studies.
and periodic asset/liability studies.
The expected rate of return on U.S. plan assets is based upon historical return experience and forward-looking return
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 2023, U.S. pension plan expense, the expected rate of return on plan
expectations for major asset class categories. For fiscal 2023, U.S. pension plan expense, the expected rate of return on plan
assets was 7.0 percent. For fiscal 2022, and 2021 U.S. pension plan expense, the expected rate of return on plan assets was 7.5
assets was 7.0 percent. For fiscal 2022, and 2021 U.S. pension plan expense, the expected rate of return on plan assets was 7.5
percent. For fiscal 2024 U.S. pension plan expense, the Company has assumed a rate of return on plan assets of 6.5 percent.
percent. For fiscal 2024 U.S. pension plan expense, the Company has assumed a rate of return on plan assets of 6.5 percent.
The Company’s funding policy for its U.S. pension plans is to contribute annually, at a minimum, the amount necessary on an
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
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.
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 2024.
plans during fiscal 2024.
Estimated pension benefit payments for the next ten fiscal years are as follows:
Estimated pension benefit payments for the next ten fiscal years are as follows:
Fiscal Year
Fiscal Year
Fiscal Year
2024
2024
2025
2025
2026
2026
2027
2027
2028
2028
2029-2033
2029-2033
Estimated Pension
Estimated Pension
Estimated Pension
Benefit Payments
Benefit Payments
Benefit Payments
$
15.5
$
15.5
15.7
15.7
15.6
15.6
15.5
15.5
15.4
15.4
72.4
72.4
Note 19: Derivative Instruments
Note 19: Derivative Instruments
The Company uses derivative financial instruments from time to time as a tool to manage certain financial risks. The
The Company uses derivative financial instruments from time to time as a tool to manage certain financial risks. The
Company’s policy prohibits the use of leveraged derivatives. Accounting for derivatives and hedging activities requires
Company’s policy prohibits the use of leveraged derivatives. Accounting for derivatives and hedging activities requires
derivative financial instruments to be measured at fair value and recognized as assets or liabilities in the consolidated balance
derivative financial instruments to be measured at fair value and recognized as assets or liabilities in the consolidated balance
sheets. All of the Company’s derivative financial instruments are categorized within Level 2 of the fair value hierarchy. Refer
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
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
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.
of the hedging activity.
Commodity Derivatives
Commodity Derivatives
The Company periodically enters into over-the-counter forward contracts related to forecasted purchases of aluminum and
The Company periodically enters into over-the-counter forward contracts related to forecasted purchases of aluminum and
copper. The Company’s strategy in entering into these contracts is to reduce its exposure to changing market prices of these
copper. The Company’s strategy in entering into these contracts is to reduce its exposure to changing market prices of these
commodities. The Company designates certain commodity forward contracts as cash flow hedges for accounting purposes.
commodities. The Company designates certain commodity forward contracts as cash flow hedges for accounting purposes.
Accordingly, for these designated hedges, the Company records unrealized gains and losses related to the change in the fair
Accordingly, for these designated hedges, the Company records unrealized gains and losses related to the change in the fair
value of the contracts in accumulated other comprehensive income (loss) (“AOCI”) within shareholders’ equity and
value of the contracts in accumulated other comprehensive income (loss) (“AOCI”) within shareholders’ equity and
subsequently recognizes the gains and losses within cost of sales as the underlying inventory is sold.
subsequently recognizes the gains and losses within cost of sales as the underlying inventory is sold.
Foreign Exchange Contracts
Foreign Exchange Contracts
The Company’s foreign exchange risk management strategy uses derivative financial instruments to mitigate foreign currency
The Company’s foreign exchange risk management strategy uses derivative financial instruments to mitigate foreign currency
exchange risk. The Company periodically enters into foreign currency forward contracts to hedge specific foreign currency-
exchange risk. The Company periodically enters into foreign currency forward contracts to hedge specific foreign currency-
denominated assets and liabilities as well as forecasted transactions. The Company designates certain hedges of forecasted
denominated assets and liabilities as well as forecasted transactions. The Company designates certain hedges of forecasted
transactions as cash flow hedges for accounting purposes. Accordingly, for these designated hedges, the Company records
transactions as cash flow hedges for accounting purposes. Accordingly, for these designated hedges, the Company records
unrealized gains and losses related to the change in the fair value of the contracts in AOCI within shareholders’ equity and
unrealized gains and losses related to the change in the fair value of the contracts in AOCI within shareholders’ equity and
subsequently recognizes the gains and losses as a component of earnings at the same time and in the same financial statement
subsequently recognizes the gains and losses as a component of earnings at the same time and in the same financial statement
line that the underlying transactions impact earnings. The Company has not designated forward contracts related to foreign
line that the underlying transactions impact earnings. The Company has not designated forward contracts related to foreign
currency-denominated assets and liabilities as hedges. Accordingly, for these non-designated contracts, the Company records
currency-denominated assets and liabilities as hedges. Accordingly, for these non-designated contracts, the Company records
unrealized gains and losses related to changes in fair value in other income and expense. Gains and losses on these foreign
unrealized gains and losses related to changes in fair value in other income and expense. Gains and losses on these foreign
currency contracts are offset by foreign currency gains and losses associated with the related assets and liabilities.
currency contracts are offset by foreign currency gains and losses associated with the related assets and liabilities.
73
73
73
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
The fair value of the Company’s derivative financial instruments recorded in the consolidated balance sheets were as follows:
The fair value of the Company’s derivative financial instruments recorded in the consolidated balance sheets were as follows:
Derivatives designated as hedges:
Derivatives designated as hedges:
Derivatives designated as hedges:
Balance Sheet Location
Balance Sheet Location
Balance Sheet Location
March 31, 2023 March 31, 2022
March 31, 2023 March 31, 2022
March 31, 2022
March 31, 2023
Commodity derivatives
Commodity derivatives
Commodity derivatives
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Other current assets
Other current assets
Other current assets
Other current assets
Other current assets
Other current assets
Derivatives not designated as hedges:
Derivatives not designated as hedges:
Derivatives not designated as hedges:
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Other current liabilities
Other current liabilities
Other current liabilities
$
-
$
-
$
$
0.5
0.5
1.3
1.3
0.3
0.3
$
$
0.2
0.2
$
$
0.3
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:
The amounts associated with derivative financial instruments that the Company designated for hedge accounting during the
years ended March 31 were as follows:
Commodity derivatives
Commodity derivatives
Commodity derivatives
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Total gains (losses)
Total gains (losses)
Total gains (losses)
Gain (loss) recognized in
other comprehensive income
Gain (loss) recognized in
other comprehensive income
2023
(1.6)
$
2023
(1.6)
2022
1.1
$
2022
1.1
2021
2.2
$
2021
2.2
$
$
$
1.6
1.6
-
-
-
-
0.4
0.4
$
0.4
0.4
$
0.6
1.7
$
0.6
1.7
$
(0.1)
2.1
$
(0.1)
2.1
$
Statement of
Statement of
Operations
Operations
Location
Location
Cost of sales
Cost of sales
Cost of sales
Net sales
Net sales
Cost of sales
Cost of sales
Cost of sales
Net sales
Gain (loss) reclassified
from AOCI
Gain (loss) reclassified
from AOCI
2023
(1.0)
$
2023
(1.0)
2022
1.2
$
2022
1.2
2021
2021
-
$
$
-
$
$
0.6
0.6
-
-
-
-
0.7
0.3
$
0.7
0.3
$
0.4
1.6
$
0.4
1.6
$
(0.1)
(0.1)
$
(0.1)
(0.1)
$
The amounts associated with derivative financial instruments that the Company did not designate for hedge accounting were as
follows:
The amounts associated with derivative financial instruments that the Company did not designate for hedge accounting were as
follows:
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Total gains (losses)
Total gains (losses)
Total gains (losses)
Statement of Operations
Location
Statement of Operations
Statement of Operations
Location
Location
Net sales
Net sales
Net sales
Other income (expense) - net
Other income (expense) - net
Other income (expense) - net
2023
2023
$
(0.5)
$
Years ended March 31,
Years ended March 31,
Years ended March 31,
2022
2022
$
(0.6)
$
(0.6)
(0.5)
2021
2021
$
-
-
$
(2.6)
$
(3.1)
$
(2.6)
(3.1)
(0.8)
$
(1.4)
$
(0.8)
(1.4)
0.6
$
0.6
$
0.6
0.6
Note 20: Risks, Uncertainties, Contingencies and Litigation
Note 20: Risks, Uncertainties, Contingencies and Litigation
Supply Chain Disruptions and Inflationary Market Conditions
Supply Chain Disruptions and Inflationary Market Conditions
Market and economic dynamics, including the impacts of the COVID-19 pandemic, have contributed to global supply chain
Market and economic dynamics, including the impacts of the COVID-19 pandemic, have contributed to global supply chain
challenges and inflationary market conditions. Since the fourth quarter of fiscal 2022, the military conflict between Russia and
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 also impacted these market conditions.
Ukraine and the related sanctions imposed by governments in the U.S. and abroad have also impacted these market conditions.
The Company is focused on mitigating the negative impacts of labor shortages, supply chain challenges and inflationary
The Company is focused on mitigating the negative impacts of labor shortages, supply chain challenges and inflationary
market conditions, including changing raw material, energy and logistic costs, as well as delays and shortages in certain
market conditions, including changing raw material, energy and logistic costs, as well as delays and shortages in certain
purchased commodities and components. At this time, the Company cannot reasonably estimate the full impact that the supply
purchased commodities and components. At this time, the Company cannot reasonably estimate the full impact that the supply
chain challenges and other related economic and market dynamics will have on the Company’s business, results of operations
chain challenges and other related economic and market dynamics will have on the Company’s business, results of operations
and cash flows in the future.
and cash flows in the future.
Credit Risk
Credit Risk
The Company invests excess cash primarily in investment quality, short-term liquid debt instruments. Financial instruments
The Company invests excess cash primarily in investment quality, short-term liquid debt instruments. Financial instruments
that potentially subject the Company to significant concentrations of credit risk consist principally of accounts receivable. The
that potentially subject the Company to significant concentrations of credit risk consist principally of accounts receivable. The
Company sells a broad range of products that provide thermal solutions to customers operating throughout the world. In fiscal
Company sells a broad range of products that provide thermal solutions to customers operating throughout the world. In fiscal
2023 and 2022, no customers accounted for more than ten percent of the Company’s total sales. In fiscal 2021, one vehicular
2023 and 2022, no customers accounted for more than ten percent of the Company’s total sales. In fiscal 2021, one vehicular
customer accounted for more than ten percent of the Company’s total sales. Sales to the Company’s top ten customers were
customer accounted for more than ten percent of the Company’s total sales. Sales to the Company’s top ten customers were
39 percent, 39 percent, and 43 percent of total sales in fiscal 2023, 2022, and 2021, respectively. At March 31, 2023 and 2022,
39 percent, 39 percent, and 43 percent of total sales in fiscal 2023, 2022, and 2021, respectively. At March 31, 2023 and 2022,
37 percent and 29 percent, respectively, of the Company's trade accounts receivable were due from the Company's top ten
37 percent and 29 percent, respectively, of the Company's trade accounts receivable were due from the Company's top ten
customers. These customers operate primarily in the commercial vehicle, off-highway, automotive and light vehicle, data
customers. These customers operate primarily in the commercial vehicle, off-highway, automotive and light vehicle, data
center cooling, and commercial air conditioning and refrigeration markets. The Company generally does not require collateral
center cooling, and commercial air conditioning and refrigeration 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
or advanced payments from its customers. The Company has not experienced significant credit losses to customers in the
markets served.
markets served.
74
74
74
74
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
The Company manages credit risk through its focus on the following:
The Company manages credit risk through its focus on the following:
condition and applicable business news;
Accounts receivable – performing periodic customer credit evaluations and actively monitoring their financial
Cash and investments – reviewing cash deposits and short-term investments to ensure banks have credit ratings
acceptable to the Company and that short-term investments are maintained in secured or guaranteed instruments;
Cash and investments – reviewing cash deposits and short-term investments to ensure banks have credit ratings
acceptable to the Company and that short-term investments are maintained in secured or guaranteed instruments;
Accounts receivable – performing periodic customer credit evaluations and actively monitoring their financial
condition and applicable business news;
Pension assets – ensuring that investments within pension plans provide appropriate diversification, monitoring of
investment teams, ensuring that portfolio managers adhere to the Company’s investment policies and directives, and
ensuring that exposure to high risk investments is limited; and
Insurance – ensuring that insurance providers maintain financial ratings that are acceptable to the Company.
investment teams, ensuring that portfolio managers adhere to the Company’s investment policies and directives, and
ensuring that exposure to high risk investments is limited; and
Insurance – ensuring that insurance providers maintain financial ratings that are acceptable to the Company.
