Modine Manufacturing Co DEF 14A, filed Jul 1, 2024
Modine Manufacturing Co (MOD)
About this DEF 14A
Modine Manufacturing Co filed this DEF 14A on July 1, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ____)
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| ☒ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Pursuant to §240.14a-12 |
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1500 DeKoven Avenue
Racine, Wisconsin 53403-2552
Notice of Annual Meeting of Shareholders
To the Shareholders of Modine Manufacturing Company:
Notice is hereby given that the Annual Meeting of Shareholders of Modine Manufacturing Company will be held in virtual format on Thursday, August 15, 2024, at 8:00 a.m. CDT. There will be no physical location for the Annual Meeting.
You may access the Annual Meeting by visiting www.virtualshareholdermeeting.com/MOD2024 where you will be able to attend and participate online, vote your shares electronically, and submit questions prior to and during the meeting.
Who may vote:
You may vote if you were a shareholder of record at the close of business on June 17, 2024, which is the Record Date for the Annual Meeting.
Matters to vote on:
| 1. | Election of the Company-nominated slate of three directors for terms expiring in 2027; |
| 2. | Advisory approval of the Company’s named executive officer compensation; |
| 3. | Ratification of the appointment of the Company’s independent registered public accounting firm; and |
| 4. | Consideration of any other matters properly brought before the shareholders at the meeting. |
We have elected to furnish our proxy materials for the 2024 Annual Meeting over the Internet. Accordingly, we have mailed to our shareholders of record and beneficial owners a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access the attached proxy statement and our annual report to shareholders via the Internet, and how to vote online.
Holders of a majority of the votes entitled to be cast must be present in person or by proxy in order for the Annual Meeting to be held. Regardless of whether you expect to attend the Annual Meeting virtually, you are urged to vote electronically via the Internet, by a telephone vote or, as applicable, by completing and mailing the proxy card. Instructions for electronic voting via the Internet and telephonic voting are contained in the Notice, or, as applicable, on the accompanying proxy card. If you attend the meeting and wish to vote your shares personally, you may do so by revoking your proxy at any time prior to the voting thereof. You may revoke your proxy at any time before it is voted by advising the Company’s Secretary in writing (including by submitting a duly executed proxy bearing a later date or voting via the Internet) or by telephone of such revocation.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on August 15, 2024: The annual report to shareholders and proxy statement of Modine Manufacturing Company are available for review at www.virtualshareholdermeeting.com/MOD2024. Instructions on how to access and review the materials on the Internet can be found on the Notice and, as applicable, the accompanying proxy card.
| By order of the Board of Directors, | |
| Erin J. Roth | |
|
Vice President, General Counsel and Chief Compliance Officer |
|
| July 1, 2024 |
TABLE OF CONTENTS
ITEM 1 – ELECTION OF DIRECTORS
The Board of Directors (the “Board of Directors” or the “Board”) of Modine Manufacturing Company (the “Company” or “Modine”) nominated three current members of the Board, Suresh V. Garimella, Christopher W. Patterson, and Christine Y. Yan, to stand for election at the 2024 Annual Meeting of Shareholders (the “Annual Meeting”). If elected, each director would serve until the 2027 Annual Meeting of Shareholders and the election of his or her successor. The persons appointed as proxies will vote “FOR” the election of these nominees, unless instructions to the contrary are given to them. The nominees have indicated they are willing to serve as directors. While it is not anticipated that any of the nominees will be unable to take office, if that happens, the proxies will vote “FOR” the substitute nominee(s) designated by the Board of Directors.
The Company’s Amended and Restated Articles of Incorporation provide that the Board of Directors shall be divided into three classes, as nearly equal in number as possible, serving staggered three-year terms. The Board of Directors currently consists of nine members, with each class consisting of three directors.
In accordance with the Company’s Bylaws, a director shall hold office until (i) the end of such director’s term and until the director’s successor shall have been elected, (ii) there is a decrease in the allowable number of directors, or (iii) his or her death, resignation or removal. Vacancies may be filled by the shareholders or the remaining directors. See Selection of Nominees to the Board of Directors below. The Company’s Bylaws require that each director retire at the close of the term in which he or she attains the age of 72 years, unless exempted from it by a resolution passed by a two-thirds vote of the Board of Directors.
Qualifications of Modine’s Board of Directors
Qualifications of Modine’s Board of Directors as a Governing Entity
Modine’s Board consists of proven leaders from various industries, disciplines, and end markets who have the knowledge and experience necessary for a deep understanding of Modine, its products, and its businesses. That knowledge and experience has been gained or enhanced in a wide variety of ways, including through years of service on Modine’s Board, employment with industry leaders that have business models and strategies similar to the Company’s or product markets important to the Company, and leadership positions in technologically innovative institutions. The Board benefits from the interplay among a group of directors who have diverse and distinguished backgrounds, which are described in further detail in this section. Modine’s directors are dedicated individuals with high integrity and discipline who have a strong desire to use their skills to govern Modine in a responsible manner.
Individual Qualifications of the Members of Modine’s Board of Directors
The Board of Directors’ Corporate Governance and Nominating Committee (the “Governance Committee”), a committee consisting of five independent directors of the Company, has determined that the Board needs certain specialized expertise as well as broad leadership experience to direct the Company to achieve its strategic goals. The Governance Committee considers the following qualities and experiences to be necessary for the proper functioning of a Board of a responsible, global, diversified industrial company:
| • | Business operations leadership; |
| • | Relevant industry experience; |
| • | Global business experience; |
| • | Financial expertise; |
| • | Technological expertise; |
| • | Corporate governance expertise; |
| • | Financial markets experience; and |
| • | Strategic planning and execution expertise, including mergers and acquisitions experience. |
In addition, from time to time, the Governance Committee considers additional attributes that are more specific to the Company’s strategic and business emphasis at any given point.
A description of the qualities provided by each Board member is included below with the description of the individual’s experience and public company directorships, all as of June 17, 2024.
Board Skills Matrix
The chart below summarizes the specific qualifications, attributes, and skills for each continuing director. An “X” in the “Skills” section of the chart below indicates that the item is a specific reason that the director was nominated to serve on the Board. The lack of an “X” does not mean that the director does not possess that qualification or skill. Rather, an “X” indicates a specific area of focus or expertise of a director on which the Board currently relies.
| Mr. Ashleman | Mr. Brinker | Dr. Garimella | Ms. Harper | Mr. Patterson | Ms. Williams | Mr. Wilson | Mr. Wulfsohn | Ms. Yan | |
| Skills | |||||||||
| Business Operations Leadership | X | X | X | X | X | X | |||
| Relevant Industry Experience | X | X | X | X | X | ||||
| Global Business Experience | X | X | X | X | X | X | X | X | |
| Financial Expertise | X | X | X | X | X | ||||
| Technological Expertise | X | X | X | ||||||
| Corporate Governance Expertise | X | X | X | X | X | X | |||
| Financial Markets Experience | X | X | X | ||||||
| Strategic Planning and Execution Expertise | X | X | X | X | X | X | X | X | X |
| Demographics | |||||||||
| Race/Ethnicity | |||||||||
| African American | |||||||||
| Asian/Pacific Islander | X | X | |||||||
| White/Caucasian | X | X | X | X | X | X | X | ||
| Gender | |||||||||
| Male | X | X | X | X | X | X | |||
| Female | X | X | X | ||||||
2024 Nominees for Director
Based upon the recommendation of the Governance Committee, the Board approved the nominations of Suresh V. Garimella, Christopher W. Patterson, and Christine Y. Yan for election as directors. Dr. Garimella, Mr. Patterson, and Ms. Yan are considered independent under the New York Stock Exchange (“NYSE”) corporate governance listing standards. Dr. Garimella, Mr. Patterson, and Ms. Yan were last elected to the Board in 2021, at which time they each received the support of over 93 percent of the votes cast.
Director Resignation Bylaw
Under the Company’s Bylaws, if an incumbent director fails to receive the affirmative vote of a majority of votes cast in an uncontested election, such director is required to promptly tender his or her resignation to the Board. The Governance and Nominating Committee will then recommend to the Board whether to accept or reject the tendered resignation, or whether other action should be taken. The Board will act on the recommendation of the Governance and Nominating Committee and publicly disclose its decision, and the rationale behind its decision, within 90 days from the date of the certification of the results of the election.
The Board of Directors recommends a vote “FOR” Suresh V. Garimella, Christopher W. Patterson, and Christine Y. Yan.
Vote Required for Approval
Directors in an uncontested election are elected by a majority of the votes cast by holders of shares of the Company’s common stock entitled to vote in the election at a shareholder meeting at which a quorum is present. Because abstentions and broker non-votes are not considered votes cast, they will not have an effect on the vote.
| Nominees for Election as Directors with Terms Expiring in 2027: | ||
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Dr. Suresh V. Garimella Age 60 |
Current Position:
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President, University of Vermont.
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Director since 2011
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Experience: |
Dr. Garimella was appointed President of the University of Vermont (“UVM”) in 2019. Under his leadership, UVM has achieved record enrollment figures and doubled research funding. Since 2018, Dr. Garimella has been a member of the National Science Board (“NSB”), which oversees the National Science Foundation and serves as an independent body of advisers to both the President of the United States and Congress on science and technology policy. He chairs the NSB’s Committee on Strategy. He also serves on the Sandia National Laboratories’ Research Advisory Board, is a Fellow of the National Academy of Inventors, and is a member of the Executive Committee of the US Council on Competitiveness.
From 2014 to 2019, Dr. Garimella was Executive Vice President for Research and Partnerships at Purdue University, where he was Goodson Distinguished Professor of Mechanical Engineering and Founding Director of the Cooling Technologies Research Center. Dr. Garimella also served as a Jefferson Science Fellow at the U.S. Department of State and as a Senior Fellow for Energy and Climate Partnership of the Americas for five years.
Dr. Garimella received his Bachelor of Technology from Indian Institute of Technology, Madras, India, his Master of Science from The Ohio State University, and his Ph.D. from the University of California at Berkeley, all in Mechanical Engineering. |
| Specific Attributes and Skills for Dr. Garimella: | ||
| Expertise | Discussion of Skills and Attributes | |
|
Technological Expertise
|
Dr. Garimella is a renowned expert in thermal management and heat transfer technology, which is central to the success of the Company.
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Strategic Planning and Execution Expertise
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In his current position, Dr. Garimella serves as the chief executive responsible for all academic, financial, legal, operational, and reputational aspects of the University of Vermont. Dr. Garimella has promoted UVM's longstanding commitment to sustainability, a commitment that was underscored by a recently approved Comprehensive Sustainability Plan that plots a course to the University becoming carbon-neutral by 2030. Previously, he was deeply engaged with the development and execution of Purdue University’s strategic plans and, in particular, the plans relating to the University’s strategic research initiatives and partnerships, both within and outside the United States. In addition, Dr. Garimella is Chair of the NSB’s Committee on Strategy, which is responsible for setting short- and long-term strategy and objectives for the National Science Foundation. |
|
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Christopher W. Patterson Age 70 Director since 2010
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Current Position:
Experience: |
Retired.
Mr. Patterson retired as President and Chief Executive Officer of Daimler Trucks North America LLC, a leading producer of heavy-duty and medium-duty trucks and specialized commercial vehicles in North America. Mr. Patterson served in this capacity from 2005 until his retirement in 2009. Prior to this, he held senior positions, including as Senior Vice President, Service & Parts, with Freightliner LLC (predecessor to Daimler Trucks North America), and other international, commercial truck producers. |
| Public Company Directorships: | Mr. Patterson is a past director of Finning International Inc., Vancouver, B.C. (Canada), having retired in February 2024. | |
| Specific Attributes and Skills for Mr. Patterson: | ||
| Expertise | Discussion of Skills and Attributes | |
| Business Operations Leadership | Mr. Patterson gained his business operations leadership experience as President and Chief Executive Officer of Daimler Trucks North America LLC and brings extensive strategic sales and marketing experience to the Company’s Board. | |
| Relevant Industry Experience | Mr. Patterson has a significant understanding of commercial truck markets and the operations of global commercial vehicle Original Equipment Manufacturers (OEMs). | |
| Global Business Experience | Mr. Patterson’s extensive executive and leadership experience, as described above, gives him valuable insight into the complexities, challenges and issues facing global manufacturing businesses. | |
|
Corporate Governance Expertise
|
Mr. Patterson has significant corporate governance experience from his role as President and Chief Executive Officer of Daimler Trucks North America LLC. In addition, Mr. Patterson served on the board of another public company and served on the boards of several privately-held companies. In these board roles, Mr. Patterson served on audit and compensation committees, as well as a safety, environment, and social responsibility committee of a publicly traded company. Through these engagements, Mr. Patterson has gained a significant understanding of corporate governance matters. | |
| Strategic Planning and Execution Expertise | Through his many roles at Daimler Trucks North America LLC, and particularly in his position as President and Chief Executive Officer, Mr. Patterson obtained significant experience in establishing and executing on that entity’s short- and long-term strategic plans. | |
|
Christine Y. Yan Age 58 Director since 2014
|
Current Position: Experience: |
Retired.
Ms. Yan retired from Stanley Black & Decker, Inc., a diversified global provider of power and hand tools and engineered fastening systems in November 2018. Ms. Yan held several executive roles with the company, including Vice President of Integration, Stanley Black & Decker, Inc.; President of Asia, Stanley Black & Decker, Inc.; President of Storage and Workspace Systems; integration leader of Stanley Engineered Fastening Group; President of the Americas business of Stanley Engineered Fastening; and President of Stanley Engineered Fastening’s Global Automotive business. |
| Public Company Directorships: | Onsemi; Ansell Limited; and Cabot Corporation | |
| Specific Attributes and Skills for Ms. Yan: | ||
| Expertise | Discussion of Skills and Attributes | |
| Business Operations Leadership | Ms. Yan gained her business operations experience as the leader of various business units within Stanley Black & Decker, Inc. | |
| Relevant Industry Experience | Ms. Yan gained experience in vehicular, electronics and general industrial sectors through her roles as President of Asia of Stanley Black and Decker, President of Americas and President of Global Automotive of Stanley Engineered Fastening. | |
| Global Business Experience | Ms. Yan has gained a significant understanding of a variety of industrial markets through her experience as President of Asia, President of Storage and Workplace Systems, and President of Americas for Stanley Black & Decker, Inc. | |
|
Corporate Governance Expertise
|
In addition to her tenure as a director of Modine, Ms. Yan serves on the board of three other public companies. She is the Chair of the Human Capital and Compensation Committee at ONSEMI and Chair of the Human Resource Committee at Ansell Limited. | |
| Technological Expertise | Ms. Yan’s engineering background and past positions at Stanley Black & Decker, Inc. have provided her with significant exposure to and experience with technologically sophisticated business operations. | |
| Strategic Planning and Execution Expertise | Ms. Yan has acquired substantial expertise in strategic planning as the leader of numerous significant business units within Stanley Black & Decker, Inc. | |
| Directors Continuing in Service for Terms Expiring in 2025: | ||
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Neil D. Brinker Age 48 Director since 2020
|
Current Position:
Experience: |
President and Chief Executive Officer of Modine since 2020.
Prior to joining Modine, Mr. Brinker was President and Chief Operating Officer of Advanced Energy Industries, Inc. (“AE”) since May of 2020, and joined AE in June of 2018 as its Executive Vice President & Chief Operating Officer. Before joining AE, Mr. Brinker served as a Group President at IDEX Corporation from July 2015 to June 2018 after holding leadership roles at IDEX from April of 2012 to July 2015. Mr. Brinker also held numerous management roles at Danaher Corporation from 2007 to 2012, as well as various operations roles at General Motors from 2001 to 2007. |
|
Specific Attributes and Skills for Mr. Brinker: |
||
| Expertise | Discussion of Skills and Attributes | |
| Business Operations Leadership | Mr. Brinker serves as President and Chief Executive Officer of the Company. He has obtained substantial business operations leadership experience through his roles at AE, IDEX and Danaher. | |
| Relevant Industry Experience | As an Executive Officer of AE, and a business leader at both IDEX and Danaher, Mr. Brinker has significant experience in leading and transforming diversified industrial companies. | |
| Global Business Experience | At AE, IDEX and Danaher, and now as President and Chief Executive Officer of Modine, Mr. Brinker’s responsibilities have included global oversight of P&L, operations, M&A, human capital and strategy. | |
| Strategic Planning and Execution Expertise | In addition to his direct responsibility for M&A activity at AE, IDEX and Danaher, Mr. Brinker has extensive experience in both setting and overseeing the execution of strategy and growth for diversified industrial companies. | |
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Katherine C. Harper Age 61 Director since 2022
|
Current Position:
Experience: |
Retired.
Ms. Harper retired as Chief Financial Officer of BDP International, a private global logistics and transportation solutions company. Ms. Harper served in this capacity from 2019 until her retirement in 2022. Prior to BDP International, Ms. Harper served as Chief Financial Officer of AgroFresh Solutions, a global public agricultural solutions provider, where she oversaw Finance, Strategy, Business Development and Investor Relations. She was also previously SVP and Chief Financial Officer of Tronox, a global public chemicals and mining company, and held various senior roles with Rio Tinto Group, one of the world’s largest metals and mining corporations.
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| Public Company Directorships: | Sasol Limited (South Africa); Venator Materials, PLC |
| Specific Attributes and Skills for Ms. Harper: | ||
| Expertise | Discussion of Skills and Attributes | |
| Global Business Experience | Ms. Harper has had a distinguished financial career across many global industries including chemicals, mining, industrial manufacturing, distribution and security services. | |
| Financial Expertise | Ms. Harper is a financial expert with extensive experience in compliance, assurance and enterprise risk management. In addition, Ms. Harper also serves as a member of the audit committee of Sasol. | |
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Corporate Governance Expertise
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In her role as Chief Financial Officer of BDP International, Ms. Harper gained significant experience implementing effective corporate governance practices. Ms. Harper currently serves as the Chairperson of the board for Venator. In addition, Ms. Harper serves on the board and the audit committee and the capital committee of Sasol Limited. | |
| Financial Markets Experience | As Chief Financial Officer of BDP International, AgroFresh and Tronox, Ms. Harper has significant experience in the public and private financial markets which the companies utilized for financing. | |
| Strategic Planning and Execution Expertise | Ms. Harper has been heavily engaged in strategic planning activities throughout her career, particularly through her role as SVP and Chief Financial Officer of Tronox and roles with Rio Tinto Group. | |
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David J. Wilson Age 55 Director since 2022
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Current Position:
Experience:
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President and Chief Executive Officer of Columbus McKinnon Corporation.
Mr. Wilson is President and Chief Executive Officer of Columbus McKinnon Corporation, a leading worldwide designer, manufacturer and marketer of intelligent motion solutions. Prior to joining Columbus McKinnon, Mr. Wilson led the significant transformation of Flowserve Corporation’s Pumps Division while serving as its President. Prior to Flowserve, Mr. Wilson served as the President of SPX FLOW’s Industrial Segment and before that, SPX Corporation’s Industrial Segment. |
| Public Company Directorships: | Columbus McKinnon Corporation | |
| Specific Attributes and Skills for Mr. Wilson: | ||
| Expertise | Discussion of Skills and Attributes | |
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Business Operations Leadership
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Mr. Wilson serves as President and Chief Executive Officer of Columbus McKinnon Corporation. Mr. Wilson also gained significant business operations leadership experience in his roles as President of Flowserve Corporation, President of SPX Flow’s Industrial Segment and President of SPX Corporation’s Industrial Segment. | |
| Relevant Industry Experience | Mr. Wilson has an extensive understanding of highly engineered equipment and technologies, including engineered flow components such as heat pumps and heat exchangers. Mr. Wilson also has experience in the heating, ventilation and air conditioning markets and the power transmission and generation markets. | |
| Global Business Experience | Mr. Wilson’s experience at SPX included the leadership of multiple global operating businesses along with tenure as an expatriate living in China for six years where he developed extensive global P&L management experience. | |
| Financial Expertise | Mr. Wilson has developed substantial financial expertise through his roles at Columbus McKinnon Corporation, Flowserve Corporation and SPX Corporation. | |
| Technological Experience | Through his engineering background and his roles at Flowserve Corporation and SPX Corporation, Mr. Wilson has acquired significant experience in application-based technology. | |
| Strategic Planning and Execution Expertise | Mr. Wilson has been heavily engaged in strategic planning activities throughout his career, particularly through his numerous roles with SPX where he led several successful corporate development initiatives. | |
| Directors Continuing in Service for Terms Expiring in 2026: | ||
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Eric D. Ashleman Age 57 Director since 2019
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Current Position:
Experience: |
Chief Executive Officer and President of IDEX Corporation.
Mr. Ashleman became the Chief Executive Officer of IDEX Corporation in December 2020 after becoming President in February 2020. Since 2008, Mr. Ashleman has served in a variety of capacities at IDEX, which is a developer, designer and manufacturer of fluidics systems and specialty engineered products. Prior to becoming the Chief Executive Officer and President of IDEX Corporation, Mr. Ashleman served in the following capacities at IDEX: President of Gast Manufacturing; President, Gast Manufacturing and Global Dispensing; Vice President and Group Executive, Fire, Safety and Diversified Segment; Senior Vice President and Group Executive, Health and Science Technology, and Fire, Safety and Diversified Segments; Senior Vice President and Chief Operating Officer; and President and Chief Operating Officer. Prior to joining IDEX, Mr. Ashleman served as President of Schutt Sports from 2006 to 2008. |
| Public Company Directorships: | IDEX Corporation | |
| Specific Attributes and Skills for Mr. Ashleman: | ||
| Expertise | Discussion of Skills and Attributes | |
| Business Operations Leadership | Mr. Ashleman has acquired business operations leadership through his many roles at IDEX Corporation, and particularly in his current role as Chief Executive Officer and President, where he is responsible for leading and managing a diversified industrial company. | |
| Relevant Industry Experience | Mr. Ashleman serves as Chief Executive Officer and President of IDEX Corporation, a global, diversified industrial company that manufactures for and sells into numerous markets also served by the Company, including the automotive, energy and industrial sectors. | |
| Global Business Experience | Mr. Ashleman has acquired substantial global business experience through his roles with IDEX Corporation, and particularly in his current role as Chief Executive Officer and President, as he leads and manages a global, diversified industrial company. | |
| Financial Expertise | Mr. Ashleman has acquired significant financial expertise through his roles at IDEX Corporation and through his previous role as President of Schutt Sports. | |
| Corporate Governance Expertise | Through his roles at IDEX Corporation, including as a member of its Board of Directors, and through his previous role as President of Schutt Sports, Mr. Ashleman has obtained considerable corporate governance expertise. | |
| Strategic Planning and Execution Expertise | Mr. Ashleman has developed short- and long-term strategic planning and execution expertise through his numerous roles at IDEX Corporation, and through his previous role as President of Schutt Sports. | |
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Marsha C. Williams Age 73 Director since 1999
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Current Position:
Experience: |
Retired.
