SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 26, 1995 ----------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-1373 ------ MODINE MANUFACTURING COMPANY (Exact name of registrant as specified in its charter) WISCONSIN 39-0482000 --------------------------------------------- ------------------- (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 1500 DeKoven Avenue, Racine, Wisconsin 53403-2552 ----------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (414) 636-1200 -------------- NOT APPLICABLE ----------------------------------------------------------------------- (Former name or former address, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at February 7, 1996 ------------------------------ ------------------------------- Common Stock, $0.625 Par Value 29,693,763
MODINE MANUFACTURING COMPANY INDEX PART I. FINANCIAL INFORMATION Page No. -------- Item 1. Financial Statements Consolidated Balance Sheets - December 26 and March 31, 1995 3 Consolidated Statements of Earnings - For the Three Months Ended December 26, 1995 and 1994 and the Nine Months Ended December 26, 1995 and 1994 4 Consolidated Statements of Cash Flows - For the Nine Months Ended December 26, 1995 and 1994 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 17 Item 5. Other Events 18 Item 6. Exhibits and Reports on Form 8-K 18 Signatures 19
<TABLE> MODINE MANUFACTURING COMPANY CONSOLIDATED BALANCE SHEETS December 26, 1995 and March 31, 1995 (In thousands, except per-share amounts) (Unaudited) <CAPTION> December 26, 1995 March 31,1995 ----------------- ------------- <S> <C> <C> ASSETS Current assets: Cash and cash equivalents $ 22,629 $ 32,691 Trade receivables, less allowance for doubtful accounts of $6,276 and $6,424 147,101 145,231 Inventories 144,502 136,114 Deferred income taxes and other current assets 26,594 26,346 -------- -------- Total current assets 340,826 340,382 -------- -------- Other assets: Property, plant, and equipment - net 194,084 170,872 Investment in affiliates 6,194 8,016 Intangible assets, less accumulated amortization of $10,003 and $7,564 68,682 34,090 Deferred charges and other noncurrent assets 40,579 36,827 -------- -------- Total other assets 309,539 249,805 -------- -------- Total assets $650,365 $590,187 ======== ======== <CAPTION> LIABILITIES AND SHAREHOLDERS' INVESTMENT - ---------------------------------------- <S> <C> <C> Current liabilities: Short-term debt $ 14,806 $ 13,565 Long-term debt - current portion 12,775 10,853 Accounts payable 65,171 74,194 Accrued compensation and employee benefits 41,355 38,285 Income taxes 3,489 7,004 Accrued expenses and other current liabilities 25,752 25,748 -------- -------- Total current liabilities 163,348 169,649 -------- -------- Other liabilities: Long-term debt 89,355 62,220 Deferred income taxes 12,553 12,958 Other noncurrent liabilities 44,619 37,088 -------- -------- Total other liabilities 146,527 112,266 -------- -------- Total liabilities 309,875 281,915 -------- --------
Shareholders' investment: Preferred stock, $0.025 par value, authorized 16,000 shares, issued - none - - Common stock, $0.625 par value, authorized 80,000 shares, issued 30,342 shares 18,964 18,964 Additional paid-in capital 8,993 7,897 Retained earnings 330,487 296,614 Foreign currency translation adjustment 4,849 5,159 Treasury stock at cost: 671 and 642 shares, respectively (19,953) (16,669) Restricted stock - unamortized value (2,850) (3,693) -------- -------- Total shareholders' investment $340,490 $308,272 -------- -------- Total liabilities and shareholders' investment $650,365 $590,187 ======== ======== <FN> (See accompanying notes to consolidated financial statements.) </TABLE>
<TABLE> MODINE MANUFACTURING COMPANY CONSOLIDATED STATEMENTS OF EARNINGS For the three months ended December 26, 1995 and 1994 For the nine months ended December 26, 1995 and 1994 (In thousands, except per-share amounts) (Unaudited) <CAPTION> Three months ended Nine months ended ----------------------- ----------------------- December 26 December 26 ----------------------- ----------------------- 1995 1994 1995 1994 ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> Net Sales $ 252,817 $ 240,505 $ 746,325 $ 670,701 Cost of sales 189,002 170,912 553,691 476,703 --------- --------- --------- --------- Gross profit 63,815 69,593 192,634 193,998 Selling, general, and administrative expenses 42,387 39,894 119,036 112,828 --------- --------- --------- --------- Income from operations 21,428 29,699 73,598 81,170 Non-operating income 5,639 1,619 10,350 5,782 Interest expense (1,660) (1,511) (5,166) (4,920) Non-operating expense (1,145) (1,569) (3,341) (3,521) --------- --------- --------- --------- Earnings before income taxes 24,262 28,238 75,441 78,511 Provision for income taxes 9,407 10,825 27,867 29,467 --------- --------- --------- --------- Net earnings $ 14,855 $ 17,413 $ 47,574 $ 49,044 ========= ========= ========= ========= Net earnings per share of common stock* $0.49 $0.57 $1.56 $1.61 ========= ========= ========= ========= Dividends per share $0.150 $0.130 $0.450 $0.390 ========= ========= ========= ========= Average common shares and common share equivalents outstanding 30,318 30,563 30,454 30,546 ========= ========= ========= ========= <FN> (See accompanying notes to consolidated financial statements.) *See EXHIBIT 11 for computation of earnings per share. </TABLE>
<TABLE> MODINE MANUFACTURING COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) For the Nine Months Ended December 26, 1995 and 1994 (Unaudited) <CAPTION> Nine months ended December 26 ----------------------------- 1995 1994 ---------- ---------- <S> <C> <C> Net cash provided by operating activities $ 66,503 $ 48,421 Cash flows from investing activities: Expenditures for property, plant, and equipment (39,066) (23,135) Acquisitions, net of cash acquired (55,460) 0 Proceeds from sale of business 9,062 0 Investments in affiliates 0 1,500 Proceeds from dispositions of property, plant, and equipment 2,143 198 Other - net 269 503 -------- -------- Net cash (used for) investing activities (83,052) (20,934) Cash flows from financing activities: Increase/(decrease) in short-term debt - net 347 (8,987) Additions to long-term debt 54,331 887 Reductions of long-term debt (30,928) (11,479) Issuance of common stock, including treasury stock 2,115 4,407 Purchase of treasury stock (6,033) (4,885) Cash dividends paid (13,345) (11,576) -------- -------- Net cash provided by/(used for) financing activities 6,487 (31,633) -------- -------- Net (decrease) in cash and cash equivalents (10,062) (4,146) Cash and cash equivalents at beginning of period 32,691 38,523 -------- -------- Cash and cash equivalents at end of period $ 22,629 $ 34,377 ======== ======== <FN> (See accompanying notes to consolidated financial statements.) </TABLE>
MODINE MANUFACTURING COMPANY ---------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ 1. The amounts of raw material, work in process and finished goods cannot be determined exactly except by physical inventories. Based on partial interim physical inventories and percentage relationships at the time of complete physical inventories, Management believes the amounts shown below are reasonable estimates of raw material, work in process and finished goods. (In Thousands) ------------------------------------------------------------ December 26, 1995 March 31, 1995 ------------------------------------------------------------ Raw materials $ 38,310 $ 37,279 Work in process 46,136 40,879 Finished goods 60,056 57,956 -------- -------- Total inventories $144,502 $136,114 ======== ======== 2. Property, plant, and equipment is composed of: (In Thousands) ------------------------------------------------------------ December 26, 1995 March 31, 1995 ------------------------------------------------------------ Gross, property, plant & equipment $424,636 $386,518 Less accumulated depreciation (230,552) (215,646) -------- -------- Net property, plant & equipment $194,084 $170,872 ======== ======== 3. Recent developments concerning legal proceedings reported in the Company's Form 10-K report for the year ended March 31, 1995, are updated in Part II, Other Information, Item 1, Legal Proceedings. While the outcome of these proceedings is uncertain, in the opinion of the Company's Management, any liabilities that may result from such proceedings are not reasonably likely to have a material effect on the Company's liquidity, financial condition, or results of operations. 4. On May 3, 1995, the Company announced a letter of intent had been signed with National Tube Holding Company, Inc. of Birmingham, Alabama for the acquisition of Modine's copper