Pension assets – ensuring that investments within pension plans provide appropriate diversification, monitoring of
Counterparty Risk
The Company manages counterparty risk through its focus on the following:
Counterparty Risk
The Company manages counterparty risk through its focus on the following:
internal credit committees;
Customers – performing thorough reviews of customer credit reports and accounts receivable aging reports by
Suppliers – maintaining a supplier risk management program and utilizing industry sources to identify and mitigate
Customers – performing thorough reviews of customer credit reports and accounts receivable aging reports by
internal credit committees;
Suppliers – maintaining a supplier risk management program and utilizing industry sources to identify and mitigate
high risk situations; and
Derivatives – ensuring that counterparties to derivative instruments maintain credit ratings that are acceptable to the
Company.
Derivatives – ensuring that counterparties to derivative instruments maintain credit ratings that are acceptable to the
high risk situations; and
Company.
Environmental
Environmental
The Company has recorded environmental investigation and remediation accruals related to manufacturing facilities in the
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.
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
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
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
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
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
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 $17.6 million and $18.2 million at March 31, 2023 and
range. The Company’s accruals for environmental matters totaled $17.6 million and $18.2 million at March 31, 2023 and
2022, respectively. During fiscal 2023 and 2022, the Company increased its remediation accrual related to a former
2022, respectively. During fiscal 2023 and 2022, the Company increased its remediation accrual related to a former
manufacturing facility in the U.S. by $1.0 million and $3.4 million, respectively. As additional information becomes available
manufacturing facility in the U.S. by $1.0 million and $3.4 million, respectively. As additional information becomes available
regarding environmental matters, the Company will re-assess the liabilities and revise the estimated accruals, if necessary.
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
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
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
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.
uncertainties, and unfavorable outcomes could occur, including significant monetary damages.
Other Litigation
Other Litigation
In the normal course of business, the Company and its subsidiaries are named as defendants in various lawsuits and
In the normal course of business, the Company and its subsidiaries are named as defendants in various lawsuits and
enforcement proceedings by private parties, governmental agencies and/or others in which claims are asserted against Modine.
enforcement proceedings by private parties, governmental agencies and/or others in which claims are asserted against Modine.
The Company believes that any additional loss in excess of amounts already accrued would not have a material effect on the
The Company believes that any additional loss in excess of amounts already accrued would not have a material effect on the
Company’s consolidated balance sheet, results of operations, and cash flows. In addition, management expects that the
Company’s consolidated balance sheet, results of operations, and cash flows. In addition, management expects that the
liabilities which may ultimately result from such lawsuits or proceedings, if any, would not have a material adverse effect on
liabilities which may ultimately result from such lawsuits or proceedings, if any, would not have a material adverse effect on
the Company’s financial position.
the Company’s financial position.
75
75
75
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
(In millions, except per share amounts)
(In millions, except per share amounts)
(In millions, except per share amounts)
Note 21: Accumulated Other Comprehensive Loss
Note 21: Accumulated Other Comprehensive Loss
Note 21: Accumulated Other Comprehensive Loss
Note 21: Accumulated Other Comprehensive Loss
Note 21: Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss were as follows:
Changes in accumulated other comprehensive loss were as follows:
Changes in accumulated other comprehensive loss were as follows:
Changes in accumulated other comprehensive loss were as follows:
Changes in accumulated other comprehensive loss were as follows:
Balance, March 31, 2022
Balance, March 31, 2022
Balance, March 31, 2022
Balance, March 31, 2022
Balance, March 31, 2022
Foreign
Foreign
Foreign
Foreign
Currency
Currency
Currency
Currency
Translation
Translation
Translation
Translation
$
(39.1)
$
(39.1)
$
(39.1)
$
(39.1)
Foreign
Currency
Defined
Defined
Defined
Defined
Translation
Benefit Plans
Benefit Plans
Benefit Plans
Benefit Plans
$
(39.1)
$
(111.1)
$
$
$
(111.1)
(111.1)
(111.1)
Defined
Cash Flow
Cash Flow
Cash Flow
Cash Flow
Benefit Plans
Hedges
Hedges
Hedges
Hedges
$
(111.1)
$
$
$
$
0.7
Cash Flow
Total
Hedges
Total
Total
Total
$
0.7
$
0.7
0.7
$
$
$
0.7
(149.5)
Total
(149.5)
(149.5)
(149.5)
$
(149.5)
Other comprehensive income (loss) before reclassifications
Other comprehensive income (loss) before reclassifications
Other comprehensive income (loss) before reclassifications
Other comprehensive income (loss) before reclassifications
Other comprehensive income (loss) before reclassifications
(18.4)
(18.4)
(18.4)
(18.4)
Reclassifications:
Reclassifications:
Reclassifications:
Reclassifications:
Reclassifications:
Amortization of unrecognized net loss (a)
Amortization of unrecognized net loss (a)
Amortization of unrecognized net loss (a)
Amortization of unrecognized net loss (a)
Amortization of unrecognized net loss (a)
Realized gains - net (b)
Realized gains - net (b)
Realized gains - net (b)
Realized gains - net (b)
Realized gains - net (b)
Income taxes
Income taxes
Income taxes
Income taxes
Income taxes
-
-
-
-
-
-
-
-
-
-
-
-
(18.4)
2.5
2.5
2.5
2.5
2.5
0.4
0.4
0.4
0.4
0.4
(15.5)
(15.5)
(15.5)
(15.5)
(15.5)
-
-
5.3
5.3
5.3
5.3
-
-
-
-
5.3
-
-
-
-
-
5.3
5.3
5.3
5.3
-
(0.3)
(0.3)
(0.3)
(0.3)
(0.3)
(0.3)
(0.3)
(0.3)
(0.3)
-
(1.1)
(1.1)
(1.1)
(1.1)
(1.1)
-
-
-
-
-
(1.1)
(1.1)
(1.1)
(1.1)
5.3
(0.3)
(1.1)
Total other comprehensive income (loss)
Total other comprehensive income (loss)
Total other comprehensive income (loss)
Total other comprehensive income (loss)
Total other comprehensive income (loss)
(18.4)
(18.4)
(18.4)
(18.4)
(18.4)
6.7
6.7
6.7
6.7
6.7
0.1
0.1
0.1
0.1
0.1
(11.6)
(11.6)
(11.6)
(11.6)
(11.6)
Balance, March 31, 2023
Balance, March 31, 2023
Balance, March 31, 2023
Balance, March 31, 2023
Balance, March 31, 2023
Balance, March 31, 2021
Balance, March 31, 2021
Balance, March 31, 2021
Balance, March 31, 2021
Balance, March 31, 2021
$
$
$
$
(57.5)
(57.5)
(57.5)
(57.5)
$
$
(57.5)
$
$
$
(104.4)
(104.4)
(104.4)
(104.4)
$
(104.4)
$
$
$
$
0.8
$
0.8
0.8
0.8
$
0.8
$
$
$
(161.1)
(161.1)
(161.1)
(161.1)
$
(161.1)
Foreign
Foreign
Foreign
Foreign
Currency
Currency
Currency
Currency
Translation
Translation
Translation
Translation
$
(31.0)
$
$
(31.0)
(31.0)
$
(31.0)
Foreign
Currency
Defined
Defined
Defined
Defined
Translation
Benefit Plans
Benefit Plans
Benefit Plans
Benefit Plans
$
(31.0)
$
(130.8)
$
$
$
(130.8)
(130.8)
(130.8)
Defined
Cash Flow
Cash Flow
Cash Flow
Cash Flow
Benefit Plans
Hedges
Hedges
Hedges
Hedges
$
(130.8)
$
$
$
$
0.6
Cash Flow
Hedges
Total
Total
Total
Total
$
0.6
$
0.6
0.6
$
$
$
0.6
(161.2)
Total
(161.2)
(161.2)
(161.2)
$
(161.2)
Other comprehensive income (loss) before reclassifications
Other comprehensive income (loss) before reclassifications
Other comprehensive income (loss) before reclassifications
Other comprehensive income (loss) before reclassifications
Other comprehensive income (loss) before reclassifications
(8.1)
(8.1)
(8.1)
(8.1)
(8.1)
11.5
11.5
11.5
11.5
11.5
1.7
1.7
1.7
1.7
1.7
5.1
5.1
5.1
5.1
5.1
Reclassifications:
Reclassifications:
Reclassifications:
Reclassifications:
Reclassifications:
Amortization of unrecognized net loss (a)
Amortization of unrecognized net loss (a)
Amortization of unrecognized net loss (a)
Amortization of unrecognized net loss (a)
Amortization of unrecognized net loss (a)
-
-
-
-
-
6.5
6.5
6.5
6.5
6.5
-
-
-
-
Unrecognized net pension loss in disposed business (c)
Realized gains - net (b)
Unrecognized net pension loss in disposed business (c)
Unrecognized net pension loss in disposed business (c)
Unrecognized net pension loss in disposed business (c)
Realized gains - net (b)
Realized gains - net (b)
Realized gains - net (b)
Unrecognized net pension loss in disposed business (c)
Realized gains - net (b)
Income taxes
Income taxes
Total other comprehensive income (loss)
Total other comprehensive income (loss)
Income taxes
Income taxes
Income taxes
Total other comprehensive income (loss)
Total other comprehensive income (loss)
Total other comprehensive income (loss)
-
-
-
(8.1)
-
-
-
-
-
-
-
-
-
(8.1)
(8.1)
(8.1)
-
1.7
-
-
-
-
(8.1)
19.7
1.7
1.7
1.7
-
-
-
-
-
-
19.7
19.7
19.7
1.7
-
-
19.7
-
(1.6)
-
0.1
-
-
-
(1.6)
(1.6)
(1.6)
-
-
-
0.1
0.1
0.1
-
6.5
6.5
6.5
6.5
-
1.7
(1.6)
(1.6)
-
-
0.1
11.7
1.7
1.7
1.7
(1.6)
(1.6)
(1.6)
-
-
-
11.7
11.7
11.7
6.5
1.7
(1.6)
-
11.7
Balance, March 31, 2022
Balance, March 31, 2022
Balance, March 31, 2022
Balance, March 31, 2022
Balance, March 31, 2022
$
$
$
$
(39.1)
(39.1)
(39.1)
(39.1)
$
$
(39.1)
$
$
$
(111.1)
(111.1)
(111.1)
(111.1)
$
(111.1)
$
$
$
$
0.7
$
0.7
0.7
0.7
$
0.7
$
$
$
(149.5)
(149.5)
(149.5)
(149.5)
$
(149.5)
(a) Amounts are included in the calculation of net periodic benefit cost for the Company’s defined benefit plans, which
(b) Amounts represent net gains and losses associated with cash flow hedges that were reclassified to net earnings. See
(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.
include pension and other postretirement plans. See Note 18 for additional information about the Company’s pension
include pension and other postretirement plans. See Note 18 for additional information about the Company’s pension
include pension and other postretirement plans. See Note 18 for additional information about the Company’s pension
plans.
plans.
plans.
(a) Amounts are included in the calculation of net periodic benefit cost for the Company’s defined benefit plans, which
(a) Amounts are included in the calculation of net periodic benefit cost for the Company’s defined benefit plans, which
(a) Amounts are included in the calculation of net periodic benefit cost for the Company’s defined benefit plans, which
include pension and other postretirement plans. See Note 18 for additional information about the Company’s pension
plans.
(b) Amounts represent net gains and losses associated with cash flow hedges that were reclassified to net earnings. See
(b) Amounts represent net gains and losses associated with cash flow hedges that were reclassified to net earnings. See
(b) Amounts represent net gains and losses associated with cash flow hedges that were reclassified to net earnings. See
Note 19 for additional information regarding derivative instruments.
(c) As a result of the sale of the Austrian air-cooled automotive business, the Company wrote-off $1.7 million of net
(c) As a result of the sale of the Austrian air-cooled automotive business, the Company wrote-off $1.7 million of net
(c) As a result of the sale of the Austrian 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.
actuarial losses related to its pension plan as a component of the loss on sale recorded during fiscal 2022. See Note 1
actuarial losses related to its pension plan as a component of the loss on sale recorded during fiscal 2022. See Note 1
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.
for additional information.
for additional information.
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.
(b) Amounts represent net gains and losses associated with cash flow hedges that were reclassified to net earnings. See
(c) As a result of the sale of the Austrian air-cooled automotive business, the Company wrote-off $1.7 million of net
(c) As a result of the sale of the Austrian air-cooled automotive business, the Company wrote-off $1.7 million of net
Note 19 for additional information regarding derivative instruments.
