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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended December 31, 2021
or
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TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ____________ to ____________
Commission file number 1-1373
MODINE MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)
Wisconsin
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39-0482000
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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1500 DeKoven Avenue, Racine, Wisconsin
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53403
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code (262) 636-1200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, $0.625 par value
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MOD
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New York Stock Exchange
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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 ☐
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Accelerated Filer ☑
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Non-accelerated Filer ☐
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Smaller reporting company ☐
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Emerging growth company ☐
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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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
The number of shares outstanding of the registrant’s common stock, $0.625 par
value, was 51,913,896 at January 28, 2022.
MODINE MANUFACTURING COMPANY
PART I.
FINANCIAL INFORMATION
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1
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27
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41
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42
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PART II. OTHER INFORMATION
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42
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43
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43 |
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44
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine months ended December 31, 2021 and 2020
(In millions, except per share amounts)
(Unaudited)
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Three months ended
December 31,
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Nine months
ended
December 31,
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2021
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2020
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2021
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2020
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Net sales
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|
$
|
502.2
|
|
|
$
|
484.3
|
|
|
$ |
1,475.7 |
|
|
$ |
1,293.5 |
|
Cost of sales
|
|
|
427.6
|
|
|
|
401.6
|
|
|
|
1,261.6
|
|
|
|
1,083.9
|
|
Gross profit
|
|
|
74.6
|
|
|
|
82.7
|
|
|
|
214.1
|
|
|
|
209.6
|
|
Selling, general and administrative expenses
|
|
|
50.3
|
|
|
|
56.1
|
|
|
|
161.6
|
|
|
|
151.6
|
|
Restructuring expenses
|
|
|
2.1
|
|
|
|
0.9
|
|
|
|
3.0
|
|
|
|
7.0
|
|
Impairment charges (reversals) – net
|
|
|
(57.2
|
)
|
|
|
134.4
|
|
|
|
(55.7 |
) |
|
|
134.4
|
|
Loss on sale of assets
|
|
|
-
|
|
|
|
-
|
|
|
|
6.6
|
|
|
|
- |
|
Operating income (loss)
|
|
|
79.4
|
|
|
|
(108.7
|
)
|
|
|
98.6 |
|
|
|
(83.4 |
) |
Interest expense
|
|
|
(3.8
|
)
|
|
|
(4.6
|
)
|
|
|
(11.8 |
) |
|
|
(15.2 |
) |
Other expense – net
|
|
|
(1.1
|
)
|
|
|
(0.5
|
)
|
|
|
(1.6 |
) |
|
|
(1.0 |
) |
Earnings (loss) before income taxes
|
|
|
74.5
|
|
|
|
(113.8
|
)
|
|
|
85.2 |
|
|
|
(99.6 |
) |
Provision for income taxes
|
|
|
(0.1
|
)
|
|
|
(81.6
|
)
|
|
|
(7.4 |
) |
|
|
(95.3 |
) |
Net earnings (loss)
|
|
|
74.4
|
|
|
|
(195.4
|
)
|
|
|
77.8 |
|
|
|
(194.9 |
) |
Net earnings attributable to noncontrolling interest
|
|
|
(0.3
|
)
|
|
|
(0.3
|
)
|
|
|
(1.0 |
) |
|
|
(0.8 |
) |
Net earnings (loss) attributable to Modine
|
|
$
|
74.1
|
|
|
$
|
(195.7
|
)
|
|
$ |
76.8 |
|
|
$ |
(195.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) per share attributable to Modine shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.42
|
|
|
$
|
(3.81
|
)
|
|
$ |
1.48 |
|
|
$ |
(3.82 |
) |
Diluted
|
|
$
|
1.41
|
|
|
$
|
(3.81
|
)
|
|
$ |
1.46 |
|
|
$ |
(3.82 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
52.0
|
|
|
|
51.3
|
|
|
|
51.9
|
|
|
|
51.2
|
|
Diluted
|
|
|
52.4
|
|
|
|
51.3
|
|
|
|
52.5
|
|
|
|
51.2
|
|
The notes to condensed consolidated financial statements are an integral part of these statements.