Ms. Williams retired as Senior Vice President and Chief Financial Officer of Orbitz Worldwide, Inc., an online travel company (July 2007 - December 2010). Prior to joining Orbitz Worldwide, Inc., Ms. Williams was Executive Vice President and Chief Financial Officer (2002 – February 2007) of Equity Office Properties Trust, a real estate investment trust. Prior to that time, Ms. Williams was Chief Administrative Officer of Crate and Barrel and served as Vice President and Treasurer of Amoco Corporation; Vice President and Treasurer of Carson Pirie Scott & Company; and Vice President of The First National Bank of Chicago. |
| Public Company Directorships: |
Fifth Third Bancorp; Crown Holdings, Inc.; and Davis Funds
Ms. Williams was previously a Director for Chicago Bridge & Iron N.V. from 1999-2018, and for McDermott International Inc. from 2018-2020 following its acquisition of Chicago Bridge & Iron N.V. Ms. Williams is the former Chairperson and Lead director of the Fifth Third Bancorp Board of Directors. |
| Specific Attributes and Skills for Ms. Williams: | ||
| Expertise | Discussion of Skills and Attributes | |
| Global Business Experience | Ms. Williams was an executive officer of Orbitz Worldwide, Inc. and is currently a director of several public companies with global operations. In these roles, Ms. Williams has accumulated extensive knowledge of global finance, capital management, internal controls and human resources. | |
| Financial Expertise | As Vice President and Chief Financial Officer of Orbitz Worldwide, Inc., and Executive Vice President and Chief Financial Officer of Equity Office Properties Trust, Ms. Williams gained significant financial acumen relating to complex, global companies. | |
| Corporate Governance Expertise | Ms. Williams serves on the board of several public companies and is the former Lead Director of the Fifth Third Bancorp Board of Directors. | |
| Financial Markets Experience | As the former Vice President and Chief Financial Officer of Orbitz Worldwide, Inc., Executive Vice President and Chief Financial Officer of Equity Office Properties Trust, and current board member of Fifth Third Bancorp, Ms. Williams has significant experience in the financial markets in which the Company competes for financing. | |
| Strategic Planning and Execution Expertise | Ms. Williams has engaged in all facets of strategic planning and execution, particularly through her roles with Orbitz Worldwide, Inc. and Equity Office Properties Trust. | |
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William A. Wulfsohn Age 62 Director since 2022
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Current Position:
Experience:
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Former Chairman and Chief Executive Officer of Ashland Global Holdings.
Mr. Wulfsohn served as Chairman and Chief Executive Officer of Ashland Global Holdings, a global leader in providing specialty chemical solutions to customers in a wide range of customer and industrial markets, from 2015 to 2019. He was also a Director and Non-Executive Chairman of Valvoline Inc., a leading worldwide producer and distributer of premium-branded automotive, commercial and industrial lubricants and automotive chemicals, from 2016 until 2018. His prior employment includes strategic, M&A and international experience in senior roles, including President and Chief Executive Officer at Carpenter Technology Corporation, Senior Vice President, Coatings at PPG Industries and Vice President and General Manager – Nylon System at Honeywell International Inc. |
| Public Company Directorships: |
Avient Corporation
Mr. Wulfsohn was chairman of the board of directors of Anzu SPAC I from 2021 to 2022, chairman of the board of directors of Ashland Global from 2015 to 2019, chairman of the board of directors of Valvoline from 2016 to 2018, and a director of Carpenter Technology from 2010 to 2014. |
| Specific Attributes and Skills for Mr. Wulfsohn: | ||
| Expertise | Discussion of Skills and Attributes | |
| Business Operations Leadership | Mr. Wulfsohn acquired his business operations experience as the former Chairman & CEO of Ashland Global Holdings and CEO of Carpenter Technology. | |
| Global Business Experience | Mr. Wulfsohn acquired extensive executive and leadership experience through his roles with Ashland Global Holding which has extensive global business operations and PPG Industries. | |
| Financial Expertise | Mr. Wulfsohn acquired significant financial expertise through his role at Ashland Global Holdings, where he led the IPO of Valvoline, and through his previous role at Carpenter Technology Corporation. | |
| Corporate Governance Expertise | In his role as Chairman & CEO of Ashland Global Holdings Mr. Wulfsohn has acquired significant experience in implementing effective corporate governance practices. He also led the establishment of an Independent, public Valvoline corporation. | |
| Financial Markets Experience | As Chairman & CEO of Ashland Global Holdings and as CEO of Carpenter Technology, Mr. Wulfsohn had significant experience in financial markets and with investors. | |
| Strategic Planning and Execution Expertise | Through his roles at Ashland Global Holdings, Carpenter Technology Corporation, Valvoline, PPG Industries and Honeywell, Mr. Wulfsohn acquired extensive experience in leading and implementing long- and short-term organizational strategies. | |
CORPORATE GOVERNANCE
The Company’s business is managed under the direction of its Board of Directors, pursuant to its Amended and Restated Articles of Incorporation, its Bylaws, and the laws of the State of Wisconsin. Members of the Board of Directors are kept informed of the Company’s operations through discussions with the CEO and key members of management, by reviewing materials provided to them, and by participating in meetings of the Board of Directors and its committees.
The Company reviews and evaluates its corporate governance policies and practices, particularly in light of the rules of the Securities and Exchange Commission (“SEC”) and the NYSE and believes that its current policies and practices meet these requirements. The Company’s corporate governance policies, including its Guidelines on Corporate Governance and charters for committees of the Board, are available on its website, www.modine.com, and are also available in print to any shareholder or other interested person upon request.
Code of Conduct
The Company’s Code of Conduct (the “Code”) summarizes the compliance and ethical standards and expectations the Company has for all its employees (including the principal executive officer, principal financial officer and principal accounting officer) and directors with respect to their conduct in furtherance of Company business. It contains procedures for reporting suspected violations of the Code, including procedures for the reporting of questionable accounting or auditing matters or other concerns regarding accounting, internal accounting controls or auditing matters. The Company has established a Business Ethics Program that includes an Internet and phone Helpline through which employees and others may report concerns regarding such matters in confidence and, if desired, anonymously. A copy of the Code, and more information about the Business Ethics Program, is available on the Company’s website, www.modine.com. These materials are also available in print to any shareholder or other interested person upon request. If we make any substantive amendment to the Code, we will disclose the nature of such amendment on our website or in a current report on Form 8-K. In addition, if the Board of Directors grants a waiver of the Code to an executive officer or director, we will disclose the nature of such waiver on our website, in a press release or in a current report on Form 8-K.
Insider Trading Policy
Upon the recommendation of the Company’s Business Ethics Committee, and approval of the Board of Directors, the Company has adopted an
Director Independence
The Company’s Guidelines on Corporate Governance require that a majority of the Board’s members be independent. The Company also believes it is in its best interest to have the President and CEO of the Company serve as a director. At a minimum, to qualify as “independent,” a director must meet the independence standards of the NYSE. The Governance Committee assesses independence regularly, and each director is responsible for bringing any changes in their status that may affect their independence to the attention of the Governance Committee. In addition, on an annual basis the directors complete a questionnaire prepared by the Company that is designed to elicit information that the Board uses to assess director independence. At least annually, the Board reviews the relationships that each director has with the Company. Only those directors that the Board affirmatively determines have no material relationship with the Company, and who do not have any of the relationships that prevent independence under the standards of the NYSE, are considered to be independent directors.
The Board has determined that all the current directors, other than Mr. Brinker, are independent within the meaning of the listing standards of the NYSE. The Board concluded that none of these directors has any of the relationships with the Company set forth in the NYSE listing standards or any other business or other relationships with the Company that would preclude a determination of his or her independence. Mr. Brinker is not independent due to his position as President and CEO of the Company.
Certain Relationships and Related Party Transactions
The Code requires that all officers, employees and directors of the Company avoid any situation that conflicts with the proper discharge of his or her responsibility to the Company or that impairs his or her ability to exercise independence of judgment with respect to the transactions in which he or she is involved for the Company. Significant transactions with the Company’s officers, employees or directors, their relatives, or enterprises in which they have material interests, are not permitted unless such transactions are fully disclosed and approved by the Board of Directors or the Audit Committee as being in the best interest of the Company.
Moreover, the Company’s Conflicts of Interest Global Policy requires disclosure and pre-clearance with the Company’s Business Ethics Committee or, in the case of the officers of the Company, the Audit Committee of transactions in which an employee or director of the Company, or the immediate family of any employee or director of the Company, may be personally enriched.
Modine is a large global organization that engages in thousands of purchases, sales and other transactions annually. Modine may enter into purchase and sale transactions with other companies, universities and entities in which members of the Board of Directors are employed or of which they are members of the board of directors. Modine enters into these arrangements in the ordinary course of business and at competitive prices and terms. The Company anticipates that similar transactions may occur in the fiscal year ending March 31, 2025.
At the end of each fiscal year, each director and officer must respond to a questionnaire that requires him or her to identify certain information about his or her immediate family and any transaction or relationship that occurred during the year or any proposed transaction that involves Modine (or any subsidiary or affiliate of Modine) and that individual, his or her immediate family, or any entity with which he, she or such immediate family member is associated. All responses to the questionnaires are reviewed by the Company’s Legal Department and shared with the President and CEO, as appropriate. In addition, the Company independently searches its records for potential transactions with known related parties. Based on such review, there were no related party transactions regarding persons who were officers or directors during fiscal 2024.
Board Chairperson
Marsha C. Williams was appointed Chairperson of the Board in October 2020, having served in the position of Lead Director since July 2013. The Chairperson of the Board presides over meetings of the shareholders, the Board of Directors, and executive sessions of the Board of Directors, and performs such other duties as directed by the Board of Directors and as listed in the Company’s Guidelines on Corporate Governance. The Company believes this leadership structure is in the best interest of the Company’s shareholders at present because it allows the Company to benefit from the unique leadership ability that Ms. Williams possesses and from her substantial business and corporate governance experience.
Risk Oversight
The Board of Directors has overall responsibility for risk oversight for the Company. Management provides the Board with information regularly to keep the Board of Directors members apprised of identified risks. These risks, including financial, organizational, reputational, strategic, and cybersecurity risks, are reviewed and discussed with the Board as part of the business and operating review conducted at each of the Board’s regular meetings. As described below under Committees of the Board of Directors, the Board of Directors has delegated certain responsibilities to its committees. The committees have oversight of risks that fall within their areas of responsibility. The Governance Committee has general oversight responsibility for risks related to the Company’s environmental, social, and corporate governance strategy and practices, except to the extent delegated to the Audit and Human Capital and Compensation committees, as discussed below under Environmental, Social, and Governance (ESG) Matters. The Audit Committee has primary oversight of the Company’s financial reporting, internal control, and compliance risks. The Human Capital and Compensation Committee evaluates the risks arising from the Company’s compensation policies and programs. Management is responsible for managing risk and the Company’s enterprise risk management program.
Selection of Nominees to the Board of Directors
The Governance Committee considers prospective candidates for Board membership who are recommended by its members, as well as those recommended by management, shareholders and professional search firms hired by the Governance Committee. The Governance Committee may also decide to engage a professional search firm to assist in identifying qualified candidates. When such a search firm is engaged, the Governance Committee sets its fees and scope of engagement.
Once the Governance Committee identifies a prospective nominee, it initially determines whether to conduct a full evaluation of the candidate. The Governance Committee makes its initial determination based on the information provided to it with the recommendation of the prospective candidate, as well as the Governance Committee’s own knowledge of the prospective candidate, which may be supplemented by inquiries to the person making the recommendation or others.
The Governance Committee evaluates the prospective nominee, considering factors it deems appropriate, including the current composition of the Board and the evaluations of other prospective nominees. In assessing candidates, the Board considers the required areas of expertise set forth above in the Board Skills Matrix (business operations leadership; relevant industry experience; global business experience; financial expertise; technological expertise; corporate governance expertise; financial markets experience; and strategic planning, including mergers and acquisitions); additional attributes that are more specific to the Company’s strategic direction and business emphasis at any given point; and such additional factors as the individual’s education, contribution to the diversity of the Board, and other factors frequently encountered by a global business.
In choosing a candidate for Board membership, every effort is made to complement and supplement skills within the existing Board and to strengthen any identified areas. Further criteria include a candidate’s personal and professional ethics, integrity and values, as well as his or her willingness and ability to devote sufficient time to attend meetings and participate effectively on the Board.
In connection with this evaluation, the Board determines whether to interview the prospective nominee. If an interview is warranted, one or more members of the Board of Directors, and others as appropriate, will interview prospective nominees. After completing the evaluation and interview, the Governance Committee makes a recommendation to the Board regarding the nomination of a candidate, and the Board acts on that recommendation.
Shareholder Nominations and Recommendations of Director Candidates
The Bylaws of the Company provide that any shareholder who is present at a meeting called for the election of directors and (i) was a beneficial owner of shares of Company common stock at the time of giving the notice described below and (ii) is entitled to vote at such meeting may nominate persons for election to the Board of Directors. Shareholders who desire to nominate a person or persons for election to the Board at the next annual meeting must comply with the notice, information and other requirements in the Company’s Bylaws, a copy of which is available from the Company’s Secretary. For consideration at the 2025 Annual Meeting of Shareholders, nominations must be received by the Secretary no earlier than April 17, 2025, and no later than May 17, 2025.
In addition to satisfying the foregoing requirements under the Company’s Bylaws, to comply with the universal proxy rules for the 2025 Annual Meeting of Shareholders, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that complies with Rule 14a-19 under the Exchange Act by June 16, 2025.
Shareholders who want to submit a recommendation for a director candidate for the Board may submit the recommendation to the Board using the procedure described below under Shareholder and Other Interested Persons’ Communication with the Board. The Governance Committee intends to evaluate candidates recommended by shareholders in the same manner that it evaluates other candidates.
Shareholder and Other Interested Persons’ Communication with the Board
Shareholders and other interested persons wishing to communicate with the Board of Directors or with a Board member (including the Chairperson) should address communications to the Board or to the particular Board member, c/o Secretary, Modine Manufacturing Company, 1500 DeKoven Avenue, Racine, Wisconsin 53403-2552. In accordance with a process approved by the Board of Directors, the Secretary reviews all such correspondence. The Secretary forwards to the Board a summary of all such correspondence and copies of all correspondence that, in the opinion of the Secretary, deal with the functions of the Board or committees thereof or that the Secretary otherwise determines requires their attention. Concerns relating to accounting, internal controls or auditing matters are immediately brought to the attention of the Company’s Business Ethics Committee and handled in accordance with procedures established by the Audit Committee with respect to such matters. From time to time, the Board may change the process by which shareholders and other interested persons may communicate with the Board of Directors or its members. Please refer to the Company’s website, www.modine.com, for any changes to this process.
Committees of the Board of Directors
Audit Committee
The Audit Committee is a standing committee of the Board of Directors, established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The charter of the Audit Committee is available on the Company’s website, www.modine.com.
The Audit Committee is responsible for, among other things, appointing, retaining, and overseeing the work of the Company’s independent registered public accounting firm for the purpose of preparing and issuing an audit report and performing related work, and for discussing with the independent registered public accounting firm appropriate staffing and compensation. The Audit Committee also oversees management’s implementation of systems of internal controls; monitors the preparation of quarterly and annual financial reports by management; determines whether the independent registered public accounting firm is independent; and reviews management’s programs to monitor and address matters associated with compliance with the Company’s Code of Conduct. The functions of the Audit Committee are more fully described below in the Report of the Audit Committee in this proxy statement.
The Board of Directors has determined that each member of the Audit Committee is independent as defined in the corporate governance listing standards of the NYSE relating to audit committees. The Board of Directors has also determined that each Audit Committee member satisfies the financial literacy and experience requirements of the NYSE, and that Ms. Harper (the Chairperson of the Committee), Mr. Wilson and Mr. Wulfsohn qualify as audit committee financial experts within the meaning of the SEC rules.
Human Capital and Compensation Committee
The Human Capital and Compensation Committee of the Board of Directors (the “HCC Committee”) is composed exclusively of non-employee, independent directors with no business relationship with the Company, other than in their capacity as directors, and there are no interlocking relationships with the Company that are subject to disclosure under the rules of the SEC related to proxy statements. The charter of the HCC Committee is available on the Company’s website, www.modine.com.
The HCC Committee oversees and provides strategic direction to management regarding the Company’s executive compensation practices. The HCC Committee reviews the performance of the executive officers, other than the CEO, and works in conjunction with the Governance Committee and all the independent directors to review the performance of the CEO; reviews candidates for positions as officers; makes recommendations to the Board on certain officer candidates; makes recommendations to the Board on compensation of the CEO; determines, with the CEO’s recommendations, the compensation of non-CEO executive officers and other officers of the Company; considers recommendations made by its independent compensation consultant relating to director compensation and presents those recommendations to the Board; administers the incentive compensation plans in which executive officers and directors participate; and reviews the Company’s benefit programs made available to some or all salaried employees of the Company. The HCC Committee has the authority to delegate the aforementioned responsibilities to subcommittees comprised of independent Board members.
Mr. Brinker, as President and CEO, recommends to the HCC Committee any compensation changes affecting the Company’s officers, including the named executive officers (“NEOs”), other than himself. Mr. Brinker presents to the HCC Committee the performance and leadership behavior goals and expectations of each such officer and their level of achievement and the Company’s performance during the fiscal year. The HCC Committee reviews Mr. Brinker’s recommendations and either approves or does not approve any compensation matters affecting such officers of the Company. Mr. Brinker has no role in setting his own compensation.
For fiscal 2024, the HCC Committee again retained Farient Advisors LLC (“Farient”) as its independent executive compensation consultant. Farient reports directly to the HCC Committee and provides no services to the Company. The HCC Committee has determined that Farient is independent under the NYSE Listing Standards. A representative of Farient attends meetings of the HCC Committee upon invitation by the Chair of the HCC Committee, either by phone or in person, and communicates with the Chair between meetings as necessary. Farient conducted a comprehensive benchmarking analysis of the Company’s pay levels for the CEO, non-CEO executive officers and other officers of the Company, by pay component, using proxy data of the Company’s self-selected Compensation Peer Group (as discussed in the Compensation Discussion and Analysis, below) and compensation survey data. In addition, Farient benchmarked the Company’s executive pay programs and practices, including severance and change-in-control arrangements, as well as its goals and performance. The HCC Committee considered Farient’s analyses in making its decisions; however, the HCC Committee made all decisions regarding the compensation of Modine’s officers, including its NEOs (except for the CEO, whose compensation is set by the full Board). Additionally, Farient regularly updated the HCC Committee on regulatory and market trends and assisted with the benchmarking of Board of Director compensation practices and levels.
Corporate Governance and Nominating Committee
The Governance and Nominating Committee develops and implements policies and practices relating to corporate governance matters, including reviewing and monitoring implementation of the Company’s Guidelines on Corporate Governance and the Code of Conduct; oversees the Company’s overall ESG framework and assists the Board in providing guidance and oversight concerning ESG strategy; develops and reviews background information on prospective nominees to the Board and makes recommendations to the Board regarding such persons; supervises the Board’s annual self-evaluation; and works with the HCC Committee, as appropriate, to review and monitor succession plans relating to the CEO and to evaluate the performance of the CEO. The Governance and Nominating Committee is composed exclusively of independent directors with no business relationship with the Company, other than in their capacity as directors. The charter of the Governance and Nominating Committee is available on the Company’s website, www.modine.com.
Technology Committee
The Technology Committee reviews and makes recommendations, as appropriate, to the entire Board of Directors on major strategies and other subjects related to the Company’s approach, emphasis, and direction regarding technical innovation and opportunities; the technology acquisition process to assure ongoing business growth; and development and implementation of measurement and tracking systems important to successful innovation. The charter of the Technology Committee is available on the Company’s website, www.modine.com.
HCC Committee Interlocks and Insider Participation
None of our executive officers currently serves, or has served during the last year, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board of Directors or HCC Committee. None of the members of the HCC Committee is or has been one of our officers or employees, or has had any relationship requiring disclosure under Item 404 of Regulation S-K.
Board Meetings and Committees
The Board of Directors held six meetings during the fiscal year ended March 31, 2024, and had the following four standing committees: Audit; Human Capital and Compensation; Corporate Governance and Nominating; and Technology.
In July of each year, the Board selects the members of each of the committees. All incumbent directors attended at least 75 percent of the aggregate of the Board meetings and meetings of committees on which he or she served during fiscal 2024 while such director served on the Board or the committees. The CEO of the Company is not a standing member of any Board Committee, but regularly attends Committee meetings at the discretion of the respective Committee Chair.
The following table lists the members of each of the standing committees and the number of meetings held by each committee during fiscal 2024:
| Name | Audit | HCC | Governance | Technology |
| Eric D. Ashleman | X | X | ||
| Neil D. Brinker | ||||
| Suresh V. Garimella | X | Chair | ||
| Katherine C. Harper | Chair | X | ||
| Christopher W. Patterson | X | Chair | ||
| Marsha C. Williams | X | |||
| David J. Wilson | X | X | ||
| William A. Wulfsohn | X | X | X | |
| Christine Y. Yan | Chair | X | ||
| Total Number of Meetings | 8 | 6 | 5 | 2 |
Attendance at the Annual Meeting. Although the Company does not have a formal policy that its directors attend the Annual Meeting of Shareholders, it expects them to do so and the Company’s directors historically have attended these meetings. All of the directors attended the 2023 Annual Meeting of Shareholders.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) MATTERS
The Board of Directors has overall responsibility for risk oversight for the Company but has delegated certain responsibilities to its committees. In the case of ESG matters, the committees share oversight responsibility. As described in its charter, the Governance Committee oversees the Company’s overall ESG framework and assists the Board in providing guidance and oversight concerning strategy, risk management, opportunities, major capital expenditures, and investment connected to such matters. The Audit Committee reviews and approves the Company’s ESG initiatives, metrics, tracking and reporting, and monitors the Company’s progress with respect to such initiatives and metrics. The HCC Committee reviews and approves the Company’s initiatives, metrics, and disclosures concerning human capital management, including employee engagement, diversity, equity and inclusion (DEI), pay equity, employment practices and culture.
We believe management’s leadership and engagement with our Board of Directors is critical to advancing our sustainability platform and implementing our companywide strategy. Management leadership is provided by our ESG Steering Committee comprised of our Chief Executive Officer, Chief Financial Officer, General Counsel, and Chief Human Resources Officer. To drive the focus of sustainability even further, our ESG Steering Committee has established subcommittees of employees focused on environmental, social and governance programs. These subcommittees gather ideas and generate conversations with mid-and senior-level subject matter experts to advance our efforts.
As exemplified by our purpose of Engineering a Cleaner, Healthier World™, we are committed to advanced technology solutions with sustainable impacts because we understand the business imperative to help improve the environment, conserve resources, reduce carbon and address climate change. Modine is implementing this strategy though our 80/20 analysis – by reducing complexity and sunsetting inefficient processes and by investing our resources and human capital in those areas of the business where we have longer-term opportunities to make a difference.
The Company’s latest Sustainability Report is available on the Investors page and the Company’s sustainability webpage, both found on our website at www.modine.com.