Note 19 for additional information regarding derivative instruments.
Note 19 for additional information regarding derivative instruments.
Note 19 for additional information regarding derivative instruments.
Note 22: Segment and Geographic Information
Note 22: Segment and Geographic Information
Note 22: Segment and Geographic Information
Note 22: Segment and Geographic Information
Note 22: Segment and Geographic Information
The Company’s product lines consist of heat-transfer systems and components. The Company serves commercial, industrial,
and building HVAC&R markets and vehicular markets.
The Company’s product lines consist of heat-transfer systems and components. The Company serves commercial, industrial,
The Company’s product lines consist of heat-transfer systems and components. The Company serves commercial, industrial,
The Company’s product lines consist of heat-transfer systems and components. The Company serves commercial, industrial,
and building HVAC&R markets and vehicular markets.
and building HVAC&R markets and vehicular markets.
and building HVAC&R markets and vehicular markets.
The Company’s product lines consist of heat-transfer systems and components. The Company serves commercial, industrial,
and building HVAC&R markets and vehicular markets.
The Company’s Climate Solutions segment provides heat transfer products, heating, ventilating, air conditioning and
The Company’s Climate Solutions segment provides heat transfer products, heating, ventilating, air conditioning and
The Company’s Climate Solutions segment provides heat transfer products, heating, ventilating, air conditioning and
The Company’s Climate Solutions segment provides heat transfer products, heating, ventilating, air conditioning and
The Company’s Climate Solutions segment provides heat transfer products, heating, ventilating, air conditioning and
refrigeration products and data center cooling solutions to global customers. The Company’s Performance Technologies
refrigeration products and data center cooling solutions to global customers. The Company’s Performance Technologies
refrigeration products and data center cooling solutions to global customers. The Company’s Performance Technologies
refrigeration products and data center cooling solutions to global customers. The Company’s Performance Technologies
refrigeration products and data center cooling solutions to global customers. The Company’s Performance Technologies
segment designs and manufactures air-and liquid-cooled technology for vehicular, stationary power, and industrial
segment designs and manufactures air-and liquid-cooled technology for vehicular, stationary power, and industrial
segment designs and manufactures air-and liquid-cooled technology for vehicular, stationary power, and industrial
segment designs and manufactures air-and liquid-cooled technology for vehicular, stationary power, and industrial
segment designs and manufactures air-and liquid-cooled technology for vehicular, stationary power, and industrial
applications. In addition, the Performance Technologies segment provides advanced thermal solutions to zero-emission and
applications. In addition, the Performance Technologies segment provides advanced thermal solutions to zero-emission and
applications. In addition, the Performance Technologies segment provides advanced thermal solutions to zero-emission and
applications. In addition, the Performance Technologies segment provides advanced thermal solutions to zero-emission and
applications. In addition, the Performance Technologies segment provides advanced thermal solutions to zero-emission and
hybrid commercial vehicle and automotive customers and coatings products and application services.
hybrid commercial vehicle and automotive customers and coatings products and application services.
hybrid commercial vehicle and automotive customers and coatings products and application services.
hybrid commercial vehicle and automotive customers and coatings products and application services.
hybrid commercial vehicle and automotive customers and coatings products and application services.
76
76
76
76
76
76
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Each operating segment is managed by a president and has separate financial results reviewed by the Company’s chief
Each operating segment is managed by a 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
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
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.
making decisions on the allocation of resources among the Company’s various businesses.
Effective April 1, 2022, the Company began managing its operations under two operating segments, Climate Solutions and
Effective April 1, 2022, the Company began managing its operations under two operating segments, Climate Solutions and
Performance Technologies. The Climate Solutions segment includes the previously-reported BHVAC and CIS segments, with
Performance Technologies. The Climate Solutions segment includes the previously-reported BHVAC and CIS segments, with
the exception of CIS Coatings. The Performance Technologies segment includes the previously-reported HDE and
the exception of CIS Coatings. The Performance Technologies segment includes the previously-reported HDE and
Automotive segments and the CIS Coatings business. See Note 3 for information regarding the primary operating activities of
Automotive segments and the CIS Coatings business. See Note 3 for information regarding the primary operating activities of
each segment. The Company’s new segment structure aligns businesses serving similar or complimentary end markets,
each segment. The Company’s new segment structure aligns businesses serving similar or complimentary end markets,
products and technologies under common segment management. The Company believes this simplified segment structure
products and technologies under common segment management. The Company believes this simplified segment structure
allows it to better focus resources on targeted growth opportunities and allows for an efficient application of 80/20 principles
allows it to better focus resources on targeted growth opportunities and allows for an efficient application of 80/20 principles
across all product lines to optimize profit margins and cash flow. The segment realignment had no impact on the Company’s
across all product lines to optimize profit margins and cash flow. The segment realignment had no impact on the Company’s
consolidated financial position, results of operations, and cash flows. Segment financial information for the prior periods has
consolidated financial position, results of operations, and cash flows. Segment financial information for the prior periods has
been recast to conform to the current presentation.
been recast to conform to the current presentation.
The following is a summary of net sales, gross profit, and operating income by segment. See Note 3 for additional information
regarding net sales by product groups within each segment.
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 product groups within each segment.
Year ended March 31, 2023
Year ended March 31, 2023
Year ended March 31, 2023
External Sales
External Sales
External Sales
Inter-segment
Inter-segment
Inter-segment
Sales
Sales
Sales
Total
Total
Total
Net sales:
Net sales:
Net sales:
Climate Solutions
Climate Solutions
Climate Solutions
Performance Technologies
Performance Technologies
Performance Technologies
Segment total
Segment total
Corporate and eliminations
Corporate and eliminations
Corporate and eliminations
Segment total
Net sales
Net sales
Net sales
Net sales:
Net sales:
Net sales:
Climate Solutions
Climate Solutions
Climate Solutions
Performance Technologies
Performance Technologies
Performance Technologies
Segment total
Segment total
Corporate and eliminations
Corporate and eliminations
Corporate and eliminations
Segment total
Net sales
Net sales
Net sales
Net sales:
Net sales:
Net sales:
Climate Solutions
Climate Solutions
Climate Solutions
Performance Technologies
Performance Technologies
Performance Technologies
Segment total
Segment total
Segment total
Corporate and eliminations
Corporate and eliminations
Corporate and eliminations
Net sales
Net sales
Net sales
$
$
1,011.5
1,011.5
$
0.4
$
0.4
$
$
1,011.9
1,011.9
1,286.4
1,286.4
2,297.9
2,297.9
-
-
29.8
29.8
30.2
30.2
(30.2)
(30.2)
1,316.2
1,316.2
2,328.1
2,328.1
(30.2)
(30.2)
$
$
2,297.9
2,297.9
$
-
$
-
$
$
2,297.9
2,297.9
Year ended March 31, 2022
Year ended March 31, 2022
Year ended March 31, 2022
Inter-segment
Inter-segment
Inter-segment
Sales
Sales
Sales
Total
Total
Total
External Sales
External Sales
External Sales
$
910.1
$
910.1
$
0.4
$
0.4
$
910.5
$
910.5
1,140.0
1,140.0
2,050.1
2,050.1
-
-
32.4
32.4
32.8
32.8
(32.8)
(32.8)
1,172.4
1,172.4
2,082.9
2,082.9
(32.8)
(32.8)
$
$
2,050.1
2,050.1
$
-
$
-
$
$
2,050.1
2,050.1
Year ended March 31, 2021
Year ended March 31, 2021
Year ended March 31, 2021
Inter-segment
Inter-segment
Inter-segment
Sales
Sales
Sales
Total
Total
Total
External Sales
External Sales
External Sales
$
731.1
$
731.1
$
0.1
$
0.1
$
731.2
$
731.2
1,077.3
1,077.3
1,808.4
1,808.4
-
-
31.5
31.5
31.6
31.6
(31.6)
(31.6)
1,108.8
1,108.8
1,840.0
1,840.0
(31.6)
(31.6)
$
$
1,808.4
1,808.4
$
$
1,808.4
1,808.4
$
-
$
-
77
77
77
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Inter-segment sales are accounted for based upon an established markup over production costs. Net sales for Corporate and
eliminations primarily represent the elimination of inter-segment sales.
Inter-segment sales are accounted for based upon an established markup over production costs. Net sales for Corporate and
eliminations primarily represent the elimination of inter-segment sales.
2023
2023
Years ended March 31,
2022
Years ended March 31,
Years ended March 31,
2022
2021
2021
Gross Profit:
Gross profit:
Gross profit:
Climate Solutions
Climate Solutions
Climate Solutions
Performance Technologies
Performance Technologies
Performance Technologies
Segment total
Segment total
Segment total
Corporate and eliminations
Corporate and eliminations
Corporate and eliminations
Gross profit
Gross profit
Gross profit
Operating income:
Climate Solutions
Operating Income:
Operating income:
Climate Solutions
Climate Solutions
Performance Technologies
Performance Technologies
Segment total
Performance Technologies
Segment total
Segment total
Corporate and eliminations (a)
Corporate and eliminations (a)
Corporate and eliminations (a)
Operating income (loss)
Operating income (loss)
Operating income (loss)
$
$'s
$'s
$
223.6
166.1
389.7
(0.3)
389.4
$
223.6
166.1
389.7
(0.3)
389.4
$
% of
% of
sales
sales
22.1%
22.1%
12.6%
12.6%
16.7%
16.7%
-
-
16.9%
16.9%
$
$'s
$'s
$
166.3
142.2
308.5
0.8
309.3
$
166.3
142.2
308.5
0.8
309.3
$
% of
% of
sales
sales
18.3%
18.3%
12.1%
12.1%
14.8%
14.8%
-
-
15.1%
15.1%
$
$'s
$'s
$
136.6
157.1
293.7
(0.3)
293.4
$
136.6
157.1
293.7
(0.3)
293.4
$
% of
% of
sales
sales
18.7%
18.7%
14.2%
14.2%
16.0%
16.0%
-
-
16.2%
16.2%
Years ended March 31,
Years ended March 31,
Years ended March 31,
2022
73.4
$
2022
73.4
2023
124.1
$
2021
49.9
$
2021
49.9
$
2023
124.1
$
$
65.6
65.6
189.7
189.7
77.4
77.4
(109.1)
(109.1)
150.8
150.8
(39.3)
(39.3)
(31.6)
(31.6)
(59.2)
(59.2)
(38.5)
(38.5)
$
150.4
$
150.4
$
119.2
$
119.2
$
$
(97.7)
(97.7)
(a) The operating loss for Corporate includes certain research and development costs, legal, finance and other general
(a) The operating loss for Corporate includes certain research and development costs, legal, finance and other general
corporate and central services expenses, and other costs that are either not directly attributable to an operating
corporate and central services expenses, and other costs that are either not directly attributable to an operating
segment or not considered when management evaluates segment performance.
segment or not considered when management evaluates segment performance.
The following is a summary of segment assets, comprised entirely of trade accounts receivable and inventories, and other
assets:
The following is a summary of segment assets, comprised entirely of trade accounts receivable and inventories, and other
assets:
March 31,
March 31,
March 31,
Assets:
Assets:
Assets:
Climate Solutions
Climate Solutions
Climate Solutions
Performance Technologies
Performance Technologies
Performance Technologies
Other (a)
Other (a)
Other (a)
Total assets
Total assets
Total assets
2023
334.8
$
2023
334.8
$
2022
291.7
$
2022
291.7
$
388.1
388.1
843.0
843.0
357.0
357.0
778.3
778.3
$
$
1,565.9
1,565.9
$
1,427.0
$
1,427.0
(a) Represents cash and cash equivalents, other current assets, property plant and equipment, intangible assets, goodwill,
(a) Represents cash and cash equivalents, other current assets, property plant and equipment, intangible assets, goodwill,
deferred income taxes, and other noncurrent assets for the Climate Solutions and Performance Technologies
segments and Corporate.
deferred income taxes, and other noncurrent assets for the Climate Solutions and Performance Technologies
segments and Corporate.