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
For the three and nine months ended December 31, 2021 and 2020
(In millions)
(Unaudited)
|
|
Three months ended
December 31,
|
|
|
Nine months
ended
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Net earnings (loss)
|
|
$
|
74.4
|
|
|
$
|
(195.4
|
)
|
|
$ |
77.8 |
|
|
$ |
(194.9 |
) |
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
(3.3
|
)
|
|
|
18.4
|
|
|
|
(6.1 |
) |
|
|
41.2 |
|
Defined
benefit plans, net of income taxes of $0, $0.3, $0, and $1.1 million
|
|
|
1.6
|
|
|
|
1.3
|
|
|
|
6.6
|
|
|
|
3.8
|
|
Cash
flow hedges, net of income taxes of $0, $0, $0.1, and $0.5 million
|
|
|
0.2
|
|
|
|
-
|
|
|
|
(0.2 |
) |
|
|
1.4 |
|
Total other comprehensive income (loss)
|
|
|
(1.5
|
)
|
|
|
19.7
|
|
|
|
0.3
|
|
|
|
46.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
|
72.9
|
|
|
|
(175.7
|
)
|
|
|
78.1 |
|
|
|
(148.5 |
) |
Comprehensive income attributable to noncontrolling interest
|
|
|
(0.4
|
)
|
|
|
(0.7
|
)
|
|
|
(0.9 |
) |
|
|
(1.4 |
) |
Comprehensive income (loss) attributable to Modine
|
|
$
|
72.5
|
|
|
$
|
(176.4
|
)
|
|
$ |
77.2 |
|
|
$ |
(149.9 |
) |
The notes to condensed consolidated financial statements are an integral part of these statements.
MODINE MANUFACTURING COMPANY
CONSOLIDATED
BALANCE SHEETS
December 31, 2021 and March 31, 2021
(In millions, except per share amounts)
(Unaudited)
|
|
December 31, 2021
|
|
|
March 31, 2021
|
|
ASSETS
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
61.1
|
|
|
$
|
37.8
|
|
Trade accounts receivable – net
|
|
|
309.3
|
|
|
|
267.9
|
|
Inventories
|
|
|
278.1
|
|
|
|
195.6
|
|
Assets held for sale
|
|
|
-
|
|
|
|
107.6
|
|
Other current assets
|
|
|
53.1
|
|
|
|
35.9
|
|
Total current assets
|
|
|
701.6
|
|
|
|
644.8
|
|
Property, plant and equipment – net
|
|
|
318.1
|
|
|
|
269.9
|
|
Intangible assets – net
|
|
|
93.2
|
|
|
|
100.6
|
|
Goodwill
|
|
|
169.5
|
|
|
|
170.7
|
|
Deferred income taxes
|
|
|
28.9
|
|
|
|
24.5
|
|
Other noncurrent assets
|
|
|
70.1
|
|
|
|
66.2
|
|
Total assets
|
|
$
|
1,381.4
|
|
|
$
|
1,276.7
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
$
|
-
|
|
|
$
|
1.4
|
|
Long-term debt – current portion
|
|
|
21.8
|
|
|
|
21.9
|
|
Accounts payable
|
|
|
295.4
|
|
|
|
233.9
|
|
Accrued compensation and employee benefits
|
|
|
64.2
|
|
|
|
66.5
|
|
Liabilities held for sale
|
|
|
-
|
|
|
|
103.3
|
|
Other current liabilities
|
|
|
52.7
|
|
|
|
42.2
|
|
Total current liabilities
|
|
|
434.1
|
|
|
|
469.2
|
|
Long-term debt
|
|
|
368.8
|
|
|
|
311.2
|
|
Deferred income taxes
|
|
|
6.0
|
|
|
|
5.9
|
|
Pensions
|
|
|
61.0
|
|
|
|
58.6
|
|
Other noncurrent liabilities
|
|
|
73.9
|
|
|
|
75.7
|
|
Total liabilities
|
|
|
943.8
|
|
|
|
920.6
|
|
Commitments and contingencies (see Note 18)
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.025 par value, authorized 16.0 million shares, issued - none
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.625 par value, authorized 80.0 million shares, issued 54.6 million and 54.3 million