We will continue to evolve in our ESG journey with a focus on sustainable outcomes where we can have the most impact. Significant highlights from fiscal 2024 include:
| • | Continuing efforts to reduce water and energy consumption in data centers, improving air quality in schools and businesses, lowering harmful emissions and enabling cleaner-running vehicles, and using more environmentally friendly refrigerants. |
| • | Purchasing renewable energy at numerous facilities worldwide and piloting solar projects at select locations. |
| • | Reducing greenhouse gas emissions at our global facilities. |
| • | Continuing to invest in our information technology security organization by implementing new security tools and capabilities, creating cybersecurity policies, standards, and processes, and adding internal resources. |
This is important work and there is much to be done. Our organizational structure, purpose and fully aligned leadership team are committed to doing our part to create a cleaner, healthier world.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of shares of the Company’s common stock as of June 17, 2024, by persons known by the Company to beneficially own more than five percent of the outstanding shares:
| Name and Address of Owner (1) | Number of Shares Owned and Nature of Interest |
Percent of Class | ||||||
| BlackRock, Inc. (2) 55 East 52nd St. New York, NY 10055 |
5,524,442 | 10.54 | ||||||
| Dimensional Fund Advisors LP (3) Building One 6300 Bee Cave Road Austin, Texas, 78746 |
3,810,929 | 7.27 | ||||||
| The Vanguard Group (4) 100 Vanguard Blvd. Malvern, PA 19355 |
3,070,556 | 5.86 | ||||||
| (1) | The number of shares is as of the date the shareholder reported the holdings in filings under the Exchange Act, unless more recent information was provided. The above beneficial ownership information is based on information furnished by the specified persons and is determined in accordance with Exchange Act Rule 13d-3, and other facts known to the Company. |
| (2) | Based on Amendment No. 12 to Schedule 13G filed under the Exchange Act on May 8, 2024, BlackRock, Inc. and certain subsidiaries of BlackRock, Inc. have the sole power to vote or direct the vote of 5,425,633 shares and the sole power to dispose or direct the disposition of 5,524,442 shares. |
| (3) | Based on Amendment No. 8 to Schedule 13G filed under the Exchange Act on February 9, 2024, Dimensional Fund Advisors LP (“DFA”) has the sole power to vote or direct the vote of 3,752,329 shares and the sole power to dispose or direct the disposition of 3,810,929 shares. DFA is a registered investment adviser to four investment companies and serves as investment manager or sub-adviser to various other clients (the “Funds”). In these roles, DFA or its subsidiaries (together, “Dimensional”) may possess voting and/or investment power over securities of the Company that are owned by the Funds, and it may be deemed to be the beneficial owner over such shares. Dimensional disclaims beneficial ownership of such securities. |
| (4) | Based on Amendment No. 10 to Schedule 13G filed under the Exchange Act on February 13, 2024, The Vanguard Group (“Vanguard”) has the shared power to vote or direct the vote of 74,057 shares, the sole power to dispose or direct the disposition of 2,951,935 shares, and shared power to dispose or direct the disposition of 118,621 shares. |
The following table sets forth information regarding the beneficial ownership of shares of the Company’s common stock as of June 17, 2024, by:
| • | Each director, director-nominee and “named executive officer” (as described below under Compensation Discussion and Analysis); and |
| • | all directors and executive officers of the Company as a group. |
| Name |
Direct Ownership |
Options Exercisable within 60 days of June 17, 2024 |
Held in 401(k) Retirement Plan |
Restricted Stock Units vesting within 60 days of June 17, 2024 |
Total (1) |
Percent of Class |
||||||||||||||||||
| Eric D. Ashleman | 51,454 | - | NA | - | 51,454 | * | ||||||||||||||||||
| Suresh V. Garimella | 90,364 | - | NA | - | 90,364 | * | ||||||||||||||||||
| Katherine C. Harper | 10,682 | - | NA | - | 10,682 | * | ||||||||||||||||||
| Christopher W. Patterson | 94,090 | - | NA | - | 94,090 | * | ||||||||||||||||||
| Marsha C. Williams | 172,074 | - | NA | - | 172,074 | * | ||||||||||||||||||
| David J. Wilson | 2,682 | - | NA | - | 2,682 | * | ||||||||||||||||||
| William A. Wulfsohn | - | - | NA | - | - | * | ||||||||||||||||||
| Christine Y. Yan | 68,547 | - | NA | - | 68,547 | * | ||||||||||||||||||
| Neil D. Brinker | 179,809 | 101,961 | - | - | 281,770 | * | ||||||||||||||||||
| Michael B. Lucareli | 107,824 | 77,923 | 971 | 37,626 | 224,344 | * | ||||||||||||||||||
| Eric S. McGinnis | 67,661 | 25,811 | - | - | 93,472 | * | ||||||||||||||||||
| Adrian I. Peace | 19,549 | 13,542 | - | - | 33,091 | * | ||||||||||||||||||
| Brian J. Agen | 71,856 | 47,939 | 1,474 | 14,315 | 135,584 | * | ||||||||||||||||||
| All directors and executive officers as a group (14 persons) | 936,592 | 267,176 | 2,445 | 51,941 | 1,258,154 | 2.40 | ||||||||||||||||||
* Represents less than one percent of the class.
| (1) | Includes shares of common stock issuable upon the exercise of stock options exercisable within 60 days of June 17, 2024, and restricted stock units that vest within 60 days of June 17, 2024. Such information is not necessarily to be construed as an admission of beneficial ownership. |
COMPENSATION OF DIRECTORS
Employees of Modine do not receive any compensation for serving on the Board. Effective July 2023, non-employee directors, including the Chairperson of the Board, are entitled to receive the following compensation for Board service: an annual retainer of $100,000, payable in equal quarterly installments; an additional annual retainer of $15,000 for acting as Chair of the HCC Committee, an additional annual retainer of $12,000 for acting as Chair of the Governance Committee, an additional annual retainer of $9,000 for acting as Chair of the Technology Committee, and an additional annual retainer of $20,000 for acting as Chair of the Audit Committee; reimbursement for travel, lodging, and related expenses incurred in attending Board and/or committee meetings; and travel-accident and director and officer liability insurance.
The Amended 2020 Incentive Compensation Plan (the “2020 Incentive Plan”) gives discretion to the Board, or a committee of the Board, to grant stock options and stock awards to non-employee directors. Under the 2020 Incentive Plan, the maximum value of stock awards that can be granted to a non-employee director per year is $300,000. The Board or the HCC Committee, as applicable, has broad discretionary authority to set the terms of awards under the 2020 Incentive Plan. It is the current practice of the Board of Directors to evaluate compensation and make grants of restricted stock units to each non-employee director annually. For the 2024 fiscal year, non-employee directors, including the Board Chairperson, were each entitled to receive a stock award of approximately $140,000. The Chairperson was also entitled to additional equity compensation with a value of approximately $120,000. Consistent with this, the Company granted each non-employee director of the Company (other than the Chairperson) 3,427 restricted stock units in August 2023, which will vest one year from date of grant contingent upon the director’s continued service on the Board. The Company granted Ms. Williams, the Chairperson, 6,364 restricted stock units at the same time. As Chairperson, Ms. Williams, among other duties, generally attends all meetings of the Board’s committees but does not receive any attendance fee for those meetings.
Directors have the option of deferring either or both of their cash fees and/or equity compensation in accordance with the Company’s Non-Employee Director Compensation Policy. For cash compensation, the directors may elect to defer up to 100 percent of their annual retainer and fees into the Modine Manufacturing Company Directors Deferred Compensation Plan and receive an investment return on the deferred funds as if the funds were invested in permitted mutual funds. The directors’ deferred compensation accounts are unsecured obligations of the Company. Distributions commence following termination of service as a director.
For fiscal 2024, the directors were entitled to defer their equity compensation by electing in advance to defer the settlement date of their restricted stock units until a director’s termination of service or a fixed date. Absent such an election, the restricted stock units are settled on the one-year anniversary of the grant date. Messrs. Ashleman, Patterson and Wulfsohn, and Ms. Harper all elected to defer the settlement date of their August 2023 restricted stock unit awards until a later date.
2024 Director Compensation Table
The following table sets forth compensation paid to non-employee members of the Company’s Board of Directors in fiscal 2024:
| Name |
Fees Paid in Cash ($) |
Stock Awards ($)(1)(2) |
Change in Pension Value ($)(3) |
Total ($) | ||||||||||||
| Eric D. Ashleman | 97,500 | 139,993 | NA | 237,493 | ||||||||||||
| Suresh V. Garimella | 106,125 | 139,993 | NA | 246,118 | ||||||||||||
| Katherine C. Harper | 116,250 | 139,993 | NA | 256,243 | ||||||||||||
| Larry O. Moore (4) | 22,500 | 0 | NA | 22,500 | ||||||||||||
| Christopher W. Patterson | 111,875 | 139,993 | NA | 251,868 | ||||||||||||
| Marsha C. Williams | 97,500 | 259,969 | 0 | (5) | 357,469 | |||||||||||
| David J. Wilson | 97,500 | 139,993 | NA | 237,493 | ||||||||||||
| William A. Wulfsohn | 97,500 | 139,993 | NA | 237,493 | ||||||||||||
| Christine Y. Yan | 109,000 | 139,993 | NA | 248,993 | ||||||||||||
| (1) | In August 2023, all of the independent directors at that time, other than Ms. Williams, were granted 3,427 shares of restricted stock units. As explained above, the Company granted 6,364 shares of restricted stock units to Ms. Williams at the same time. |
| (2) | Represents the aggregate grant date fair value of stock grants computed in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 718. The assumptions used to determine the value of the awards are discussed in Note 5 of the Notes to Consolidated Financial Statements contained in the Company’s Form 10-K for the fiscal year ended March 31, 2024. |
| (3) | Represents the change in pension value between the end of fiscal 2023 and the end of fiscal 2024 under the Modine Manufacturing Company Director Emeritus Retirement Plan. The change in pension value is solely a result of the change in the interest rate used to calculate the present value of the pension benefit under the Director Emeritus Retirement Plan because no benefits otherwise continue to accrue under that plan. |
The Board of Directors adopted the Director Emeritus Retirement Plan pursuant to which any person, other than an employee of the Company, who was or became a director of Modine on or after April 1, 1992 and who retired from the Board would be paid a retirement benefit equal to the annualized sum directors were paid for their service to the Company as directors (including Board meeting attendance fees but excluding any applicable committee attendance fees) in effect at the time such director ceased his or her service as a director. The retirement benefit continues for the period of time equal in length to the duration of the director’s Board service. If a director dies before retirement or after retirement during such period, his or her spouse or other beneficiary would receive the benefit. In the event of a change in control (as defined in the Director Emeritus Retirement Plan) of Modine, each eligible director, or his or her spouse or other beneficiary entitled to receive a retirement benefit through him or her, would be entitled to receive a lump-sum payment equal to the present value of the total of all benefit payments that would otherwise be payable to such director under the Director Emeritus Retirement Plan. The retirement benefit is not payable if the director, directly or indirectly, competes with the Company or if the director is convicted of fraud or a felony and such fraud or felony is determined by disinterested members of the Board of Directors to have damaged Modine. Effective July 1, 2000, the Director Emeritus Retirement Plan was frozen with no further benefits accruing under it. Ms. Williams accrued pension benefits under the Director Emeritus Retirement Plan until it was frozen on July 1, 2000.
| (4) | Mr. Moore retired from the Board on August 17, 2023. |
| (5) | The change in pension value for Ms. Williams was ($58). |
Share Ownership Guidelines - Directors
The Board maintains share ownership guidelines for incumbent members of the Board of Directors. The Board believes that in order to further align the interests of members of the Board and shareholders, members of the Board should have a meaningful personal investment in the Company. Shares of Company common stock, either restricted or unrestricted, including any deferred by a director in accordance with the Company’s Non-Employee Director Compensation Policy, count toward the guideline figures. The current guidelines generally provide that, five years after joining the Board, directors are expected to hold shares of Company common stock with a value of at least five times the value of the director’s current annual cash retainer. All directors are currently in compliance with these guidelines. The share ownership guidelines for officers of the Company are described below in the Compensation Discussion and Analysis – Share Ownership Guidelines - Officers.
Compensation-Related Risk Assessment
In fiscal 2024, the HCC Committee assessed each element of compensation – base salary, and short- and long-term incentives – as well as other plans covering employees in international locations to determine whether any of such elements or plans promotes excessive or unreasonable risk-taking. The HCC Committee determined that the Company’s compensation policies and practices encourage behaviors that drive the performance of the Company and balance short-term results with longer-term results in the interests of shareholders. The HCC Committee determined that any risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
This Compensation Discussion and Analysis describes the material components of compensation paid to Modine’s Principal Executive Officer, Principal Financial Officer, and certain other highly compensated executive officers, as described in the Summary Compensation Table on page 34. In the discussion below, we refer to this group of executives as the NEOs. This group includes the executive officers for whom specific compensation disclosure is required under the rules of the SEC. This group includes the following current executive officers:
| • | Neil D. Brinker, President and Chief Executive Officer; |
| • | Michael B. Lucareli, Executive Vice President, Chief Financial Officer; |
| • | Eric S. McGinnis, President, Climate Solutions; |
| • | Adrian I. Peace, President, Performance Technologies; and |
| • | Brian J. Agen, Vice President, Chief Human Resources Officer. |
The compensation for the NEOs is listed in the tables on pages 34 through 41 of this proxy statement.
In this Compensation Discussion and Analysis, we will also explain the objectives of our compensation programs, why we pay the compensation we do, and how executive compensation fits with the Company’s commitment to provide value to our shareholders.
Executive Summary
Executive Compensation Philosophy
The HCC Committee seeks to pay our NEOs fairly and to align executive compensation with the Company’s performance. The HCC Committee believes this approach will enhance shareholder return over the long term.
Goals of the Executive Compensation Program
The HCC Committee seeks to help the Company achieve its short- and long-term financial goals and encourage its executive officers to act as owners of the Company. The HCC Committee believes these goals can be accomplished through a compensation program that provides a balanced mix of cash and equity-based compensation. Base salary is designed to attract and retain executives by compensating them for their day-to-day activities, level of responsibility, and sustained individual performance. The annual short-term cash incentive is intended to reward recipients for achieving annual operating goals critical to the Company’s short- term business objectives. The equity and performance cash portions of the compensation package provide incentives that are intended to focus executives on the Company’s long-term success, align the executives’ returns with those of shareholders, encourage long-term retention, and reward the executives for the Company’s superior long-term performance.
Alignment of Objectives/Fiscal 2024 Financial Performance and Strategic Highlights
The HCC Committee believes the structure of its executive compensation program is aligned with the Company’s overall performance in fiscal 2024. In fiscal 2024, among other things:
| • | Fiscal 2024 was a record year for the Company, with the highest sales and earnings in our history. Mr. Brinker has successfully focused the organization by simplifying and segmenting the business, strengthening our leadership team and decentralizing operations. |
| • | Fiscal 2024 net sales were $2.4 billion, a 5 percent increase from the prior year. Operating income of $241 million during fiscal 2024 increased $90 million, or 60 percent, from the prior year, primarily due to higher gross profit driven by higher sales, lower material costs, and improved operating efficiencies. |
| • | The Company reported a record-breaking adjusted EBITDA of $314 million, a 48 percent increase from the prior year, driven by strong earnings growth in both the Climate Solutions and Performance Technologies segments. |
| • | The Company achieved $215 million of cash flow from operating activities, a $107 million improvement from the prior year, and $127 million of free cash flow, a $70 million improvement from the prior year. |
| • | The Climate Solutions segment had an outstanding year. Net sales increased 4 percent from the prior year, driven by an increase in sales of data center products. Adjusted EBITDA increased $45 million, or 31 percent, to $193 million, resulting in an adjusted EBITDA margin of 18.3 percent. |
| • | The Climate Solutions segment made several strategic investments during the year. The Company acquired Scott Springfield Mfg. Inc., substantially all of the net operating assets of Napps Technology Corporation, and also purchased liquid immersion cooling technology from TMGcore Inc. In addition, the Company has secured additional manufacturing capacity to support future demand for our data center cooling solutions. |
| • | The Performance Technologies segment also had an outstanding year. Net sales increased 5 percent from the prior year, driven by an increase in sales in all product groups. Adjusted EBITDA increased $67 million, or 67 percent to $167 million, resulting in an adjusted EBITDA margin of 12.1 percent. |
| • | The Performance Technologies segment achieved significant margin improvement through its application of our 80/20 strategy throughout the organization. The Company divested three automotive businesses based in Germany and is closing a technical service center in Germany to optimize utilization of its global technical service capacity. |
For a reconciliation of adjusted EBITDA, adjusted EBITDA margin, and free cash flow, which are non-GAAP financial measures, to the most directly comparable GAAP financial measures, please refer to the section titled “Non-GAAP Reconciliations” included in Appendix A to this Proxy Statement.
Fiscal 2024 Compensation Highlights
The HCC Committee’s actions in fiscal 2024 included the following:
| • | Set CEO and CFO compensation at or near the median of Modine’s Compensation Peer Group and the median of a broad survey of manufacturing companies, weighted equally, and compensation for the other NEOs at or near the median of a broad survey of manufacturing companies in order to meet its objective of offering competitive compensation, utilizing an analysis provided by Farient. |
| • | Approved three distinct incentive plans under the fiscal 2024 Management Incentive Plan (“MIP”) relative to the Company as a whole and each of the business segments. |
| • | Approved Adjusted EBITDA Margin and Adjusted EBITDA Growth as the performance metrics for all plans under the fiscal 2024 MIP. These performance goals drive alignment with inherent business characteristics. |
| • | Approved Average Cash Flow Return on Invested Capital (“Cash Flow ROI”) and Average Annual Adjusted EBITDA Growth as the performance metrics for the Long-Term Incentive Plan (the “LTIP”) for fiscal 2024. |
| • | Approved the removal of the Stock Option component of the Company’s LTIP. |
| • | Reviewed the composition of the Company’s Compensation Peer Group used for CEO compensation, overall executive pay program design, and the Performance Peer Group used for company performance comparisons. |
| • | Reviewed the Company’s succession plan for each executive officer and other key employees of the Company. |
| • | Established compensation for the Board of Directors, utilizing analysis provided by Farient. |
| • | Reviewed the Company’s guidelines regarding stock ownership requirements for Company officers and members of the Board of Directors and confirmed compliance therewith. |
| • | Reviewed regulatory, shareholder and market changes, including governance best practices as applicable to the Company. |
| • | Reviewed CEO pay-for-performance alignment, utilizing analysis provided by Farient. |
| • | Reviewed strategic human capital and compensation topics including talent assessment processes, organizational design and key talent additions in support of the Company’s transformation. |
Shareholder Advisory Vote on Executive Compensation
A nonbinding advisory vote on the compensation of the Company’s NEOs received the affirmative vote of over 93 percent of the shares represented at the 2023 Annual Meeting of Shareholders, demonstrating very strong support for the Company’s executive compensation program. Nonetheless, the Company and HCC Committee are mindful of the results of the shareholder advisory vote and take the vote into consideration when determining and evaluating the Company’s executive compensation philosophy, program and disclosure. For example, the Company has continued its ongoing efforts to be fully transparent about the link between pay and performance in its Pay for Performance discussion immediately below. In addition, during one-on-one conversations, sponsored road shows, and other regular communications with shareholders, the Company routinely discusses its performance in the context of underlying incentive compensation metrics and emphasizes management’s active use of those same metrics in the Company’s daily operations.
Pay for Performance
The HCC Committee believes that the Company’s compensation program should encourage management to create long-term, sustained value for shareholders and to act like owners of the Company. To achieve this objective, the compensation program is designed to balance short- and long-term considerations while rewarding management in a way that reflects the Company’s performance over time. The HCC Committee further supports this objective with a strong pay-for-performance philosophy.
The key elements of the Company’s executive compensation program that support the pay-for-performance philosophy include:
| • | A median compensation positioning strategy that targets total pay as well as each element of compensation at the median of the market, and allows actual compensation to vary from the median based on higher or lower performance, i.e., above median for above-market performance and below median for below-market performance; | |
| • | A significant portion of compensation tied to performance, including short-term and long-term incentives tied to strong financial/operational performance; | |
| • | Use of performance measures for incentives that balance strong growth and returns and provide a direct link to shareholder value over time; | |
| • | A significant weighting on long-term incentives, particularly performance stock or cash; and | |
| • | Share ownership guidelines (described on page 31), requiring that executives be meaningfully invested in the Company’s common stock, and therefore be personally invested in the Company’s performance. |
Market Benchmarking of Executive Pay
The HCC Committee has historically used a peer group, to which we refer in this proxy statement as the “Compensation Peer Group,” to target total pay and each element of compensation at the median of such Compensation Peer Group and at the median of a broad survey of manufacturing companies, weighted equally, for the CEO and CFO. For the other NEOs, the HCC Committee has used a broad survey of manufacturing companies to target total pay and each element of compensation at the median of that survey and uses such survey data because the publicly available Compensation Peer Group information does not provide adequate data for such other NEO positions. The HCC Committee believes that targeting the median is an objective way of ensuring that the Company’s executive compensation practices are competitive and reasonable relative to the broader market. Actual pay may vary from the median based on differences in individual performance, job responsibilities, tenure and experience for the individuals being compared, as well as based on actual performance of the Company.
In addition, the HCC Committee, starting with fiscal 2021, has also used a larger peer group, to which we refer in this proxy statement as the “Performance Peer Group,” to evaluate long-term financial performance data and as a goal-setting reference. All companies in the Compensation Peer Group are also included in the Performance Peer Group.
Use of Peer Groups
Compensation Peer Group
The HCC Committee reviewed the Compensation Peer Group composition used to set pay for fiscal 2024. As a group, these peers have characteristics and markets like those of the Company. These characteristics and markets are as follows:
| • | U.S.-headquartered companies traded on major U.S. exchanges involved in these industries: industrial machinery; construction machinery and heavy trucks; agriculture and farm machinery; auto parts and equipment (<50% revenue from automotive); electrical components and equipment; and building products (HVAC-related); |
| • | Companies with revenue between $700 million and $4.5 billion, with proxy pay data size adjusted to approximate pay for a company with revenue of $2.3 billion as estimated at the time of the executive pay benchmarking used to set fiscal 2024 pay; and |
| • | Technology- and capital-intensive companies with a strong focus on OEM suppliers and thermal management solutions, distributed product expertise and global industrial customers in the vehicular and industrial/commercial (e.g., Heating, ventilation, air conditioning, and refrigeration “HVAC&R”) arena and substantial exposure in the international marketplace (international revenue of at least 20% for vehicle industry companies). |
Based on its review, the HCC Committee made two changes to the composition of the peer group used to set fiscal 2024 pay to better align the peer group with the Company’s reorganization of business into two segments. Meritor, Inc. and Welbilt, Inc. were acquired and were removed from the peer group, and The Timken Company, A.O. Smith Corporation, ITT Inc., and AAON inc. were added as they fit within the desired peer group characteristics.