The following is a summary of capital expenditures and depreciation and amortization expense by segment:
The following is a summary of capital expenditures and depreciation and amortization expense by segment:
Capital expenditures:
Capital expenditures:
Capital expenditures:
Climate Solutions
Climate Solutions
Climate Solutions
Performance Technologies
Performance Technologies
Performance Technologies
Corporate
Corporate
Total capital expenditures
Total capital expenditures
Total capital expenditures
Corporate
Years ended March 31,
Years ended March 31,
Years ended March 31,
2022
2022
$
9.9
9.9
$
2023
24.2
2021
2021
$
7.2
7.2
$
2023
$
24.2
$
25.2
25.2
1.3
1.3
29.2
29.2
1.2
1.2
25.0
25.0
0.5
0.5
$
$
50.7
50.7
$
$
40.3
40.3
$
$
32.7
32.7
78
78
78
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
MODINE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts)
Climate Solutions
Depreciation and amortization expense:
Depreciation and amortization expense:
Depreciation and amortization expense:
Climate Solutions
Climate Solutions
Performance Technologies (a)
Performance Technologies (a)
Corporate
Corporate
Performance Technologies (a)
Corporate
Years ended March 31,
Years ended March 31,
Years ended March 31,
2022
2022
$
23.6
23.6
$
2021
2021
$
24.9
24.9
$
2023
2023
$
21.7
21.7
$
31.8
31.8
1.0
1.0
29.9
29.9
1.3
1.3
42.1
42.1
1.6
1.6
Total depreciation and amortization expense
Total depreciation and amortization expense
Total depreciation and amortization expense
$
$
54.5
54.5
$
$
54.8
54.8
$
$
68.6
68.6
(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.
(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.
The following is a summary of net sales by geographic area, based upon the location of the selling unit:
The following is a summary of net sales by geographic area, based upon the location of the selling unit:
China
United States
United States
United States
Italy
Italy
Italy
Hungary
Hungary
Hungary
China
China
Brazil
Brazil
United Kingdom
United Kingdom
Other
Other
Other
Net sales
Net sales
Net sales
United Kingdom
Brazil
$
$
Years ended March 31,
Years ended March 31,
Years ended March 31,
2022
949.6
$
232.0
185.2
2022
949.6
232.0
185.2
$
2023
1,139.3
249.5
210.7
2023
1,139.3
249.5
210.7
2021
765.7
$
188.6
153.7
2021
765.7
188.6
153.7
$
151.6
151.6
103.6
103.6
166.0
166.0
81.2
81.2
217.6
217.6
48.5
48.5
93.6
349.6
2,297.9
93.6
349.6
2,297.9
$
$
118.6
317.5
2,050.1
118.6
317.5
2,050.1
$
$
96.4
337.9
1,808.4
96.4
337.9
1,808.4
$
$
The following is a summary of property, plant and equipment by geographic area:
The following is a summary of property, plant and equipment by geographic area:
China
United States
United States
United States
Hungary
Hungary
Hungary
China
China
Mexico
Mexico
Mexico
Italy
Italy
Other
Other
Other
Italy
Total property, plant and equipment
Total property, plant and equipment
Total property, plant and equipment
March 31,
March 31,
March 31,
2023
2023
96.4
$
96.4
$
2022
2022
83.6
$
83.6
$
40.8
40.8
40.2
40.2
34.0
34.0
32.8
32.8
70.3
70.3
44.0
44.0
45.6
45.6
38.5
38.5
33.2
33.2
70.5
70.5
$
$
314.5
314.5
$
$
315.4
315.4
79
79
79
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
To the Shareholders and Board of Directors
Modine Manufacturing Company:
Modine Manufacturing Company:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheet of Modine Manufacturing Company and subsidiaries (the
We have audited the accompanying consolidated balance sheet of Modine Manufacturing Company and subsidiaries (the
Company) as of March 31, 2023, the related consolidated statements of operations, comprehensive income, shareholders’
Company) as of March 31, 2023, the related consolidated statements of operations, comprehensive income, shareholders’
equity, and cash flows for the year ended March 31, 2023, and the related notes and financial statement schedule II -
equity, and cash flows for the year ended March 31, 2023, and the related notes and financial statement schedule II -
Valuation and Qualifying Accounts (collectively, the consolidated financial statements). We also have audited the
Valuation and Qualifying Accounts (collectively, the consolidated financial statements). We also have audited the
Company’s internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control
Company’s internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control
– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of March 31, 2023, and the results of its operations and its cash flows for the year ended
position of the Company as of March 31, 2023, and the results of its operations and its cash flows for the year ended
March 31, 2023, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company
March 31, 2023, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of March 31, 2023 based on criteria
maintained, in all material respects, effective internal control over financial reporting as of March 31, 2023 based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
Treadway Commission.
Basis for Opinions
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to
included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control
express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control
over financial reporting based on our audits. We are a public accounting firm registered with the Public Company
over financial reporting based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained
in all material respects.
in all material respects.
Our audit of the consolidated financial statements included performing procedures to assess the risks of material
Our audit of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and
disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial
significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial
statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control
statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.
opinions.
Definition and Limitations of Internal Control Over Financial Reporting
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
80
80
80
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
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: (1) relates to accounts
or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of a critical audit matter 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.
Realizability of certain domestic deferred tax assets
As discussed in Notes 1 and 8 to the consolidated financial statements, 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. In making this assessment,
the Company considers expectations of future taxable income and tax planning strategies. In addition, the Company
considers the duration of statutory carryforward periods and historical financial results. Valuation allowances as of
March 31, 2023 were $61.6 million, a portion of which are related to certain domestic deferred tax assets. The
Company recorded a reduction in its valuation allowance on its deferred tax assets during the year ended March 31,
2023.
We identified the evaluation of the realizability of certain domestic deferred tax assets, specifically certain federal
carryforward assets, as a critical audit matter. Subjective and challenging auditor judgment was required to: (i)
evaluate the realizability of certain federal carryforward assets based on the projected future taxable income over the
periods in which those federal carryforward assets will be utilized, and (ii) assess the application of tax laws to utilize
the federal carryforward assets.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design
and tested the operating effectiveness of certain internal controls related to the Company’s evaluation of the
realizability of the federal carryforward assets, including controls related to the projections of future taxable income
and the application of tax laws to utilize the federal carryforward assets. We evaluated the reasonableness of
management’s projections of future taxable income, including positive and negative evidence used, by comparing the
projections to:
recent financial profitability trends of the Company
industry data and economic trends, and
evidence obtained in other areas of the audit.
We assessed the Company’s ability to project future earnings based on comparisons of the Company’s previous
annual projections to actual results. We performed a sensitivity analysis over the amount and timing of future taxable
income to assess the impact on utilization of the federal carryforward assets. We involved tax professionals with
specialized skills and knowledge, who assisted in assessing the Company’s application of tax laws to utilize the
federal carryforward assets and evaluating the recognition and realizability of the carryforward assets.
/s/ KPMG LLP
We have served as the Company’s auditor since 2022.
Milwaukee, Wisconsin
May 25, 2023
81
81
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Modine Manufacturing Company
To the Board of Directors and Shareholders of Modine Manufacturing Company
Opinion on the Financial Statements
Opinion on the Financial Statements
We have audited the consolidated balance sheet of Modine Manufacturing Company and its subsidiaries (the “Company”)
We have audited the consolidated balance sheet of Modine Manufacturing Company and its subsidiaries (the “Company”)
as of March 31, 2022, and the related consolidated statements of operations, comprehensive income, cash flows and
as of March 31, 2022, and the related consolidated statements of operations, comprehensive income, cash flows and
shareholders’ equity for each of the two years in the period ended March 31, 2022, including the related notes and schedule
shareholders’ equity for each of the two years in the period ended March 31, 2022, including the related notes and schedule
of valuation and qualifying accounts as of and for each of the two years in the period ended March 31, 2022 listed in the
of valuation and qualifying accounts as of and for each of the two years in the period ended March 31, 2022 listed in the
index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the
index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March
31, 2022, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2022 in
31, 2022, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2022 in
conformity with accounting principles generally accepted in the United States of America.
conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting
express an opinion on the Company’s consolidated financial statements 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
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
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.
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud.
financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
Our audits 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
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
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
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. We believe that our audits provide a reasonable
evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
/s/ PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
Milwaukee, Wisconsin
May 26, 2022, except for the change in composition of reportable segments discussed in Note 22 to the consolidated
May 26, 2022, except for the change in composition of reportable segments discussed in Note 22 to the consolidated
financial statements, as to which the date is May 25, 2023
financial statements, as to which the date is May 25, 2023
We served as the Company's auditor from 1935 to 2022.
We served as the Company's auditor from 1935 to 2022.
82
82
82
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
DISCLOSURE.
DISCLOSURE.
DISCLOSURE.
Not Applicable
Not Applicable
Not Applicable
Not Applicable
ITEM 9A. CONTROLS AND PROCEDURES.
ITEM 9A. CONTROLS AND PROCEDURES.
ITEM 9A. CONTROLS AND PROCEDURES.
ITEM 9A. CONTROLS AND PROCEDURES.
Conclusion Regarding Disclosure Controls and Procedures
Conclusion Regarding Disclosure Controls and Procedures
Conclusion Regarding Disclosure 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,
As of the end of the period covered by this Annual Report on Form 10-K, management of the Company, under the supervision,
As of the end of the period covered by this Annual Report on Form 10-K, management of the Company, under the supervision,
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
and with the participation, of the Company's President and Chief Executive Officer and Executive Vice President, Chief
and with the participation, of the Company's President and Chief Executive Officer and Executive Vice President, Chief
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
Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures, at a reasonable assurance
Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures, at a reasonable assurance
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
level, as defined in the Securities Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the President and
level, as defined in the Securities Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the President and
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
Chief Executive Officer and Executive Vice President, Chief Financial Officer have concluded that the Company's disclosure
Chief Executive Officer and Executive Vice President, Chief Financial Officer have concluded that the Company's disclosure
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, 2023.
controls and procedures were effective, at a reasonable assurance level, as of March 31, 2023.
controls and procedures were effective, at a reasonable assurance level, as of March 31, 2023.
controls and procedures were effective, at a reasonable assurance level, as of March 31, 2023.
Management’s Report on Internal Control Over Financial Reporting
Management’s Report on Internal Control Over Financial Reporting
Management’s Report on Internal Control Over Financial Reporting
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
The management of the Company is responsible for establishing and maintaining adequate internal control over financial
The management of the Company is responsible for establishing and maintaining adequate internal control over financial
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.
reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.
reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.
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
The Company’s internal control over financial reporting is a process designed by, or under the supervision of, the Company’s
The Company’s internal control over financial reporting is a process designed by, or under the supervision of, the Company’s
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
President and Chief Executive Officer and Executive Vice President, Chief Financial Officer, and effected by the Company's
President and Chief Executive Officer and Executive Vice President, Chief Financial Officer, and effected by 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
board of directors, management and other personnel to provide reasonable assurance regarding the reliability of its financial
board of directors, management and other personnel to provide reasonable assurance regarding the reliability of its financial
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
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
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
principles. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
principles. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
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
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
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
the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
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
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are
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
being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable
being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable
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
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that
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
could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial
could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial
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
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
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
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
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.
the policies or procedures may deteriorate.
the policies or procedures may deteriorate.
the policies or procedures may deteriorate.
Management, with the participation of the Company’s President and Chief Executive Officer and Executive Vice President,
Management, with the participation of the Company’s President and Chief Executive Officer and Executive Vice President,
Management, with the participation of the Company’s President and Chief Executive Officer and Executive Vice President,
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,
Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of March 31,
Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of March 31,
Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of March 31,
2023. In making its assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the
2023. In making its assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the
2023. In making its assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the
2023. 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
Treadway Commission in “Internal Control—Integrated Framework (2013).” Based upon this assessment, management
Treadway Commission in “Internal Control—Integrated Framework (2013).” Based upon this assessment, management
Treadway Commission in “Internal Control—Integrated Framework (2013).” Based upon this assessment, management
concluded that, as of March 31, 2023, the Company’s internal control over financial reporting was effective.
concluded that, as of March 31, 2023, the Company’s internal control over financial reporting was effective.
concluded that, as of March 31, 2023, the Company’s internal control over financial reporting was effective.
concluded that, as of March 31, 2023, 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, 2023 has been audited by KPMG
The effectiveness of the Company’s internal control over financial reporting as of March 31, 2023 has been audited by KPMG
The effectiveness of the Company’s internal control over financial reporting as of March 31, 2023 has been audited by KPMG
The effectiveness of the Company’s internal control over financial reporting as of March 31, 2023 has been audited by KPMG
LLP, an independent registered public accounting firm, as stated in their report which appears herein.
LLP, an independent registered public accounting firm, as stated in their report which appears herein.
LLP, an independent registered public accounting firm, as stated in their report which appears herein.
LLP, an independent registered public accounting firm, as stated in their report which appears herein.