shares
|
|
|
34.2
|
|
|
|
33.9
|
|
Additional paid-in capital
|
|
|
260.5
|
|
|
|
255.0
|
|
Retained earnings
|
|
|
336.0
|
|
|
|
259.2
|
|
Accumulated other comprehensive loss
|
|
|
(160.8
|
)
|
|
|
(161.2
|
)
|
Treasury stock, at cost, 2.8 million and 2.7 million shares
|
|
|
(39.7
|
)
|
|
|
(38.2
|
)
|
Total Modine shareholders’ equity
|
|
|
430.2
|
|
|
|
348.7
|
|
Noncontrolling interest
|
|
|
7.4
|
|
|
|
7.4
|
|
Total equity
|
|
|
437.6
|
|
|
|
356.1
|
|
Total liabilities and equity
|
|
$
|
1,381.4
|
|
|
$
|
1,276.7
|
|
The notes to condensed consolidated financial statements are an integral part of these statements.
MODINE MANUFACTURING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
For the nine months ended December 31, 2021 and 2020
(In millions)
(Unaudited)
|
|
Nine months
ended December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
77.8
|
|
|
$
|
(194.9
|
)
|
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
40.4
|
|
|
|
54.2
|
|
Impairment charges (reversals) – net
|
|
|
(55.7
|
)
|
|
|
134.4
|
|
Loss on sale of assets
|
|
|
6.6
|
|
|
|
-
|
|
Stock-based compensation expense
|
|
|
4.7
|
|
|
|
4.2
|
|
Deferred income taxes
|
|
|
(4.7
|
)
|
|
|
77.5
|
|
Other – net
|
|
|
2.0
|
|
|
|
4.7
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
|
5.8
|
|
|
|
24.5
|
|
Inventories
|
|
|
(66.6
|
)
|
|
|
9.9
|
|
Accounts payable
|
|
|
24.9
|
|
|
|
1.1
|
|
Other assets and liabilities
|
|
|
(27.8
|
)
|
|
|
30.9
|
|
Net cash provided by operating activities
|
|
|
7.4
|
|
|
|
146.5
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Expenditures for property, plant and equipment
|
|
|
(30.7
|
)
|
|
|
(23.7
|
)
|
Proceeds from (payments for) disposition of assets
|
|
|
(7.6
|
)
|
|
|
0.7
|
|
Disbursements for loan origination (see Note 1) |
|
|
(4.7 |
) |
|
|
- |
|
Other – net
|
|
|
1.3
|
|
|
|
0.6
|
|
Net cash used for investing activities
|
|
|
(41.7
|
)
|
|
|
(22.4
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Borrowings of debt
|
|
|
278.6
|
|
|
|
12.0
|
|
Repayments of debt
|
|
|
(221.9
|
)
|
|
|
(134.5
|
)
|
Borrowings (repayments) on bank overdraft facilities – net
|
|
|
(5.0
|
)
|
|
|
3.5
|
|
Financing fees paid
|
|
|
(0.2
|
)
|
|
|
(0.8
|
)
|
Dividend paid to noncontrolling interest
|
|
|
(0.9
|
)
|
|
|
-
|
|
Other – net
|
|
|
(0.4
|
)
|
|
|
(0.8
|
)
|
Net cash provided by (used for) financing activities
|
|
|
50.2
|
|
|
|
(120.6
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
(0.7
|
)
|
|
|
3.6
|
|
Net increase in cash, cash equivalents, restricted cash and cash held for sale
|
|
|
15.2
|
|
|
|
7.1
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents, restricted cash and cash held for sale – beginning of period
|
|
|
46.1
|
|
|
|
71.3
|
|
Cash, cash equivalents, restricted cash and cash held for sale – end of period
|
|
$
|
61.3
|
|
|
$
|
78.4
|
|
The notes to condensed consolidated financial statements are an integral part of these statements.