The following is the Company’s current Compensation Peer Group:
| AAON Inc. | Hubbell Incorporated | Standex International Corporation |
| Allison Transmission Holdings, Inc. | ITT Inc. | Stoneridge, Inc. |
| A.O. Smith Corporation | Lennox International Inc. | The Timken Company |
| Commercial Vehicle Group, Inc | Mueller Industries, Inc. | Titan International, Inc. |
| Donaldson Company, Inc. | nVent Electric plc | Woodward Inc. |
| Enerpac Tool Group Corp. | Regal Rexnord Corporation | |
| EnerSys inc. | SPX Corporation |
The HCC Committee uses the publicly available Compensation Peer Group data to assist in the evaluation of the:
| • | Compensation levels of the Company’s CEO and CFO; and |
| • | Company’s compensation practices. |
Performance Peer Group
The HCC Committee also reviewed the composition of the Performance Peer Group that it uses to evaluate and set performance goals for fiscal 2024. This group consists of approximately 90 companies, generally in the vehicle and capital goods manufacturing industries and generally with revenues between $750 million and $5.0 billion, which includes all of the companies in the Compensation Peer Group. Minor adjustments were made to this group, generally to remove companies that were acquired or without U.S. headquarters, and to add new companies that were not previously on the list. The Performance Peer Group is compiled through a collaboration between the Company’s Finance department and Farient from a group of companies that are used for other Company performance benchmarking purposes, with the final composition of the Performance Peer Group subject to approval of the HCC Committee. Since fiscal 2022, the performance goal data gathered from the Performance Peer Group has been used as a reference by the HCC for setting MIP and LTIP performance goals.
Use of Compensation Survey Data
The HCC Committee used the 2022 Mercer U.S. Executive Benchmark Database (the “Database”), which compiles data of manufacturing companies with revenues of approximately $1.0 billion to $5.0 billion to evaluate competitive pay levels of certain corporate officers and other key employees in addition to those of the CEO and CFO, and with revenues approximating each business unit to evaluate competitive pay levels of certain officers and other key employees who are heads of business units. Survey pay data was size adjusted to approximate pay for an approximately $2.3 billion revenue company at the time of benchmarking for corporate officers and key corporate employees, and to approximate pay for business units with revenue similar to those of Modine’s business units for officers and key employees who are heads of business units. Mercer did not identify, and the HCC Committee was not aware of, the identities of the companies whose information is reflected in the Database. The HCC Committee recognizes that the Company attracts employees from a broad range of companies and its comparison data reflects that fact. The HCC Committee does not use the survey data in a formulaic manner. If the compensation of a particular NEO is substantially greater or less than the median in the survey for the same position, the HCC Committee takes the survey information into account when setting base salary, short-term and long-term incentive target values, but also exercises its discretion, taking into consideration the individual’s performance, tenure, experience, and changes in job responsibilities.
The overall resulting pay positioning for the corporate officers and other key employees as a group is slightly below the median of the market data as defined above.
Description of Executive Compensation Program
The HCC Committee sets the compensation philosophy at Modine in a manner intended to promote the Company’s achievement of its short- and long-term financial goals and encourage its executive officers to act as owners of the Company. In addition, the HCC Committee focuses on attracting and retaining employees who are qualified, motivated, and committed to excellence. The HCC Committee believes these goals can be accomplished through a compensation program that provides a balanced mix of cash and equity-based compensation. Base salary is designed to attract and retain executives by compensating them for their day-to-day activities, level of responsibility, and sustained individual performance. The short-term cash incentive is intended to reward the recipients for achievement of annual operating goals that are critical to the Company’s short-term business objectives. The long-term portion of the compensation package provides incentives that are intended to focus executives on the Company’s long-term success, align the executives’ returns with those of shareholders, encourage long-term retention, and reward executives for the Company’s superior long-term performance.
The HCC Committee’s actions are guided by the following principles:
| • | Compensation is a primary factor in attracting and retaining employees, and the Company can only achieve its goals if it attracts and retains qualified and highly skilled people; |
| • | All elements of executive compensation, including base salary, targeted annual incentives (cash-based), and targeted long-term incentives (both equity- and cash-based), are set to levels that the HCC Committee believes ensure that executives are fairly, but not excessively, compensated; |
| • | Strong financial and operational performance is expected, and shareholder value must be preserved and enhanced over time; |
| • | Compensation must be linked to the interests of shareholders and the most effective means of ensuring this linkage is by granting equity incentives such as stock awards, stock options and PS or cash awards; |
| • | The Company continued to use 80/20 principles in fiscal 2024 to reduce complexity, improve pricing discipline and improve segment profitability. The fiscal 2024 MIP was designed to develop segment-specific incentive plans, and a corporate-wide plan for the Company’s corporate functional employees; and |
| • | The executive compensation program should reflect the economic condition of the Company, as well as Company performance relative to the Performance Peer Group companies, so that in a year in which the Company underperforms, the compensation of the executive officers should be lower than in years when the Company is achieving or exceeding its objectives. |
As reflected in this Compensation Discussion and Analysis, the HCC Committee believes the compensation program is aligned with these principles.
Treatment of the CEO
The CEO participates in the same programs and receives compensation generally based upon the same factors as the other NEOs. However, the level of the CEO’s compensation is even more heavily dependent upon the Company’s performance than the compensation of other NEOs. Mr. Brinker’s overall compensation reflects a greater degree of policy- and decision-making authority and a higher level of responsibility for the strategic direction and financial and operational results of the Company. Given the President and Chief Executive Officer’s key role in policy- and decision-making, the HCC Committee believes that the CEO’s compensation should be weighted more heavily toward long-term incentive awards, so the CEO’s compensation more directly correlates with the Company’s performance.
Elements of Executive Compensation for Fiscal 2024
The following is a summary of the elements of the Company’s executive compensation program:
| Pay Element |
Competitive Positioning |
Program Objectives | Time Horizon |
Performance Measures for Fiscal 2024 |
| Base Salary | Compares to 50th percentile, but use of judgment to determine actual pay | Attract and retain key personnel; reward for individual performance | Annual |
Individual performance Length of time in the position and overall experience Consistency of performance Changes in job responsibility |
| Management Incentive Plan | Motivate and reward for achieving objectives | Annual |
Adjusted EBITDA Margin % (50%) Adjusted EBITDA Growth (50%) |
|
|
Long-Term Incentive Plan
|
||||
| Performance Share Awards (80%)
|
Align executive’s returns with those of shareholders Encourage long-term retention Reward for superior long-term performance |
3-year performance period with payout upon results certification
|
Three-year average Cash Flow ROI (50%) Three-year Average Annual Adjusted EBITDA Growth (50%)
|
|
| Restricted Stock Unit Awards (20%) | Reward employees for their continued commitment to the Company | 3-year ratable vesting starting on 1st anniversary of grant | Retention |
Base Salary
Base salary is designed to attract and retain executives by compensating them for their day-to-day activities, level of responsibility and sustained individual performance. Individual performance, based upon achievement of annual performance objectives and demonstration of leadership behaviors as reflected in each employee’s performance development plan, is a key component in determining base salary and any adjustments to base salary, and is a subjective determination made by the HCC Committee and, for the NEOs other than the CEO, the CEO. The determination of base salary affects every other element of executive compensation because all of the other components, including short-term, performance-based awards, long-term incentive compensation payouts, retirement benefits and severance, are based on the amount of the individual’s base salary. The HCC Committee annually reviews base salaries of the NEOs to ensure that the compensation levels are aligned with the HCC Committee’s principles, based on individual responsibility, performance and job scope.
The HCC Committee increased each NEO’s base salary in fiscal 2024. The percentage increase for each NEO was based upon both subjective and objective criteria, including the individual performance of each NEO, the length of tenure in their current positions, and their respective compensation relative to the market midpoint for their respective functions.
The table below illustrates the base salary for each NEO in fiscal 2024, with increases effective in July 2023.
| Name | Prior Salary | Fiscal 2024 Approved Base Salary |
Percent Increase | |||
| Mr. Brinker | $900,000 | $1,050,000 | 16.7% | |||
| Mr. Lucareli | $577,500 | $630,000 | 9.1% | |||
| Mr. McGinnis | $448,000 | $500,000 | 11.6% | |||
| Mr. Peace | $448,000 | $500,000 | 11.6% | |||
| Mr. Agen | $384,500 | $420,000 | 9.2% |
CEO Base Salary
The Governance Committee, working with the HCC Committee, evaluated Mr. Brinker’s individual performance as the Company’s CEO by evaluating the achievement of his performance development plan goals. Following discussion with the CEO, the HCC Committee recommended the CEO’s base salary to the Board of Directors based upon this evaluation.
Short-Term, Performance-Based Cash Award
The MIP is Modine’s broadly applicable short-term, performance-based cash award plan designed to motivate and reward the Company’s leaders. All NEOs participate in the MIP. The HCC Committee’s objectives for the MIP are to encourage continuous (short-term) operational improvements with metrics that also drive total shareholder return. The HCC Committee believes the MIP metrics should be challenging, but achievable, and well-defined so they are understood by the MIP participants and, accordingly, actively drive results.
The Company approved three distinct plans under the MIP for fiscal 2024: (1) a Corporate plan based on the metrics of the Company as a whole, (2) a plan specific to the metrics of the Climate Solutions business segment, and (3) a plan specific to the metrics of the Performance Technologies business segment. All the NEOs participate in the general corporate plan regarding the MIP for fiscal 2024. Mr. McGinnis and Mr. Peace also participate in the appropriate segment-specific plan, with participation in the Corporate and segment-specific plans weighted equally 50/50.
Within each of the three plans, the HCC Committee approved the use of two independent and equally-weighted performance goals. As in fiscal 2023, the MIP continued to use the Adjusted EBITDA Growth and Adjusted EBITDA Margin metrics.
Adjusted EBITDA Growth is a percentage change calculated as follows:
Adjusted EBITDA for FY2024 – Adjusted EBITDA for FY2023
Adjusted EBITDA for FY2023
Adjusted EBITDA Margin is calculated as follows:
Adjusted EBITDA for FY2024
FY2024 Net Sales
For purposes of calculating these metrics, “Net Sales” is that amount as reported externally in the Company’s audited financial statements and, “Adjusted EBITDA” represents “Operating Income” plus “Depreciation and Amortization Expenses”, both as reported in the Company’s audited financial statements, plus or minus “Permitted Adjustments.” Permitted Adjustments include: restructuring-related expenses, acquisition- and divestiture-related costs and adjustments and certain other unusual, non-recurring or extraordinary gains or charges, as well as the impact of the adoption of new U.S. GAAP accounting standards and significant changes in the Company’s accounting methods. The HCC Committee’s charter permits the Committee to agree to disregard any Permitted Adjustments if, in the HCC Committee’s assessment, disregarding any of them would result in an award that is inconsistent with the spirit and intent of the plan, and at variance with the unadjusted results from the perspective of the shareholders.
Notwithstanding any of the foregoing, the HCC Committee has negative discretion to reduce the amounts otherwise payable under the MIP but may not increase such amount.
The HCC Committee chose to continue to use the Adjusted EBITDA Margin because the focus on margin and earnings growth fully aligns the MIP with the Company’s key priorities. The HCC Committee chose to continue to use the Adjusted EBITDA Growth metric to incentivize increased earnings and shareholder return. In addition, the HCC Committee believes that these two measures are closely correlated with Total Shareholder Return, aligning the Company’s MIP measures with shareholder interests. The HCC Committee considered the Company’s business plan, as well as seven years of historical performance results for the Performance Peer Group companies, when setting the Adjusted EBITDA Margin and Adjusted EBITDA Growth goals. As a result, for the fiscal 2024 MIP, the HCC Committee approved the following specific levels of goals with respect to each MIP plan for fiscal 2024 in which an NEO participates:
The specific levels for the MIP metrics for fiscal 2024 with respect to the Corporate plan were as follows:
| Weight | Threshold | Target | Maximum | Actual | |
| Adjusted EBITDA Margin | 50% | 8.0% | 10.0% | ≥12.0% | 13.1% |
| Adjusted EBITDA Growth | 50% | 5.0% | 10.0% | ≥18.0% | 48.2% |
| Payout as a % of Target | N/A | 10% | 100% | 200% | 200% |
The specific levels for the MIP metrics for fiscal 2024 with respect to the Climate Solutions business segment plan (only applicable to Mr. McGinnis) were as follows:
| Weight | Threshold | Target | Maximum | Actual | |
| Adjusted EBITDA Margin | 50% | 12.0% | 14.0% | ≥16.0% | 18.3% |
| Adjusted EBITDA Growth | 50% | 5.0% | 10.0% | ≥15.0% | 30.7% |
| Payout as a % of Target | N/A | 10% | 100% | 200% | 200% |
The specific levels for the MIP metrics for fiscal 2024 with respect to the Performance Technologies business segment plan (only applicable to Mr. Peace) were as follows:
| Weight | Threshold | Target | Maximum | Actual | |
| Adjusted EBITDA Margin | 50% | 7.0% | 9.5% | ≥11.0% | 12.1% |
| Adjusted EBITDA Growth | 50% | 5.0% | 10.0% | ≥39.0% | 66.8% |
| Payout as a % of Target | N/A | 10% | 100% | 200% | 200% |
Assuming Threshold achievement for each metric under each plan, each of the NEOs would receive 10 percent of the Target amount. Assuming Maximum level achievement for each metric, each of the NEOs would receive 200 percent of the Target amount. The Company pays amounts between the Threshold and Target and/or between Target and Maximum levels on a linear basis for achievement above Threshold and below Maximum.
Assuming achievement of the Target level for each metric, the NEOs would receive the following percentages of base salary:
| MIP Target Payout for NEOs (Percentage of Base Salary) | |
| Mr. Brinker | 125% |
| Mr. Lucareli | 75% |
| Mr. McGinnis* | 70% |
| Mr. Peace* | 70% |
| Mr. Agen | 65% |
*For Mr. McGinnis and Mr. Peace, 50% of the target payout would be attributable to the Corporate MIP plan with the remaining 50% of the target payout attributable to the Climate Solutions and Performance Technologies segment MIP plans, respectively.
As illustrated above, for purposes of the MIP metrics for the Corporate plan, the Company’s Adjusted EBITDA Margin for fiscal 2024 was 13.1% (maximum), and Adjusted EBITDA Growth was 48.2% (maximum) – both as calculated with regard to Permitted Adjustments. As a result, the Committee approved of a payment for the Corporate MIP participants at 200% of Target.
For purposes of the MIP metrics for the Climate Solutions plan, the Company’s Adjusted EBITDA Margin for fiscal 2024 was 18.3% (maximum), and Adjusted EBITDA Growth was 30.7% (maximum) – both as calculated with regard to Permitted Adjustments. As a result, the Committee approved a payment for the Climate Solutions MIP participants at 200% of Target.
For the purposes of the MIP metrics for the Performance Technologies plan, the Company’s Adjusted EBITDA Margin for fiscal 2024 was 12.1% (maximum), and Adjusted EBITDA Growth was 66.8% (maximum) – both as calculated with regard to Permitted Adjustments. As a result, the Committee approved a payment for the Performance Technologies MIP participants at 200% of Target.
Long-Term Incentive Compensation
The long-term incentive element of the Company’s executive compensation program is intended to attract, retain, and motivate key employees who directly impact the performance of the Company over a timeframe greater than a year. Long-term compensation may be equity or cash-based, or a combination of each, and in any event, is structured so that the interests of the Company’s executive officers, and other key employees are directly aligned with the interests of shareholders. The long-term portion of the compensation package provides an incentive that rewards superior long-term performance and provides financial consequences for underperformance.
Performance Cash under the Long-Term Incentive Plan for Performance Period Ending in 2024
The performance period for performance cash under the long-term incentive compensation plan initiated in June 2021 was completed as of March 31, 2024. The amount of the potential award varied based upon the achievement of Threshold, Target or Maximum performance levels.
The Company used two measures to determine payouts – three-year average Cash Flow ROI and three-year Average Annual Adjusted EBITDA Growth (“EBITDA Growth”). For purposes of the performance cash awards, Cash Flow ROI means adjusted free cash flow, which is net cash provided by operating activities less expenditures for property, plant and equipment, plus cash interest, which is cash paid for interest expense related to outstanding debt, with the total amount divided by average capital employed. The calculation of Cash Flow ROI is based on a three-year average Cash Flow ROI for fiscal 2022 through fiscal 2024 with average capital employed determined over five points (i.e., the last day of each fiscal quarter and prior fiscal year-end) and is subject to Permitted Adjustments similar to those described above with respect to the MIP. EBITDA Growth is the simple three-year average of Adjusted EBITDA Growth during the fiscal 2022 to fiscal 2024 performance period. Each metric for performance cash awards is calculated independently of the other metric, and each was weighted at 50 percent of the total award. The Threshold performance goal was the minimum performance goal that must have been achieved by the Company for the NEOs to earn a payout under the awards.
The performance goals for the LTIP metrics for performance cash awards for the period ending in fiscal 2024 were set in May 2021 and considered the long-term performance of the Compensation Peer Group, which was the comparator group at that time. The performance goals were as follows:
| Weight | Threshold | Target | Maximum | Actual |
Performance Payout |
|
| Cash Flow ROI | 50% | 7.0% | 10.5% | ≥14.0% | 9.1% | 32% |
| Average Annual Adjusted EBITDA Growth | 50% | 2.0% | 7.0% | ≥12.0% | 26.9% | 100% |
| Payout as a % of Target | N/A | 10% | 100% | 200% | - | 132% |
For the performance period ended in fiscal 2024, the Company’s three-year average Cash Flow ROI was 9.1 percent, which resulted in a payout equal to 32 percent of Target for the Cash Flow ROI metric. The Company’s three-year average Adjusted EBITDA Growth was 26.9 percent, which resulted in a payout equal to 100 percent of Target. Overall, both metrics were weighted equally, and the payout under the LTIP for the performance cash was 132 percent of the Target for the total award.
Grants under the Long-Term Incentive Plan for Plan Commencing in Fiscal 2024 and Ending in Fiscal 2026
In fiscal year 2024, the HCC Committee approved a Long-Term Incentive Plan (LTIP) consisting of a mix of performance share awards (“PS”) and restricted stock unit awards (“RSU”). The amount of any LTIP award is based on a percentage of the executive’s base salary, as described in more detail below. The HCC Committee believes that the mix of PS and RSU awards encourages the retention of strong executive talent, while also encouraging these executives to drive long-term company performance, as follows:
Performance Share Awards (80 percent of long-term incentive dollars at Target). Performance share awards are intended to drive Company performance and reward executive officers who are able to influence the outcomes of the financial goals set by the HCC Committee. Performance shares are earned by achieving corporate financial goals over a three-year period (ending March 31, 2026) and any earned performance shares will vest at the end of that three-year period. The final amount of the awarded and vested performance shares will vary based upon the achievement of Threshold, Target, or Maximum goals in each of the Cash Flow ROI and Average Annual Adjusted EBITDA Growth metrics, as described below. Once earned and vested, the PS awards will remain subject to the Company’s Executive Officer Compensation Recovery Policy, described on pages 31-32 of this proxy statement. Determination of the achievement of performance goals for the PS awards is not made until the Company’s audited financial statements covering the last year in the performance period are completed and the results for the fiscal year are announced publicly.
Restricted Stock Unit Awards (20 percent of long-term incentive dollars at Target). RSU awards reward employees for their continued commitment to the Company. The Company grants the employees RSUs, which vest in three annual installments commencing on the first anniversary of the effective date of the grant.
Consistent with performance cash awards in fiscal 2023, the HCC Committee utilized two metrics for the PS awards: Cash Flow ROI and Average Annual Adjusted EBITDA Growth. For purposes of the LTIP, Cash Flow ROI has the same meaning set forth in the section above titled Performance Cash under the Long-Term Incentive Plan for Performance Period Ending in 2024, provided the calculation of such metric will be based on a three-year period beginning April 1, 2023 and ending on March 31, 2026. Average Annual Adjusted EBITDA Growth means the simple three-year average of Adjusted EBITDA Growth during the performance period. Adjusted EBITDA Growth is calculated as set forth in the section above titled Short-Term, Performance-Based Cash Award.
The Cash Flow ROI and Average Annual Adjusted EBITDA Growth metrics are intended to align management’s and shareholders’ interests, both as a measure of capital efficiency and of free cash flow generation, and in achieving the Company’s earnings growth targets. The Company uses Cash Flow ROI (a measure indicative of the cash flow return and efficiency of invested capital) to evaluate its financial performance, so the HCC Committee used the Cash Flow ROI metric to incentivize management to continue to improve the Company’s financial performance. Similarly, because Average Annual Adjusted EBITDA Growth is a key measure of growth of the earnings of the Company, the HCC Committee used the Average Annual Adjusted EBITDA Growth metric to incentivize management to create additional shareholder value through increased earnings of the Company. For both metrics, the HCC Committee set the Threshold level at what it believed to be an acceptable return and set the Maximum level at what it believed to be exceptional performance, with each corresponding to an appropriate competitive payout level. Each metric for PS awards is weighted at 50 percent and is calculated independently of the other metric.
For the fiscal 2024 through fiscal 2026 LTIP, the HCC Committee considered the Company’s business plan as well as seven years of historical performance results for the Performance Peer Group when setting the Cash Flow ROI and Average Annual Adjusted EBITDA Growth goals. As a result, the HCC Committee made no adjustments to the Threshold, Target or Maximum levels, or the payout percentages, compared to the fiscal 2023 through fiscal 2025 LTIP, for Cash Flow ROI or Average Annual Adjusted EBITDA Growth. The HCC Committee set the payout percentages for Cash Flow ROI and Average Annual Adjusted EBITDA Growth to the same level as the payout percentages for fiscal 2023 with respect to both metrics. The goals at the Threshold, Target, and Maximum levels are intended to incentivize participants to achieve the Threshold level and strive for greater performance beyond the Threshold level.
The specific three-year performance goals for the LTIP metrics for PS awards granted in fiscal 2024 are as follows:
| Threshold | Target | Maximum | |
| Cash Flow ROI | 7.0% | 10.5% | ≥14.0% |
| Average Annual Adjusted EBITDA Growth | 2.0% | 7.0% | ≥12.0% |
The specific levels of PS award metrics are set forth below:
| Performance | Cash Flow ROI (50%) |
Average Annual Adjusted EBITDA Growth (50%) |
| Threshold | 10% of Target Awards | 10% of Target Awards |
| Target | 100% of Target Awards | 100% of Target Awards |
| Maximum | 200% of Target Awards | 200% of Target Awards |
If either the Company’s actual Cash Flow ROI or Average Annual Adjusted EBITDA Growth does not meet the Threshold for the performance period, no performance shares will be earned under that metric. If actual Cash Flow ROI or Average Annual Adjusted EBITDA Growth for the performance period is between Threshold and Target and/or between Target and Maximum, the number of PS awards earned will be determined on a linear basis. If either the Company’s actual Cash Flow ROI or Average Annual Adjusted EBITDA Growth exceeds the Maximum for the performance period, only the Maximum percentage of the Target amount of performance shares for that metric will be earned. Notwithstanding the foregoing, the HCC Committee retains the discretion to decrease the number of performance shares earned under the LTIP.