Changes in Internal Control Over Financial Reporting
Changes in Internal Control Over Financial Reporting
Changes in Internal Control Over Financial Reporting
Changes in Internal Control Over Financial Reporting
There have been no changes in internal control over financial reporting during the fourth quarter of fiscal 2023 that have
There have been no changes in internal control over financial reporting during the fourth quarter of fiscal 2023 that have
There have been no changes in internal control over financial reporting during the fourth quarter of fiscal 2023 that have
There have been no changes in internal control over financial reporting during the fourth quarter of fiscal 2023 that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
ITEM 9B. OTHER INFORMATION.
ITEM 9B. OTHER INFORMATION.
ITEM 9B. OTHER INFORMATION.
None.
None.
None.
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not Applicable.
Not Applicable.
Not Applicable.
Not Applicable.
PART III
PART III
PART III
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Directors
Directors
Directors
Directors
The Company incorporates by reference the information appearing in the Company's Proxy Statement for the 2023 Annual
The Company incorporates by reference the information appearing in the Company's Proxy Statement for the 2023 Annual
The Company incorporates by reference the information appearing in the Company's Proxy Statement for the 2023 Annual
The Company incorporates by reference the information appearing in the Company's Proxy Statement for the 2023 Annual
Meeting of Shareholders to be held on August 17, 2023 (the “2023 Annual Meeting Proxy Statement”) under the caption
Meeting of Shareholders to be held on August 17, 2023 (the “2023 Annual Meeting Proxy Statement”) under the caption
Meeting of Shareholders to be held on August 17, 2023 (the “2023 Annual Meeting Proxy Statement”) under the caption
Meeting of Shareholders to be held on August 17, 2023 (the “2023 Annual Meeting Proxy Statement”) under the caption
“Election of Directors.”
“Election of Directors.”
“Election of Directors.”
“Election of Directors.”
83
83
83
83
83
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 2023 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 2023 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 2023 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 2023 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 2023 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 2023 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: HCC Committee Interlocks and Insider Participation,” and “Compensation Committee Report” is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
Other than the information below, the information required by this Item 12 is incorporated by reference to the section under the
caption “Security Ownership of Certain Beneficial Owners and Management” in the 2023 Annual Meeting Proxy Statement.
Each of the Company’s equity compensation plans, listed below, has been approved by its shareholders:
Amended and Restated 2008 Incentive Compensation Plan;
2017 Incentive Compensation Plan; and
Amended and Restated 2020 Incentive Compensation Plan.
84
84
The following table sets forth required information about equity compensation plans as of March 31, 2023:
The following table sets forth required information about equity compensation plans as of March 31, 2023:
The following table sets forth required information about equity compensation plans as of March 31, 2023:
Plan Category
Plan Category
Plan Category
Equity Compensation Plans approved by security holders
Equity Compensation Plans approved by security holders
Equity Compensation Plans approved by security holders
Plan Category
Equity Compensation Plans not approved by security holders
Equity Compensation Plans not approved by security holders
Equity Compensation Plans not approved by security holders
Equity Compensation Plans approved by security holders
Total
Total
Total
Equity Compensation Plans not approved by security holders
Total
Number of shares to
Number of shares to
be issued upon
be issued upon
Number of shares to
exercise of
exercise of
be issued upon
outstanding options,
outstanding options,
exercise of
warrants or rights (a)
warrants or rights (a)
outstanding options,
1,889,799
1,889,799
warrants or rights (a)
-
-
1,889,799
1,889,799
1,889,799
-
1,889,799
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
$ 12.28
-
$ 12.28
Weighted-average
exercise price of
Weighted-average
outstanding options,
exercise price of
warrants and rights
outstanding options,
(b)
warrants and rights
$ 12.28
(b)
-
$ 12.28
$ 12.28
-
$ 12.28
Number of shares
Number of shares
remaining available for
remaining available for
Number of shares
future issuance
future issuance
remaining available for
(excluding securities
(excluding securities
future issuance
reflected in 1st column)
reflected in 1st column)
(excluding securities
(c)
(c)
reflected in 1st column)
2,159,658
2,159,658
(c)
2,159,658
2,159,658
2,159,658
2,159,658
-
-
-
(a) Includes shares issuable under the following type of awards: options – 890,687 shares and restricted stock units –
(a) Includes shares issuable under the following type of awards: options – 890,687 shares and restricted stock units –
999,112 shares. The number of shares subject to options were granted under the following plans: 2008 Incentive Plan
999,112 shares. The number of shares subject to options were granted under the following plans: 2008 Incentive Plan
(a) Includes shares issuable under the following type of awards: options – 890,687 shares and restricted stock units –
– 136,735 shares, 2017 Incentive Plan – 142,972 shares, 2020 Incentive Plan –610,980 shares. Shares issuable under
– 136,735 shares, 2017 Incentive Plan – 142,972 shares, 2020 Incentive Plan –610,980 shares. Shares issuable under
999,112 shares. The number of shares subject to options were granted under the following plans: 2008 Incentive Plan
restricted stock unit awards were granted under the following plans: 2017 Incentive Plan – 83,350 shares, 2020
restricted stock unit awards were granted under the following plans: 2017 Incentive Plan – 83,350 shares, 2020
– 136,735 shares, 2017 Incentive Plan – 142,972 shares, 2020 Incentive Plan –610,980 shares. Shares issuable under
Incentive Plan – 915,762 shares.
Incentive Plan – 915,762 shares.
restricted stock unit awards were granted under the following plans: 2017 Incentive Plan – 83,350 shares, 2020
(b) The weighted average exercise price does not take into account awards of restricted stock units or performance stock
Incentive Plan – 915,762 shares.
which do not have an exercise price.
which do not have an exercise price.
(b) The weighted average exercise price does not take into account awards of restricted stock units or performance stock
(c) Includes the number of shares remaining available for future issuance under the Amended and Restated 2020 Incentive
which do not have an exercise price.
Compensation Plan.
Compensation Plan.
(c) Includes the number of shares remaining available for future issuance under the Amended and Restated 2020 Incentive
Compensation Plan.
(c) Includes the number of shares remaining available for future issuance under the Amended and Restated 2020 Incentive
(b) The weighted average exercise price does not take into account awards of restricted stock units or performance stock
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The Company incorporates by reference the information contained in the 2023 Annual Meeting Proxy Statement under the
captions “Certain Relationships and Related Party Transactions” and “Director Independence.”
The Company incorporates by reference the information contained in the 2023 Annual Meeting Proxy Statement under the
caption “Independent Auditors’ Fees for Fiscal 2023 and 2022.”
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The Company incorporates by reference the information contained in the 2023 Annual Meeting Proxy Statement under the
captions “Certain Relationships and Related Party Transactions” and “Director Independence.”
The Company incorporates by reference the information contained in the 2023 Annual Meeting Proxy Statement under the
captions “Certain Relationships and Related Party Transactions” and “Director Independence.”
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The Company incorporates by reference the information contained in the 2023 Annual Meeting Proxy Statement under the
caption “Independent Auditors’ Fees for Fiscal 2023 and 2022.”
The Company incorporates by reference the information contained in the 2023 Annual Meeting Proxy Statement under the
caption “Independent Auditors’ Fees for Fiscal 2023 and 2022.”
PART IV
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Documents Filed. The following documents are filed as part of this Report:
(a) Documents Filed. The following documents are filed as part of this Report:
(a) Documents Filed. The following documents are filed as part of this Report:
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
PART IV
Page in Form 10-K
Page in Form 10-K
Page in Form 10-K
1. The consolidated financial statements of Modine Manufacturing Company and its subsidiaries filed
under Item 8:
1. The consolidated financial statements of Modine Manufacturing Company and its subsidiaries filed
under Item 8:
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, 2023, 2022 and 2021
Consolidated Statements of Operations for the years ended March 31, 2023, 2022 and 2021
Consolidated Statements of Comprehensive Income for the years ended March 31, 2023, 2022 and 2021
Consolidated Statements of Comprehensive Income for the years ended March 31, 2023, 2022 and 2021
Consolidated Statements of Operations for the years ended March 31, 2023, 2022 and 2021
Consolidated Balance Sheets at March 31, 2023 and 2022
Consolidated Balance Sheets at March 31, 2023 and 2022
Consolidated Statements of Comprehensive Income for the years ended March 31, 2023, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended March 31, 2023, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended March 31, 2023, 2022 and 2021
Consolidated Balance Sheets at March 31, 2023 and 2022
Consolidated Statements of Shareholders' Equity for the years ended March 31, 2023, 2022 and 2021
Consolidated Statements of Shareholders' Equity for the years ended March 31, 2023, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended March 31, 2023, 2022 and 2021
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Consolidated Statements of Shareholders' Equity for the years ended March 31, 2023, 2022 and 2021
Report of Independent Registered Public Accounting Firm (KPMG PCAOB ID 185)
Report of Independent Registered Public Accounting Firm (KPMG PCAOB ID 185)
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PricewaterhouseCoopers PCAOB ID 238)
Report of Independent Registered Public Accounting Firm (PricewaterhouseCoopers PCAOB ID 238)
Report of Independent Registered Public Accounting Firm (KPMG PCAOB ID 185)
Report of Independent Registered Public Accounting Firm (PricewaterhouseCoopers PCAOB ID 238)
2. Financial Statement Schedules
2. Financial Statement Schedules
The following financial statement schedule should be read in conjunction with the consolidated
The following financial statement schedule should be read in conjunction with the consolidated
financial statements set forth in Item 8:
financial statements set forth in Item 8:
The following financial statement schedule should be read in conjunction with the consolidated
Schedule II -- Valuation and Qualifying Accounts for the years ended March 31, 2023, 2022 and 2021
Schedule II -- Valuation and Qualifying Accounts for the years ended March 31, 2023, 2022 and 2021
financial statements set forth in Item 8:
Schedule II -- Valuation and Qualifying Accounts for the years ended March 31, 2023, 2022 and 2021
2. Financial Statement Schedules
42
43
44
45
46
47-79
80-81
82
42
43
42
44
43
45
44
46
45
47-79
46
80-81
47-79
82
80-81
82
87
87
87
85
85
85
85
Schedules other than those listed above are omitted because they are not applicable, not required, or
because the required information is included in the consolidated financial statements and the notes
thereto.
Schedules other than those listed above are omitted because they are not applicable, not required, or
because the required information is included in the consolidated financial statements and the notes
thereto.
3. Exhibits and Exhibit Index.
3. Exhibits and Exhibit Index.
88-91
88-91
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.
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.
ITEM 16. FORM 10-K SUMMARY.
ITEM 16. FORM 10-K SUMMARY.
None.
None.
86
86
86
MODINE MANUFACTURING COMPANY AND SUBSIDIARIES
MODINE MANUFACTURING COMPANY AND SUBSIDIARIES
(A Wisconsin Corporation)
(A Wisconsin Corporation)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the years ended March 31, 2023, 2022 and 2021
For the years ended March 31, 2023, 2022 and 2021
(In millions)
(In millions)
Additions
Additions
Balance at
Balance at
Beginning of
Beginning of
Period
Period
Charged
Charged
(Benefit) to
(Benefit) to
Costs and
Costs and
Expenses
Expenses
Charged to
Charged to
Other
Other
Accounts
Accounts
Reclassified
Reclassified
from (to)
from (to)
Held for Sale
Held for Sale
Balance at
Balance at
End of Period
End of Period
$
$
112.2
112.2
$
$
(49.7)
(49.7)
$
$
(0.9)
(0.9)
(a)
(a)
$
$
-
-
$
$
61.6
61.6
$
$
90.7
90.7
$
$
(4.6)
(4.6)
$
$
(1.0)
(1.0)
(a)
(a)
$
$
27.1
27.1
$
$
112.2
112.2
$
$
46.9
46.9
$
$
86.2
86.2
$
$
2.8
2.8
(a)
(a)
$
$
(45.2)
(45.2)
$
$
90.7
90.7
Description
Description
2023: Valuation Allowance for
2023: Valuation Allowance for
2023: Valuation Allowance for
Deferred Tax Assets
Deferred Tax Assets
Deferred Tax Assets
2022: Valuation Allowance for
2022: Valuation Allowance for
2022: Valuation Allowance for
Deferred Tax Assets
Deferred Tax Assets
Deferred Tax Assets
2021: Valuation Allowance for
2021: Valuation Allowance for
2021: Valuation Allowance for
Deferred Tax Assets
Deferred Tax Assets
Deferred Tax Assets
(a) Foreign currency translation and other adjustments.
(a) Foreign currency translation and other adjustments.