MODINE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the three and nine months ended December 31,
2021 and 2020
(In millions)
(Unaudited)
|
|
Common stock
|
|
|
Additional
|
|
|
Retained
|
|
|
Accumulated other
|
|
|
Treasury stock,
|
|
|
Non-controlling
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
paid-in capital
|
|
|
earnings
|
|
|
comprehensive loss
|
|
|
at cost
|
|
|
interest
|
|
|
Total
|
|
Balance, March 31, 2021
|
|
|
54.3
|
|
|
$
|
33.9
|
|
|
$
|
255.0
|
|
|
$
|
259.2
|
|
|
$
|
(161.2
|
)
|
|
$
|
(38.2
|
)
|
|
$
|
7.4
|
|
|
$
|
356.1
|
|
Net earnings
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2.3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.5
|
|
|
|
2.8
|
|
Other comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8.0
|
|
|
|
-
|
|
|
|
0.2
|
|
|
|
8.2
|
|
Stock options and awards
|
|
|
0.2
|
|
|
|
0.1
|
|
|
|
0.7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.8
|
|
Purchase of treasury stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.0
|
)
|
|
|
-
|
|
|
|
(1.0
|
)
|
Stock-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
1.2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.2
|
|
Dividend paid to noncontrolling interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(0.9 |
) |
|
|
(0.9 |
) |
Balance, June 30, 2021
|
|
|
54.5
|
|
|
$
|
34.0
|
|
|
$
|
256.9
|
|
|
$
|
261.5
|
|
|
$
|
(153.2
|
)
|
|
$
|
(39.2
|
)
|
|
$
|
7.2
|
|
|
$
|
367.2
|
|
Net earnings
|
|
|
-
|
|
|
|
- |
|
|
|
- |
|
|
|
0.4 |
|
|
|
- |
|
|
|
- |
|
|
|
0.2 |
|
|
|
0.6 |
|
Other comprehensive loss
|
|
|
-
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(6.0 |
) |
|
|
- |
|
|
|
(0.4 |
) |
|
|
(6.4 |
) |
Stock options and awards
|
|
|
- |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.2 |
|
Stock-based compensation expense
|
|
|
-
|
|
|
|
- |
|
|
|
2.4 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2.4 |
|
Balance, September 30, 2021
|
|
|
54.5 |
|
|
$ |
34.1 |
|
|
$ |
259.4 |
|
|
$ |
261.9 |
|
|
$ |
(159.2 |
) |
|
$ |
(39.2 |
) |
|
$ |
7.0 |
|
|
$ |
364.0 |
|
Net earnings
|
|
|
-
|
|
|
|
- |
|
|
|
- |
|
|
|
74.1 |
|
|
|
- |
|
|
|
- |
|
|
|
0.3 |
|
|
|
74.4 |
|
Other comprehensive income (loss)
|
|
|
-
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1.6 |
) |
|
|
- |
|
|
|
0.1 |
|
|
|
(1.5 |
) |
Stock options and awards
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.1 |
|
Purchase of treasury stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(0.5 |
) |
|
|
- |
|
|
|
(0.5 |
) |
Stock-based compensation expense
|
|
|
-
|
|
|
|
- |
|
|
|
1.1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1.1 |
|
Balance, December 31, 2021
|
|
|
54.6 |
|
|
$ |
34.2 |
|
|
$ |
260.5 |
|
|
$ |
336.0 |
|
|
$ |
(160.8 |
) |
|
$ |
(39.7 |
) |
|
$ |
7.4 |
|
|
$ |
437.6 |
|
|
|
Common stock
|
|
|
Additional
|
|
|
Retained
|
|
|
Accumulated other
|
|
|
Treasury stock,
|
|
|
Non-controlling
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
paid-in capital
|
|
|
earnings
|
|
|
comprehensive loss
|
|
|
at cost
|
|
|
interest
|
|
|
Total
|
|
Balance, March 31, 2020
|
|
|
53.4
|
|
|
$
|
33.3
|
|
|
$
|
245.1
|
|
|
$
|
469.9
|
|
|
$
|
(223.3
|
)
|
|
$
|
(37.1
|
)
|
|
$
|
5.7
|
|
|
$
|
493.6
|
|
Net (loss) earnings
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8.6
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
0.2
|
|
|
|
(8.4
|
)
|
Other comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7.5
|
|
|
|
-
|
|
|
|
0.1
|
|
|
|
7.6
|
|
Stock options and awards
|
|
|
0.3
|
|
|
|
0.2
|
|
|
|
(0.2
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Purchase of treasury stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.8
