10-Q - MOD - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 1-1373

MODINE MANUFACTURING COMPANY

(Exact name of registrant as specified in its charter)

Wisconsin	39-0482000
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1500 DeKoven Avenue, Racine, Wisconsin	53403
---	---
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (262) 636-1200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.625 par value	MOD	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐	Accelerated Filer ☑
Non-accelerated Filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

The number of shares outstanding of the registrant’s common stock, $0.625 par value, was 51,753,022 at July 30, 2021.

MODINE MANUFACTURING COMPANY

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	24
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	34
Item 4. Controls and Procedures.	34
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	35
Item 5. Other Information	35
Item 6. Exhibits.	36
SIGNATURE	37

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

MODINE MANUFACTURING COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

For the three months ended June 30, 2021 and 2020

(In millions, except per share amounts)

(Unaudited)

	Three months ended June 30,
	2021			2020
Net sales	$	494.6		$	347.8
Cost of sales		421.4			301.7
Gross profit		73.2			46.1
Selling, general and administrative expenses		59.4			44.7
Restructuring expenses		0.3			4.6
Impairment charges (reversals) – net		(1.8	)		-
Loss on sale of assets		6.6			-
Operating income (loss)		8.7			(3.2	)
Interest expense		(4.2	)		(5.4	)
Other income – net		0.2			-
Earnings (loss) before income taxes		4.7			(8.6	)
(Provision) benefit for income taxes		(1.9	)		0.2
Net earnings (loss)		2.8			(8.4	)
Net earnings attributable to noncontrolling interest		(0.5	)		(0.2	)
Net earnings (loss) attributable to Modine	$	2.3		$	(8.6	)
Net earnings (loss) per share attributable to Modine shareholders:
Basic	$	0.04		$	(0.17	)
Diluted	$	0.04		$	(0.17	)
Weighted-average shares outstanding:
Basic		51.8			50.9
Diluted		52.5			50.9

The notes to condensed consolidated financial statements are an integral part of these statements.

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MODINE MANUFACTURING COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three months ended June 30, 2021 and 2020

(In millions)

(Unaudited)


			2020
Net earnings (loss)	2.8		$	(8.4	)
Other comprehensive income (loss):
Foreign currency translation	5.2			5.4
Defined benefit plans, net of income taxes of 0 and 0.4 million	3.4			1.2
Cash flow hedges, net of income taxes of 0 and 0.3 million	(0.4	)		1.0
Total other comprehensive income	8.2			7.6
Comprehensive income (loss)	11.0			(0.8	)
Comprehensive income attributable to noncontrolling interest	(0.7	)		(0.3	)
Comprehensive income (loss) attributable to Modine	10.3		$	(1.1	)

All values are in US Dollars.

The notes to condensed consolidated financial statements are an integral part of these statements.

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MODINE MANUFACTURING COMPANY

CONSOLIDATED BALANCE SHEETS

June 30, 2021 and March 31, 2021

(In millions, except per share amounts)

(Unaudited)

			March 31, 2021
ASSETS
Cash and cash equivalents	49.0		$	37.8
Trade accounts receivable – net	293.7			267.9
Inventories	229.1			195.6
Assets held for sale	76.1			107.6
Other current assets	43.1			35.9
Total current assets	691.0			644.8
Property, plant and equipment – net	271.6			269.9
Intangible assets – net	99.0			100.6
Goodwill	171.4			170.7
Deferred income taxes	28.1			24.5
Other noncurrent assets	65.8			66.2
Total assets	1,326.9		$	1,276.7
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term debt	0.6		$	1.4
Long-term debt – current portion	21.9			21.9
Accounts payable	260.0			233.9
Accrued compensation and employee benefits	68.7			66.5
Liabilities held for sale	62.5			103.3
Other current liabilities	54.3			42.2
Total current liabilities	468.0			469.2
Long-term debt	348.6			311.2
Deferred income taxes	6.2			5.9
Pensions	56.6			58.6
Other noncurrent liabilities	80.3			75.7
Total liabilities	959.7			920.6
Commitments and contingencies (see Note 18)
Shareholders’ equity:
Preferred stock, 0.025 par value, authorized 16.0 million shares, issued - none	-			-
Common stock, 0.625 par value, authorized 80.0 million shares, issued 54.5 million and 54.3 million shares	34.0			33.9
Additional paid-in capital	256.9			255.0
Retained earnings	261.5			259.2
Accumulated other comprehensive loss	(153.2	)		(161.2	)
Treasury stock, at cost, 2.7 million shares	(39.2	)		(38.2	)
Total Modine shareholders’ equity	360.0			348.7
Noncontrolling interest	7.2			7.4
Total equity	367.2			356.1
Total liabilities and equity	1,326.9		$	1,276.7

All values are in US Dollars.

The notes to condensed consolidated financial statements are an integral part of these statements.

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MODINE MANUFACTURING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended June 30, 2021 and 2020

(In millions)

(Unaudited)

	Three months ended June 30,
	2021			2020
Cash flows from operating activities:
Net earnings (loss)	$	2.8		$	(8.4	)
Adjustments to reconcile net earnings (loss) to net cash (used for) provided by operating activities:
Depreciation and amortization		13.5			18.6
Impairment charges (reversals) – net		(1.8	)		-
Loss on sale of assets		6.6			-
Stock-based compensation expense		1.2			0.7
Deferred income taxes		(3.1	)		(5.9	)
Other – net		0.9			1.3
Changes in operating assets and liabilities:
Trade accounts receivable		(4.9	)		21.7
Inventories		(26.7	)		(1.5	)
Accounts payable		9.2			(34.1	)
Other assets and liabilities		(7.8	)		19.9
Net cash (used for) provided by operating activities		(10.1	)		12.3
Cash flows from investing activities:
Expenditures for property, plant and equipment		(11.4	)		(9.1	)
Proceeds from (payments for) disposition of assets		(5.7	)		0.6
Other – net		1.6			-
Net cash used for investing activities		(15.5	)		(8.5	)
Cash flows from financing activities:
Borrowings of debt		97.5			8.2
Repayments of debt		(62.5	)		(17.1	)
Borrowings on bank overdraft facilities – net		5.7			12.3
Financing fees paid		(0.2	)		(0.8	)
Dividend paid to noncontrolling interest		(0.9	)		-
Other – net		(0.2	)		(0.8	)
Net cash provided by financing activities		39.4			1.8
Effect of exchange rate changes on cash		0.4			0.6
Net increase in cash, cash equivalents, restricted cash and cash held for sale		14.2			6.2
Cash, cash equivalents, restricted cash and cash held for sale – beginning of period		46.1			71.3
Cash, cash equivalents, restricted cash and cash held for sale – end of period	$	60.3		$	77.5

The notes to condensed consolidated financial statements are an integral part of these statements.