87
87
87
MODINE MANUFACTURING COMPANY
(THE “REGISTRANT”)
(COMMISSION FILE NO. 1-1373)
EXHIBIT INDEX
TO
2023 ANNUAL REPORT ON FORM 10-K
Exhibit No. Description
Exhibit No. Description
Exhibit No. Description
Exhibit No. Description
Exhibit No. Description
Exhibit No. Description
Exhibit No. Description
Exhibit No. Description
Exhibit No. Description
Exhibit No. Description
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
MODINE MANUFACTURING COMPANY
(THE “REGISTRANT”)
(THE “REGISTRANT”)
(THE “REGISTRANT”)
(THE “REGISTRANT”)
(THE “REGISTRANT”)
(THE “REGISTRANT”)
(THE “REGISTRANT”)
(THE “REGISTRANT”)
(THE “REGISTRANT”)
(THE “REGISTRANT”)
(COMMISSION FILE NO. 1-1373)
(COMMISSION FILE NO. 1-1373)
(COMMISSION FILE NO. 1-1373)
(COMMISSION FILE NO. 1-1373)
(COMMISSION FILE NO. 1-1373)
(COMMISSION FILE NO. 1-1373)
(COMMISSION FILE NO. 1-1373)
(COMMISSION FILE NO. 1-1373)
(COMMISSION FILE NO. 1-1373)
(COMMISSION FILE NO. 1-1373)
EXHIBIT INDEX
EXHIBIT INDEX
EXHIBIT INDEX
EXHIBIT INDEX
EXHIBIT INDEX
EXHIBIT INDEX
EXHIBIT INDEX
EXHIBIT INDEX
EXHIBIT INDEX
EXHIBIT INDEX
TO
TO
TO
TO
TO
TO
TO
TO
TO
TO
2023 ANNUAL REPORT ON FORM 10-K
2023 ANNUAL REPORT ON FORM 10-K
2023 ANNUAL REPORT ON FORM 10-K
2023 ANNUAL REPORT ON FORM 10-K
2023 ANNUAL REPORT ON FORM 10-K
2023 ANNUAL REPORT ON FORM 10-K
2023 ANNUAL REPORT ON FORM 10-K
2023 ANNUAL REPORT ON FORM 10-K
2023 ANNUAL REPORT ON FORM 10-K
2023 ANNUAL REPORT ON FORM 10-K
Exhibit No. Description
3.1
3.1
3.1
3.1
3.1
3.1
3.1
3.1
3.1
Filed
Herewith
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Incorporated Herein By
Referenced To
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
3.1
Amended and Restated Articles of Incorporation, as amended.
Bylaws, as amended.
3.2
3.2
3.2
3.2
3.2
3.2
3.2
3.2
3.2
4.1
Form of Stock Certificate of the Registrant.
4.1
4.1
4.1
4.1
4.1
4.1
4.1
4.1
4.2
4.2
4.2
4.2
4.2
4.2
4.2
4.2
4.2
Exhibit 3.1 to Form 10-K for the
fiscal year ended March 31, 2018
3.2
Bylaws, as amended.
Bylaws, as amended.
Bylaws, as amended.
Bylaws, as amended.
Bylaws, as amended.
Bylaws, as amended.
Bylaws, as amended.
Bylaws, as amended.
Bylaws, as amended.
Bylaws, as amended.
Exhibit 3.1 to Registrant’s Current
Report on Form 8-K dated January
19, 2023
4.1
Form of Stock Certificate of the Registrant.
Form of Stock Certificate of the Registrant.
Form of Stock Certificate of the Registrant.
Form of Stock Certificate of the Registrant.
Form of Stock Certificate of the Registrant.
Form of Stock Certificate of the Registrant.
Form of Stock Certificate of the Registrant.
Form of Stock Certificate of the Registrant.
Form of Stock Certificate of the Registrant.
Form of Stock Certificate of the Registrant.
Exhibit 4(a) to Form 10-K for the
fiscal year ended March 31, 2003
(“2003 10-K”)
Incorporated Herein By
Incorporated Herein By
Incorporated Herein By
Incorporated Herein By
Incorporated Herein By
Incorporated Herein By
Incorporated Herein By
Incorporated Herein By
Incorporated Herein By
Incorporated Herein By
Referenced To
Referenced To
Referenced To
Referenced To
Referenced To
Referenced To
Referenced To
Referenced To
Referenced To
Referenced To
Filed
Filed
Filed
Filed
Filed
Filed
Filed
Filed
Filed
Filed
Herewith
Herewith
Herewith
Herewith
Herewith
Herewith
Herewith
Herewith
Herewith
Herewith
Exhibit 3.1 to Form 10-K for the
fiscal year ended March 31, 2018
Exhibit 3.1 to Form 10-K for the
Exhibit 3.1 to Form 10-K for the
Exhibit 3.1 to Form 10-K for the
Exhibit 3.1 to Form 10-K for the
Exhibit 3.1 to Form 10-K for the
Exhibit 3.1 to Form 10-K for the
Exhibit 3.1 to Form 10-K for the
Exhibit 3.1 to Form 10-K for the
fiscal year ended March 31, 2018
fiscal year ended March 31, 2018
fiscal year ended March 31, 2018
fiscal year ended March 31, 2018
fiscal year ended March 31, 2018
fiscal year ended March 31, 2018
fiscal year ended March 31, 2018
fiscal year ended March 31, 2018
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 January
19, 2023
Exhibit 3.1 to Registrant’s Current
Exhibit 3.1 to Registrant’s Current
Exhibit 3.1 to Registrant’s Current
Exhibit 3.1 to Registrant’s Current
Exhibit 3.1 to Registrant’s Current
Exhibit 3.1 to Registrant’s Current
Exhibit 3.1 to Registrant’s Current
Exhibit 3.1 to Registrant’s Current
Report on Form 8-K dated January
Report on Form 8-K dated January
Report on Form 8-K dated January
Report on Form 8-K dated January
Report on Form 8-K dated January
Report on Form 8-K dated January
Report on Form 8-K dated January
Report on Form 8-K dated January
19, 2023
19, 2023
19, 2023
19, 2023
19, 2023
19, 2023
19, 2023
19, 2023
Exhibit 3.1 to Registrant’s Current
Report on Form 8-K dated January
19, 2023
Exhibit 4(a) to Form 10-K for the
fiscal year ended March 31, 2003
(“2003 10-K”)
Exhibit 4(a) to Form 10-K for the
Exhibit 4(a) to Form 10-K for the
Exhibit 4(a) to Form 10-K for the
Exhibit 4(a) to Form 10-K for the
Exhibit 4(a) to Form 10-K for the
Exhibit 4(a) to Form 10-K for the
Exhibit 4(a) to Form 10-K for the
Exhibit 4(a) to Form 10-K for the
fiscal year ended March 31, 2003
fiscal year ended March 31, 2003
fiscal year ended March 31, 2003
fiscal year ended March 31, 2003
fiscal year ended March 31, 2003
fiscal year ended March 31, 2003
fiscal year ended March 31, 2003
fiscal year ended March 31, 2003
(“2003 10-K”)
(“2003 10-K”)
(“2003 10-K”)
(“2003 10-K”)
(“2003 10-K”)
(“2003 10-K”)
(“2003 10-K”)
(“2003 10-K”)
Exhibit 4(a) to Form 10-K for the
fiscal year ended March 31, 2003
(“2003 10-K”)
3.1
3.2
4.1
4.2
4.3*
4.4*
4.5
4.6
4.7
4.8
4.9
4.10
4.11
N.A. as Collateral Agent.
Agreement.
27, 2012.
June 28, 2019.
2020
4.2
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
Amended and Restated Articles of Incorporation, as amended.
See Exhibit 3.1 hereto.
See Exhibit 3.1 hereto.
See Exhibit 3.1 hereto.
See Exhibit 3.1 hereto.
See Exhibit 3.1 hereto.
See Exhibit 3.1 hereto.
See Exhibit 3.1 hereto.
See Exhibit 3.1 hereto.
See Exhibit 3.1 hereto.
See Exhibit 3.1 hereto.
Amended and Restated Articles of Incorporation, as amended.
See Exhibit 3.1 hereto.
4.3*
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,
Amended and Restated Collateral Agency Intercreditor
Amended and Restated Collateral Agency Intercreditor
Amended and Restated Collateral Agency Intercreditor
Amended and Restated Collateral Agency Intercreditor
Amended and Restated Collateral Agency Intercreditor
Amended and Restated Collateral Agency Intercreditor
Amended and Restated Collateral Agency Intercreditor
Amended and Restated Collateral Agency Intercreditor
Amended and Restated Collateral Agency Intercreditor
Amended and Restated Collateral Agency Intercreditor
Agreement (the “Original Intercreditor Agreement”) dated as of
Agreement (the “Original Intercreditor Agreement”) dated as of
Agreement (the “Original Intercreditor Agreement”) dated as of
Agreement (the “Original Intercreditor Agreement”) dated as of
Agreement (the “Original Intercreditor Agreement”) dated as of
Agreement (the “Original Intercreditor Agreement”) dated as of
Agreement (the “Original Intercreditor Agreement”) dated as of
Agreement (the “Original Intercreditor Agreement”) dated as of
Agreement (the “Original Intercreditor Agreement”) dated as of
Agreement (the “Original Intercreditor Agreement”) dated as of
Exhibit 4.3 to Registrant’s Current
August 12, 2010 among the Lenders (as defined therein), the
August 12, 2010 among the Lenders (as defined therein), the
August 12, 2010 among the Lenders (as defined therein), the
August 12, 2010 among the Lenders (as defined therein), the
August 12, 2010 among the Lenders (as defined therein), the
August 12, 2010 among the Lenders (as defined therein), the
August 12, 2010 among the Lenders (as defined therein), the
August 12, 2010 among the Lenders (as defined therein), the
August 12, 2010 among the Lenders (as defined therein), the
August 12, 2010 among the Lenders (as defined therein), the
Report on Form 8-K dated August
Noteholders (as defined therein) and JPMorgan Chase Bank,
Noteholders (as defined therein) and JPMorgan Chase Bank,
Noteholders (as defined therein) and JPMorgan Chase Bank,
Noteholders (as defined therein) and JPMorgan Chase Bank,
Noteholders (as defined therein) and JPMorgan Chase Bank,
Noteholders (as defined therein) and JPMorgan Chase Bank,
Noteholders (as defined therein) and JPMorgan Chase Bank,
Noteholders (as defined therein) and JPMorgan Chase Bank,
Noteholders (as defined therein) and JPMorgan Chase Bank,
Noteholders (as defined therein) and JPMorgan Chase Bank,
12, 2010
N.A. as Collateral Agent.
N.A. as Collateral Agent.
N.A. as Collateral Agent.
N.A. as Collateral Agent.
N.A. as Collateral Agent.
N.A. as Collateral Agent.
N.A. as Collateral Agent.
N.A. as Collateral Agent.
N.A. as Collateral Agent.
N.A. as Collateral Agent.
4.3*
4.3*
4.3*
4.3*
4.3*
4.3*
4.3*
4.3*
4.3*
Exhibit 4.3 to Registrant’s Current
Report on Form 8-K dated August
12, 2010
Exhibit 4.3 to Registrant’s Current
Exhibit 4.3 to Registrant’s Current
Exhibit 4.3 to Registrant’s Current
Exhibit 4.3 to Registrant’s Current
Exhibit 4.3 to Registrant’s Current
Exhibit 4.3 to Registrant’s Current
Exhibit 4.3 to Registrant’s Current
Exhibit 4.3 to Registrant’s Current
Report on Form 8-K dated August
Report on Form 8-K dated August
Report on Form 8-K dated August
Report on Form 8-K dated August
Report on Form 8-K dated August
Report on Form 8-K dated August
Report on Form 8-K dated August
Report on Form 8-K dated August
12, 2010
12, 2010
12, 2010
12, 2010
12, 2010
12, 2010
12, 2010
12, 2010
Exhibit 4.3 to Registrant’s Current
Report on Form 8-K dated August
12, 2010
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
4.4*
4.4*
4.4*
4.4*
4.4*
4.4*
4.4*
4.4*
4.4*
4.4*
First Amendment to the Original Intercreditor Agreement,
First Amendment to the Original Intercreditor Agreement,
First Amendment to the Original Intercreditor Agreement,
First Amendment to the Original Intercreditor Agreement,
First Amendment to the Original Intercreditor Agreement,
First Amendment to the Original Intercreditor Agreement,
First Amendment to the Original Intercreditor Agreement,
First Amendment to the Original Intercreditor Agreement,
First Amendment to the Original Intercreditor Agreement,
First Amendment to the Original Intercreditor Agreement,
among the Lenders, the Note Holders and JPMorgan as
among the Lenders, the Note Holders and JPMorgan as
among the Lenders, the Note Holders and JPMorgan as
among the Lenders, the Note Holders and JPMorgan as
among the Lenders, the Note Holders and JPMorgan as
among the Lenders, the Note Holders and JPMorgan as
among the Lenders, the Note Holders and JPMorgan as
among the Lenders, the Note Holders and JPMorgan as
among the Lenders, the Note Holders and JPMorgan as
among the Lenders, the Note Holders and JPMorgan as
Exhibit 4.3 to Registrant’s Current
Collateral Agent, pursuant to which the Lenders, the Note
Collateral Agent, pursuant to which the Lenders, the Note
Collateral Agent, pursuant to which the Lenders, the Note
Collateral Agent, pursuant to which the Lenders, the Note
Collateral Agent, pursuant to which the Lenders, the Note
Collateral Agent, pursuant to which the Lenders, the Note
Collateral Agent, pursuant to which the Lenders, the Note
Collateral Agent, pursuant to which the Lenders, the Note
Collateral Agent, pursuant to which the Lenders, the Note
Collateral Agent, pursuant to which the Lenders, the Note
Report on Form 8-K dated August
Holders and JPMorgan amended the Original Intercreditor
Holders and JPMorgan amended the Original Intercreditor
Holders and JPMorgan amended the Original Intercreditor
Holders and JPMorgan amended the Original Intercreditor
Holders and JPMorgan amended the Original Intercreditor
Holders and JPMorgan amended the Original Intercreditor
Holders and JPMorgan amended the Original Intercreditor
Holders and JPMorgan amended the Original Intercreditor
Holders and JPMorgan amended the Original Intercreditor
Holders and JPMorgan amended the Original Intercreditor
30, 2013
Agreement.