|
)
|
|
|
-
|
|
|
|
(0.8
|
)
|
Stock-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
0.7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.7
|
|
Balance, June 30, 2020
|
|
|
53.7
|
|
|
$
|
33.5
|
|
|
$
|
245.6
|
|
|
$
|
461.3
|
|
|
$
|
(215.8
|
)
|
|
$
|
(37.9
|
)
|
|
$
|
6.0
|
|
|
$
|
492.7
|
|
Net earnings
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8.6 |
|
|
|
-
|
|
|
|
-
|
|
|
|
0.3
|
|
|
|
8.9 |
|
Other comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19.0 |
|
|
|
-
|
|
|
|
0.1 |
|
|
|
19.1 |
|
Stock options and awards
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.1 |
|
Stock-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
1.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.4
|
|
Balance, September 30, 2020
|
|
|
53.8
|
|
|
$ |
33.6 |
|
|
$ |
247.0 |
|
|
$ |
469.9 |
|
|
$ |
(196.8 |
) |
|
$ |
(37.9 |
) |
|
$ |
6.4 |
|
|
$ |
522.2 |
|
Net (loss) earnings
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(195.7 |
) |
|
|
-
|
|
|
|
-
|
|
|
|
0.3
|
|
|
|
(195.4 |
) |
Other comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19.3
|
|
|
|
-
|
|
|
|
0.4
|
|
|
|
19.7
|
|
Stock-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
2.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2.1
|
|
Balance, December 31, 2020
|
|
|
53.8
|
|
|
$ |
33.6 |
|
|
$ |
249.1 |
|
|
$ |
274.2 |
|
|
$ |
(177.5 |
) |
|
$ |
(37.9 |
) |
|
$ |
7.1 |
|
|
$ |
348.6 |
|
The notes to condensed consolidated financial statements are an integral part of these statements.
Note 1: General
The accompanying unaudited condensed consolidated financial statements of Modine
Manufacturing Company (“Modine” or the “Company”) were prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes necessary for a comprehensive presentation of financial position, results of operations and cash flows required by GAAP for complete financial
statements. The financial statements include all normal recurring adjustments that are, in the opinion of management, necessary for a fair statement of results for the interim periods. Results for the first nine months of fiscal 2022 are not necessarily indicative of the results to be expected for the full year. These
financial statements should be read in conjunction with the consolidated financial statements and related notes in Modine’s Annual Report on Form 10-K for the year
ended March 31, 2021.
Disposition of Air-cooled Automotive Business
On April 30, 2021, the Company sold its air-cooled automotive business to Schmid Metall GmbH. As a result of this transaction, the Company recorded a loss of $6.6 million during the first quarter of fiscal 2022, which included the write-off of $1.7 million of net actuarial losses related to the business’s pension plan. The Company reported this loss within the loss on sale of
assets line on the consolidated statement of operations. Upon transaction closing, $5.9 million of cash within the business transferred to the buyer. During the third quarter of fiscal 2022, a purchase price adjustment for net working capital and certain other items was finalized and the
Company paid the buyer $2.4 million. The final purchase price adjustment was consistent with the Company’s prior estimate and no
adjustment was required to the $6.6 million loss on sale recorded during the first quarter fiscal 2022. Prior to the disposition, the
Company reported the financial results of this business within the Automotive segment. The air-cooled automotive business’s net sales were $63.0
million in fiscal 2021.