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MODINE MANUFACTURING COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the three months ended June 30, 2021 and 2020

(In millions)

(Unaudited)

									_________________
	Common stock				Additional		Retained		Accumulated other			Treasury stock,			Non-<br><br>controlling
	Shares		Amount		paid-in capital		earnings		comprehensive loss			at cost			interest			Total
Balance, March 31, 2021		54.3	$	33.9	$	255.0	$	259.2	$	(161.2	)	$	(38.2	)	$	7.4		$	356.1
Net earnings		-		-		-		2.3		-			-			0.5			2.8
Other comprehensive income		-		-		-		-		8.0			-			0.2			8.2
Stock options and awards		0.2		0.1		0.7		-		-			-			-			0.8
Purchase of treasury stock		-		-		-		-		-			(1.0	)		-			(1.0	)
Stock-based compensation expense		-		-		1.2		-		-			-			-			1.2
Dividend paid to noncontrolling interest		-		-		-		-		-			-			(0.9	)		(0.9	)
Balance, June 30, 2021		54.5	$	34.0	$	256.9	$	261.5	$	(153.2	)	$	(39.2	)	$	7.2		$	367.2
	Common stock				Additional			Retained			Accumulated other			Treasury stock,			Non-<br><br>controlling
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Shares		Amount		paid-in capital			earnings			comprehensive loss			at cost			interest		Total
Balance, March 31, 2020		53.4	$	33.3	$	245.1		$	469.9		$	(223.3	)	$	(37.1	)	$	5.7	$	493.6
Net (loss) earnings		-		-		-			(8.6	)		-			-			0.2		(8.4	)
Other comprehensive income		-		-		-			-			7.5			-			0.1		7.6
Stock options and awards		0.3		0.2		(0.2	)		-			-			-			-		-
Purchase of treasury stock		-		-		-			-			-			(0.8	)		-		(0.8	)
Stock-based compensation expense		-		-		0.7			-			-			-			-		0.7
Balance, June 30, 2020		53.7	$	33.5	$	245.6		$	461.3		$	(215.8	)	$	(37.9	)	$	6.0	$	492.7

The notes to condensed consolidated financial statements are an integral part of these statements.

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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

Note 1: General

The accompanying unaudited condensed consolidated financial statements of Modine Manufacturing Company (“Modine” or the “Company”) were prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes necessary for a comprehensive presentation of financial position, results of operations and cash flows required by GAAP for complete financial statements. The financial statements include all normal recurring adjustments that are, in the opinion of management, necessary for a fair statement of results for the interim periods. Results for the first three months of fiscal 2022 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the consolidated financial statements and related notes in Modine’s Annual Report on Form 10-K for the year ended March 31, 2021.

Disposition of Air-cooled Automotive Business

On April 30, 2021, the Company sold its air-cooled automotive business to Schmid Metall GmbH. As a result of this transaction, the Company recorded a loss of $6.6 million during the first quarter of fiscal 2022, which included the write-off of $1.7 million of net actuarial losses related to the business’s pension plan. The Company reported this loss within the loss on sale of assets line on the consolidated statement of operations. Upon transaction closing, $5.9 million of cash within the business transferred to the buyer. The finalization of and payment for the purchase price adjustment for net working capital and certain other items, as defined by the sale agreement, is pending. While the Company does not expect a material adjustment, it is possible that the loss on sale may increase when the purchase price adjustment is finalized. Prior to the disposition, the Company reported the financial results of this business within the Automotive segment. The air-cooled automotive business’s net sales were $63.0 million in fiscal 2021.

Pending Disposition of Liquid-cooled Automotive Business

The Company has agreed to sell its liquid-cooled automotive business to Dana Incorporated. In connection with the pending sale, the Company classified the assets and liabilities expected to convey to the buyer as held for sale on the June 30, 2021 consolidated balance sheet. See Note 2 for additional information.

Note 2: Assets Held for Sale

Liquid-cooled Automotive Business

On November 2, 2020, the Company signed a definitive agreement to sell its liquid-cooled automotive business to Dana Incorporated, subject to the receipt of governmental and third-party approvals and satisfaction of other closing conditions. During the first quarter of fiscal 2022, the Company and the buyer withdrew the regulatory filing for approval of the transaction in Germany. The Company and the buyer subsequently resubmitted a plan containing a modified sale perimeter for regulatory approval. In accordance with the modified sale perimeter, certain manufacturing operations will no longer convey to the buyer. In addition, the Company expects to inject additional cash into the business to counterbalance the impact of the perimeter modifications on the economic value of the pending transaction. The Company and the buyer are currently working to amend the definitive sale agreement to reflect the transaction modifications. The Company expects to record a loss on sale of approximately $30.0 million to $50.0 million upon transaction completion. The loss on sale recorded will be impacted by the final negotiated terms with the buyer and other impacts such as changes in working capital, costs to sell and net actuarial losses in accumulated other comprehensive loss related to the disposal group’s pension plans. It is possible that the loss on sale recorded could differ materially from the Company’s estimate.

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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

The Company has classified and reported the assets and liabilities within the modified sale perimeter as held for sale on the June 30, 2021 consolidated balance sheet. The Company believes it is probable that the sale will be completed within one year of the balance sheet date. The Company ceased depreciating the long-lived assets within the disposal group beginning on November 2, 2020 when it first met the criteria for held for sale classification. The Company has determined that this disposal group does not qualify as a discontinued operation for reporting under U.S. GAAP. As part of its discontinued operations assessment, the Company considered anticipated future sales to automotive and light vehicle customers as well as sales to other vehicular customers with similar product offerings and using similar heat-transfer technology within the Heavy Duty Equipment and Automotive segments. In addition, the Company will continue to operate in the same major geographical areas as it does today.

In fiscal 2021, upon classification as held for sale, the Company compared the disposal group’s carrying value with its fair value, less costs to sell. Based upon the selling price for the transaction, the Company estimated implied losses in excess of the respective carrying value of the disposal group’s long-lived assets. The disposal groups’ long-lived assets consist entirely of property, plant and equipment and right-of-use lease assets. As a result, the Company recorded non-cash impairment charges of $138.3 million in fiscal 2021 to reduce the net carrying value of the disposal group’s long-lived assets to zero as of March 31, 2021.

The Company reassesses the liquid-cooled disposal group’s fair value less costs to sell at each reporting period that it is held for sale until the transaction is completed. As a result of this evaluation for the first quarter of fiscal 2022, the Company recorded $5.3 million of additional non-cash impairment charges related to the Automotive segment’s held for sale assets. The impairment charges reduced the net carrying value of property, plant and equipment additions during the quarter to zero as of June 30, 2021.

In connection with the modifications to the sale perimeter, the Company determined that the manufacturing operations that will not be sold to the buyer no longer meet the requirements to be classified as held for sale. U.S. GAAP requires companies to measure asset groups that revert back to held and used classification at the lower of their (i) carrying value, as if held for sale classification had not been met; or (ii) fair value at the date of the decision not to sell. As noted above, the long-lived assets within these businesses were previously impaired when they were classified as held for sale. As a result of its evaluation, the Company reversed $7.4 million of impairment charges to adjust the long-lived asset groups to their estimated fair value. For purposes of its evaluation, the Company estimated the fair value of the businesses primarily using the income approach, which is a valuation technique that focuses on future cash flows anticipated to be generated by a business. The Company’s determination of fair value involved judgement and the use of significant estimates and assumptions, including assumptions regarding future revenue projections and operating profit margins, risk-adjusted discount rates, business trends and market conditions. The fair value measurements of these businesses are categorized as Level 3 within the fair value hierarchy. Refer to Note 4 for the definition of a Level 3 fair value measurement.

Previously-closed CIS Facility

During the first quarter of fiscal 2022, the Company signed a definitive agreement to sell a previously-closed manufacturing facility in the U.S. As a result, the Company recorded an impairment charge of $0.3 million within the Commercial and Industrial Solutions (“CIS”) segment to write-down the property to fair value less costs to sell. During July 2021, the sale was completed and the Company received net cash proceeds of $0.7 million.