extrusion business in Dowagiac, Michigan. On October 9, 1995, the Company announced the completion of the sale effective following the close of business September 26, 1995. The Company, based upon current estimates, recognized a pretax gain from the sale of approximately $3.5 million in the third quarter. 5. In the first quarter of fiscal 1996, the Company made two small acquisitions. Effective April 1, the Company, through its wholly owned subsidiary NRF Holding B.V., acquired Radiadores Montana S.A., a Spanish manufacturer and distributor to the automotive aftermarket. Based in Granada, Spain, Montana produces radiators and radiator cores, oil coolers, heaters, and air-conditioning condensers and evaporators for on- and off-highway vehicles and for industrial applications. At the end of May, the Company acquired its partner's 57-percent ownership in the joint venture company Radinam S.A., which owns Mexpar (Manufacturera Mexicana de Partes de Automoviles S.A. de C.V.), a radiator manufacturer in Mexico City. Mexpar produces automotive radiators primarily for the aftermarket. In addition, Mexpar serves original equipment manufacturers of vehicles in Mexico. The acquisitions were financed through a combination of additional borrowing and cash provided by operations. The Company acquired the business and assets of the Signet Systems Division from The Equion Corporation following the close of business on July 31. The Company also assumed certain liabilities as part of the acquisition. The purchase price was financed with available cash, a portion of a new $25 million multicurrency unsecured revolving credit arrangement through an international bank, and $5.0 million in promissory notes with the seller. Signet is a full- service supplier of climate-control systems and components to the automotive, truck, and off-highway vehicle markets both in North America and Europe. The acquisition includes Signet's main plant in Harrodsburg, Kentucky; a recently acquired operation in Goch, Germany; and a sales and engineering office in Detroit, Michigan. The Company intends to continue to use the plants, machinery and equipment, and other assets obtained in the acquisitions for the manufacture of heat-transfer products. The combined purchase price of the three acquisitions, subject to further adjustments, totaled approximately $57,483,000 in cash and $5,000,000 in promissory notes to Equion Corporation. Combined goodwill acquired, based upon preliminary estimates, is $36,780,000, and is being amortized on a straight line basis over 15 years. The results of operations of the Signet Systems Division are included in the consolidated financial statements since the effective date of acquisition. The results of operations of Radinam S.A. and Radiadores Montana S.A. are included in the consolidated financial statements since the respective effective dates of acquisition, using a one-month delay, consistent with the Company's policy for reporting foreign operations outside of the United States and Canada. All of
the acquisitions have been accounted for using the purchase method, whereby the purchase prices have been allocated to the underlying assets and liabilities based upon their estimated fair market values at the date of acquisition. The allocation of the purchase price for Signet Systems has been based upon preliminary estimates which may be revised at a later date. The Company used the equity method to account for its interest in Radinam S.A. prior to majority ownership. Details of businesses acquired in purchase transactions, subject to further adjustments, were as follows: Value of assets acquired, including intangibles, excluding cash acquired of $2,023,000 $ 84,719,000 Liabilities assumed and created (26,779,000) Equity investment in affiliate (2,480,000) ------------ Net cash paid for acquisitions $ 55,460,000 6. The following pro forma financial information presented below is for informational purposes only and does not necessarily reflect the results of operations that would have occurred had the disposal and acquisitions discussed in Notes 4 and 5, respectively, taken place on the date assumed below, nor are those results necessarily indicative of the results of future combined operations. On a pro forma basis, the unaudited consolidated results of operations would have been as follows had the disposal and acquisitions occurred on April 1, 1994, after giving effect to certain adjustments. Nine Months Ended ------------------- December 26 ------------------- (In thousands, except per share amounts) 1995 1994 -------- -------- Net Sales $752,426 $719,334 Net Earnings $ 46,069 $ 46,648 Net Earnings Per Share: Primary $1.51 $1.53 Fully Diluted $1.51 $1.53 7. In November 1995, the Company purchased the business and certain assets of Emmett Radiator Supply, Inc., in El Paso, Texas, and Emmett Radiator Supply, Inc., in Albuquerque, New Mexico. Both sites have become additional sales branches in the Aftermarket Division. The purchase price was not material to the consolidated financial statements. The results of operations did not have a material effect on the consolidated results of operations and, accordingly, is not included in the pro forma presentation above.