In connection with the sale of the air-cooled automotive business, the Company provided the buyer with a 5-year, €4.0 million loan facility.
Borrowings under the agreement currently bear interest at 2.6 percent. During the second quarter of fiscal 2022, the Company disbursed
€4.0 million ($4.7
million) to the buyer under this facility. The Company recorded the loan receivable within other noncurrent assets on its consolidated balance sheet because the Company expects to receive the principal repayment more than twelve months from the
balance sheet date.
Disposition of Previously-Closed Facility
During the first quarter of fiscal 2022, the Company signed a definitive agreement to sell a previously-closed manufacturing facility
in the U.S. As a result, the Company recorded an impairment charge of $0.3 million within the Commercial and Industrial Solutions
(“CIS”) segment to write down the property to fair value less costs to sell. During July 2021, the sale was completed and the Company received net cash proceeds of $0.7 million.
Chief Executive Officer (“CEO”) Transition in Fiscal 2021
In August 2020, Thomas A. Burke stepped down from his position as President and CEO. The Board of Directors subsequently conducted a
search for his successor and, effective December 1, 2020, appointed Neil D. Brinker as President and CEO.
As a result of Mr. Burke’s departure and in connection with the search for his successor, the Company recorded costs totaling $5.9 million during the first nine months of fiscal 2021. These costs, which were recorded as selling, general and administrative (“SG&A”)
expenses at Corporate, primarily consisted of severance and benefit-related expenses based upon the terms of Mr. Burke’s transition and separation agreement and costs directly associated with the CEO search, partially offset by the impact of Mr.
Burke’s forfeited stock-based compensation awards.
Note 2: Assets Held for Sale
Liquid-cooled Automotive Business
On October 25, 2021, the Company announced that it agreed with Dana Incorporated (“Dana”)
to terminate an agreement for the sale of the liquid-cooled automotive business. Both companies had been actively engaged in the regulatory review process in Germany for many months and agreed that it was no longer in the best interest of either
party to pursue the sale transaction further.
In connection with the termination of the sale agreement,
the Company determined that the liquid-cooled automotive business no longer met the requirements to be classified as held for sale during the third quarter of fiscal 2022. As a result, the Company remeasured the long-lived assets reverting back to held and used classification at the
lower of their (i) carrying value, as if held for sale classification had not been met; or (ii) fair value at the date of the decision not to sell. These long-lived assets consisted primarily of property, plant and equipment assets and were
fully impaired while classified as held for sale.
During the third quarter of fiscal 2022, the Company reversed $57.2 million of held for sale impairment charges based on the remeasurement of the long-lived assets of the liquid-cooled automotive business. The Company engaged third-party valuation specialists to assist in
estimating the fair values of the assets. The Company primarily used the market and cost valuation approaches and utilized third-party information from various industry-accepted sources, including applicable government-published statistics and
data from appraisal and resale service providers. The market approach focused on prices for comparable assets in arm’s length transactions. For land and building assets, for example, sales of similar properties near the Company’s facilities
were analyzed. For machinery and equipment assets, the Company referenced available third-party information regarding the selling prices of similar equipment. The cost approach focused on the amount for which an asset could be replaced or
reproduced. The cost of an asset was then adjusted downward based on various factors including, but not limited to, age, location, and physical condition. After estimating the fair values of the assets reverting back to held and used
classification, the Company compared the fair value for each asset to its carrying value. Carrying value represented each asset’s carrying value before the initial impairment charge, reduced for depreciation that would have been recorded if the
asset had not been classified as held for sale. The Company then adjusted each asset to the lower of fair value or carrying value, resulting in the reversal of $57.2 million of previous impairment charges. In addition, the Company resumed depreciating the property, plant and equipment assets of the liquid-cooled automotive business based on the remeasured asset values
during the third quarter of fiscal 2022.