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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

Assets and Liabilities Held for Sale

As of June 30, 2021, the Company presented the assets and liabilities within the modified sale perimeter of the liquid-cooled automotive business and the previously-closed CIS facility as held for sale on its consolidated balance sheet.

As of March 31, 2021, the Company presented the assets and liabilities of the liquid- and air-cooled automotive businesses as held for sale. See Note 1 for additional information regarding the sale of the air-cooled automotive business, which was completed on April 30, 2021.

The major classes of assets and liabilities held for sale were as follows:

	June 30, 2021			March 31, 2021
ASSETS
Cash and cash equivalents	$	11.1		$	8.0
Trade accounts receivable - net		31.7			54.4
Inventories		14.1			24.7
Other current assets		12.9			12.8
Property, plant and equipment - net		115.9			164.0
Other noncurrent assets		7.0			8.8
Impairment of carrying value		(116.6	)		(165.1	)
Total assets held for sale	$	76.1		$	107.6
LIABILITIES
Short-term debt	$	10.1		$	5.0
Accounts payable		24.1			46.3
Accrued compensation and employee benefits		8.0			15.5
Other current liabilities		6.2			12.2
Pensions		10.2			17.8
Other noncurrent liabilities		3.9			6.5
Total liabilities held for sale	$	62.5		$	103.3

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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

Note 3: Revenue Recognition

Disaggregation of Revenue

The table below presents revenue for each of the Company’s business segments, Building HVAC Systems (“BHVAC”), CIS, Heavy Duty Equipment (“HDE”) and Automotive. Each segment’s revenue is disaggregated by primary end market, by geographic location and based upon the timing of revenue recognition and includes inter-segment sales.

	Three months ended June 30, 2021										Three months ended June 30, 2020
	BHVAC		CIS		HDE		Automotive		Segment<br><br>Total		BHVAC		CIS		HDE		Automotive		Segment<br><br>Total
Primary end market:
Commercial HVAC&R	$	42.7	$	129.0	$	-	$	-	$	171.7	$	32.5	$	93.9	$	-	$	-	$	126.4
Data center cooling		16.7		9.6		-		-		26.3		15.0		13.8		-		-		28.8
Industrial cooling		-		17.4		-		-		17.4		-		11.9		-		-		11.9
Commercial vehicle		-		-		79.2		4.1		83.3		-		-		46.3		2.1		48.4
Off-highway		-		-		79.9		1.3		81.2		-		-		53.4		0.7		54.1
Automotive and light vehicle		-		-		20.4		79.5		99.9		-		-		13.0		54.4		67.4
Other		0.5		3.2		22.3		1.3		27.3		0.1		2.9		10.8		4.9		18.7
Net sales	$	59.9	$	159.2	$	201.8	$	86.2	$	507.1	$	47.6	$	122.5	$	123.5	$	62.1	$	355.7
Geographic location:
Americas	$	31.5	$	81.8	$	119.6	$	9.3	$	242.2	$	26.0	$	59.9	$	67.9	$	7.5	$	161.3
Europe		28.4		70.9		41.2		63.5		204.0		21.6		50.9		24.1		39.6		136.2
Asia		-		6.5		41.0		13.4		60.9		-		11.7		31.5		15.0		58.2
Net sales	$	59.9	$	159.2	$	201.8	$	86.2	$	507.1	$	47.6	$	122.5	$	123.5	$	62.1	$	355.7
Timing of revenue recognition:
Products transferred at a point in time	$	59.9	$	145.0	$	193.4	$	86.2	$	484.5	$	47.6	$	109.3	$	121.3	$	62.1	$	340.3
Products transferred over time		-		14.2		8.4		-		22.6		-		13.2		2.2		-		15.4
Net sales	$	59.9	$	159.2	$	201.8	$	86.2	$	507.1	$	47.6	$	122.5	$	123.5	$	62.1	$	355.7

Contract Balances

Contract assets and contract liabilities from contracts with customers were as follows:

	June 30, 2021		March 31, 2021
Contract assets	$	8.0	$	5.7
Contract liabilities		7.2		5.6

Contract assets, included within other current assets in the consolidated balance sheets, primarily consist of capitalized costs related to customer-owned tooling contracts, wherein the customer has guaranteed reimbursement, and assets recorded for revenue recognized over time, which represent the Company’s rights to consideration for work completed but not yet billed. The $2.3 million increase in contract assets during the first three months of fiscal 2022 primarily resulted from an increase in capitalized costs related to customer-owned tooling contracts and, to a lesser extent, an increase in contracts assets for revenue recognized over time.

Contract liabilities, included within other current liabilities in the consolidated balance sheets, consist of payments received in advance of satisfying performance obligations under customer contracts, including contracts for customer-owned tooling. The $1.6 million increase in contract liabilities during the first three months of fiscal 2022 was primarily related to customer contracts for which payment was received in advance of the Company’s satisfaction of performance obligations.

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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

Note 4: Fair Value Measurements

Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Fair value measurements are classified under the following hierarchy:

•	Level 1 – Quoted prices for identical instruments in active markets.
•	Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.
---	---
•	Level 3 – Model-derived valuations in which one or more significant inputs are not observable.
---	---

When available, the Company uses quoted market prices to determine fair value and classifies such measurements as Level 1. In some cases, where market prices are not available, the Company uses observable market-based inputs to calculate fair value, in which case the measurements are classified as Level 2. If quoted or observable market prices are not available, the Company determines fair value based upon valuation models that use, where possible, market-based data such as interest rates, yield curves or currency rates. These measurements are classified as Level 3.

The carrying values of cash, cash equivalents, restricted cash, short-term investments, trade accounts receivable, accounts payable, and short-term debt approximate fair value due to the short-term nature of these instruments. In addition, the Company assesses the fair value of a disposal group for each reporting period it is held for sale. See Note 2 for additional information regarding assets held for sale. The fair value of the Company’s long-term debt is disclosed in Note 17.

The Company holds investments in deferred compensation trusts to fund obligations under certain non-qualified deferred compensation plans. The Company records the fair value of these investments within other noncurrent assets on its consolidated balance sheets. The Company classifies money market investments held by the trusts within Level 2 of the valuation hierarchy. The Company classifies all other investments held by the trusts within Level 1 of the valuation hierarchy, as it uses quoted market prices to determine the investments’ fair value. The Company’s deferred compensation obligations, which are recorded as other noncurrent liabilities, are recorded at the fair values of the investments held by the trust. At June 30, 2021 and March 31, 2021, the fair values of the investments and obligations for the Company’s deferred compensation plans each totaled $3.0 million and $2.8 million, respectively.

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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

Note 5: Pensions

Pension cost included the following components:

	Three months ended<br><br>June 30,
	2021			2020
Service cost	$	0.1		$	0.1
Interest cost		1.8			2.0
Expected return on plan assets		(3.2	)		(2.9	)
Amortization of unrecognized net loss		1.7			1.7
Net periodic benefit cost	$	0.4		$	0.9

During the three months ended June 30, 2021, the Company contributed $2.8 million to its U.S. pension plans. In connection with the American Rescue Plan Act of 2021, employer funding requirements have been reduced. During the remainder of fiscal 2022, the Company expects to contribute approximately $2.0 million to its U.S. pension plans.

Note 6: Stock-Based Compensation

The Company’s stock-based incentive programs consist of the following: (1) a long-term incentive plan (“LTIP”) for officers and other executives that consists of stock awards, stock options, and performance-based stock awards granted for retention and performance, (2) a discretionary equity program for other management and key employees, and (3) stock awards for non-employee directors.