8. In October of 1995, the Financial Accounting Standards Board issued Statement No. 123, "Accounting for Stock-Based Compensation." Under the accounting and disclosure requirements promulgated in the statement, the Company must adopt the provisions in its fiscal year beginning April 1, 1996. The Company is currently evaluating the accounting and disclosure alternatives provided for under the provisions of the statement. At this time, Management has not selected the planned method of adoption and therefore cannot reasonably estimate the probable impact, if any, on the consolidated financial statements. 9. The accompanying consolidated financial statements, which have not been audited by independent certified public accountants, were prepared in conformity with generally accepted accounting principles and such principles were applied on a basis consistent with the preparation of the consolidated financial statements in the Company's March 31, 1995 Annual Report filed with the Securities and Exchange Commission. The financial information furnished includes all normal recurring accrual adjustments which are, in the opinion of Management, necessary for a fair statement of results for the interim period. Results for the first nine months of fiscal 1996 are not necessarily indicative of the results to be expected for the full year. 10. Certain notes and other information have been condensed or omitted from these interim financial statements which consolidate both domestic and foreign wholly-owned subsidiaries. Therefore, such statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company's 1995 Annual Report to stockholders which statements and notes were incorporated by reference in the Company's Form 10-K Report for the year ended March 31, 1995.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF --------------------------------------- RESULTS OF OPERATIONS AND FINANCIAL CONDITION --------------------------------------------- The following discussion and analysis provides information which Management believes is relevant to an assessment and understanding of the Company's consolidated results of operations and financial condition. This discussion should be read in conjunction with the consolidated financial statements and notes thereto. RESULTS OF OPERATIONS - --------------------- Comparison of the Third Quarter of 1995-96 with the Third Quarter - ----------------------------------------------------------------- of 1994-95 - ---------- Net sales for the third quarter of fiscal 1995-96 were a record $252.8 million, up 5.1% from the $240.5 million reported in the third quarter of last year. The Company's European operations' generated over 80% of the sales increase, or approximately $10 million, with almost 60% of this growth arising from favorable currency fluctuations compared to the same quarter, a year ago. The Company's most recent acquisition, Signet Systems, contributed almost $20 million to the sales growth in the quarter. The sale of the Company's copper-tubing business, effective at the end of the second quarter, resulted in a sales reduction of just over $8 million from the same quarter in the prior year. The aftermarket and automotive divisions registered lower sales due to competitive forces in the North American aftermarket and a general softening of the U.S. economy. Modine's quarterly sales, when including those from newly acquired Signet Systems, increased to all but one of its major markets. The largest percentage increases were to off-highway- equipment customers and to original-equipment manufactures of passenger cars and light trucks. Sales to the building-HVAC market were lower than the year before due to decreases in sales to manufacturers of residential heating and air-conditioning equipment and by the copper-tubing business sale at the end of the second quarter. Gross margin declined 3.7%, as a percentage of sales, over the third quarter of the previous year to 25.2% from 28.9%. Contributing factors to the overall reduction in gross margin were: higher raw material costs that were passed on to most original-equipment customers without corresponding markups; competitive pressures in the North American aftermarket; a higher percentage of total sales by the Company's European operations and the inclusion of three months operating results from the newly acquired Signet Systems, which are both generally earning lower gross margins than the overall Company average. Selling, general and administrative expenses increased 6.2% over last year's third quarter while remaining almost flat as a percentage of sales. Excluding Signet Systems, acquired at the
end of July, selling, general and administrative expenses declined by $0.8 million or 2.0%. Interest expense rose by 9.9% from the same quarter a year ago. Increased borrowing relative to the Signet acquisition and higher capital spending in Europe in order to prepare for expanding business worldwide were the main factors contributing to higher interest costs. Net non-operating income increased by $4.0 million. The increase is primarily the result of the $3.5 million gain recognized from the sale of the Company's copper-tubing business. The effective tax rate increased by 0.5% when compared to the same period last year. Net earnings for the third quarter were $14.9 million or $.49 per share, down 14.7% from last year's $17.4 million, or $.57 per share.