As mentioned above, the HCC Committee approves the grants for each NEO under the long-term incentive plan as a percentage of base salary (for Mr. Brinker, the Board approves the grants). Assuming achievement of the Target level for each metric under the performance cash awards, the NEOs would receive the following percentages of base salary in total grants under the long-term incentive plan approved in fiscal 2024:
| LTIP Target Payout for NEOs (Percentage of Base Salary) | |
| Mr. Brinker | 350% |
| Mr. Lucareli | 200% |
| Mr. McGinnis | 135% |
| Mr. Peace | 135% |
| Mr. Agen | 115% |
The percentages for each NEO increased from fiscal year 2023 to better align this compensation element with external benchmark data, including the Compensation Peer Group data and the Database. The table below sets forth the number of RSUs issued to each NEO in fiscal 2024 as well as the number performance shares that would be earned upon achievement of each of the long-term incentive plan metrics on March 31, 2026:
| Performance Share Awards | ||||||||||||||||
| Shares of Restricted Stock Units (#) | Threshold | Target | Maximum | |||||||||||||
| Mr. Brinker | 26,933 | 10,773 | 107,732 | 215,464 | ||||||||||||
| Mr. Lucareli | 9,234 | 3,694 | 36,937 | 73,874 | ||||||||||||
| Mr. McGinnis | 4,947 | 1,979 | 19,787 | 39,574 | ||||||||||||
| Mr. Peace | 4,947 | 1,979 | 19,787 | 39,574 | ||||||||||||
| Mr. Agen | 3,540 | 1,416 | 14,159 | 28,318 | ||||||||||||
Executive Compensation in Fiscal 2025
As it did for fiscal 2024, the HCC Committee approved a fiscal 2025 MIP program including three distinct incentive plans – one Corporate plan for the corporate leadership team, and two segment-specific plans, one each for our Climate Solutions and Performance Technologies businesses. Executive leadership at the segment level will participate in both the Corporate Plan and the appropriate segment-specific plan (with participation in each plan weighted equally 50/50), while all other participants will be assigned to the appropriate Business Segment or Corporate plan. For fiscal 2025, the HCC Committee determined there would be no change to the performance measures for the fiscal 2025 MIP plans.
Employment and Post-Employment Benefits
General Benefit
The NEOs receive the same basic employee benefits that are offered by the Company to all salaried employees within the region where the individual resides. These benefits include medical and dental coverage, disability insurance and life insurance. The cost of these benefits is partially borne by the employee, including each NEO.
The Company does not generally provide perquisites to any of the NEOs.
Retirement Benefits for U.S. Employees
The Company offers retirement benefits to its employees through tax-qualified plans, including the Modine Manufacturing Company 401(k) Retirement Plan (formerly known as the Modine 401(k) Plan for Salaried Employees), which is an employee and employer funded “Safe Harbor” plan. In recent years, the Company has contributed to participant 401(k) accounts (including NEO participants) a Safe Harbor Matching Contribution equal to 100 percent of the first 3 percent of compensation that an employee contributes to the Plan as an Elective Deferral for the Plan Year, plus 50 percent of the next 3 percent of compensation that an employee contributes as an Elective Deferral for the Plan Year. For eligible NEOs and eligible senior managers whose eligible compensation exceeds the IRS annual compensation limit, the Company has applied this matching formula to the applicable over-the-limit compensation and this amount is contributed to the Modine Deferred Compensation Plan. The Company did not make any additional contributions to the Modine Manufacturing Company 401(k) Retirement Plan for fiscal 2024.
While the Modine Manufacturing Company 401(k) Retirement Plan “Safe Harbor” contribution is available to the Company’s eligible employees in the U.S., each individual participant’s 401(k) plan balance may vary due to a combination of differing annual amounts contributed by the employee, the investment choices of the participant (the same investment choices are available to all participants in the plan) and the number of years the person has participated in the 401(k) plan. Additionally, each eligible NEO’s and senior manager’s Deferred Compensation Plan balance may vary due to a combination of differing annual amounts contributed by the employee, the employee’s annual eligible compensation, the investment choices of the participant (the same investment choices are available to all eligible NEOs and senior managers in the plan) and the number of years the employee has participated in the Deferred Compensation Plan.
In fiscal 2024, the Company made matching contributions to an NEO’s account under the 401(k) Retirement Plan equal to the sum of 100 percent of the first 3 percent of compensation an NEO elected to contribute to the 401(k) Retirement Plan and 50 percent of the next 3 percent of compensation an NEO elected to contribute to the 401(k) Retirement Plan. In fiscal 2024, the Company made contributions to the NEOs’ accounts under the Deferred Compensation Plan equal to the sum of 100 percent of the NEOs’ first 3 percent of eligible compensation in excess of the compensation limits applicable to 401(k) Plans and the NEOs (“over-the-limit compensation”) and 50 percent of the NEO’s next 3 percent of eligible over-the-limit compensation.
The Company’s defined benefit pension plan, which is frozen, is more fully described in the Pension Benefits Table for Fiscal 2024 below. Mr. Lucareli and Mr. Agen participate in the Company’s defined benefit pension plan. Mr. Brinker, Mr. McGinnis, and Mr. Peace joined the Company after the defined benefit pension plan was closed to new participants.
In addition to the employee benefits applicable to U.S. employees in general, certain highly compensated employees of the Company, including the NEOs, may participate in the Deferred Compensation Plan. The Deferred Compensation Plan is a nonqualified plan that allows a highly compensated employee to defer up to 50 percent of their base salary and up to 50 percent of their bonus. Compensation deferred pursuant to the Deferred Compensation Plan is an asset of the Company. The sums deferred do not earn a preferential rate of return and the investment alternatives are generally the same as the 401(k) Retirement Plan. Payments out of the Deferred Compensation Plan are not made until termination of service or retirement. As part of the Company’s objective of restoring in this plan amounts that exceeded the allowable Company match and Company contributions to the 401(k) Retirement Plan because of statutory limits, the Company contributes an amount equal to the amount of the employer match and employer contribution that was not allowed to be contributed to the 401(k) Retirement Plan for such individuals due to statutory limits.
Severance Plan
The Company has a severance plan that was last updated by the HCC Committee in fiscal 2012 (the “Severance Plan”) for members of the officer-level Executives as recommended to the Committee by the Company’s CEO, to ensure consistent treatment of individuals in such positions in the event of an involuntary termination of employment without cause. The Severance Plan provides that such individuals would be paid their annual base salary at the time of termination in installment payments over the course of the year following termination and would be eligible to elect Company-paid COBRA continuation coverage for one year following termination. In order to receive these benefits, participants are required to release the Company from any and all liability. Additionally, the Severance Plan provides certain benefits in the event of an NEO’s termination of employment in connection with a change in control of the Company. See Potential Post-Employment Payments below for additional information about benefits under the Severance Plan. All NEOs other than Mr. Brinker (who has a separate employment and change in control agreement) are covered under the Severance Plan; provided, however, Mr. Lucareli is not entitled to certain benefits in the event of his termination of employment in connection with a change in control of the Company under the Severance Plan as he has entered into a separate change in control agreement with the Company (see Potential Post-Employment Payments below for more information).
Share Ownership Guidelines - Officers
The Company has maintained share ownership guidelines for directors and officers of the Company, including the NEOs, since 2008. The Board continues to believe that directors and officers should have a meaningful personal investment in the Company. Shares of common stock, either restricted or unrestricted, count toward compliance with the guidelines.
The current guidelines provide that, on the fifth anniversary of appointment to the position, the President and CEO is expected to hold shares of Company stock with a value of at least five times his or her annual base salary. In addition, the guidelines do not distinguish between NEOs and other executive officers and provide that all executive officers, other than the President and CEO, are expected to hold shares of Company common stock with a value of at least three times their current annual base salary. The stock value is determined by using the higher of the stock price at the time of measurement or the average stock price over the previous three years. The HCC Committee reviews the guidelines and compliance therewith on at least an annual basis. The chair of the Governance Committee evaluates whether an exception should be made for any officer, who, due to his or her unique financial circumstances or other extenuating circumstances, would incur a hardship by complying with the applicable guideline after the initial five-year period and, in such an event, may make an exception to the guidelines for such individual. Additionally, the guidelines may be temporarily waived for an officer who has an unusual personal circumstance or is approaching retirement and has a need to diversify his/her stock holdings. Each of the NEOs who has been an officer of the Company for at least five years is currently in compliance with the stock ownership guidelines.
Certain Prohibited Transactions
Under the Company’s Insider Trading Policy, all directors and executive officers, including the NEOs, are prohibited from holding shares of Company common stock in a margin account or otherwise pledging shares of Company common stock in any way, and all directors and employees, including their designees, of the Company are prohibited from engaging in hedging or monetizing transactions involving Company common stock.
Incentive Compensation Recovery Policies
The HCC Committee has also implemented two policies providing for the recovery of incentive compensation under specified circumstances. The Company’s Incentive Compensation Recoupment Policy, as amended and restated, requires, effective beginning with awards granted in fiscal 2013, forfeiture or repayment of any awards granted under the Incentive Plan (i.e., the MIP (cash bonus) or any long-term incentive awards) if the HCC Committee determines that a participant committed an act of misconduct that is adverse, or reasonably expected to be adverse, to the best interests of the Company or its shareholders.
In addition, in fiscal 2024, the Company adopted the Modine Manufacturing Company Executive Office Compensation Recovery Policy (the “Recovery Policy”), which is intended to comply with regulations promulgated under the Exchange Act and the NYSE listing requirements. Under the Recovery Policy, in the event of an accounting restatement (i) due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or (ii) that corrects an error that is not material to previously issued financial statements, but would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (each of (i) or (ii), an “Accounting Restatement”), the Company is required to recover from each executive officer the amount of any applicable incentive-based compensation (compensation granted, earned or vested based wholly or in part upon the attainment of a financial reporting measure) received by such executive officer during the applicable clawback period (generally the three prior completed fiscal years) that exceeds the amount that would have been received had it been determined based on the restated financial statements.
Employment Agreements
The Company has an employment agreement with Mr. Brinker. See Potential Post-Employment Payments below for additional information about benefits in the event of a termination of employment under Mr. Brinker’s employment agreement.
Effective as of August 31, 2020, the Company entered into certain CEO Transition Retention Agreement Letters with Messrs. Lucareli and Agen to provide a retention incentive for such NEOs through the transition of the CEO role from Thomas A. Burke, the former President and Chief Executive Officer of the Company, to Mr. Brinker. The CEO Transition Retention Agreement Letters provided for a cash award incentive and a grant of restricted stock units to each of the foregoing NEOs if they remained employed with the Company until August 4, 2022 (unless terminated earlier by the Company without Good Cause). The cash award incentive under the CEO Transition Retention Agreement Letters for each of the applicable NEOs was equal to fifty percent (50%) of the NEO’s base salary as of August 4, 2022 and the grant of restricted stock units (“Transition Retention Grants”) was equal, based on grant date fair value, to fifty percent (50%) of each applicable NEO’s target value of his or her prevailing annual LTIP award as of August 4, 2022, based on the closing stock price of the Company on August 3, 2022. Messrs. Lucareli and Agen received their cash award incentives and their Transition Retention Grants in fiscal 2023, the value and grant date fair value of which has been included in the Summary Compensation Table for fiscal 2023. The Transition Retention Grants will not vest until the second anniversary after the date of grant.
The Company has entered into change in control agreements with Mr. Brinker and Mr. Lucareli. The purpose of these agreements is to ensure continuity and, in the case of a change in control, the continued dedication of key employees during any period of uncertainty due to a proposed or pending change in control of the Company. See Potential Post-Employment Payments below for additional information about benefits in the event of a change in control under the employment agreements and the change in control agreements.
Tax Implications for NEOs
The HCC Committee generally seeks to structure compensation amounts and plans so that they do not result in penalties for the NEOs under the Internal Revenue Code of 1986, as amended (the “Code”). For example, Section 409A of the Code imposes substantial penalties and results in the loss of any tax deferral for nonqualified deferred compensation that does not meet the requirements of that section. The HCC Committee has generally structured the elements of the Company’s compensation program so that they are either not characterized as nonqualified deferred compensation under Section 409A or meet the distribution, timing and other requirements of Section 409A. Without these steps, certain elements of compensation could result in substantial tax liability for the NEOs. Section 280G and related provisions of the Code impose substantial excise taxes on so-called “excess parachute payments” payable to certain executives upon a change in control and results in the loss of the compensation deductions for such payments by the executive’s employer. When the Company entered into the change in control agreement with Mr. Lucareli, which was entered into prior to 2009, the HCC Committee structured the change in control payment to include a gross up for excise taxes imposed under Section 280G in order to preserve the after-tax value of those payments to him. The portion of the Severance Plan applicable in a change in control, which is applicable to those joining the Company’s senior management on or after the date of adoption of the Severance Plan, does not provide excise tax gross ups in the event of a change in control.
Tax Implications of IRC Section 162(m)
Section 162(m) of the Code generally disallows a tax deduction to public companies for compensation over $1,000,000 paid in any tax year to a company’s CEO, CFO, and its three most highly compensated NEOs (other than the CEO and CFO) regardless of whether they were in service as of the end of any such tax year (each a “covered employee”). Additionally, for any NEO whose compensation was or is subject to this limitation in any tax year beginning in or after 2017, that executive officer’s compensation will remain subject to this annual deductibility limitation for any future tax year in which he or she receives compensation from Modine, regardless of whether he or she remains a NEO.
Accordingly, Modine is only able to deduct up to $1,000,000 per year of the compensation payable to any of our NEOs who is a “covered employee” as determined under Section 162(m), unless certain transition relief pursuant to tax reform legislation signed into law on December 22, 2017, would apply to the applicable compensation.
COMPENSATION COMMITTEE REPORT
The HCC Committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis with management; and, based on that review and discussion, the HCC Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement and the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2024.
THE HUMAN CAPITAL AND COMPENSATION COMMITTEE
Christopher W. Patterson, Chair
Eric D. Ashleman
Suresh V. Garimella
Katherine C. Harper
FISCAL 2024 NEO COMPENSATION
2024 Summary Compensation Table
The following table sets forth compensation awarded to, earned by, or paid to the Company’s NEOs, which include (i) the Principal Executive Officer, (ii) the Principal Financial Officer, and (iii) the three most highly compensated executive officers, serving as officers as of the end of fiscal 2024.
| Name and Principal Position |
Fiscal Year | Salary ($)(1) | Bonus ($) |
Stock Awards ($)(2) |
Option Awards ($)(3) |
Incentive Plan Compensation ($)(4) |
Change in Pension Value ($)(5) |
All Other Compensation ($)(6) |
Total ($) | |||||||||
| Neil D. Brinker | 2024 | 1,009,615 | - | 3,675,008 | - | 3,771,225 | NA | 49,979 | 8,505,827 | |||||||||
| President and CEO | ||||||||||||||||||
| 2023 | 882,750 | - | 944,995 | 540,016 | 2,414,355 | NA | 42,016 | 4,824,132 | ||||||||||
| 2022 | 825,846 | - | 730,618 | 417,282 | - | NA | 39,694 | 2,013,440 | ||||||||||
| Michael B. Lucareli | 2024 | 615,865 | - | 1,260,007 | - | 1,471,051 | 2,105 | 30,352 | 3,379,380 | |||||||||
| EVP, CFO | ||||||||||||||||||
| 2023 | 563,567 | 288,750 | 1,147,780 | 202,133 | 1,162,545 | 0 | 27,240 | 3,392,015 | ||||||||||
| 2022 | 510,615 | - | 321,554 | 183,650 | - | 0 | 25,099 | 1,040,918 | ||||||||||
| Eric S. McGinnis | 2024 | 486,000 | - | 674,991 | - | 1,039,517 | NA | 24,110 | 2,224,618 | |||||||||
| President, Climate Solutions | ||||||||||||||||||
| 2023 | 439,242 | - | 396,483 | 98,562 | 703,730 | NA | 21,018 | 1,659,035 | ||||||||||
| 2022 | 261,769 | 25,000 | 889,874 | 259,379 | - | NA | 9,893 | 1,445,915 | ||||||||||
| Adrian I. Peace | 2024 | 486,000 | - | 674,991 | - | 846,140 | NA | 24,110 | 2,031,241 | |||||||||
| President, Performance | ||||||||||||||||||
| Technologies | ||||||||||||||||||
| Brian J. Agen | 2024 | 410,442 | - | 483,006 | - | 724,781 | 1,718 | 20,747 | 1,640,693 | |||||||||
| VP, Chief Human Resources | ||||||||||||||||||
| Officer | 2023 | 376,937 | 192,250 | 519,076 | 76,902 | 475,951 | 0 | 18,037 | 1,659,153 | |||||||||
| 2022 | 351,554 | - | 112,148 | 64,049 | - | 0 | 17,515 | 545,266 | ||||||||||
| (1) | The salary amounts include amounts deferred at the NEO’s option through contributions to the Modine 401(k) Retirement Plan and the Modine Deferred Compensation Plan. |
| (2) | Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for RSUs and, in fiscal 2024, RSUs and PS awards. For fiscal 2024, the maximum grant date fair value for the PS awards are as follows for the NEOs – Mr. Brinker $5,880,012; Mr. Lucareli $2,016,021; Mr. McGinnis $1,079,974; Mr. Peace $1,079,974; and Mr. Agen $772,798. The assumptions used to determine the fair value of the awards are discussed in Note 5 of the Notes to Consolidated Financial Statements contained in the Company’s Form 10-K for the fiscal year ended March 31, 2024. |
| (3) | The Company did not award stock options as part of its LTIP Plan in fiscal year 2024. Values disclosed in this column for fiscal years 2022 and 2023, represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for grants of stock options in those years. The actual value, if any, that an optionee will realize upon the exercise of an option will depend on the excess of the market value of the Company’s common stock over the exercise price on the date the option is exercised, which cannot be determined until the option is exercised. |
| (4) | The amounts in the “Non-Equity Incentive Plan Compensation” column include payments under the MIP for fiscal year 2024 and the earned value of the performance cash awards for the fiscal 2022 - 2024 performance cycle, as follows: |
| 2024 MIP | Fiscal 2022-24 LTIP Earned Performance Cash Awards | |
| Mr. Brinker | $2,531,250 | $1,239,975 |
| Mr. Lucareli | $925,313 | $545,738 |
| Mr. McGinnis | $681,800 | $164,340 (pro-rated) |
| Mr. Peace | $681,800 | $164,340 (pro-rated) |
| Mr. Agen | $534,463 | $190,318 |
Finally, Mr. McGinnis’s amount also includes a payment on his Make Whole performance cash award of $193,377.
| (5) | Represents the change in pension value between the end of fiscal 2023 and the end of fiscal 2024 for the NEOs who participate in the Modine Manufacturing Company Pension Plan. For purposes of calculating the change in benefit values from year to year, the discount rates used to determine the present value of the benefit were 5.4 percent as of March 31, 2024, and 5.2 percent as of March 31, 2023. |
| (6) | The amounts set forth in this column for fiscal 2024 include: |
| ● | Company matching contributions to participant accounts in the 401(k) Retirement Plan (“401(k) Company Match”) equal to 100 percent of the amount contributed to the plan by the employee for up to 3 percent of annual income, and 50 percent of the amount contributed to the plan by the employee for up to an additional 3 percent of annual income, subject to the maximum contribution limit to the plan ($22,500 in calendar year 2023 and $23,000 in calendar year 2024); |
| ● | Company contributions to the Deferred Compensation Plan equal to the amount of the Company match on salary that could not be contributed to the 401(k) Retirement Plan, because of statutory limits (“Company Excess Match/Contribution Overflow to Deferred Compensation Plan”); |
| ● | Company payment of long-term disability insurance premiums (“Long-Term Disability Insurance Premiums”); and |
| ● | Company payment of life insurance premiums (“Life Insurance Premiums”). |
| Name |
401(k) Company Match ($) |
Company Excess Match / Contribution Overflow to Deferred Compensation Plan ($) |
Long-Term Disability & Life Insurance Premiums ($) |
Severance ($) | Perquisites ($) | Total ($) | ||||||
| Neil D. Brinker | 17,100 | 29,025 | 3,854 | - | - | 49,979 | ||||||
| Michael B. Lucareli | 15,395 | 12,319 | 2,638 | - | - | 30,352 | ||||||
| Eric S. McGinnis | 15,390 | 6,480 | 2,240 | - | - | 24,110 | ||||||
| Adrian I. Peace | 15,390 | 6,480 | 2,240 | - | - | 24,110 | ||||||
| Brian J. Agen | 15,219 | 3,521 | 2,007 | - | - | 20,747 |
Grants of Plan-Based Awards for Fiscal 2024
In fiscal 2024, the Company granted restricted stock units, PS awards, and short-term cash incentives as Plan-Based Awards.
Restricted stock units granted in fiscal 2024 vest in three annual installments commencing one year after the date of grant. PS awards are earned by achieving financial goals over a three-year period (ending March 31, 2026) and any earned performance shares will vest at the end of that three-year period. Further details regarding the PS awards and short-term cash incentive awards (MIP awards) are described in the Compensation Discussion and Analysis section above.
The following table sets forth information about grants of awards made in the fiscal year ending March 31, 2024, to the NEOs.