The Company calculates compensation expense based upon the fair value of the instruments at the time of grant and subsequently recognizes expense ratably over the respective vesting periods of the stock-based awards. The Company recognized stock-based compensation expense of $1.2 million and $0.7 million for the three months ended June 30, 2021 and 2020, respectively.

The fair value of stock-based compensation awards granted during the three months ended June 30, 2021 were as follows:

			Fair Value
	Shares		Per Award
Stock options		0.2	$	9.39
Restricted stock awards		0.2	$	17.49

In lieu of performance-based stock awards, the Company granted performance cash awards to the LTIP participants during the first quarter of fiscal 2022. The performance metrics for the cash awards are based upon a target three-year average cash flow return on invested capital and a target three-year average growth in consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”) at the end of the three-year performance period ending March 31, 2024.

In fiscal 2021, the Company granted stock-based awards to officers and other executives during the third quarter of the fiscal year.

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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

The Company used the following assumptions in determining fair value for stock options for the three months ended June 30, 2021:

Expected life of awards in years	6.1
Risk-free interest rate	1.0	%
Expected volatility of the Company’s stock	56.4	%
Expected dividend yield on the Company’s stock	0.0	%

As of June 30, 2021, unrecognized compensation expense related to non-vested stock-based compensation awards, which will be amortized over the remaining service periods, was as follows:

	Unrecognized<br><br>Compensation<br><br>Expense
Stock options	$	3.1	3.3
Restricted stock awards		8.2	3.0
Performance stock awards		0.4	0.8
Total	$	11.7	3.0

Note 7: Restructuring Activities

During the first quarter of fiscal 2022, restructuring and repositioning expenses primarily consisted of equipment transfer costs within the HDE segment and severance-related costs in the Automotive segment.

During the first quarter of fiscal 2021, the Company recorded $1.7 million of severance expenses related to plant consolidation activities in China within the CIS segment. The Company also implemented targeted headcount reductions, the most significant of which were in North America in the HDE and CIS segments.

Restructuring and repositioning expenses were as follows:

	Three months ended<br><br>June 30,
	2021		2020
Employee severance and related benefits	$	0.1	$	4.4
Other restructuring and repositioning expenses		0.2		0.2
Total	$	0.3	$	4.6

Other restructuring and repositioning expenses primarily consist of equipment transfers and plant consolidation costs.

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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

The Company accrues severance in accordance with its written plans, procedures, and relevant statutory requirements. Changes in accrued severance were as follows:

	Three months ended June 30,
	2021			2020
Beginning balance	$	4.0		$	5.0
Additions		0.1			4.4
Payments		(1.3	)		(2.6	)
Effect of exchange rate changes		0.1			0.1
Ending balance	$	2.9		$	6.9

Note 8: Other Income and Expense

Other income and expense consisted of the following:

	Three months ended<br><br>June 30,
	2021			2020
Interest income	$	-		$	0.3
Foreign currency transactions (a)		0.4			0.5
Net periodic benefit cost (b)		(0.2	)		(0.8	)
Total other income – net	$	0.2		$	-

(a)	Foreign currency transactions primarily consist of foreign currency transaction gains and losses on the re-measurement or settlement of foreign currency-denominated assets and liabilities, including intercompany loans and transactions denominated in a foreign currency, along with gains and losses on certain foreign currency exchange contracts.
(b)	Net periodic benefit cost for the Company’s pension and postretirement plans is exclusive of service cost.
---	---

Note 9: Income Taxes

The Company’s effective tax rate for the three months ended June 30, 2021 and 2020 was 40.4 percent and 2.3 percent, respectively. The effective tax rate for the first quarter of fiscal 2022 is higher than the first quarter of the prior year, primarily due to changes in the mix and amount of foreign and U.S. earnings, partially offset by an income tax benefit recorded in the first quarter of fiscal 2022 for the release of a valuation allowance in a foreign jurisdiction, as further described below.

The Company records valuation allowances against its net deferred tax assets to the extent it determines it is more likely than not that such assets will not be realized in the future. Each quarter, the Company evaluates the probability that its deferred tax assets will be realized and determines whether valuation allowances or adjustments thereto are needed. This determination involves judgement and the use of significant estimates and assumptions, including expectations of future taxable income and tax planning strategies. In addition, the Company considers the duration of statutory carryforward periods and historical financial results.

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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

Based upon the Company’s analysis as of June 30, 2021, the Company determined it was more likely than not that the deferred tax assets in a foreign jurisdiction will be realized. As a result, the need for the valuation allowance recorded thereon was eliminated and the Company recorded an income tax benefit of $4.8 million in the first quarter of fiscal 2022 upon release of the valuation allowance. The Company’s analysis included consideration of the perimeter modifications for the pending sale of the liquid-cooled automotive business and the associated reversal of $7.4 million of impairment charges during the first quarter of fiscal 2022; see Note 2 for additional information.

As of June 30, 2021, valuation allowances against deferred tax assets in the U.S. and in certain foreign jurisdictions totaled $85.8 million and $9.5 million, respectively. These totals exclude the full valuation allowances recorded for net deferred tax assets classified as held for sale. The Company will maintain the valuation allowances in each applicable tax jurisdiction until it determines it is more likely than not the deferred tax assets will be realized, thereby eliminating the need for a valuation allowance. As further discussed in Note 18, the COVID-19 pandemic has resulted in risks and uncertainties for the Company. Future events or circumstances, such as lower taxable income or unfavorable changes in the financial outlook of the Company’s operations in certain foreign jurisdictions, could necessitate the establishment of further valuation allowances.

Accounting policies for interim reporting require the Company to adjust its effective tax rate each quarter to be consistent with its estimated annual effective tax rate. Under this methodology, the Company applies its estimated annual income tax rate to its year-to-date ordinary earnings to derive its income tax provision each quarter. The Company records the tax impacts of certain significant, unusual or infrequently occurring items in the period in which they occur. The Company excluded the impact of its operations in the U.S. and certain foreign locations from the overall effective tax rate methodology and recorded them discretely based upon year-to-date results because the Company anticipates net operating losses for the full fiscal year in these jurisdictions. The Company does not anticipate a significant change in unrecognized tax benefits during the remainder of fiscal 2022.

Note 10: Earnings Per Share

The components of basic and diluted earnings per share were as follows:

	Three months ended<br><br>June 30,
	2021		2020
Net earnings (loss) attributable to Modine	$	2.3	$	(8.6	)
Weighted-average shares outstanding - basic		51.8		50.9
Effect of dilutive securities		0.7		-
Weighted-average shares outstanding - diluted		52.5		50.9
Earnings (loss) per share:
Net earnings (loss) per share - basic	$	0.04	$	(0.17	)
Net earnings (loss) per share - diluted	$	0.04	$	(0.17	)

For the three months ended June 30, 2021, the calculation of diluted earnings per share excluded 0.3 million and 0.2 million stock options and restricted stock awards, respectively, because they were anti-dilutive.

For the three months ended June 30, 2020, the calculation of diluted earnings per share excluded 1.4 million and 0.4 million stock options and restricted stock awards, respectively, because they were anti-dilutive.