MANAGEMENT'S DISCUSSION AND ANALYSIS ------------------------------------ RESULTS OF OPERATIONS --------------------- Comparison of the First Nine Months of 1995-96 with the First - ------------------------------------------------------------- Nine Months of 1994-95 - ---------------------- Net sales for the first nine months of fiscal 1995-96 were a record $746.3 million, up 11.3% from the $670.7 million reported in the first nine months of last year. The Company's European operations generated 62% of the sales increase, or approximately $47 million, with close to $26 million of the increase in Europe arising from favorable currency fluctuations over the same period, a year ago. Signet Systems, the Company's newest acquisition, contributed over $30 million to the sales increase. The sale of the Company's copper-tubing business at the end of the second quarter resulted in a loss of approximately $8 million of sales recorded in the third quarter last year. Modine's worldwide shipments during the first nine months grew the most in the passenger-car and light-truck market with the largest sales growth to European customers. The second largest gain was recorded in agricultural- and construction segments of the off-highway market. The remaining markets demonstrated modest growth with the exception of the building-HVAC market, which recorded a decline due to decreases in sales to manufacturers of residential heating and air-conditioning equipment The sale of the copper tubing business, effective at the end of the second quarter, also contributed to the decline registered in the building-HVAC market. Gross margin decreased 3.1%, as a percent of sales, over the first nine months of the previous year to 25.8% from 28.9%. Once again the primary factors contributing to the decline were: higher raw material costs that are being passed on to most original-equipment customers without corresponding markups; competitive pricing pressures in the North American aftermarket; a higher percentage of total sales by the Company's European operations and the inclusion of five months operating results from the newly acquired Signet Systems, which are both generally earning lower gross margins than the overall Company average. Selling, general and administrative expenses increased 5.5% over the first nine months last year while declining 0.9% as a percentage of sales. The increase is primarily attributable to the Signet Systems acquisition, which was included in the consolidated results of operations beginning in August. Average outstanding debt levels during the first nine months rose by approximately $10.6 million, or 11.6%, over the same period a year ago. Corresponding interest expense increased only 5.0% over the same nine month period, a year ago. Interest expense grew at a slower rate in part due to a continuing reduction in higher rate domestic debt through normally scheduled repayments. More
favorable interest rates on outstanding domestic and foreign variable rate debt also contributed to the slower growth rate of interest expense when compared to average debt outstanding. The effective tax rate decreased by 0.6% when compared to the same period last year. Net earnings for the nine months were $47.6 million, or $1.56 per share, down 3.0% from last year's $49.0 million, or $1.61 per share. Outlook for the Remainder of the Year - ------------------------------------- In December, Modine adjusted its sales and earnings estimates for the fiscal year ending March 31, 1996. The reduction was primarily due to competitive forces in the North American aftermarket and to a general softening of the U.S. economy, which is affecting sales to original-equipment manufacturers of highway vehicles. Business remains solid, but full-year sales are likely to be up less than 10 percent from last year's record. Continued pressures on margins worldwide, partially a reflection of high material costs, will result in annual earnings that will reach 90 to 95 percent of the prior year's record, ending with the second-highest earnings year ever. This will include an after-tax gain of approximately seven cents per share from the sale of Modine's copper-tubing business in the third fiscal quarter.
FINANCIAL CONDITION ------------------- Comparison between December 26, 1995 and March 31, 1995 - ------------------------------------------------------- Current Assets - -------------- Cash and cash equivalents decreased by $10.1 million to a total of $22.6 million. The Company's primary sources of liquidity and capital resources were cash provided by operations and the use of available borrowing facilities. Net trade receivables increased $1.9 million, or 1.3%. Excluding the recent Signet Systems acquisition, net trade receivables declined by $8.4 million, or approximately 5.8%. The reduction is partially the result the sale of the company's copper-tubing business at the end of the second quarter. Also contributing to the reduction were lower sales to the North American aftermarket and original-equipment manufacturers of highway vehicles in the third quarter. Overall inventory levels increased by $8.4 million. The majority of the increase is attributable to the Signet Systems acquisition and other smaller acquisitions made in the current year. Offsetting part of the increase from the acquisitions, is a reduction from the sale of the Company's copper tubing business at the end of the second quarter. Other smaller variations in inventory levels in the Company's operating units accounted for the remaining increase. Working capital increased approximately 4% to $177.5 million from $170.7 million while the current ratio increased to 2.1 to 1 from 2.0 to 1. A number of categories experienced changes, but the largest items contributing to the increase were higher inventories as a result of acquisitions during the year and lower accounts payable due to normal timing difference in the level of operating activity. These increases were offset in part by a reduction in cash used to finance acquisitions and capital expenditures that occurred in the first nine months. Property, Plant and Equipment - ----------------------------- Net property, plant and equipment increased $23.2 million to $194.1 million. A little over 50% of the increase occurred as a result of the Signet Systems acquisition at the end of July. Management currently anticipates that capital expenditures will rise to $50-60 million in the current year to prepare for expanded business worldwide. Outstanding material commitments for capital expenditures were $19.2 million at December 26, 1995, compared to $13.6 million at March 31, 1995. About $7.2 million of these commitments cover facility improvements and equipment upgrades at various European subsidiaries. Most of the remaining commitments relate to new and existing plant expansions, tooling for new products, and process improvements. Domestically, these commitments will be financed with cash generated by operations; while overseas, the commitments will be financed with internally generated cash and additional borrowing in Europe, as required.