Agreement.
Agreement.
Agreement.
Agreement.
Agreement.
Agreement.
Agreement.
Agreement.
Agreement.
Exhibit 4.3 to Registrant’s Current
Report on Form 8-K dated August
30, 2013
Exhibit 4.3 to Registrant’s Current
Exhibit 4.3 to Registrant’s Current
Exhibit 4.3 to Registrant’s Current
Exhibit 4.3 to Registrant’s Current
Exhibit 4.3 to Registrant’s Current
Exhibit 4.3 to Registrant’s Current
Exhibit 4.3 to Registrant’s Current
Exhibit 4.3 to Registrant’s Current
Report on Form 8-K dated August
Report on Form 8-K dated August
Report on Form 8-K dated August
Report on Form 8-K dated August
Report on Form 8-K dated August
Report on Form 8-K dated August
Report on Form 8-K dated August
Report on Form 8-K dated August
30, 2013
30, 2013
30, 2013
30, 2013
30, 2013
30, 2013
30, 2013
30, 2013
Exhibit 4.3 to Registrant’s Current
Report on Form 8-K dated August
30, 2013
Exhibit 4.10 to Registrant’s Form 10-
Credit Facility Agreement among Modine Holding GmbH,
Exhibit 4.10 to Registrant’s Form 10-
Credit Facility Agreement among Modine Holding GmbH,
Exhibit 4.10 to Registrant’s Form 10-
Credit Facility Agreement among Modine Holding GmbH,
Exhibit 4.10 to Registrant’s Form 10-
Credit Facility Agreement among Modine Holding GmbH,
Credit Facility Agreement among Modine Holding GmbH,
Exhibit 4.10 to Registrant’s Form 10-
Credit Facility Agreement among Modine Holding GmbH,
Credit Facility Agreement among Modine Holding GmbH,
Credit Facility Agreement among Modine Holding GmbH,
Credit Facility Agreement among Modine Holding GmbH,
Credit Facility Agreement among Modine Holding GmbH,
Exhibit 4.10 to Registrant’s Form 10-
Exhibit 4.10 to Registrant’s Form 10-
Exhibit 4.10 to Registrant’s Form 10-
Exhibit 4.10 to Registrant’s Form 10-
K for the fiscal year ended March 31,
Modine Europe GmbH and Deutsche Bank AG dated as of April
K for the fiscal year ended March 31,
Modine Europe GmbH and Deutsche Bank AG dated as of April
K for the fiscal year ended March 31,
Modine Europe GmbH and Deutsche Bank AG dated as of April
K for the fiscal year ended March 31,
Modine Europe GmbH and Deutsche Bank AG dated as of April
K for the fiscal year ended March 31,
Modine Europe GmbH and Deutsche Bank AG dated as of April
Modine Europe GmbH and Deutsche Bank AG dated as of April
Modine Europe GmbH and Deutsche Bank AG dated as of April
Modine Europe GmbH and Deutsche Bank AG dated as of April
Modine Europe GmbH and Deutsche Bank AG dated as of April
Modine Europe GmbH and Deutsche Bank AG dated as of April
K for the fiscal year ended March 31,
K for the fiscal year ended March 31,
K for the fiscal year ended March 31,
K for the fiscal year ended March 31,
Exhibit 4.10 to Registrant’s Form 10-
Credit Facility Agreement among Modine Holding GmbH,
27, 2012.
2012
2012
27, 2012.
2012
27, 2012.
2012
27, 2012.
27, 2012.
27, 2012.
27, 2012.
27, 2012.
27, 2012.
27, 2012.
2012
2012
2012
2012
2012
Modine Europe GmbH and Deutsche Bank AG dated as of April
K for the fiscal year ended March 31,
2012
Exhibit 4.10 to Registrant’s Form 10-
K for the fiscal year ended March 31,
2012
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.6
4.6
4.6
4.6
4.6
4.6
4.6
4.6
4.6
4.6
Description of Registrant’s securities
Description of Registrant’s securities
Description of Registrant’s securities
Description of Registrant’s securities
Description of Registrant’s securities
Description of Registrant’s securities
Description of Registrant’s securities
Description of Registrant’s securities
Description of Registrant’s securities
Description of Registrant’s securities
X
X
X
X
X
X
X
X
X
X
Description of Registrant’s securities
4.7
4.7
4.7
4.7
4.7
4.7
4.7
4.7
4.7
4.7
Fourth Amended and Restated Credit Agreement dated as of
Second Amended and Restated Note Purchase and Private Shelf
Agreement dated as of August 6, 2019
4.8
4.8
4.8
4.8
4.8
4.8
4.8
4.8
4.8
4.8
X
Fourth Amended and Restated Credit Agreement dated as of
Fourth Amended and Restated Credit Agreement dated as of
Fourth Amended and Restated Credit Agreement dated as of
Fourth Amended and Restated Credit Agreement dated as of
Fourth Amended and Restated Credit Agreement dated as of
Fourth Amended and Restated Credit Agreement dated as of
Fourth Amended and Restated Credit Agreement dated as of
June 28, 2019.
June 28, 2019.
June 28, 2019.
June 28, 2019.
June 28, 2019.
June 28, 2019.
June 28, 2019.
Fourth Amended and Restated Credit Agreement dated as of
June 28, 2019.
Fourth Amended and Restated Credit Agreement dated as of
June 28, 2019.
Fourth Amended and Restated Credit Agreement dated as of
June 28, 2019.
Exhibit 4.1 to Registrant’s Current
Report on Form 8-K dated June 28,
2019
Second Amended and Restated Note Purchase and Private Shelf
Second Amended and Restated Note Purchase and Private Shelf
Second Amended and Restated Note Purchase and Private Shelf
Second Amended and Restated Note Purchase and Private Shelf
Second Amended and Restated Note Purchase and Private Shelf
Second Amended and Restated Note Purchase and Private Shelf
Second Amended and Restated Note Purchase and Private Shelf
Second Amended and Restated Note Purchase and Private Shelf
Second Amended and Restated Note Purchase and Private Shelf
Second Amended and Restated Note Purchase and Private Shelf
Agreement dated as of August 6, 2019
Agreement dated as of August 6, 2019
Agreement dated as of August 6, 2019
Agreement dated as of August 6, 2019
Agreement dated as of August 6, 2019
Agreement dated as of August 6, 2019
Agreement dated as of August 6, 2019
Agreement dated as of August 6, 2019
Agreement dated as of August 6, 2019
Agreement dated as of August 6, 2019
Exhibit 4.1 to Registrant’s Form 10-
Q for the third quarter ended
December 31, 2019 (“December 31,
2019 10-Q”)
Exhibit 4.1 to Registrant’s Current
Report on Form 8-K dated June 28,
2019
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Report on Form 8-K dated June 28,
Report on Form 8-K dated June 28,
Report on Form 8-K dated June 28,
Report on Form 8-K dated June 28,
Report on Form 8-K dated June 28,
Report on Form 8-K dated June 28,
Report on Form 8-K dated June 28,
Report on Form 8-K dated June 28,
2019
2019
2019
2019
2019
2019
2019
2019
Exhibit 4.1 to Registrant’s Current
Report on Form 8-K dated June 28,
2019
Exhibit 4.1 to Registrant’s Form 10-
Exhibit 4.1 to Registrant’s Form 10-
Exhibit 4.1 to Registrant’s Form 10-
Exhibit 4.1 to Registrant’s Form 10-
Exhibit 4.1 to Registrant’s Form 10-
Exhibit 4.1 to Registrant’s Form 10-
Exhibit 4.1 to Registrant’s Form 10-
Exhibit 4.1 to Registrant’s Form 10-
Exhibit 4.1 to Registrant’s Form 10-
Exhibit 4.1 to Registrant’s Form 10-
Q for the third quarter ended
Q for the third quarter ended
Q for the third quarter ended
Q for the third quarter ended
Q for the third quarter ended
Q for the third quarter ended
Q for the third quarter ended
Q for the third quarter ended
Q for the third quarter ended
Q for the third quarter ended
December 31, 2019 (“December 31,
December 31, 2019 (“December 31,
December 31, 2019 (“December 31,
December 31, 2019 (“December 31,
December 31, 2019 (“December 31,
December 31, 2019 (“December 31,
December 31, 2019 (“December 31,
December 31, 2019 (“December 31,
December 31, 2019 (“December 31,
December 31, 2019 (“December 31,
2019 10-Q”)
2019 10-Q”)
2019 10-Q”)
2019 10-Q”)
2019 10-Q”)
2019 10-Q”)
2019 10-Q”)
2019 10-Q”)
2019 10-Q”)
2019 10-Q”)
First Amendment to Second Amended and Restated Note
Purchase and Private Shelf Agreement dated as of January 31,
4.9
4.9
4.9
4.9
4.9
4.9
4.9
4.9
4.9
4.9
First Amendment to Second Amended and Restated Note
First Amendment to Second Amended and Restated Note
First Amendment to Second Amended and Restated Note
First Amendment to Second Amended and Restated Note
First Amendment to Second Amended and Restated Note
First Amendment to Second Amended and Restated Note
First Amendment to Second Amended and Restated Note
First Amendment to Second Amended and Restated Note
First Amendment to Second Amended and Restated Note
First Amendment to Second Amended and Restated Note
Exhibit 4.2 to December 31, 2019
Purchase and Private Shelf Agreement dated as of January 31,
Purchase and Private Shelf Agreement dated as of January 31,
Purchase and Private Shelf Agreement dated as of January 31,
Purchase and Private Shelf Agreement dated as of January 31,
Purchase and Private Shelf Agreement dated as of January 31,
Purchase and Private Shelf Agreement dated as of January 31,
Purchase and Private Shelf Agreement dated as of January 31,
Purchase and Private Shelf Agreement dated as of January 31,
Purchase and Private Shelf Agreement dated as of January 31,
Purchase and Private Shelf Agreement dated as of January 31,
Exhibit 4.2 to December 31, 2019
10-Q
2020
2020
2020
2020
2020
2020
2020
2020
2020
2020
10-Q
Exhibit 4.2 to December 31, 2019
Exhibit 4.2 to December 31, 2019
Exhibit 4.2 to December 31, 2019
Exhibit 4.2 to December 31, 2019
Exhibit 4.2 to December 31, 2019
Exhibit 4.2 to December 31, 2019
Exhibit 4.2 to December 31, 2019
Exhibit 4.2 to December 31, 2019
10-Q
10-Q
10-Q
10-Q
10-Q
10-Q
10-Q
10-Q
Exhibit 4.2 to December 31, 2019
10-Q
First Amendment to Fourth Amended and Restated Credit
Agreement dated as of May 19, 2020
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.11
4.11
4.11
4.11
4.11
4.11
4.11
4.11
4.11
4.11
First Amendment to Fourth Amended and Restated Credit
First Amendment to Fourth Amended and Restated Credit
First Amendment to Fourth Amended and Restated Credit
First Amendment to Fourth Amended and Restated Credit
First Amendment to Fourth Amended and Restated Credit
First Amendment to Fourth Amended and Restated Credit
First Amendment to Fourth Amended and Restated Credit
Agreement dated as of May 19, 2020
Agreement dated as of May 19, 2020
Agreement dated as of May 19, 2020
Agreement dated as of May 19, 2020
Agreement dated as of May 19, 2020
Agreement dated as of May 19, 2020
Agreement dated as of May 19, 2020
First Amendment to Fourth Amended and Restated Credit
Agreement dated as of May 19, 2020
First Amendment to Fourth Amended and Restated Credit
First Amendment to Fourth Amended and Restated Credit
Agreement dated as of May 19, 2020
Agreement dated as of May 19, 2020
Exhibit 4.1 to Registrant’s Current
Report on Form 8-K dated May 19,
2020 (“May 19, 2020 8-K”)
Second Amendment to Second Amended and Restated Note
Second Amendment to Second Amended and Restated Note
Second Amendment to Second Amended and Restated Note
Second Amendment to Second Amended and Restated Note
Second Amendment to Second Amended and Restated Note
Second Amendment to Second Amended and Restated Note
Second Amendment to Second Amended and Restated Note
Second Amendment to Second Amended and Restated Note
Second Amendment to Second Amended and Restated Note
Second Amendment to Second Amended and Restated Note
Purchase and Private Shelf Agreement dated as of May 19, 2020
Purchase and Private Shelf Agreement dated as of May 19, 2020
Purchase and Private Shelf Agreement dated as of May 19, 2020
Purchase and Private Shelf Agreement dated as of May 19, 2020
Purchase and Private Shelf Agreement dated as of May 19, 2020
Purchase and Private Shelf Agreement dated as of May 19, 2020
Purchase and Private Shelf Agreement dated as of May 19, 2020
Purchase and Private Shelf Agreement dated as of May 19, 2020
Purchase and Private Shelf Agreement dated as of May 19, 2020
Purchase and Private Shelf Agreement dated as of May 19, 2020
Exhibit 4.2 to May 19, 2020 8-K
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Exhibit 4.1 to Registrant’s Current
Report on Form 8-K dated May 19,
Report on Form 8-K dated May 19,
Report on Form 8-K dated May 19,
Report on Form 8-K dated May 19,
Report on Form 8-K dated May 19,
Report on Form 8-K dated May 19,
Report on Form 8-K dated May 19,
Report on Form 8-K dated May 19,
Report on Form 8-K dated May 19,
Report on Form 8-K dated May 19,
2020 (“May 19, 2020 8-K”)
2020 (“May 19, 2020 8-K”)
2020 (“May 19, 2020 8-K”)
2020 (“May 19, 2020 8-K”)
2020 (“May 19, 2020 8-K”)
2020 (“May 19, 2020 8-K”)
2020 (“May 19, 2020 8-K”)
2020 (“May 19, 2020 8-K”)
2020 (“May 19, 2020 8-K”)
2020 (“May 19, 2020 8-K”)
Exhibit 4.2 to May 19, 2020 8-K
Exhibit 4.2 to May 19, 2020 8-K
Exhibit 4.2 to May 19, 2020 8-K
Exhibit 4.2 to May 19, 2020 8-K
Exhibit 4.2 to May 19, 2020 8-K
Exhibit 4.2 to May 19, 2020 8-K
Exhibit 4.2 to May 19, 2020 8-K
Exhibit 4.2 to May 19, 2020 8-K
Exhibit 4.2 to May 19, 2020 8-K
Exhibit 4.2 to May 19, 2020 8-K
Second Amendment to Second Amended and Restated Note
Purchase and Private Shelf Agreement dated as of May 19, 2020
88
88
88
88
88
88
88
88
88
88
88
88
4.12
4.13
4.14
4.15
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
Fifth Amended and Restated Credit Agreement dated as of
October 12, 2022.