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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

Note 11: Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash consisted of the following:

	June 30, 2021		March 31, 2021
Cash and cash equivalents	$	49.0	$	37.8
Restricted cash		0.1		0.1
Cash and restricted cash held for sale		11.2		8.2
Total cash, cash equivalents, restricted cash and cash held for sale	$	60.3	$	46.1

Restricted cash, which is reported within other current assets in the consolidated balance sheets, consists primarily of deposits for contractual guarantees or commitments required for rents, import and export duties, and commercial agreements.

Note 12: Inventories

Inventories consisted of the following:

	June 30, 2021		March 31, 2021
Raw materials	$	139.7	$	117.1
Work in process		46.5		38.5
Finished goods		42.9		40.0
Total inventories	$	229.1	$	195.6

Inventories in the table above exclude amounts classified as held for sale. See Note 2 for additional information.

Note 13: Property, Plant and Equipment

Property, plant and equipment, including depreciable lives, consisted of the following:

	June 30, 2021			March 31, 2021
Land	$	16.7		$	16.4
Buildings and improvements (10-40 years)		206.2			203.5
Machinery and equipment (3-15 years)		634.9			623.2
Office equipment (3-10 years)		81.6			81.3
Construction in progress		19.1			19.0
		958.5			943.4
Less: accumulated depreciation		(686.9	)		(673.5	)
Net property, plant and equipment	$	271.6		$	269.9

Property, plant and equipment in the table above excludes amounts classified as held for sale. See Note 2 for additional information.

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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

Note 14: Goodwill and Intangible Assets

Changes in the carrying amount of goodwill were as follows:

	BHVAC		CIS		Total
Goodwill, March 31, 2021	$	14.8	$	155.9	$	170.7
Effect of exchange rate changes		-		0.7		0.7
Goodwill, June 30, 2021	$	14.8	$	156.6	$	171.4

Intangible assets consisted of the following:

	June 30, 2021							March 31, 2021
	Gross<br><br>Carrying<br><br>Value		Accumulated<br><br>Amortization			Net<br><br>Intangible<br><br>Assets		Gross<br><br>Carrying<br><br>Value		Accumulated<br><br>Amortization			Net<br><br>Intangible<br><br>Assets
Customer relationships	$	63.1	$	(17.9	)	$	45.2	$	62.8	$	(16.9	)	$	45.9
Trade names		51.7		(12.1	)		39.6		51.5		(11.4	)		40.1
Acquired technology		24.0		(9.8	)		14.2		23.9		(9.3	)		14.6
Total intangible assets	$	138.8	$	(39.8	)	$	99.0	$	138.2	$	(37.6	)	$	100.6

The Company recorded amortization expense of $2.1 million for each of the three months ended June 30, 2021 and 2020. The Company estimates that it will record $6.4 million of amortization expense during the remainder of fiscal 2022 and approximately $8.0 million of annual amortization expense in fiscal 2023 through 2027.

Note 15: Product Warranties

Changes in accrued warranty costs were as follows:

	Three months ended June 30,
	2021			2020
Beginning balance	$	5.2		$	7.9
Warranties recorded at time of sale		1.4			1.1
Adjustments to pre-existing warranties		(0.2	)		-
Settlements		(0.8	)		(0.8	)
Effect of exchange rate changes		-			0.1
Ending balance	$	5.6		$	8.3

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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

Note 16: Leases

Lease Assets and Liabilities

The following table provides a summary of leases recorded on the consolidated balance sheets. The amounts exclude operating lease right of use (“ROU”) assets and liabilities, which each totaled $4.5 million and $6.1 million as of June 30, 2021 and March 31, 2021, respectively, that are classified as held for sale on the Company’s consolidated balance sheets; see Note 2 for additional information.

	Balance Sheet Location	June 30, 2021		March 31, 2021
Lease Assets
Operating lease ROU assets	Other noncurrent assets	$	53.6	$	54.1
Finance lease ROU assets (a)	Property, plant and equipment - net		8.3		8.3
Lease Liabilities
Operating lease liabilities	Other current liabilities	$	11.8	$	11.2
Operating lease liabilities	Other noncurrent liabilities		43.7		44.8
Finance lease liabilities	Long-term debt - current portion		0.4		0.4
Finance lease liabilities	Long-term debt		3.2		3.2

(a)	Finance lease ROU assets were recorded net of accumulated amortization of $2.5 million and $2.4 million as of June 30, 2021 and March 31, 2021, respectively.

Components of Lease Expense

The components of lease expense were as follows:

	Three months ended June 30,
	2021		2020
Operating lease expense (a)	$	4.6	$	4.9
Finance lease expense:
Depreciation of ROU assets		0.1		0.1
Interest on lease liabilities		-		-
Total lease expense	$	4.7	$	5.0

(a)	For the three months ended June 30, 2021 and 2020, operating lease expense included short-term lease expense of $0.8 million and $0.9 million, respectively. Variable lease expense was not significant.

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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

Note 17: Indebtedness

Long-term debt consisted of the following:

_	Fiscal year<br><br>of maturity	June 30, 2021			March 31, 2021
Term loans	2025	$	176.1		$	178.9
Revolving credit facility	2025		44.9			4.8
5.9% Senior Notes	2029		100.0			100.0
5.8% Senior Notes	2027		50.0			50.0
Other (a)			3.6			3.6
			374.6			337.3
Less: current portion			(21.9	)		(21.9	)
Less: unamortized debt issuance costs			(4.1	)		(4.2	)
Total long-term debt		$	348.6		$	311.2

(a)	Other long-term debt primarily includes finance lease obligations.

Long-term debt, including the current portion of long-term debt, matures as follows:

Fiscal Year
Remainder of 2022	$	18.5
2023		21.9
2024		21.9
2025		193.7
2026		33.8
2027 & beyond		84.8
Total	$	374.6

The Company maintains a credit agreement with a syndicate of banks that provides for a multi-currency $250.0 million revolving credit facility expiring in June 2024. In addition, this credit agreement provides for both U.S. dollar- and euro-denominated term loan facilities and shorter-duration swingline loans. Borrowings under the revolving credit, swingline and term loan facilities bear interest at a variable rate, based upon the applicable reference rate and including a margin percentage dependent upon the Company’s leverage ratio, as described below. At June 30, 2021, the weighted-average interest rates for revolving credit facility borrowings and the term loans were each 1.6 percent. Based upon the terms of the credit agreement, the Company classifies borrowings under its revolving credit and swingline facilities as long-term and short-term debt, respectively, on its consolidated balance sheets.

At June 30, 2021, the Company’s revolving credit facility borrowings totaled $44.9 million and domestic letters of credit totaled $5.7 million, resulting in available borrowings under the revolving credit facility of $199.4 million.

The Company also maintains credit agreements for its foreign subsidiaries. The outstanding short-term borrowings related to these foreign credit agreements totaled $10.7 million at June 30, 2021, of which $10.1 million was classified as held for sale. The $5.0 million of outstanding short-term foreign borrowings at March 31, 2021 were classified as held for sale. See Note 2 for additional information.

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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

Provisions in the Company’s credit agreement, Senior Note agreements, and various foreign credit agreements require the Company to maintain compliance with various covenants and include certain cross-default clauses. Under its primary debt agreements in the U.S., the Company has provided liens on substantially all domestic assets. Also, as specified in the credit agreement, the term loans may require prepayments in the event of certain asset sales. In addition, at the time of each incremental borrowing under the revolving credit facility, the Company is required to represent to the lenders that there has been no material adverse effect, as defined in the credit agreement, on its business, property, or results of operations.