Investment in Affiliates - ------------------------ Investment in affiliates declined by $1.8 million. The primary reason for the decrease was the reclassification of the Company's equity investment in Radinam, S.A. to an investment in wholly owned affiliates. As mentioned in footnote 5, Modine acquired its partner's 57% ownership in Radinam S.A. in May 1995. Intangible Assets - ----------------- Intangible assets, net of accumulated amortization rose $34.6 million. The increase is principally the result of goodwill recorded in conjunction with the Signet Systems, Radinam S.A., Radiadores Montana S.A. Deferred Charges and Other Assets - --------------------------------- Deferred charges and other assets increased $3.8 million. The net increase is primarily the result of continuing recognition of the surplus in the Company's overfunded pension plans. Current Liabilities - ------------------- Accounts payable and various accrued expenses decreased $5.9 million. Excluding the Signet Systems acquisition, accounts payable and other accrued expenses decreased $15.7 million. Normal timing differences in the level of operating activity were responsible for the decline. Accrued income taxes decreased $3.5 million from normal timing differences in making estimated tax payments and federal tax benefits resulting from the exercise of stock options. Debt - ---- Outstanding debt increased by $30.3 million from March 31, 1995. Long-term debt increased $29.1 million mainly in conjunction with the acquisitions of Radiadores Montana S.A., Signet Systems, Inc., and Radinam S.A. At December 26, the Company had used $14.8 million of its $25 million multi- currency revolving unsecured credit facility. The borrowings were denominated in U.S. dollars ($8.0), German marks (equivalent to $.9 million USD), and Japanese yen (equivalent to $5.9 million USD). The German marks provided working capital for the German subsidiary of our Signet acquisition. The Japanese yen were borrowed as a hedge of our investment in our Japanese joint venture. The equivalent of $27.7 million USD was renegotiated in Germany to extend the maturities to fiscal years ending in 1997 and 1999. The Company also issued $5.0 million in promissory notes as partial funding of the Signet Systems acquisition. Scheduled repayments on fixed-rate domestic debt and currency fluctuations account for the balance of the change in long-term debt. Short-term debt increased by $1.2 million at the company's European subsidiaries. This overall change consisted of the equivalent of $2.4 million USD increase in Dutch guilders, and $2.0 million USD decrease in Austrian schillings, with the balance of the activity at our German subsidiaries. Available lines of credit were unchanged in total, with $20.6 million available. The lines of credit available in the Netherlands
decreased by $3.5 million. The lines of credit available in Germany and Austria increased by $2.4 million and $1.1 million, respectively. Total debt to equity increased to 34.3%. Shareholders' Investment - ------------------------ Total shareholders' investment increased by $32.2 million to a total of $340.5 million. The net increase resulted primarily from net earnings of $47.6 million for the first nine months. Dividends paid to shareholders of $13.3 million, net treasury stock purchases of $3.3 million, and other minor changes to the capital accounts also contributed to the change.