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) |
Estimated Future Payouts of Performance-based Equity Incentive Plan Awards (2) |
All Other Stock Awards; Number of Shares of Stock or Units (#) (2) |
All Other Option Awards; Number of Securities Underlying Options (#) (2) |
Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) | |||||||||||||||
| Threshold ($) | Target ($) | Max ($) | Threshold (#) | Target (#) | Max (#) | |||||||||||||||||
| Neil D. | NA | 126,563 | 1,265,625 | 2,531,250 | NA | |||||||||||||||||
| Brinker | 5/31/23 | 10,773 | 107,732 | 215,464 | 2,940,006 | |||||||||||||||||
| 5/31/23 | 26,933 | 735,002 | ||||||||||||||||||||
| Michael B. | NA | 46,266 | 462,656 | 925,313 | NA | |||||||||||||||||
| Lucareli | 5/31/23 | 3,694 | 36,937 | 73,874 | 1,008,011 | |||||||||||||||||
| 5/31/23 | 9,234 | 251,996 | ||||||||||||||||||||
| Eric S. | NA | 34,090 | 340,900 | 681,800 | NA | |||||||||||||||||
| McGinnis | 5/31/23 | 1,979 | 19,787 | 39,574 | 539,987 | |||||||||||||||||
| 5/31/23 | 4,947 | 135,004 | ||||||||||||||||||||
| Adrian I. | NA | 34,090 | 340,900 | 681,800 | NA | |||||||||||||||||
| Peace | 5/31/23 | 1,979 | 19,787 | 39,574 | 539,987 | |||||||||||||||||
| 5/31/23 | 4,947 | 135,004 | ||||||||||||||||||||
| Brian J. | NA | 26,723 | 267,231 | 534,463 | NA | |||||||||||||||||
| Agen | 5/31/23 | 1,416 | 14,159 | 28,318 | 386,399 | |||||||||||||||||
| 5/31/23 | 3,540 | 96,607 | ||||||||||||||||||||
| (1) | Amounts in these columns represent potential cash incentive payout amounts under the fiscal 2024 MIP. |
| (2) | Restricted stock units and PS awards are made under the 2020 Amended and Restated Incentive Compensation Plan. No stock options were granted in fiscal 2024. For the PS awards, amounts in those columns represent the potential earned share awards under the fiscal year 2024 LTIP. |
Outstanding Equity Awards at Fiscal Year End
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable (#)(1) |
Number of Securities Underlying Unexercised Options Unexercisable (#)(1) |
Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#)(2) | Market Value of Shares or Units of Stock that Have Not Vested ($)(2) | Equity Incentive Plan Awards; Number of Unearned Shares, Units or Other Rights that Have Not Vested (#)(3) | Equity Incentive Plan Awards; Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($)(3) | ||||||||
| Neil D. | 17,130 | 5,713 | 11.19 | 12/1/30 | 104,926 | 9,987,906 | 215,464 | 20,510,018 | ||||||||
| Brinker | 22,218 | 22,221 | 17.79 | 6/4/31 | ||||||||||||
| 25,752 | 52,285 | 12.28 | 6/6/32 | |||||||||||||
| Michael B. | 14,443 | - | 17.90 | 5/30/28 | 94,837 | 9,027,534 | 73,874 | 7,032,066 | ||||||||
| Lucareli | 29,537 | - | 13.26 | 5/29/29 | ||||||||||||
| - | 19,595 | 6.62 | 10/2/30 | |||||||||||||
| 9,778 | 9,780 | 17.79 | 6/4/31 | |||||||||||||
| 9,638 | 19,572 | 12.28 | 6/6/32 | |||||||||||||
| Eric S. | 12,269 | - | 12.62 | 8/25/31 | 18,195 | 1,731,982 | 39,574 | 3,767,049 | ||||||||
| McGinnis | 4,142 | 4,142 | 12.62 | 8/25/31 | ||||||||||||
| 4,700 | 9,543 | 12.28 | 6/6/32 | |||||||||||||
| Adrian I. | 4,142 | 4,142 | 12.62 | 8/25/31 | 18,195 | 1,731,982 | 39,574 | 3,767,049 | ||||||||
| Peace | 4,700 | 9,543 | 12.28 | 6/6/32 | ||||||||||||
| Brian J. | 6,847 | - | 15.90 | 6/1/27 | 32,449 | 3,088,820 | 28,318 | 2,695,590 | ||||||||
| Agen | 6,643 | - | 17.90 | 5/30/28 | ||||||||||||
| 9,739 | - | 13.26 | 5/29/29 | |||||||||||||
| 12,261 | 4,090 | 6.62 | 10/2/30 | |||||||||||||
| 3,410 | 3,411 | 17.79 | 6/4/31 | |||||||||||||
| 3,667 | 7,446 | 12.28 | 6/6/32 | |||||||||||||
| (1) | The options vest in four equal annual installments commencing on the first anniversary of the date of grant, except that options awarded in fiscal 2023 vest in three annual installments. |
| (2) | Amounts represent RSU awards. All RSUs granted prior to fiscal 2023 vest in four equal annual installments commencing one year after the date of grant, and awards granted beginning in fiscal 2023 vest in three annual installments. The market value of the awards was determined by multiplying the number of restricted stock units by $95.19, the closing price of the Company’s common stock on the NYSE on March 28, 2024 (the last trading day of fiscal 2024). See Compensation Discussion and Analysis – Equity Incentives – Long-Term Incentive Compensation for a description of restricted stock unit awards. |
The restricted stock units vest as follows:
| Shares vesting for | ||||||||||||
| Neil Brinker (#) | Michael Lucareli (#) | Eric McGinnis (#) | Adrian Peace (#) | Brian Agen (#) | ||||||||
| May 31, 2024 | 8,887 | 3,047 | 1,632 | 1,632 | 1,168 | |||||||
| June 4, 2024 | 10,267 | 4,518 | 1,576 | |||||||||
| June 6, 2024 | 25,394 | 9,505 | 4,635 | 4,635 | 3,616 | |||||||
| August 4, 2024 | 37,626 | 14,315 | ||||||||||
| August 25, 2024 | 1,918 | 1,918 | ||||||||||
| October 2, 2024 | 19,639 | 4,099 | ||||||||||
| December 1, 2024 | 5,898 | |||||||||||
| May 31, 2025 | 8,887 | 3,047 | 1,632 | 1,632 | 1,168 | |||||||
| June 4, 2025 | 10,268 | 4,521 | 1,576 | |||||||||
| June 6, 2025 | 26,166 | 9,794 | 4,776 | 4,776 | 3,727 | |||||||
| August 25, 2025 | 1,919 | 1,919 | ||||||||||
| May 31, 2026 | 9,159 | 3,140 | 1,683 | 1,683 | 1,204 | |||||||
| (3) | The fiscal 2024 PS awards are reflected at the Maximum level. See Compensation Discussion and Analysis – Equity Incentives – Long-Term Incentive Compensation for a description of PS awards. The market value of the PS award was determined by multiplying the number of unvested shares by $95.19, the closing price of the Company’s common stock on the NYSE on March 28, 2024 (the last trading day of fiscal 2024). |
Option Exercises and Stock Vested for Fiscal 2024
The following table shows a summary of the stock options exercised and RSUs vested for the named executive officers during the fiscal year ended March 31, 2024.
| Option Awards | Stock Awards | |||||||||
| Name |
Number of Shares Acquired on Exercise (#) |
Value Realized on Exercise ($) |
(1) |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting ($) |
(2) | ||||
| Neil D. Brinker | - | - | 48,278 | 1,541,562 | ||||||
| Michael B. Lucareli | 135,313 | 8,250,571 | 59,428 | 2,312,207 | ||||||
| Eric S. McGinnis | - | - | 33,063 | 1,537,394 | ||||||
| Adrian I. Peace | - | - | 21,729 | 863,919 | ||||||
| Brian J. Agen | 16,799 | 1,416,095 | 24,359 | 946,484 | ||||||
| (1) | Reflects the amount calculated by multiplying the number of options exercised by the difference between the market price of the Company’s stock on the exercise date and the exercise price of the options. |
| (2) | Reflects the amount calculated by multiplying the number of shares vested by the market price of the Company’s common stock on the vesting date. |
Pension Benefits Table for Fiscal 2024
| Name | Plan Name |
Number of Years Credited Service (#) |
Present Value of Accumulated Benefit ($) (1) |
Payments During Last Fiscal Year ($) |
||||
| Neil D. Brinker | NA | NA | NA | NA | ||||
| Michael B. Lucareli | Salaried Pension Plan | 6.6 | 165,054 | - | ||||
| Eric S. McGinnis | NA | NA | NA | NA | ||||
| Adrian I. Peace | NA | NA | NA | NA | ||||
| Brian J. Agen | Salaried Pension Plan | 9.3 | 121,227 | - |
| (1) | The Company used the following assumptions to determine the present value of accumulated benefit as set forth in the table above: discount rate of 5.4%; Mortality: use of Pri-2012 (70% Blue Collar/30% White Collar Blend) table projected generationally using scale MP-2021 converging to the 2023 Proxy SSA ultimate improvement factors over 10 years for age and 20 year for cohort (post - retirement decrement only); service up to March 31, 2006 and pay up to December 31, 2007 (the plans froze service accumulation on March 31, 2006 and pay changes on December 31, 2007); employees elect to begin payments as soon as they are eligible to receive unreduced benefits; 80% of employees elect lump sums from the qualified plan and 20% elect annuities. |
Pension Benefits
The Company’s pension plan, The Modine Manufacturing Company Pension Plan (the “Salaried Pension Plan”), is frozen. Participants in the Salaried Pension Plan no longer earn additional credited service (effective April 1, 2006) and changes in salary for a participant are not considered in determining pension benefits (effective December 31, 2007). The Salaried Pension Plan was formerly a part of competitive compensation for manufacturing companies such as Modine. The Salaried Pension Plan was frozen consistent with contemporary benefit practices.
The NEOs who were employed by the Company on or before December 31, 2003, participate on the same basis as other salaried employees in the non-contributory Salaried Pension Plan. Mr. Brinker, Mr. McGinnis, and Mr. Peace do not participate in the Salaried Pension Plan because they joined the Company after December 31, 2003.
Retirement benefits are based upon an employee’s earnings for the five highest consecutive calendar years of the last ten calendar years preceding retirement (provided that salary after the plan was frozen is not considered) and on years of service (provided that service after the plan was frozen is not considered). Applicable earnings include salary, bonus, and any amount deferred under the 401(k) Retirement Plan. A minimum of five years of service was required for the benefits to vest. The principal benefit under the Salaried Pension Plan is a lifetime monthly benefit for the joint lives of a participant and his or her spouse based on the employee’s earnings and period of employment. The pension benefit is not subject to offset against Social Security benefits. Employees may retire with unreduced early retirement benefits at age 62 or may be eligible for deferred or other early retirement benefits depending on their age and years of service. In addition, an employee may elect to receive a lump-sum pension benefit if, upon retirement, the sum of the employee’s age plus years of eligible service with the Company equals at least 85. Furthermore, if employed on and before March 31, 2001, an employee who reaches age 62 and who has accumulated thirty or more years of eligible service may request that the accrued benefit be paid immediately in a lump-sum amount, even if he or she elects not to retire at that time. Payment pursuant to the Salaried Pension Plan may be limited by regulation based upon the funded status of the plan.
Pension benefits under the Salaried Pension Plan are subject to possible limitations imposed by the Code.
Nonqualified Deferred Compensation Table for Fiscal 2024
| Name |
Executive Contributions in Last FY ($)(1) |
Registrant Contributions in Last FY ($)(2) |
Aggregate Earnings in Last FY ($) |
Aggregate Withdrawals / Distributions ($) |
Aggregate Balance at Last FYE ($)(3) |
|||||
| Neil D. Brinker | - | 29,025 | 11,350 | - | 86,480 | |||||
| Michael B. Lucareli | 359,793 | 12,319 | 179,747 | - | 1,094,398 | |||||
| Eric S. McGinnis | - | 6,480 | 400 | - | 12,642 | |||||
| Adrian I. Peace | - | 6,480 | 400 | - | 12,642 | |||||
| Brian J. Agen | 114,797 | 3,251 | 29,127 | - | 167,647 |
| (1) | Amounts include any deferrals of base salary and such amounts are included in the “Base Salary” column of the Summary Compensation Table. |
| (2) | Amounts are reported in the Summary Compensation Table. Company matching contributions that could not otherwise be made to the 401(k) Retirement Plan because of statutory limits are made to the Deferred Compensation Plan. |
| (3) | All executive contributions and contributions by the Company for fiscal 2024 have been reported in the Summary Compensation Table for the current year (i.e., fiscal 2024). In addition to the current year, executive contributions and contributions by the Company with respect to Mr. Lucareli for prior years in which Mr. Lucareli was an NEO have been reported in the Summary Compensation Table in prior years. In total, $214,517 in contributions have been reported for Mr. Lucareli as an NEO in the Summary Compensation Table in prior years. The remainder of the aggregate balance for Mr. Lucareli in the above column reflects earnings (and losses) on those contributions. In addition to the current year, the Company has reported $49,074, $5,698 and $5,534 in contributions in the Summary Compensation Table for Mr. Brinker, Mr. McGinnis, and Mr. Agen, respectively, prior to fiscal 2024. The remainder of their aggregate balances in the above column reflects contributions prior to their (and Mr. Peace) becoming an NEO, if any, and the earnings (and losses) on their contributions. |
Nonqualified Deferred Compensation
The Deferred Compensation Plan is a nonqualified plan. All of the NEOs currently employed by Modine are eligible to participate in the Deferred Compensation Plan. The Deferred Compensation Plan allows an employee to defer salary in an amount that exceeds the statutory limitations applicable to the 401(k) Retirement Plan. For the 2023 calendar year, an employee could generally contribute no more than $22,500 to the 401(k) Retirement Plan. The Deferred Compensation Plan allows a highly compensated employee to defer up to ten percent of base salary. Salary deferred pursuant to the Deferred Compensation Plan is an asset of the Company. The sums deferred do not earn a preferential rate of return. Company contributions are also made to the Deferred Compensation Plan in an amount equal to the Company match and profit sharing contributions that would otherwise have been contributed to the 401(k) Retirement Plan but for the statutory limits. All of the NEOs who participate in the Deferred Compensation Plan were fully vested in the Company contributions as of March 31, 2024. Payments out of the Deferred Compensation Plan are not made until termination of service or retirement.
The investment alternatives available to the NEOs under the Deferred Compensation Plan are selected by the Company and are generally the same as the alternatives available under the 401(k) Retirement Plan but may be changed from time to time. The NEOs are permitted to change their investment elections at any time on a prospective basis. The table below shows the funds available under the plan and their annual rate of return for the fiscal year ended March 31, 2024.
|
Name of Fund |
Return for 12 Months Ended March 31, 2024 |
| Baird Aggregate Bond Institutional Fund | 2.8% |
| DFA US Large Cap Equity Portfolio Institutional Fund | 30.17% |
| DFA US Small Cap Fund | 19.82% |
| Fidelity 500 Index Fund | 29.87% |
| Fidelity Diversified International K6 Fund | 16.82% |
| Fidelity Mid Cap Index Fund | 22.35% |
|
Name of Fund |
Return for 12 Months Ended March 31, 2024 |
| Fidelity Small Cap Index Fund | 19.83% |
| Fidelity Total International Index Fund | 12.81% |
| Fidelity US Bond Index Fund | 1.69% |
| FMI Common Stock Institutional Fund | 26.64% |
| Hartford MidCap R6 Fund | 16.69% |
| Vanguard Short-Term Bond Index Admiral Fund | 3.06% |
| Allspring Government Money Market Institutional Fund | 5.23% |
| T. Rowe Price Retirement I 2005 I Fund | 11.37% |
| T. Rowe Price Retirement I 2010 I Fund | 12.23% |
| T. Rowe Price Retirement I 2015 I Fund | 12.67% |
| T. Rowe Price Retirement I 2020 I Fund | 13.43% |
| T. Rowe Price Retirement I 2025 I Fund | 14.71% |
| T. Rowe Price Retirement I 2030 I Fund | 16.88% |
| T. Rowe Price Retirement I 2035 I Fund | 19.41% |
| T. Rowe Price Retirement I 2040 I Fund | 21.49% |
| T. Rowe Price Retirement I 2045 I Fund | 22.84% |
| T. Rowe Price Retirement I 2050 I Fund | 23.2% |
| T. Rowe Price Retirement I 2055 I Fund | 23.36% |
| T. Rowe Price Retirement I 2060 I Fund | 23.42% |
| T. Rowe Price Retirement Balanced Fund | 9.58% |
POTENTIAL POST-EMPLOYMENT PAYMENTS
The Company has certain obligations to its NEOs upon a termination of employment as a result of agreements with such officers or other plans, arrangements or policies that benefit the officers.
Mr. Brinker is the only NEO who has an agreement with the Company governing the terms of his employment. Pursuant to the employment agreement that was entered into with Mr. Brinker in 2020, Mr. Brinker agreed to serve as an executive officer of the Company and devote his full time to the performance of his duties.
The following sets forth the amount of payments to each NEO in the event of a termination of employment as a result of voluntary termination, retirement (including early retirement), death, disability, termination for Cause, and involuntary termination (including termination without Cause or for Good Reason).
Voluntary Termination. An NEO may terminate his/her employment with the Company at any time. In general, upon the individual’s voluntary termination:
| • | we would not pay severance; |
| • | the executive would forfeit all unvested stock options, restricted awards, performance cash awards and PS awards; |
| • | all benefits and perquisites would cease; and |
| • | the NEO, if a participant in the Salaried Pension Plan, would be entitled to a distribution of his/her vested benefits under that plan (see the Pension Benefits Table for Fiscal 2024 on page 40) and the Nonqualified Deferred Compensation Plan (see the Nonqualified Deferred Compensation Table for Fiscal 2024 on page 41). |
Retirement and Early Retirement. No NEOs were eligible for retirement on March 31, 2024. In general, upon the executive’s full or early retirement:
| • | we would not pay severance; |
| • | the HCC Committee may, in whole or in part, waive any or all remaining restrictions on unvested stock options and restricted awards (for NEOs); |
| • | all benefits and perquisites would cease; and |
| • | the NEO, if a participant in the Salaried Pension Plan or the Nonqualified Deferred Compensation Plan, would be entitled to a distribution of his/her vested benefits under those plans. |
Death. In general, upon the death of an NEO:
| • | the executive’s estate would receive his/her base salary through the month in which the executive dies, plus any unused vacation pay; |
| • | all unvested stock options and restricted awards would vest; |
| • | all benefits and perquisites would cease; |
| • | a prorated portion (based on the period worked during the performance period) of performance shares and performance cash shall vest based on the Company’s actual achievement of the performance goals at the end of the performance period; and |
| • | the NEO’s estate, if he or she was a participant in the Salaried Pension Plan or the Nonqualified Deferred Compensation Plan, would be entitled to a distribution of his/her vested benefits under those plans. |
Disability. If a total and permanent disability causes the termination of employment of an NEO, then for such NEO:
| • | we would not pay severance; |
| • | all unvested stock options and restricted awards would vest; |
| • | a prorated portion (based on the period worked during the performance period) of performance shares and performance cash shall vest based on the Company’s actual achievement of the performance goals at the end of the performance period; |
| • | all benefits and perquisites would cease; and |
| • | the NEO, if a participant in the Salaried Pension Plan or the Nonqualified Deferred Compensation Plan, would be entitled to a distribution of his/her vested benefits under those plans. |
Termination for Cause. The Company may terminate Mr. Brinker’s employment for Cause under the terms of his employment agreement and, thereby, terminate any obligation to Mr. Brinker under his employment agreement. A termination for “Cause” generally means a termination for willful and continued failure to substantially perform his duties with the Company, conviction of a crime related to his duties, material breach of his employment agreement, or commission of an act of dishonesty or any willful act of misconduct which results in or could reasonably be expected to result in significant injury to the Company. The other NEOs without an employment agreement may be terminated by the Company for cause at any time and are not entitled to receive any severance payments or benefits upon such termination. On the NEO’s termination date, generally, all unvested stock options, restricted awards and long-term incentive awards would be forfeited, and all benefits and perquisites would cease. The NEO, if a participant in the Salaried Pension Plan or the Nonqualified Deferred Compensation Plan, would be entitled to a distribution of his/her vested benefits under those plans.
Termination without Cause, or for Good Reason. If the Company terminates Mr. Brinker’s employment and the termination is not for Cause or if Mr. Brinker terminates employment with the Company for Good Reason (“Good Reason” means at least one of the following events has occurred without the consent of the affected executive: a material diminution in the executive’s aggregate base salary and target incentive amount (other than pro rata reductions that also affect similarly situated employees); a material decrease in the executive’s authority, duties or responsibilities, or a material change in the geographic location at which the executive must perform services), the Company is obligated to pay to Mr. Brinker an amount equal to two times his base salary over a two-year period following his termination. The Company’s obligation is subject to Mr. Brinker’s execution of a full release of any claims against Modine.
If the Company terminates the employment of Mr. Lucareli, Mr. McGinnis, Mr. Peace, or Mr. Agen without cause, these NEOs would receive benefits under the Severance Plan for officer-level Executives. Under the Severance Plan, each of the NEOs would receive his or her annual base salary at the time of termination in installment payments over the course of one year following termination and would be eligible to elect Company-paid COBRA continuation coverage for one year following termination. The NEOs are required to release the Company from any and all liability in order to be eligible for benefits under the Severance Plan.
POTENTIAL CHANGE IN CONTROL PAYMENTS AND BENEFITS
Generally, awards granted under the Incentive Plans accelerate vesting in the event of an involuntary termination of employment within one year following a Change in Control unless specified otherwise in the applicable award agreement. A Change in Control, as generally defined in the Incentive Plans, will be deemed to take place on the occurrence of any of the following events: (i) a merger or consolidation of the Company with one or more other corporations as a result of which the holders of the outstanding capital stock of the Company entitled to vote in elections of directors (“Voting Power”) of the Company immediately prior to such merger or consolidation hold less than 50 percent of the Voting Power of the surviving or resulting corporation; (ii) a transfer of 30 percent of the Voting Power, or a substantial portion of the property, of the Company other than to an entity of which the Company owns at least 50 percent of the Voting Power; or (iii) during any period of 24 months, the persons who at the beginning of such 24-month period were directors of the Company cease for any reason to constitute at least a majority of the Board of Directors of the Company. Pursuant to the award agreements for performance cash awards granted in fiscal 2022 and 2023 and the PS award granted in fiscal 2024, upon an involuntary termination of employment within one year following a Change in Control, the NEO is entitled to accelerated vesting on a pro rata basis, where performance is assumed to be at the Target level and the proration is based on the period worked during the performance period.
Mr. Brinker entered into a change in control agreement with the Company on June 4, 2021, which contains separate Change in Control provisions. The definition of Change in Control generally has the same meaning as in the Incentive Plan described above. If at any time during the 24 months after a Change in Control occurs Mr. Brinker’s employment were terminated without “Cause,” or if Mr. Brinker were to terminate the agreement for “Good Reason” during the same time period, the Company is obligated to:
| • | pay to Mr. Brinker an amount equal to two and one-half times his base salary; |
| • | pay to Mr. Brinker an amount equal to two and one-half times his Target bonus for the current fiscal year; and |
| • | if Mr. Brinker elects COBRA coverage with Modine, the Company shall pay his full COBRA premium for eighteen (18) months following his termination of employment. |
The Company’s obligation to provide the foregoing benefits is subject to Mr. Brinker’s execution of a full release of any claims against Modine.
The Company has also entered into a Change in Control Agreement and Termination Agreement with Mr. Lucareli and certain other key employees. The definition of Change in Control generally has the same meaning as in the Incentive Plan described above and the definitions of Good Cause and Good Reason generally have the same meanings as “Cause” and “Good Reason,” respectively, in Mr. Brinker’s employment agreement described above. For Mr. Lucareli, in the event of a Change in Control, if employment of the employee is terminated by the Company for any reason other than Good Cause, or terminated by the employee for Good Reason within 24 months after the Change in Control occurs, or for any reason during the 13th month after the Change in Control, the Company is obligated to pay to Mr. Lucareli an amount equal to two times the greater of (i) the sum of his then current base salary and Target bonus, or (ii) his five year average base salary and actual bonus, plus a pro rata portion of his Target bonus for the year of his termination, continue to provide coverage under applicable welfare plans (or the equivalent) for a period of two years, and pay a Supplemental Defined Contribution Benefit for a period of two years.
As described in the Compensation Discussion and Analysis section of the Company’s fiscal 2011 proxy statement, the HCC Committee determined that no substantive changes would be made to any of the existing Change in Control Agreements that were in place with the Company’s employees prior to 2009. At the same time, the HCC Committee determined that any future agreements with employees which provide for benefits upon a change in control will not provide for excise tax gross ups and any benefits following a change in control under such future agreements would only be payable upon the employee’s involuntary termination other than for Cause or Good Cause or the employee’s voluntary termination for Good Reason.
The Change in Control provisions of the Severance Plan govern the benefits that Mr. McGinnis, Mr. Peace, and Mr. Agen each would be eligible to receive following a Change in Control. The definition of Change in Control under the Severance Plan generally has the same meaning as in the Incentive Plan described above and the definition of Good Reason generally has the same meaning as in Mr. Brinker’s employment agreement described above. In the event of a Change in Control, the Severance Plan provides that if employment is terminated by the Company for any reason other than Cause, or terminated by the NEO for Good Reason within 12 months after the Change in Control occurs, the Company is obligated to provide the following benefits to the terminated NEO: (i) a payment equal to two (2) times his annual base salary at the time of termination, (ii) a payment equal to two (2) times the NEO’s target award under the MIP for the fiscal year in progress at the time of her/his termination, and (iii) eighteen (18) months of Company-paid COBRA continuation coverage if the NEO elects such coverage. “Cause” is defined under the Severance Plan to include the following: (a) engagement in an act of dishonesty constituting a felony that results or is intended to result directly or indirectly in gain or personal enrichment at the expense of Modine; (b) disclosure of confidential information of Modine that results in a demonstrable injury to Modine; or (c) engagement in a willful and continued failure to perform substantially one’s duties on behalf of Modine or to comply with Modine’s Code of Ethics and Business Conduct.