The leverage ratio covenant requires the Company to limit its consolidated indebtedness, less a portion of its cash balances, both as defined by the credit agreements, to no more than three and one-quarter times consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”.) The Company is also subject to an interest expense coverage ratio covenant, which requires the Company to maintain Adjusted EBITDA of at least three times consolidated interest expense. As of June 30, 2021, the Company was in compliance with its debt covenants; its leverage ratio and interest coverage ratio were 2.0 and 10.8, respectively.

The Company estimates the fair value of long-term debt using discounted future cash flows at rates offered to the Company for similar debt instruments of comparable maturities. As of June 30, 2021 and March 31, 2021, the carrying value of the Company’s long-term debt approximated fair value, with the exception of the Senior Notes, which had an aggregate fair value of $152.8 million and $146.0 million, respectively. The fair value of the Company’s long-term debt is categorized as Level 2 within the fair value hierarchy. Refer to Note 4 for the definition of a Level 2 fair value measurement.

Note 18: Risks, Uncertainties, Contingencies and Litigation

COVID-19

The COVID-19 pandemic has broadly impacted the global economy and the Company’s key end markets, which were most severely impacted during the first quarter of fiscal 2021. In connection with local government requirements or customer shutdowns, the Company suspended production at many of its manufacturing facilities in March and April 2020. All of the temporarily-closed facilities reopened in the first or second quarter of fiscal 2021 and have generally returned to more normal production levels. However, since reopening, production at certain of our plants has been negatively affected at times by employee absences due to COVID-19. The Company is continuing to focus on protecting the health and wellbeing of its employees and the communities in which it operates, while also ensuring the continuity of its business operations and timely delivery of quality products and services to its customers. Beginning largely in April 2020 and to mitigate the negative impacts of COVID-19, the Company took actions including, but not limited to, production staffing adjustments, furloughs, shortened work weeks, and temporary salary reductions at all levels of the organization. While the Company withdrew most of the cost-saving actions in the third quarter of fiscal 2021 as production returned to more normal levels as markets recovered, it remains focused on controlling operating and administrative expenses.

The Company’s consolidated financial statements reflect estimates and assumptions made by management, including assumptions regarding the future impacts of the COVID-19 pandemic, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. While the Company believes it used appropriate estimates and assumptions to prepare the consolidated financial statements, actual amounts could differ materially and future events or circumstances could have a potential negative effect on the assumptions used. If the Company, its suppliers, or its customers experience shutdowns or other significant business disruptions associated with the COVID-19 pandemic, its ability to conduct business in the manner and on the timelines presently planned could be materially and negatively impacted, which could have a material adverse effect on the Company’s business, financial position, results of operations and cash flows.

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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

Environmental

The Company has recorded environmental investigation and remediation accruals related to soil and groundwater contamination at manufacturing facilities in the U.S., one of which the Company currently owns and operates, and at its former manufacturing facility in the Netherlands, along with accruals for lesser environmental matters at certain other facilities in the U.S. These accruals generally relate to facilities where past operations followed practices and procedures that were considered acceptable under then-existing regulations, or where the Company is a successor to the obligations of prior owners, and current laws and regulations require investigative and/or remedial work to ensure sufficient environmental compliance. In instances where a range of loss can be reasonably estimated for a probable environmental liability, but no amount within the range is a better estimate than any other amount, the Company accrues the minimum of the range. The Company’s accruals for environmental matters totaled $19.3 million and $16.0 million as of June 30, 2021 and March 31, 2021, respectively. During the first quarter of fiscal 2022, the Company increased its remediation accrual related to a former manufacturing facility in the U.S. by $3.4 million. As additional information becomes available regarding the environmental matters, the Company will re-assess the liabilities and revise the estimated accruals, if necessary. While it is possible that the ultimate environmental remediation costs may be in excess of amounts accrued, the Company believes, based upon currently available information, that the ultimate outcome of these matters, individually and in the aggregate, will not have a material adverse effect on its financial position. However, these matters are subject to inherent uncertainties, and unfavorable outcomes could occur, including significant monetary damages.

Other Litigation

In the normal course of business, the Company and its subsidiaries are named as defendants in various lawsuits and enforcement proceedings by private parties, governmental agencies and/or others in which claims are asserted against Modine. The Company believes that any additional loss in excess of amounts already accrued would not have a material effect on the Company’s consolidated balance sheet, results of operations, and cash flows. In addition, management expects that the liabilities which may ultimately result from such lawsuits or proceedings, if any, would not have a material adverse effect on the Company’s financial position.

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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

Note 19: Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss were as follows:

	Three months ended June 30, 2021
	Foreign<br><br>Currency<br><br>Translation			Defined<br><br>Benefit<br><br>Plans			Cash Flow<br><br>Hedges			Total
Beginning balance	$	(31.0	)	$	(130.8	)	$	0.6		$	(161.2	)
Other comprehensive income before reclassifications		5.0			-			0.3			5.3
Reclassifications:
Amortization of unrecognized net loss (a)		-			1.7			-			1.7
Unrecognized net pension loss in disposed business (b)		-			1.7			-			1.7
Realized gains - net (c)		-			-			(0.7	)		(0.7	)
Income taxes		-			-			-			-
Total other comprehensive income		5.0			3.4			(0.4	)		8.0
Ending balance	$	(26.0	)	$	(127.4	)	$	0.2		$	(153.2	)
	Three months ended June 30, 2020
---	---	---	---	---	---	---	---	---	---	---	---	---
	Foreign<br><br>Currency<br><br>Translation			Defined<br><br>Benefit<br><br>Plans			Cash Flow<br><br>Hedges			Total
Beginning balance	$	(61.4	)	$	(160.9	)	$	(1.0	)	$	(223.3	)
Other comprehensive income before reclassifications		5.3			-			0.8			6.1
Reclassifications:
Amortization of unrecognized net loss (a)		-			1.6			-			1.6
Realized losses - net (c)		-			-			0.5			0.5
Income taxes		-			(0.4	)		(0.3	)		(0.7	)
Total other comprehensive income		5.3			1.2			1.0			7.5
Ending balance	$	(56.1	)	$	(159.7	)	$	-		$	(215.8	)

(a)	Amounts are included in the calculation of net periodic benefit cost for the Company’s defined benefit plans, which include pension and other postretirement plans. See Note 5 for additional information about the Company’s pension plans.
(b)	As a result of the sale of the air-cooled automotive business, the Company wrote-off $1.7 million of net actuarial losses related to the disposed business’s pension plan as a component of the loss on sale recorded during the first quarter of fiscal 2022. See Note 1 for additional information.
---	---
(c)	Amounts represent net gains and losses associated with cash flow hedges that were reclassified to net earnings.
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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

Note 20: Segment Information

Effective July 1, 2021, the BHVAC segment assumed leadership of the Company’s business operation in Guadalajara, Spain, which was previously managed by and reported within the CIS segment. This organizational change is integral to the Company’s strategic initiative to align its data center businesses under the BHVAC leadership team in order to accelerate organizational efficiencies and operational improvements. The Company is focused on expanding its presence in the North American and European data center markets. Beginning for the second quarter of fiscal 2022, the Company will report the financial results of its business in Spain as part of the BHVAC segment.