PART II. OTHER INFORMATION Item 1. Legal Proceedings. In the normal course of business, the Company and its subsidiaries are named as defendants in various lawsuits and enforcement proceedings by private parties, the Occupational Safety and Health Administration, the Environmental Protection Agency, other governmental agencies, and others in which claims, such as personal injury, property damage, or antitrust and trade regulation issues, are asserted against the Company. While the outcome of these proceedings is uncertain, in the opinion of the Company's Management and counsel, any liabilities that may result from such proceedings are not reasonably likely to have a material effect on the Company's liquidity, financial condition or results of operations. Many of the pending damage claims are covered by insurance and, in addition, the Company from time to time establishes reserves for uninsured liabilities. The Mitsubishi Litigation ------------------------- In November 1991, the Company filed a lawsuit in the Federal District Court in Milwaukee, Wisconsin against Mitsubishi Motor Sales of America, Inc. and Showa Aluminum Corporation, alleging infringement of the Company's Patent No. 4,998,580 on parallel-flow air-conditioning condensers. The suit seeks an injunction to prohibit continued infringement and accounting for damages, a trebling of such damages for willful infringement, and reimbursement of attorneys' fees. In December of 1991, the Company submitted a complaint to the U. S. International Trade Commission (ITC) requesting that the ITC ban the import and sale of parallel-flow air-conditioning condensers and systems or vehicles that contain them, which are the subject of the aforementioned lawsuit. In July 1993, the ITC reversed an earlier ruling by a hearing officer and upheld, as valid and enforceable, the Company's 4,998,580 patent on parallel-flow air-conditioning condensers. The ITC also ruled that specific condensers from the two Japanese companies did not infringe the Company's patent. Each of the parties appealed to the U.S. Court of Appeals for the Federal Circuit the portion of the ITC opinion adverse to them. In February 1996, the U.S. Court of Appeals for the Federal Circuit, upheld the patent as valid and enforceable and remanded the case back to the ITC for a determination with respect to Showa infringement. In July of 1994, Showa filed a lawsuit against the Company in the Federal District Court in Columbus, Ohio alleging infringement by the Company of Showa's patents pertaining to double circuit condensers and baffles therefor (In June, 1995, the Company filed a motion for partial summary judgment against such lawsuit). In December of 1994, the Company filed another lawsuit against Mitsubishi Motor Sales of America, Inc. and Showa Aluminum Corporation in the Federal District Court in Milwaukee, Wisconsin pertaining to the Company's newly-issued Patent No. 5,372,188 also pertaining to parallel-flow air-conditioning condensers. Both 1994 suits have been stayed pending the outcome of re-examination in the U. S. Patent Office of the patents involved. All legal and court costs associated with these cases have been expensed as they were incurred. Other previously reported legal proceedings have been settled or the issues resolved so as to not merit further reporting. Item 5. Other Events. As previously reported, in May of 1986, the Board of Directors authorized the Company to acquire up to 10% per year of the issued and outstanding
shares of the common stock of the Company. Pursuant to this authorization, the Company purchases shares of its common stock from time to time as such shares become available on the open market or in private transactions for resale to the employee stock purchase plans and for other corporate purposes. Since December 31, 1994, the Company has purchased at market price a total of 338,245 shares, 167,836 shares of which were purchased during the fourth fiscal quarter of 1994-95, and 170,409 shares of which were purchased from April 1, 1995 through December 31, 1995. The Company currently has 648,401 shares (as of February 6, 1996) in its Treasury. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: -------- The following exhibits are included for information only unless specifically incorporated by reference in this report: Reference Number per Item 601 of Regulation S-K Page - -------------- ---- 4(a) Rights Agreement dated as of October 16, 1986 between the Registrant and First Chicago Trust Company of New York (Rights Agent) (filed by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1992). 4(b)(i) Rights Agreement Amendment No. 1 dated as of January 18, 1995 between the Registrant and First Chicago Trust Company of New York (Rights Agent) (filed by reference to the exhibit contained within the Registrant's Current Report on Form 8-K dated January 13, 1995.) 4(b)(ii) Rights Agreement Amendment No. 2 dated as of January 18, 1995 between the Registrant and First Chicago Trust Company of New York (Rights Agent) (filed by reference to the exhibit contained within the Registrant's Current Report on Form 8-K dated January 13, 1995.) Note: The amount of long-term debt authorized under any instrument defining the rights of holders of long- term debt of the Registrant, other than as noted above, does not exceed ten percent of the total assets of the Registrant and its subsidiaries on a consolidated basis. Therefore, no such instruments are required to be filed as exhibits to this Form 10-K. The Registrant agrees to furnish copies of such instruments to the Commission upon request.
Reference Number per Item 601 of Regulation S-K Page - -------------- ---- 11* Computation of per share earnings 21 27* Financial Data Schedule (electronic transmission only) *Filed herewith. (b) Reports on Form 8-K: ------------------- The Company filed no reports on Form 8-K during this third fiscal quarter. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MODINE MANUFACTURING COMPANY (Registrant) By: A. D. REID --------------------------------------- A. D. Reid, Vice President, Finance and Chief Financial Officer (Principal Financial Officer) Date: February 8, 1996 By: W. E. PAVLICK --------------------------------------- W. E. Pavlick, Senior Vice President, General Counsel and Secretary <PAGE