The below table sets forth the potential payments upon termination of employment or change in control for each of the NEOs. if such events had occurred on March 31, 2024, the last day of fiscal 2024. For purposes of the calculations, it is assumed that Company matching contributions to the 401(k) Retirement Plan and Deferred Compensation Plan would be 4.5 percent of base salary for future calendar years.
Potential Payments Upon Termination of Employment or Change in Control Table
| Name |
Cash Payment ($) |
Accelerated Vesting of Equity and Performance Cash ($)(1) |
Retirement Plan Benefits: Pension Plan ($) |
Perquisites and Continued Benefits ($) |
Total ($) |
| Neil D. Brinker | |||||
| Death | 0 | $26,219,300.41 | NA | NA | $26,219,300.41 |
| Disability | (2) | $26,219,300.41 | NA | (2) | $26,219,300.41 |
| Involuntary Termination | $2,100,000.00 | $0.00 | NA | NA | $2,100,000.00 |
| Termination if Change in Control | $5,789,062.50 (4) | $21,690,364.05 | NA | $36,776.70 (3) | $27,516,203.25 |
| Change in Control (no termination) | NA | NA | NA | NA | NA |
| Michael B. Lucareli | |||||
| Death | 0 | $16,638,884.55 | $78,859 | NA | $16,717,743.55 |
| Disability | (2) | $16,638,884.55 | $165,054 | (2) | $16,803,938.55 |
| Involuntary Termination | $630,000.00 (5) | 0 | $165,054 | $23,035.92 (6) | $818,089.92 |
| Termination if Change in Control | $2,647,968.75 (7) | $15,031,386.04 | $165,054 | $108,047.84 (8) | $17,952,456.63 |
| Change in Control (no termination) | NA | NA | NA | NA | NA |
| Eric S. McGinnis | |||||
| Death | 0 | $4,580,900.14 | NA | NA | $4,580,900.14 |
| Disability | (2) | $4,580,900.14 | NA | (2) | $4,580,900.14 |
| Involuntary Termination | $500,000.00 (5) | $0.00 | NA | $22,286.40 (6) | $522,286.40 |
| Termination if Change in Control | $1,681,800.00 (10) | $3,911,876.63 | NA | $33,429.60 (3) | $5,627,106.23 |
| Change in Control (no termination) | NA | NA | NA | NA | NA |
| Adrian I. Peace | |||||
| Death | 0 | $4,580,900.14 | NA | NA | $4,580,900.14 |
| Disability | (2) | $4,580,900.14 | NA | (2) | $4,580,900.14 |
| Involuntary Termination | $500,000.00 (5) | $0.00 | NA | $7,241.64 (6) | $507,241.64 |
| Termination if Change in Control | $1,681,800.00 (10) | $3,765,378.63 | NA | $10,862.46 (3) | $5,458,041.09 |
| Change in Control (no termination) | NA | NA | NA | NA | NA |
| Brian J. Agen | |||||
| Death | 0 | $5,651,978.61 | $57,919.00 | NA | $5,709,897.61 |
| Disability | (2) | $5,651,978.61 | $121,227.00 | (2) | $5,773,205.61 |
| Involuntary Termination | $420,000.00 (5) | $0.00 | $121,227.00 | $24,517.80 (6) | $565,744.80 |
| Termination if Change in Control | $1,374,462.50 (9) | $5,041,225.94 | $121,227.00 | $36,776.70 (3) | $6,573,692.14 |
| Change in Control (no termination) | NA | NA | NA | NA | NA |
| (1) | Amounts represent the vesting of RSU awards, certain performance cash awards, PS awards and the spread value of the stock options at the closing stock price of $95.19 on March 28, 2024 (the last trading day of fiscal 2024). In addition, a prorated portion of the performance cash and PS awards (based on the period worked during each performance period as of March 31, 2024) is illustrated in the events of a change in control termination of employment or termination of employment due to death or permanent disability. In the event of a change in control termination of employment, the pro rata vesting of performance cash and PS awards is illustrated at the Target level of performance for all awards. In the case of death or permanent disability, the pro rata vesting of performance cash and PS awards is illustrated at actual performance of 132% of Target for fiscal 2022 awards, 200% of Target for fiscal 2023 awards, and 200% of Target for fiscal 2024 awards (the current projected achievement). |
| (2) | Paid in accordance with plans available to all salaried employees. |
| (3) | Amount consists of COBRA continuation coverage for eighteen months. |
| (4) | Amount is two and one-half times Base Salary and Target Bonus for fiscal 2024. |
| (5) | Amount is equal to Base Salary. |
| (6) | Amount consists of COBRA continuation coverage for one year. |
| (7) | Amount is equal to (i) two times Base Salary and Target Bonus for fiscal 2024, plus (ii) a pro rata Target Bonus for fiscal 2024. |
| (8) | Amount consists of $51,348 for two years of welfare plan benefits (or the equivalent); and $56,700 for two years of Company matching contributions to the 401(k) Retirement Plan and Deferred Compensation Plan. |
| (9) | Amount is equal to two times Base Salary and Target Bonus for fiscal 2024. |
CEO PAY RATIO
As a result of the rules adopted by the SEC pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), we are providing disclosure regarding the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Brinker as the Company’s Chief Executive Officer. The CEO Pay Ratio included in this information is a reasonable estimate calculated in accordance with Item 402(u) of Regulation S-K.
When we calculated our median employee for fiscal 2024, we used our fiscal year end (March 31, 2024) as the measurement date, as of which date we employed in total, including contractors, approximately 12,700 individuals worldwide. In determining the employee population from which we identified the median employee, we excluded the 265 employees located in India and 329 employees located in Serbia. Additionally, we excluded 46 employees, across various countries, who had no earnings for fiscal 2024 due to their hire date or termination date falling near the start or end of the fiscal year. The median employee is a Setup & Operate employee based in our Grenada, Mississippi facility.
For each of the individuals in our employee population, total annual compensation was calculated by compiling total wages, which included base salary, plus any overtime, shift premiums and cash allowances, actually paid to each member of our workforce (including full-time, part-time, seasonal and temporary employees), other than our CEO. When identifying the median employee, consistent with Item 402(u) of Regulation S-K, we included adjustments for annualizing the pay for any full-time and part-time employees who were employed by us for only part of the year.
Based on the foregoing, the median of the annual total compensation of the Company’s calculated employee population (other than Mr. Brinker) was approximately $38,210 for fiscal 2024. Mr. Brinker’s total annual compensation, as reflected in the Summary Compensation Table, was $8,505,827. This yields a CEO Pay Ratio of 1:223.
PAY VERSUS PERFORMANCE
Modine and the HCC Committee strive for alignment between executive compensation and company performance, which we expect will enhance shareholder return over the long-term. This pay-for-performance philosophy is reflected in the design of the compensation program that uses a mix of cash and equity vehicles plus incentives that are tied to strong financial and operational performance measures.
Pay versus Performance Table
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K under the Securities Act, we are providing the following information about the relationship between Compensation Actually Paid” (“CAP”) to our CEOs, or principal executive officers (“PEOs”), and our other NEOs as compared to the Company’s total shareholder return (TSR), the TSR of our selected peer group, our GAAP net income, and our Company-selected performance measure, Adjusted EBITDA. For further information concerning the Company’s performance-based approach to executive compensation and how the Company aligns executive compensation with the Company’s performance, refer to the Compensation Discussion and Analysis of this proxy statement.
2024 Pay vs. Performance Table
| Summary Compensation Table Total for First PEO (1) | Summary Compensation Table Total for Second PEO (2) | Summary Compensation Table Total for Third PEO (3) | Compensation Actually Paid to First PEO (1)(4) | Compensation Actually Paid to Second PEO (2)(4) | Compensation Actually Paid to Third PEO (3)(4) | Average Summary Compensation Table Total for Other NEOs (5) | Average Compensation Actually Paid to Other NEOs (4)(5) | Value of Initial Fixed $100 Investment Based On: | Net Income ($MM) (7) | Adjusted EBITDA ($MM) (8) | ||
| Year | MOD TSR (6) | Peer Group TSR (6) | ||||||||||
| 2024 | $ | N/A | N/A | $ | N/A | N/A | $ | $ | $ | $ | $ | $ |
| 2023 | $ | N/A | N/A | $ | N/A | N/A | $ | $ | $ | $ | $ | $ |
| 2022 | $ | N/A | N/A | $ | N/A | N/A | $ | $ | $ | $ | $ | $ |
| 2021 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ($ | $ |
| (1) | “First PEO” reflects compensation for Modine’s current CEO, |
| (2) | “Second PEO” reflects compensation for |
| (3) | “Third PEO” reflects compensation for Modine’s former CEO, |
| (4) | CAP reflects the SEC methodology, with adjustments for calculating CAP from Summary Compensation Table (“SCT”) values provided in the table below. |
| (5) | NEOs used for the average non-CEO NEO for each fiscal year are as follows: |
| − | 2024: Michael Lucareli, Eric McGinnis, Adrian Peace and Brian Agen. |
| − | 2023: Michael Lucareli, Eric McGinnis, Sylvia Stein and Brian Agen. |
| − | 2022: Michael Lucareli, Eric McGinnis, Sylvia Stein, Brian Agen, Matthew McBurney, and Joel Casterton. |
| − | 2021: Sylvia Stein, Matthew McBurney, Joel Casterton, and Scott Bowser. Mr. Lucareli was not included in this year’s average as he served as interim CEO during this year. |
| (6) | Cumulative TSR is measured as of a beginning date of April 1, 2020 (i.e., March 31, 2020, stock price is the base date for calculation). Peer group TSR for all years reflects values for the S&P MidCap 400 Industrials Index, the same benchmark used in our 2024 annual report on Form 10-K; this is changed from the S&P SmallCap Industrials Index used in last year’s disclosure. In 2024, based upon the Company’s higher market capitalization as compared with the prior year, the Company determined the S&P MidCap 400 Industrials Index was more representative of its business. Had we used the values for the S&P SmallCap 600 Industrials Index for peer group TSR, the values would have been: 2021 = $ |
| (7) | Net Income reflects net earnings (loss) attributable to Modine, as disclosed in our financial statements. |
| (8) |
Adjustments to Calculate Compensation Actually Paid
| Pension Benefits | Equity Awards | |||||||||||
| Year | Executive | SCT Total | Deduct SCT Change In Pension Value | Add Pension Service Cost | Deduct SCT Stock & Option Awards | Add Year-End Fair Value of Unvested Equity Granted in Year | Add Fair Value Of Equity Vested and Granted in Year | Add Change in Fair Value of Unvested Awards Granted in Prior Years | Add Change in Fair Value of Vested Equity Granted in Prior Years | Deduct Fair Value of Awards Not Meeting Vesting Conditions | Add Dividends Paid on Unvested Equity | Total CAP (1) |
| 2024 | First PEO (Brinker) | $ | NA | $ | ($ | $ | $ | $ | $ | $ | $ | $ |
| Avg. Non-PEO NEO | $ | ($ | $ | ($ | $ | $ | $ | $ | $ | $ | $ | |
| 2023 | First PEO (Brinker) | $ | N/A | $ | ($ | $ | $ | $ | $ | $ | $ | $ |
| Avg. Non-PEO NEO | $ | $ | $ | ($ | $ | $ | $ | $ | $ | $ | $ | |
| 2022 | First PEO (Brinker) | $ | N/A | $ | ($ | $ | $ | ($ | ($ | $ | $ | $ |
| Avg. Non-PEO NEO | $ | $ | $ | ($ | $ | $ | ($ | ($ | ($ | $ | $ | |
| 2021 | First PEO (Brinker) | $ | N/A | $ | ($ | $ | $ | $ | $ | $ | $ | $ |
| Second PEO (Lucareli) | $ | ($ | $ | ($ | $ | $ | $ | $ | $ | $ | $ | |
| Third PEO (Burke) | $ | N/A | $ | $ | $ | $ | $ | $ | ($ | $ | $ | |
| Avg. Non-PEO NEO | $ | ($ | $ | ($ | $ | $ | $ | $ | ($ | $ | $ | |
| (1) | Columns may not sum due to rounding. |
Relationship Between Compensation Actually Paid (CAP) and Performance Measures
The Pay versus Performance table above and the charts below illustrate the following:
| ◾ | CAP to our PEOs (i.e., CEOs) and average NEOs has generally tracked with our TSR performance – CAP has declined in years where TSR has declined, and CAP has increased in years of positive TSR. This alignment reflects the design choices of our compensation program that include a mix of equity incentives and cash incentives tied to key financial performance indicators, which then translate in our market performance. Additionally, CAP values reflect changes in the value of executives’ outstanding equity holdings that fluctuate with changes in our stock price. |
| ◾ | CAP has also generally tracked with our Adjusted EBITDA, moving directionally together year-over-year. This is influenced by the use of Adjusted EBITDA as a performance measure in our incentive program, and the measure being a key performance measure influencing the value of our stock. Conversely, CAP has not always moved in alignment with Net Income due to the measure’s significant fluctuations as a result of accounting requirements. |
| ◾ | Modine’s TSR has significantly outperformed the Pay versus Performance comparator group, the S&P 600 Industrials Index, over the 4-year period as well as over the latest year. |
|
CAP vs. Modine TSR and Peer Group TSR (1)
|
| (1) | Peer Group TSR reflects values for the S&P MidCap 400 Industrials Index |
| CAP vs. Modine Net Income and Adjusted EBITDA
|
Tabular List Metrics
The table below lists our most important performance measures used to link “Compensation Actually Paid” for our NEOs to company performance over the fiscal year ending March 31,2024. These measures are used to determine payouts for our annual incentive plan, our long-term performance cash plan, and our long-term performance share plan. For more information on our incentive plan measures and goals, refer to the Compensation Discussion and Analysis section of this proxy statement. The performance measures included in this table are not ranked by relative importance.
Most Important Metrics
ITEM 2 – ADVISORY APPROVAL OF THE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION
As required pursuant to Section 14A of the Exchange Act, the Company annually seeks the advisory vote of its shareholders on its executive compensation program and asks that you support the compensation of the Company’s NEOs as disclosed in the Compensation Discussion and Analysis section and accompanying tables contained in this proxy statement.
The HCC Committee and the Company are committed to paying for performance and ensuring that the executive compensation plans of the Company drive value. This commitment is reflected in the Company’s executive compensation program, which is designed to balance short- and long-term considerations while rewarding management in a way that reflects the Company’s performance over time.
This proposal, commonly known as a “Say on Pay” proposal, gives you the opportunity to indicate your support or lack of support for the Company’s fiscal 2024 pay practices and programs for the NEOs through the following resolution:
RESOLVED, that the compensation paid to the Company’s NEOs, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.
This vote is not for or against a particular item of compensation but rather is with regard to the executive compensation program, as a whole, for the NEOs. This shareholder vote is advisory and is, therefore, not binding on the Board of Directors. The Board of Directors will, however, take the outcome of this vote into account when determining NEO compensation for future years.
The Board of Directors recommends a vote “FOR” approval of the compensation of the Company’s NEOs.
Vote Required for Approval
Approval of the advisory vote supporting the Company’s executive compensation policies and procedures for its NEOs requires the affirmative vote of a majority of the votes cast thereon, provided a quorum is present. Because abstentions and broker non-votes are not considered votes cast, they will have no effect on the vote.
ITEM 3 – RATIFICATION OF THE APPOINTMENT OF THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has appointed KPMG LLP (“KPMG”) as the Company’s independent registered public accounting firm for the fiscal year ending March 31, 2025, to audit the consolidated financial statements of the Company. Before the Audit Committee selected KPMG, it carefully considered the qualifications of the firm, including their performance in the prior year and their reputation for integrity and for competence in the fields of accounting and auditing. Services provided to the Company and its subsidiaries by KPMG in fiscal 2024 and 2023 are described under Independent Auditors’ Fees for Fiscal 2024 and 2023 below.
If the shareholders do not ratify the appointment of KPMG, the selection of our independent registered public accounting firm will be reconsidered by the Audit Committee. If, prior to the Annual Meeting, KPMG declines to act or its engagement is otherwise discontinued by the Audit Committee, the Audit Committee will appoint another independent registered public accounting firm whose engagement for any period subsequent to the meeting will be subject to ratification by the shareholders at the 2024 Annual Meeting of Shareholders.
Representatives of KPMG are expected to be in attendance at the 2024 Annual Meeting of Shareholders. They will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
The Board of Directors recommends a vote “FOR” ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm.
Vote Required for Approval
Approval of this proposal requires the affirmative vote of a majority of the votes cast on the proposal, provided a quorum is present. Because abstentions and broker non-votes are not considered votes cast, they will not have an effect on the vote.
Change in Registered Public Accounting Firm
On August 16, 2022, following a competitive request-for-proposal process, the Audit Committee approved the engagement of KPMG as the Company’s independent registered public accounting firm for the fiscal year ending March 31, 2023, and dismissed PwC as the Company’s independent registered public accounting firm, in each case, effective on that date.
The reports of PwC on the consolidated financial statements of the Company for the fiscal years ended March 31, 2022, and 2021 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles.
During the fiscal years ended March 31, 2022 and 2021, and during the subsequent interim periods through August 16, 2022, there were no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosures, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of PwC, would have caused PwC to make reference thereto in its reports on the financial statements of the Company for such years, and there were no “reportable events” as defined under Item 304(a)(1)(v) of Regulation S-K.
During the fiscal years ended March 31, 2022 and 2021, and during the subsequent interim periods through August 16, 2022, neither the Company, nor anyone on its behalf, consulted KPMG regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the financial statements of the Company, and neither a written report nor oral advice was provided to the Company that KPMG concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue; or (ii) any matter that was the subject of a “disagreement” (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a “reportable event” (as described in Item 304(a)(1)(v) of Regulation S-K).
INDEPENDENT AUDITORS’ FEES FOR FISCAL 2024 AND 2023
The following table represents fees for professional audit services rendered by KPMG for the fiscal years ended March 31, 2024 and 2023, and fees billed for other services rendered by KPMG during those periods.
| (In thousands) | Fiscal 2024 | Fiscal 2023 | |
| Audit Fees: (a) | $2,142 | $1,796 | |
| Audit-Related Fees: (b) | $11 | $0 | |
| Tax Fees: (c) | $148 | $138 | |
| All Other Fees: | $0 | $0 | |
| Total | $2,301 | $1,934 |
| (a) | Audit Fees: Fees for professional services performed by KPMG for (1) the audit of the Company’s annual consolidated financial statements included in the Company’s annual report on Form 10-K and review of financial statements included in the Company’s quarterly reports on Form 10-Q; (2) the audit of the Company’s internal control over financial reporting; and (3) services that are normally provided in connection with statutory and regulatory filings or engagements. |
| (b) | Audit-Related Fees: Fees for professional services performed by KPMG that are reasonably related to the performance of the audit. The audit-related fees in fiscal 2024 related to a compliance audit required under local international regulations. |
| (c) | Tax Fees: Fees for professional services performed by KPMG with respect to tax compliance, tax advice, and tax planning. This may include preparation of returns for the Company and its consolidated subsidiaries, refund claims, payment planning and tax audit assistance. |
Pre-Approval Policy
The Audit Committee pre-approves all audit services and permitted non-audit services, including all fees and terms, to be performed for the Company by its independent registered public accounting firm. Alternatively, the Audit Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting. Non-audit services are reviewed and pre-approved by project at the beginning of each fiscal year. Descriptions of each project are provided to the Audit Committee. Any additional non-audit services contemplated by the Company after the beginning of the fiscal year are submitted to the Audit Committee for pre-approval prior to engaging the independent registered public accounting firm to perform any services. The Audit Committee is routinely informed as to the non-audit services actually provided by the independent registered public accounting firm pursuant to the pre-approved projects. All of the fees paid to the independent registered public accounting firm in the fiscal years ended March 31, 2024 and March 31, 2023 were approved in advance by the Audit Committee.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors consists of four members, each of whom has been determined by the Board to be sufficiently experienced, financially literate and independent in accordance with the applicable NYSE listing standards. Ms. Harper, the Chairperson of the Audit Committee, Mr. Wilson and Mr. Wulfsohn qualify as audit committee financial experts within the meaning of the SEC rules.
The Audit Committee operates under a written charter adopted by the Board of Directors. Under its charter, the Audit Committee’s purpose is to assist the Board of Directors in overseeing:
| • | The integrity of the Company’s financial statements; |
| • | The internal control and disclosure control systems of the Company; |
| • | The independent registered public accounting firm’s qualifications and independence; |
| • | The performance of the Company’s internal audit function and independent registered public accounting firm; and |
| • | The implementation and effectiveness of the Company’s programs to promote ethics and compliance with its legal and regulatory requirements, and the preparation of disclosures required by the SEC relative to the Audit Committee. |
The Audit Committee is responsible for appointing and overseeing the work of the Company’s independent registered public accounting firm for the purpose of preparing and issuing an audit report and performing related work, and for discussing with the independent registered public accounting firm appropriate staffing and compensation. It is also the responsibility of the Audit Committee to ensure the rotation of the lead audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law, or more frequently if the Audit Committee may deem necessary.
In determining whether to reappoint KPMG as the Company’s independent registered public accounting firm to audit the consolidated financial statements of the Company for the fiscal year ending March 31, 2025, the Audit Committee considered the qualifications of the firm, including their performance in the prior year and their reputation for integrity and for competence in the fields of accounting and auditing. Each year, members of the Audit Committee prepare written evaluations of KPMG, and the evaluations are considered as part of the reappointment process for the following year, along with input from members of executive management and the head of the Company’s Internal Audit department regarding their views of and experiences with KPMG in its capacity as the Company’s independent registered public accounting firm.
The Audit Committee discussed and approved KPMG’s compensation for its work as the Company’s independent registered public accounting firm based on a number of factors. These factors included the review of a fee proposal presented by KPMG describing the background of the relationship, the proposed scope of audit, and circumstances distinguishing KPMG’s work in fiscal 2024 from its proposed fiscal 2025 role. The Audit Committee also received input from management regarding its work experience with the KPMG audit team and the reasonableness and market competitiveness of KPMG’s fee proposal.