The following is a summary of net sales, gross profit, operating income, and total assets by segment:

	Three months ended June 30,
	2021								2020
	External Sales		Inter-segment<br><br>Sales			Total			External Sales		Inter-segment<br><br>Sales			Total
Net sales:
BHVAC	$	59.4	$	0.5		$	59.9		$	47.4	$	0.2		$	47.6
CIS		158.2		1.0			159.2			121.3		1.2			122.5
HDE		191.9		9.9			201.8			118.3		5.2			123.5
Automotive		85.1		1.1			86.2			60.8		1.3			62.1
Segment total		494.6		12.5			507.1			347.8		7.9			355.7
Corporate and eliminations		-		(12.5	)		(12.5	)		-		(7.9	)		(7.9	)
Net sales	$	494.6	$	-		$	494.6		$	347.8	$	-		$	347.8
	Three months ended June 30,
---	---	---	---	---	---	---	---	---
	2021				2020
	_’s	% of sales			_’s	% of sales
Gross profit:
BHVAC			27.1	%			30.5	%
CIS			13.0	%			12.6	%
HDE			11.2	%			9.2	%
Automotive			15.3	%			7.7	%
Segment total			14.3	%			13.0	%
Corporate and eliminations			-				-
Gross profit			14.8	%			13.3	%

All values are in US Dollars.

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MODINE MANUFACTURING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

(unaudited)

	Three months ended June 30,
	2021			2020
Operating income:
BHVAC	$	6.8		$	7.1
CIS		6.4			-
HDE		8.9			(2.5	)
Automotive		4.2			(3.8	)
Segment total		26.3			0.8
Corporate and eliminations		(17.6	)		(4.0	)
Operating income (loss)	$	8.7		$	(3.2	)
	June 30, 2021			March 31, 2021
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Total assets:
BHVAC	$	127.6		$	110.8
CIS		633.5			609.2
HDE		443.9			438.7
Automotive		125.7			124.2
Corporate and eliminations (a)		(3.8	)		(6.2	)
Total assets	$	1,326.9		$	1,276.7

(a)	At June 30, 2021 and March 31, 2021, Corporate assets totaled $19.2 million and $17.5 million, respectively and were more than offset by eliminations for intercompany balances, including accounts receivable.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

When we use the terms “Modine,” “we,” “us,” the “Company,” or “our” in this report, we are referring to Modine Manufacturing Company. Our fiscal year ends on March 31 and, accordingly, all references to quarters refer to our fiscal quarters. The quarter ended June 30, 2021 was the first quarter of fiscal 2022.

Air-cooled Automotive Business

On April 30, 2021, we sold our air-cooled automotive business to Schmid Metall GmbH. As a result of this transaction, we recorded a loss of $6.6 million during the first quarter of fiscal 2022. The finalization of and payment for the purchase price adjustment for net working capital and certain other items, as defined by the sale agreement, are pending. While we do not expect a material adjustment, it is possible that the loss on sale may increase when the purchase price adjustment is finalized.

Liquid-cooled Automotive Business

On November 2, 2020, we signed a definitive agreement to sell our liquid-cooled automotive business to Dana Incorporated, subject to the receipt of governmental and third-party approvals and satisfaction of other closing conditions. During the first quarter of fiscal 2022, we withdrew the regulatory filing for approval of the transaction in Germany. Together with the buyer, we subsequently resubmitted a plan containing a modified sale perimeter for regulatory approval. As part of the modified perimeter, certain manufacturing operations will no longer convey to the buyer. We are currently working with the buyer to amend the definitive sale agreement to reflect the transaction modifications. We currently estimate that we will record a loss on sale of approximately $30.0 million to $50.0 million when the sale is completed. The loss on sale recorded will be impacted by the final negotiated terms with the buyer and other impacts such as changes in working capital, costs to sell and net actuarial losses in accumulated other comprehensive loss related to the disposal group’s pension plans. It is possible that the loss on sale recorded could differ materially from our estimate.

As a result of the modified sale perimeter, we reevaluated the long-lived assets within the businesses that will not be sold and reversed $7.4 million of previously-recorded impairment charges to adjust the asset groups to their estimated fair value. This impairment reversal was partially offset by $5.3 million of impairment charges related to other assets held for sale in the Automotive segment.

See Note 2 of the Notes to Condensed Consolidated Financial Statements for further information regarding the accounting impacts of this pending sale.

COVID-19

As the COVID-19 pandemic continues, both the health and overall well-being of our employees and delivering quality products and services to our customers remain our top priorities.

The COVID-19 pandemic has broadly impacted the global economy and our key end markets, which were most severely impacted during the first quarter of fiscal 2021. In an effort to mitigate the negative impacts of COVID-19 on our financial results, we implemented cost-saving actions starting in the first quarter of fiscal 2021 that primarily impacted selling, general and administrative (“SG&A”) expenses and capital expenditures. While we remain focused on controlling expenses, we withdrew most of the cost-saving actions in the third quarter of fiscal 2021 as production returned to more normal levels as markets recovered. As a result and as anticipated, compensation-related expenses, particularly SG&A expenses, were higher in the first quarter of fiscal 2022 compared with the prior year.

The full extent of the impacts of COVID-19, which will largely depend on the length and severity of the pandemic, could have a material adverse effect on our business, results of operations, and cash flows.

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First Quarter Highlights

Net sales in the first quarter of fiscal 2022 increased $146.8 million, or 42 percent, from the first quarter of fiscal 2021, primarily due to higher sales volume in each of our segments. Sales during the first quarter of the prior year were negatively impacted by the COVID-19 pandemic. Cost of sales increased $119.7 million compared with the first quarter of fiscal 2021. Gross profit increased $27.1 million and gross margin improved 150 basis points to 14.8 percent. SG&A expenses increased $14.7 million, primarily due to higher compensation-related expenses, as the prior-year benefitted from cost-saving measures implemented in response to COVID-19, which were subsequently withdrawn in the third quarter of fiscal 2021. Operating income of $8.7 million during the first quarter of fiscal 2022 represents an improvement of $11.9 million from the prior-year operating loss of $3.2 million, primarily due to higher earnings in our Heavy Duty Equipment (“HDE”), Automotive, and Commercial Industrial Solutions (“CIS”) segments, partially offset by the $6.6 million loss recorded on the sale of the air-cooled automotive business.

CONSOLIDATED RESULTS OF OPERATIONS

The following table presents our consolidated financial results on a comparative basis for the three months ended June 30, 2021 and 2020:

	Three months ended June 30,
	2021					2020
(in millions)	_’s		% of sales			_’s		% of sales
Net sales				100.0	%				100.0	%
Cost of sales				85.2	%				86.7	%
Gross profit				14.8	%				13.3	%
Selling, general and administrative expenses				12.0	%				12.9	%
Restructuring expenses				0.1	%				1.3	%
Impairment charges (reversals) – net		)		-0.4	%				-
Loss on sale of assets				1.3	%				-
Operating income (loss)				1.8	%		)		-0.9	%
Interest expense		)		-0.8	%		)		-1.6	%
Other income – net				-					-
Earnings (loss) before income taxes				1.0	%		)		-2.5	%
(Provision) benefit for income taxes		)		-0.4	%				0.1	%
Net earnings (loss)				0.6	%		)		-2.4	%

All values are in US Dollars.

First quarter net sales of $494.6 million were $146.8 million, or 42 percent, higher than the first quarter of the prior year, primarily due to higher sales volume across each of our segments and, to a lesser extent, a $23.5 million favorable impact of foreign currency exchange rates. Sales in the first quarter of the prior year were negatively impacted by the COVID-19 pandemic. Sales in the HDE, CIS, Automotive, and Building HVAC Systems (“BHVAC”) segments increased $78.3 million, $36.7 million, $24.1 million and $12.3 million, respectively.