Exhibit 4.1 to Registrant’s Current
Report on Form 8-K dated October
12, 2022
Fourth Amendment to Second Amended and Restated Note
Purchase and Private Shelf Agreement dated as of November
21, 2022
Exhibit 4.1 to Registrant’s Form 10-
Q for the third quarter ended
December 31, 2022
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 2023 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, 2022 (“June 30, 2022 10-Q”)
10.7**
Form of Fiscal 2023 Incentive Stock Option Award Agreement. Exhibit 10.2 to June 30, 2022 10-Q
10.8**
Form of Fiscal 2023 Non-Qualified Stock Option Award
Agreement..
Exhibit 10.3 to June 30, 2022 10-Q
10.9**
Form of Fiscal 2023 Restricted Stock Unit Award Agreement..
Exhibit 10.4 to June 30, 2022 10-Q
10.10**
10.11**
10.12**
10.13**
Form of Fiscal 2023 Modine Non-Employee Director Restricted
Stock Unit Award Agreement with Deferral.
Exhibit 10.6 to June 30, 2022 10-Q
Form of Fiscal 2023 Modine Non-Employee Director Restricted
Stock Unit Award Agreement without Deferral.
Exhibit 10.7 to June 30, 2022 10-Q
Change in Control Agreement dated as of June 4, 2021, by and
between Modine Manufacturing Company and Neil D. Brinker
Exhibit 10.1 to Registrant’s Current
Report on Form 8-K dated June 4,
2021
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
89
89
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**
2020 Incentive Compensation Plan (Amended and Restated
effective July 21, 2022).
Exhibit 10.1 to the Registrant’s Form
10-Q for the third quarter ended
December 31, 2020
Exhibit 10.1 to Registrant’s Current
Report on Form 8-K dated July 21,
2022
10.19**
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
10.20**
Offer Letter dated as of July 2, 2021, by and between the
Company and Adrian Peace.
Exhibit 10.1 to the Registrant’s
Form 10-Q for the second quarter
ended September 30, 2021 10-Q
(“September 30, 2021 10-Q”)
10.21**
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
10.22**
First Amendment to Eric S. McGinnis Offer Letter
10.23**
Form of Retention Restricted Stock Award Agreement, effective
October 19, 2022, between the Company and each of Brian J.
Agen, Michael B. Lucareli, Eric S. McGinnis and Sylvia A.
Stein
21
23.1
23.2
31.1
31.2
32.1
32.2
List of subsidiaries of the Registrant.
Consent of PricewaterhouseCoopers LLP
Consent of KPMG LLP
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.
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Exhibit 10.3 to September 30, 2021
10-Q
Exhibit 10.1 to Registrant’s Current
Report on Form 8-K dated October
19, 2022
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Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant has omitted certain agreements with respect to
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.
*
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.
** 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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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 25, 2023
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/ 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/ William A. Wulfsohn
William A. Wulfsohn
Director
/s/ Christine Y. Yan
Christine Y. Yan
Director
May 25, 2023
May 25, 2023
May 25, 2023
May 25, 2023
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May 25, 2023
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May 25, 2023
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May 25, 2023
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CORPORATE INFORMATION
CORPORATE HEADQUARTERS
Modine Manufacturing Company
1500 DeKoven Avenue
Racine, WI 53403-2552
Telephone: 262.636.1200
Website: www.modine.com
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
833 East Michigan Street
Suite 1050
Milwaukee, WI 53202
Telephone: 414.276.4200
STOCK EXCHANGE
TRANSFER AGENT AND REGISTRAR
New York Stock Exchange Ticker Symbol: MOD
Equiniti Trust Company is Modine’s stock transfer agent and
registrar and maintains the company’s shareholder records.
NEW YORK STOCK EXCHANGE COMPLIANCE
Shareholders needing information about account records,
Modine Manufacturing Company has included as exhibits
stock certificates and change of address should contact:
to its Form 10-K filed with the Securities and Exchange
Commission certifications by the company’s Chief Executive
EQ Shareowner Services
Officer in the role of Principal Executive Officer and Chief
P.O. Box 64854
Financial Officer in the role of Principal Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Modine Manufacturing Company also has filed with the
St. Paul, MN 55164-0854
Telephone: 800.468.9716
New York Stock Exchange (NYSE) the most recent Domestic
DIRECT PURCHASE PLAN
Company Section 303A Annual CEO Certification as required
(Shareowner Service Plus Plan)
by the NYSE Listed Company Manual.
FORM 10-K REPORT
Shareholders can build their investments in Modine through
a no-cost purchase plan for automatically making additional
cash purchases of Modine stock. Systematic investments
Modine’s Form 10-K Report, filed in May 2023 with the Securities
can be established for your account by authorizing direct
and Exchange Commission, is contained within this report.
deductions from your bank account on a monthly basis.
It and the proxy statement also are available to shareholders
To receive plan material and enrollment information, please
and interested individuals without charge by contacting Investor
call 800.468.9716. The Modine Manufacturing Company
Relations at the company’s headquarters address, or by visiting
Direct Stock Purchase Plan is administered by the company’s
the Investors section at www.modine.com.
transfer agent, EQ Shareowner Services. Inquiries may be
directed to the address listed above.
MODINE SEC FILINGS AND NEWS RELEASES
Forms 10-K, 10-Q and 8-K, news releases and other company
SHAREHOLDERS
information can be obtained at www.modine.com, or by
As of March 31, 2023, there were 2,071 shareholders of record.
contacting Investor Relations at the company’s headquarters
In addition, Modine estimates that there were approximately
address, by telephone at 262.636.1200 or by e-mail at
19,447 beneficial shareholders as of that date.
kathleen.t.powers@modine.com.
TRADEMARKS
ANNUAL MEETING OF SHAREHOLDERS
Trademarks or registered trademarks of Modine Manufacturing
The 2023 Annual Meeting of Shareholders will be held at
Company are denoted by a registration symbol in this report.
8:00am Central Time on Thursday, August 17, 2023.
Copyright © 2023 Modine Manufacturing Company.
A Notice of Internet Availability of Proxy Materials will be
All Rights Reserved.
mailed to shareholders, containing a formal notice of the
annual meeting, instructions on how to access the proxy
statement and vote online, and how to request a paper or
email copy of the annual meeting materials.
OFFICERS & DIRECTORS*
OFFICERS
Brian J. Agen
Vice President, Human Resources
Age 54; joined Modine in 1996
Neil D. Brinker
President and Chief Executive Officer
Age 47; joined Modine in 2020
Mark D. Hudson
Vice President, Corporate Controller
Age 52; joined Modine in 2012
C. Steve Langer
Vice President, Information Technology
Age 60; joined Modine in 2018
Michael B. Lucareli
Executive Vice President,
Chief Financial Officer
Age 54; joined Modine in 1999
Eric S. McGinnis
President, Climate Solutions
Age 52; joined Modine in 2021
Adrian I. Peace
President, Performance Technologies
Age 55; joined Modine in 2021
Kathleen T. Powers
Vice President, Treasurer,
Investor Relations and Tax
Age 55; joined Modine in 2011
Sylvia A. Stein
Vice President, General Counsel,
Corporate Secretary and
Chief Compliance Officer
Age 57; joined Modine in 2018
BOARD OF DIRECTORS**
Eric D. Ashleman - A, B
Chief Executive Officer and
President of IDEX Corporation
Age 56; Director since 2019
Neil D. Brinker
President and Chief Executive
Officer of Modine
Age 47; Director since 2020
Dr. Suresh V. Garimella - C, D
President, University of Vermont
Age 59; Director since 2011
Katherine C. Harper - A, C
Retired; Chief Financial Officer of
BDP International
Age 60; Director since 2022
Larry O. Moore - C, D
Retired; Senior Vice President,
Module Centers and Operations
of Pratt & Whitney
Age 73; Director since 2010
Christopher W. Patterson - A, C
Retired; President and
Chief Executive Officer of
Daimler Trucks North America LLC
Age 69; Director since 2010
Marsha C. Williams - B
Retired; Senior Vice President
and Chief Financial Officer of
Orbitz Worldwide, Inc.
Age 72; Director since 1999
David J. Wilson - A, B
President and Chief Executive Officer
of Columbus McKinnon Corporation
Age 54; Director since 2022
William A. Wulfsohn - A, B
Former Chairman and Chief
Executive Officer of Ashland
Global Holdings
Age 61; Director since 2022
Christine Y. Yan - B, D
Retired; Vice President of Integration,
Stanley Black and Decker, Inc.
Age 57; Director since 2014
COMMITTEES OF THE BOARD
(A) Audit Committee: This committee, composed solely of independent directors, appoints the independent auditors;
works with the independent auditors in determining audit plan and scope; reviews the results of the audit; oversees
management’s implementation of systems of internal controls and the adequacy of internal accounting controls;
reviews the company’s compliance program and approves the company’s Code of 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 and 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, 2023.
**Board of Director Committee charters are available on the corporate governance section of www.modine.com.
Modine Manufacturing Company
1500 DeKoven Avenue
Racine, WI 53403-2552 USA
Modine.com
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