In addition, the Audit Committee is charged under its charter with a wide range of responsibilities and authority, including, among others:
| • | Retaining, to the extent it deems necessary or appropriate, and with appropriate funding provided by the Company, independent legal, accounting or other advisors, or other services or tools as it deems necessary or appropriate in carrying out its duties; |
| • | Pre-approval of all audit and permitted non-audit services (including the fees and terms thereof) to be performed by the independent auditor; |
| • | Oversight of management’s implementation of systems of internal controls, including review of policies relating to legal and regulatory compliance, ethics and conflicts of interest; |
| • | Review of the activities and recommendations of the Company’s internal auditing program; |
| • | Monitoring the preparation of quarterly and annual financial reports by the Company’s management, including discussions with management and the Company’s independent registered public accounting firm about draft annual financial statements and key accounting and reporting matters; |
| • | Monitoring and reviewing the Company’s earnings releases with management and the Company’s independent registered public accounting firm; |
| • | Evaluating the qualifications, performance and independence of the independent auditor and the lead partner of the independent audit team, including considering whether the auditor’s quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor’s independence, and taking into account the opinions of management and internal auditors, and present its conclusions with respect to the independent auditor to the Board; |
| • | Reviewing the independent registered public accounting firm’s quality control program and any material control issues; |
| • | Annually reviewing management’s programs to monitor compliance with the Company’s Code of Ethics; |
| • | Annually reviewing with management the assumptions and disclosures related to the defined benefit and post-employment benefit plans; |
| • | Reviewing with management at least semi-annually the status, policies and procedures relating to Company common stock held in any such plan; and |
| • | Review and approve the Company’s initiatives, metrics, tracking and disclosures concerning environmental and sustainability measures in connection with environmental, social and governance (ESG) reporting, and monitor the Company’s progress with respect to such initiatives and metrics. |
The Audit Committee met eight times during the fiscal year ended March 31, 2024. The Audit Committee has an appropriate number of meetings to ensure that it devotes appropriate attention to all of its responsibilities. The Audit Committee’s meetings include, whenever appropriate, executive sessions with the Company’s independent registered public accounting firm and with the Company’s internal auditors and compliance personnel, in each case without any other member of the Company’s management being present.
In overseeing the preparation of the Company’s financial statements, the Audit Committee met with both management and the Company’s independent registered public accounting firm to review and discuss all financial statements, including the Company’s audited financial statements, prior to their issuance, and to discuss significant accounting issues. Management advised the Audit Committee that all financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee has discussed with KPMG the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC.
With respect to the Company’s independent registered public accounting firm, the Audit Committee, among other things, discussed with KPMG matters relating to its independence, after receiving the written disclosures and the letter from KPMG required by the applicable requirements of the PCAOB.
On the basis of these reviews and discussions, the Audit Committee recommended to the Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024, for filing with the SEC.
In performing all of the functions described above, the Audit Committee acts only in an oversight capacity. The Audit Committee completes its review of the matters described above prior to the public announcements of financial results. In its oversight role, the Audit Committee relies on the work and assurances of the Company’s management, which has the primary responsibility for the Company’s financial statements and its report on the effectiveness of the Company’s internal control over financial reporting, and of the Company’s independent registered public accounting firm, who, in their report, express an opinion on the Company’s annual financial statements and on the effectiveness of the Company’s internal control over financial reporting.
THE AUDIT COMMITTEE
Katherine C. Harper, Chair
Christopher W. Patterson
David J. Wilson
William A. Wulfsohn
DELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Exchange Act requires the Company’s executive officers and directors, and certain persons who beneficially own more than 10 percent of a registered class of the Company’s equity securities to file reports of ownership and changes in ownership of equity securities of Modine and derivative securities of Modine with the SEC. Those “reporting persons” are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
Based upon a review of those filings and other information furnished by the reporting persons, we believe that all of the Company’s reporting persons complied during the fiscal year ended March 31, 2024 with the reporting requirements of Section 16(a) of the Exchange Act.
ADDITIONAL MATTERS
The Board of Directors is not aware of any other matters that will be presented for action at the 2024 Annual Meeting of Shareholders. Should any additional matters properly come before the meeting, the persons named in the proxy will vote on those matters in accordance with their best judgment.
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Why are you holding a virtual meeting instead of a physical meeting?
In light of significant improvements in technology and changes in applicable law in recent years, we have again determined to hold an entirely virtual meeting. We believe that hosting a virtual meeting will enable more of our shareholders to attend and participate in the meeting.
Why did I receive a separate Notice of Internet Availability of Proxy Materials this year?
In order to be efficient with the Company’s resources, and in keeping with our commitment to sustainable practices, we have chosen to taken advantage of SEC rules that allow us to make our proxy statement and other Annual Meeting materials available to you on the Internet.
How can I access the proxy statement and other Annual Meeting Materials on the Internet?
On or about July 1, 2024, we began mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) to our shareholders, advising them that this proxy statement and our annual report on Form 10-K for the fiscal year ended March 31, 2024, along with voting instructions, may be accessed over the Internet at www.proxyvote.com. You may access these materials and vote your shares over the Internet, or request that a printed copy of the materials be sent to you.
How do I receive a copy of the printed proxy statement and Annual Meeting materials?
If you want to receive a paper or e-mail copy of these materials, you must make the request over the Internet at www.proxyvote.com, by calling toll free 1-800-579-1639, or by sending an e-mail to sendmaterial@proxyvote.com. There is no charge to you for requesting a paper or e-mail copy. If you would like to receive a paper or e-mail copy of the Annual Meeting materials, please make your request on or before August 1, 2024, in order to facilitate timely delivery. If you previously elected to receive our proxy materials electronically, these materials will continue to be sent via e-mail unless you change your election.
How may I access the virtual Annual Meeting?
You may access the Annual Meeting by visiting www.virtualshareholdermeeting.com/MOD2024 where you will be able to attend and participate online, vote your shares electronically, and submit questions prior to and during the meeting.
How do I ask questions during the Annual Meeting?
You may submit questions during the Annual Meeting by visiting www.virtualshareholdermeeting.com/MOD2024, where you will enter the 16-digit control number found on
the proxy card or voter instruction form provided to you with this proxy statement. Shareholders who do not have a 16-digit control number should contact their bank or broker to obtain one.
Shareholders are able to submit questions for the Annual Meeting’s question and answer session during the meeting through www.virtualshareholdermeeting.com/MOD2024. Shareholders who have been provided or obtained a 16-digit control number may submit a question during the meeting at www.virtualshareholdermeeting.com/MOD2024 after logging in with that control number.
Shareholder questions must be pertinent to matters properly before the meeting. The Annual Meeting is not to be used as a forum to present views that are not directly related to the business before the Annual Meeting. Recording of the Annual Meeting is prohibited. A webcast playback will be available at www.virtualshareholdermeeting.com/MOD2024 24 hours after the completion of the meeting.
Any additional information regarding the rules and procedures for participating in the Annual Meeting will be available during the meeting on the meeting website. We encourage you to access the Annual Meeting before it begins. Online check-in will be available at www.virtualshareholdermeeting.com/MOD2024 approximately 15 minutes before the Annual Meeting starts on August 15, 2024. If you encounter any difficulties accessing the virtual Annual Meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual meeting login page.
Who may vote?
You may vote your shares of common stock if our records show that you owned the shares at the close of business on June 17, 2024, the record date for the Annual Meeting. A total of 52,394,723 shares of common stock were outstanding as of the record date and entitled to vote at the Annual Meeting. You are entitled to one vote for each share of common stock you own.
How do I vote?
You may vote your shares electronically via the Internet, electronically at the Annual Meeting, by telephone or by a properly appointed proxy.
Registered Holders
Registered holders may vote prior to the Annual Meeting (i) by completing and mailing the proxy card, or (ii) electronically via the Internet, or (iii) by calling Broadridge Financial Solutions, Inc. Specific instructions for each voting option are set forth on the Notice or the proxy card. You may also vote electronically at the Annual Meeting.
The Internet and telephone voting procedures on the Notice or the proxy card to vote your shares prior to the Annual Meeting are for your convenience and reduce costs for Modine. The procedures are designed to authenticate your identity, allow you to give voting instructions and confirm that those instructions have been recorded properly.
Street Name Holders
If your shares are registered in the name of a bank or brokerage firm, you may be eligible to vote your shares electronically via the Internet or by telephone. If your bank or brokerage firm is participating in the Broadridge Investor Communication Services’ program, your voting form will provide you with instructions.
401(k) Retirement Plan Participants
If you are a participant in one of Modine’s 401(k) Retirement Plans, you will receive a proxy on which you may indicate your voting instructions for the shares held in your plan account. The trustee for the plan, Equiniti Trust Company, will vote your shares as you direct. If a proxy is not returned for shares held in a plan, the trustee generally will vote those shares in the same proportion that all shares in the plan for which voting instructions have been received are voted, although it may do otherwise in its discretion.
May I vote during the Annual Meeting?
Although we encourage you to vote via the Internet, complete and return the proxy card or vote by telephone prior to the Annual Meeting to ensure that your vote is counted, you may attend the Annual Meeting and vote your shares electronically at the Annual Meeting.
What does the Board of Directors recommend?
The Board of Directors’ recommendation is included with the description of each item in this proxy statement. In summary, the Board recommends a vote:
“FOR” election of each of the Company-nominated directors for terms expiring in 2027 (see Item 1); and
“FOR” approval of the Company’s NEO compensation (see Item 2); and
“FOR” ratification of the Company’s independent registered public accounting firm (see Item 3).
Unless you give other instructions, the persons named as proxies will vote “FOR” Items 1, 2, and 3.
What if other matters come up at the Annual Meeting?
To our knowledge, the matters described in this proxy statement are the only matters that will be subject to a vote at the Annual Meeting. If other matters are properly presented, the persons appointed as proxies will vote your shares on those other matters in accordance with their best judgment.
May I change my vote after I appoint a proxy?
Yes, you may change your vote by revoking your proxy. You may revoke your proxy by:
| • | submitting a new proxy; |
| • | giving written notice before the Annual Meeting to the Company’s Secretary stating that you are revoking your previous proxy; |
| • | revoking your proxy in the same manner you initially submitted it – by mail, Internet, or the telephone; or |
| • | virtually attending the Annual Meeting and voting your shares electronically at the Annual Meeting. |
If you decide to vote your shares electronically at the Annual Meeting, we prefer that you first revoke your prior proxy in the same way you initially submitted it – that is, by mail, Internet or the telephone. The presence at the Annual Meeting of a shareholder who has made an effective proxy appointment does not, by itself, constitute a revocation of a proxy appointment.
How are votes counted?
A majority of the shares entitled to vote, represented in person or by proxy, will constitute a quorum at the Annual Meeting. Abstentions and broker non-votes are counted as present for purposes of determining a quorum.
Voting on the Election of Directors (Item 1)
Directors in an uncontested election are elected by a majority of the votes cast by holders of shares of the Company’s common stock entitled to vote in the election at a shareholder meeting at which a quorum is present. Because abstentions and broker non-votes are not considered votes cast, they will not have an effect on the vote.
Advisory Vote on NEO Compensation (Item 2)
Approval of the advisory resolution on the Company’s NEO compensation policies and procedures for its NEOs requires the affirmative vote of a majority of the votes cast, provided a quorum is present. Because abstentions and broker non-votes are not considered votes cast, they will not have an effect on the vote.
Voting on the Ratification of Independent Registered Public Accounting Firm (Item 3)
Approval of this proposal requires the affirmative vote of a majority of the votes cast, provided a quorum is present. Because abstentions and broker non-votes are not considered votes cast, they will not have an effect on the vote.
Who will count the votes?
Broadridge Financial Solutions, Inc., an independent tabulator, will count the votes under the supervision of the Inspectors of Election appointed by the Board of Directors.
Shareholder Proposals for 2025 Annual Meeting
Shareholder proposals for the 2025 Annual Meeting of Shareholders of the Company must be received no later than March 3, 2025 at the Company’s principal executive office, Modine Manufacturing Company, 1500 DeKoven Avenue, Racine, Wisconsin 53403-2552, directed to the attention of the Company’s Secretary, in order to be considered for inclusion in next year’s Annual Meeting proxy material under the proxy rules of the SEC. Written notice of shareholder proposals and director nominations for the 2025 Annual Meeting of Shareholders of the Company that are not intended to be considered for inclusion in next year’s annual meeting proxy material (shareholder proposals submitted outside the processes of Rule 14a-8) must be received no earlier than April 17, 2025 and no later than May 17, 2025 at such offices, directed to the attention of the Company’s Secretary, and must be submitted in accordance with the requirements of the Bylaws of the Company.
In addition to satisfying the foregoing requirements under our Bylaws, to comply with the universal proxy rules for the Annual Meeting of Shareholders, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that complies with Rule 14a-19 under the Exchange Act by June 16, 2025.
Who pays for this proxy solicitation?
Modine pays for the proxy solicitation. Directors, officers and employees of Modine, who will receive no additional compensation for their services, may solicit proxies in person or by mail, telephone, facsimile transmission or
other means. Brokers, banks, nominees, fiduciaries and other custodians will be requested to solicit beneficial owners of shares and will be reimbursed for their expenses.
How may I help reduce mailing costs?
Eligible shareholders who have more than one account in their name or the same address as other shareholders may authorize us to discontinue mailings of multiple annual reports and proxy statements. Most shareholders can also view future annual reports and proxy statements on the Internet rather than receiving paper copies in the mail. See the next two questions and answers and your proxy card for more information.
What happens if multiple shareholders share the same address?
We have adopted a procedure called “householding,” so we are sending only one Notice to shareholders with the same last name at a single address, unless we have received instructions to do otherwise. Householding reduces our printing and postage costs. If a shareholder of record wishes to receive a separate copy of a proxy statement or annual report in the future, he or she may tell us so by providing written notice to the Company’s Secretary, Modine Manufacturing Company, 1500 DeKoven Avenue, Racine, WI 53403-2552, or oral notice by calling 262-636-1517. Upon written or oral request, the Company will promptly send a copy of either document.
Shareholders of record sharing the same address and receiving multiple copies of the Notice may request householding by contacting us in the same manner. If you own your shares in street name, you may request householding by contacting the entity in whose name the shares are held.
APPENDIX A: NON-GAAP RECONCILIATIONS
Adjusted EBITDA, adjusted EBITDA margin, and free cash flow (which are defined below) as used in this proxy statement are not measures that are defined in generally accepted accounting principles (GAAP). These non-GAAP measures are used by management as performance measures to evaluate the Company’s overall financial performance and liquidity. These measures are not, and should not be viewed as, substitutes for the applicable GAAP measures, and may be different from similarly-titled measures used by other companies.
Definition – Adjusted EBITDA and adjusted EBITDA margin
The Company defines adjusted EBITDA as net earnings excluding interest expense, the provision or benefit for income taxes, depreciation and amortization expenses, other income and expense, restructuring expenses, acquisition and integration costs, and certain other gains or charges. Adjusted EBITDA margin represents adjusted EBITDA as a percentage of net sales. The Company believes that adjusted EBITDA and adjusted EBITDA margin provide relevant measures of profitability and earnings power. The Company views these financial metrics as being useful in assessing operating performance from period to period by excluding certain items that it believes are not representative of its core business. Adjusted EBITDA, when calculated for the business segments, is defined as GAAP operating income excluding depreciation and amortization expenses, restructuring expenses, and certain other gains or charges.
Definition – Free cash flow
Free cash flow represents net cash provided by operating activities less expenditures for property, plant and equipment. Free cash flow presents cash generated from operations during the period that is available for strategic capital decisions.
Reconciliations for the non-GAAP financial measures referenced within this proxy statement to the most directly comparable GAAP measures are set forth below:
Modine Manufacturing Company
Adjusted EBITDA (unaudited)
(In millions)
| Twelve months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net earnings | $ | 163.4 | $ | 153.6 | ||||
| Interest expense | 24.1 | 20.7 | ||||||
| Provision (benefit) for income taxes | 51.2 | (28.3 | ) | |||||
| Depreciation and amortization expense | 56.1 | 54.5 | ||||||
| Other expense - net | 2.0 | 4.4 | ||||||
| Restructuring expenses(a) | 15.0 | 5.0 | ||||||
| Gain on sale of assets(b) | (4.0 | ) | - | |||||
| Acquisition and integration costs(c) | 4.1 | - | ||||||
| Environmental charges(d) | 2.4 | 2.2 | ||||||
| Adjusted EBITDA | $ | 314.3 | $ | 212.1 | ||||
| (a) | Restructuring expenses primarily consist of employee severance expenses related to targeted headcount reductions and equipment transfer costs. The restructuring expenses recorded during fiscal 2024 primarily relate to severance expenses associated with the pending closure of a technical service center in Europe within the Performance Technologies segment. |
| (b) | The Company’s sale of three automotive businesses based in Germany closed on October 31, 2023. As a result of the sale, the Company recorded a $4.0 million gain on sale at Corporate during fiscal 2024. |
| (c) | On March 1, 2024, the Company acquired Scott Springfield Manufacturing, a leading provider of air handling units for the data center, telecommunications, healthcare, and aerospace markets. In addition, the Company purchased liquid immersion cooling technology from TMGcore, Inc. in January 2024. Acquisition and integration costs in fiscal 2024, recorded as SG&A expenses at Corporate, primarily include fees for i) transaction advisors, ii) legal, accounting, and other professional services, and iii) incremental costs directly associated with integration activities. In addition, the adjustment includes $1.6 million, also recorded at Corporate, for the impact of an inventory purchase accounting adjustment. The Company wrote up acquired inventory to its estimated fair value and is charging the write-up to cost of sales as the underlying inventory is sold. |
| (d) | Environmental charges, including related legal costs, are recorded as SG&A expenses at Corporate and relate to a previously-owned U.S. manufacturing facility. |
Modine Manufacturing Company
Segment adjusted financial results (unaudited)
(In millions)
| Twelve months ended March 31, 2024 | Twelve months ended March 31, 2023 | |||||||||||||||||||||||||||||||
| Climate Solutions |
Performance Technologies |
Corporate and eliminations | Total | Climate Solutions |
Performance Technologies |
Corporate and eliminations | Total | |||||||||||||||||||||||||
| Operating income | $ | 166.9 | $ | 123.4 | $ | (49.6 | ) | $ | 240.7 | $ | 124.1 | $ | 65.6 | $ | (39.3 | ) | $ | 150.4 | ||||||||||||||
| Depreciation and amortization expense | 23.5 | 31.7 | 0.9 | 56.1 | 21.7 | 31.8 | 1.0 | 54.5 | ||||||||||||||||||||||||
| Restructuring expenses(a) | 3.0 | 12.0 | - | 15.0 | 2.2 | 2.8 | - | 5.0 | ||||||||||||||||||||||||
| Gain on sale of assets(a) | - | - | (4.0 | ) | (4.0 | ) | - | - | - | - | ||||||||||||||||||||||
| Acquisition and integration costs(a) | - | - | 4.1 | 4.1 | - | - | - | - | ||||||||||||||||||||||||
| Environmental charges(a) | - | - | 2.4 | 2.4 | - | - | 2.2 | 2.2 | ||||||||||||||||||||||||
| Adjusted EBITDA | $ | 193.4 | $ | 167.1 | $ | (46.2 | ) | $ | 314.3 | $ | 148.0 | $ | 100.2 | $ | (36.1 | ) | $ | 212.1 | ||||||||||||||
| Net sales | $ | 1,054.6 | $ | 1,378.0 | $ | (24.8 | ) | $ | 2,407.8 | $ | 1,011.9 | $ | 1,316.2 | $ | (30.2 | ) | $ | 2,297.9 | ||||||||||||||
| Adjusted EBITDA margin | 18.3 | % | 12.1 | % | 13.1 | % | 14.6 | % | 7.6 | % | 9.2 | % | ||||||||||||||||||||
(a) See the Adjusted EBITDA reconciliation on the previous page for information on restructuring expenses and other adjustments.
Free cash flow (unaudited)
(In millions)
| Twelve months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net cash provided by operating activities | $ | 214.6 | $ | 107.5 | ||||
| Expenditures for property, plant and equipment | (87.7 | ) | (50.7 | ) | ||||
| Free cash flow | $ | 126.9 | $ | 56.8 | ||||
Notice
of Meeting
and Proxy
Statement
| 2024 |
Annual Meeting of Shareholders |
|
MODINE MANUFACTURING COMPANY C/O CORPORATE SECRETARY 1500 DEKOVEN AVENUE RACINE, WI 53403-2552
|
VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on August 14, 2024 for shares held directly and by 11:59 p.m. Eastern Time on August 10, 2024 for shares held in a Plan. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting - Go to www.virtualshareholdermeeting.com/MOD2024
You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on August 14, 2024 for shares held directly and by 11:59 p.m. Eastern Time on August 10, 2024 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. If you vote by phone or Internet, please do not mail your proxy card. |
| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||
| V53526-P14142 | KEEP THIS PORTION FOR YOUR RECORDS | |
| THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
MODINE MANUFACTURING COMPANY
| The Board of Directors recommends you vote FOR the following proposals: | |
| 1. | Election of Directors | |||||
| Nominees: | For | Against | Abstain | |||
| 1a. | Dr. Suresh V. Garimella | ☐ | ☐ | ☐ | ||
| 1b. | Mr. Christopher W. Patterson | ☐ | ☐ | ☐ | ||
| 1c. | Ms. Christine Y. Yan | ☐ | ☐ | ☐ | ||
| For | Against | Abstain | |||
| 2. | Advisory approval of the Company's named executive officer compensation. | ☐ | ☐ | ☐ | |
| 3. | Ratification of the appointment of the Company's independent registered public accounting firm. | ☐ | ☐ | ☐ | |
| NOTE: This Proxy, when properly executed, will be voted as directed or, if no direction is given, will be voted FOR the election of ALL nominees listed above and FOR Items 2 and 3. | |
| Please sign exactly as your name(s) appear(s) on the proxy card. If held in joint tenancy, all persons must sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy. | |
| Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on August 15, 2024 – the Notice and Proxy Statement and Annual Report are available at www.proxyvote.com and www.modine.com.
V53527-P14142
|
Annual Meeting of Shareholders 8:00 AM CDT This proxy is solicited by the Board of Directors
If you consented to access your proxy information electronically, you may view materials and/or vote these shares by going to www.proxyvote.com.
The undersigned hereby appoints Michael B. Lucareli and Kathleen T. Powers, or either of them, with full power of substitution to each, as attorneys and proxies to represent the undersigned at the 2024 Annual Meeting of Shareholders of Modine Manufacturing Company to be held at www.virtualshareholdermeeting.com/MOD2024 on August 15, 2024 at 8:00 A.M. CDT, and at any adjournment(s) thereof, and to vote all shares of common stock that the undersigned may be entitled to vote at said meeting as directed with respect to the matters as set forth in the Proxy Statement. If any other business should properly come before the meeting and/or at any adjournment(s) thereof, the shares represented by the proxy and voting instructions solicited thereby may be discretionarily voted on such business in accordance with the best judgment of the proxy holders.
Modine 401(k) Retirement Savings Plan-Voting Instructions to Trustee, Equiniti Trust Company, for the Annual Meeting of Shareholders. If you are a participant in the Modine 401(k) Retirement Savings Plan, you have the right to give instructions to the Trustee as to the voting of shares of Modine Manufacturing Company common stock held in the plan account. The voting of those shares will occur at the 2024 Annual Meeting of Shareholders or at any adjournment(s) thereof. In this regard, please indicate your voting choices on the card, sign and date it, and return this card promptly in the enclosed postage-paid envelope or follow the instructions to record your vote by telephone or Internet. If your instructions are not received at least five days prior to the meeting, or if you do not respond, shares held in an account for which a proxy is not received will generally be voted by the Trustee, Equiniti Trust Company, in the same proportion that all shares in the plan for which voting instructions have been received are voted although it may do otherwise in its discretion.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD.
Continued and to be signed on reverse side.
|