On a year-to-date basis, 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 during the first six months of fiscal 2022. At both June 30, 2021 and September 30, 2021, while the liquid-cooled automotive business was held for sale, the Company reassessed its fair value less costs to sell. As a result of these evaluations,
the Company recorded a total of $8.6 million of impairment charges during the first and second quarters of fiscal 2022. These impairment charges reduced the net carrying value of property, plant and equipment additions
during each quarter to zero. In addition, in connection with a modification of the sale perimeter in the first quarter of fiscal 2022, the Company determined that
certain manufacturing operations no longer met the requirements to be classified as held for sale. As a result, the Company reversed $7.4
million of previous impairment charges to adjust the long-lived assets within the asset groups impacted by the sale perimeter change to their estimated
fair value as of June 30, 2021. The
Company’s determination of fair value for the long-lived assets within these businesses involved judgement and the use of significant estimates and assumptions, including assumptions regarding future revenue projections and operating profit
margins, risk-adjusted discount rates, business trends and market conditions.
The Company’s fair value measurements of the property, plant
and equipment assets within the liquid-cooled automotive business are categorized as Level 3 within the fair value hierarchy. Refer to Note 4 for the definition of a Level 3 fair value measurement.
The liquid-cooled automotive business was initially classified
as held for sale during the third quarter of fiscal 2021. At that time, the Company recorded $134.4 million of impairment charges primarily related to the long-lived assets within the liquid-cooled automotive business. Upon classification as held for sale, 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.
The Company reported all impairment charges and reversals
during fiscal 2021 and 2022 within the
impairment charges (reversals) line on the consolidated statements of operations.
Assets and Liabilities Held for Sale
As of March 31, 2021, the Company presented the assets and liabilities of the liquid- and
air-cooled automotive businesses as held for sale. See Note 1 for additional information regarding the sale of the air-cooled automotive
business, which was completed on April 30, 2021.
The major classes of assets and liabilities held for sale at March 31, 2021 were as follows:
ASSETS
|
|
|
|
Cash and cash equivalents
|
|
$
|
8.0
|
|
Trade accounts receivable – net
|
|
|
54.4
|
|
Inventories
|
|
|
24.7
|
|
Other current assets
|
|
|
12.8
|
|
Property, plant and equipment – net
|
|
|
164.0
|
|
Other noncurrent assets
|
|
|
8.8
|
|
Impairment of carrying value
|
|
|
(165.1
|
)
|
Total assets held for sale
|
|
$
|
107.6
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Short-term debt
|
|
$
|
5.0
|
|
Accounts payable
|
|
|
46.3
|
|
Accrued compensation and employee benefits
|
|
|
15.5
|
|
Other current liabilities
|
|
|
12.2
|
|
Pensions
|
|
|
17.8
|
|
Other noncurrent liabilities
|
|
|
6.5
|
|
Total liabilities held for sale
|
|
$
|
103.3
|
|
Note 3: Revenue Recognition
Disaggregation of Revenue
The table below presents revenue for each of the Company’s business segments,
Building HVAC Systems (“BHVAC”), CIS, Heavy Duty Equipment (“HDE”) and Automotive. Each segment’s revenue is disaggregated by primary end market, by geographic location and based upon the timing of revenue recognition and includes inter-segment
sales.
Effective July 1, 2021, the Company aligned the data center businesses previously managed by and reported within the CIS segment under the BHVAC segment; see
Note 20 for additional information regarding the Company’s operating segments. In connection with this segment realignment, the Company also reassessed end market classifications within the impacted businesses. The primary end market revenue
information presented in the tables below for fiscal 2021 has been recast to conform to the Company’s new classifications for its end markets.
|
|
Three months ended December 31,
2021
|
|
|
Three months ended December 31,
2020
|
|
|
|
BHVAC
|
|
|
CIS
|
|
|
HDE
|
|
|
Automotive
|
|
|
Segment
Total
|
|
|
BHVAC
|
|
|
CIS
|
|
|
HDE
|
|
|
Automotive
|
|
|
Segment
Total
|
|
Primary end market:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial HVAC&R
|
|
$
|
66.1
|
|
|
$
|
129.6
|
|
|
$
|
-
|
|
|
$
|
|