First quarter cost of sales increased $119.7 million, or 40 percent, primarily due to higher sales volume. As a percentage of sales, cost of sales decreased 150 basis points to 85.2 percent, primarily due to the favorable impact of the higher sales volume and lower depreciation expense in the Automotive segment. We ceased depreciating the long-lived assets within the liquid- and air-cooled automotive businesses when they were classified as held for sale during fiscal 2021. These favorable drivers were partially offset by higher material costs, which negatively impacted cost of sales by approximately $13.0 million.

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As a result of higher sales and lower cost of sales as a percentage of sales, first quarter gross profit increased $27.1 million and gross margin improved 150 basis points to 14.8 percent.

First quarter SG&A expenses increased $14.7 million. The increase in SG&A expenses was primarily due to higher compensation-related expenses, as the prior year was favorably impacted by cost-saving actions, including furloughs, shortened work weeks and temporary salary reductions, that we implemented to mitigate the negative impacts of COVID-19. In addition, we recorded $3.5 million of environmental charges at Corporate during the first quarter of fiscal 2022 related to a previously-owned manufacturing facility in the U.S. We also incurred higher costs at Corporate related to our review of strategic alternatives for the Automotive segment businesses and for strategic reorganization costs, including professional fees for the recruiting of new senior management positions and our implementation of our 80/20 strategy. These costs increased $1.5 million and $0.6 million, respectively.

Restructuring expenses of $0.3 million decreased $4.3 million, primarily due to lower severance expenses and costs associated with plant consolidation and equipment transfer activities.

The net impairment reversal of $1.8 million in the first quarter of fiscal 2022 primarily related to assets held for sale in the Automotive segment. We recorded a net impairment reversal of $2.1 million in the Automotive segment associated with the pending sale of the liquid-cooled automotive business. This net impairment reversal was partially offset by a $0.3 million impairment charge in the CIS segment related to a previously-closed facility.

We sold our air-cooled automotive business on April 30, 2021. As a result of the sale, we recorded a $6.6 million loss on sale at Corporate during the first quarter of fiscal 2022.

Operating income of $8.7 million during the first quarter of fiscal 2022 represents an $11.9 million improvement from the prior-year operating loss of $3.2 million and was primarily due to higher earnings in our HDE, Automotive and CIS segments.

The provision for income taxes was $1.9 million in the first quarter of fiscal 2022, compared with a benefit for income taxes of $0.2 million during the first quarter of the prior year. The $2.1 million change was primarily due to increased operating earnings in the current year, partially offset by a $4.8 million income tax benefit recorded in the current year resulting from the reversal of a tax valuation allowance in a foreign jurisdiction.

SEGMENT RESULTS OF OPERATIONS

Effective July 1, 2021, the BHVAC segment assumed leadership of our business operation in Guadalajara, Spain, which was previously managed by and reported within the CIS segment. This organizational change is integral to our strategic initiative to align our data center businesses under the BHVAC leadership team in order to accelerate organizational efficiencies and operational improvements. We are focused on expanding our presence in the North American and European data center markets. Beginning for the second quarter of fiscal 2022, we will report the financial results of the business in Spain as part of the BHVAC segment.

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The following is a discussion of our segment results of operations for the three months ended June 30, 2021 and 2020:

Building HVAC Systems
	Three months ended June 30,
	2021				2020
(in millions)	_’s	% of sales			_’s	% of sales
Net sales			100.0	%			100.0	%
Cost of sales			72.9	%			69.5	%
Gross profit			27.1	%			30.5	%
Selling, general and administrative expenses			15.7	%			15.5	%
Operating income			11.4	%			15.0	%

All values are in US Dollars.

BHVAC net sales increased $12.3 million, or 26 percent, from the first quarter of fiscal 2021 to the first quarter of fiscal 2022, primarily due to higher sales volume and, to a lesser extent, a $3.2 million favorable impact of foreign currency exchange rates. BHVAC sales in the first quarter of fiscal 2021 were negatively impacted by the COVID-19 pandemic. Compared with the first quarter of the prior year, BHVAC sales increased $6.8 million and $5.5 million in the U.K. and the U.S., respectively. The higher sales in the U.K. were primarily due to higher sales of air conditioning, data center, and ventilation products. The higher sales in the U.S. were primarily driven by higher sales of heating products, partially offset by lower sales of ventilation products.

BHVAC cost of sales increased $10.6 million, or 32 percent, from the first quarter of fiscal 2021 to the first quarter of fiscal 2022 and included a $2.7 million unfavorable impact of foreign currency exchange rate changes. As a percentage of sales, cost of sales increased 340 basis points to 72.9 percent, primarily due to higher material costs, which negatively impacted cost of sales by approximately 360 basis points.

As a result of the higher sales and higher cost of sales as a percentage of sales, gross profit increased $1.7 million and gross margin declined 340 basis points to 27.1 percent.

SG&A expenses increased $2.0 million, or 20 basis points as a percentage of sales, from the prior year. The increase in SG&A expenses was primarily due to higher compensation-related expenses, which increased $1.4 million, and a $0.4 million unfavorable impact of foreign currency exchange rate changes.

Operating income of $6.8 million decreased $0.3 million from the first quarter of fiscal 2021 to the first quarter of fiscal 2022, primarily due to higher SG&A expenses, partially offset by higher gross profit.

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Commercial and Industrial Solutions
	Three months ended June 30,
	2021				2020
(in millions)	_’s	% of sales			_’s	% of sales
Net sales			100.0	%			100.0	%
Cost of sales			87.0	%			87.4	%
Gross profit			13.0	%			12.6	%
Selling, general and administrative expenses			8.8	%			10.6	%
Restructuring expenses			-				2.0	%
Impairment charge			0.2	%			-
Operating income			4.0	%			-

All values are in US Dollars.

CIS net sales increased $36.7 million, or 30 percent, from the first quarter of fiscal 2021 to the first quarter of fiscal 2022, primarily due to higher sales volume and, to a lesser extent, a $7.0 million favorable impact of foreign currency exchange rates. CIS sales in the first quarter of fiscal 2021 were negatively impacted by the COVID-19 pandemic. Compared with the first quarter of the prior year, sales to commercial HVAC&R customers increased $35.1 million.

CIS cost of sales increased $31.4 million, or 29 percent, from the first quarter of fiscal 2021 to the first quarter of fiscal 2022, primarily due to higher sales volume. In addition, cost of sales was unfavorably impacted by $6.3 million from foreign currency exchange rate changes. As a percentage of sales, cost of sales decreased 40 basis points to 87.0 percent, primarily due to the favorable impact of higher sales volume and improved operating efficiencies. These favorable drivers were partially offset by higher material costs and unfavorable sales mix.

As a result of the higher sales and lower cost of sales as a percentage of sales, gross profit increased $5.3 million and gross margin improved 40 basis points to 13.0 percent.

SG&A expenses increased $1.0 million compared with the first quarter of the prior year, primarily due to a $0.6 unfavorable impact of foreign currency exchange rate changes and higher compensation-related expenses.

Restructuring expenses decreased $2.4 million compared with the first quarter of fiscal 2021. The restructuring expenses during the first quarter of fiscal 2021 primarily consisted of severance expenses related to plant consolidation activities in China and targeted headcount reductions in North America.

During the first quarter of fiscal 2022, we signed an agreement to sell a previously-closed manufacturing facility in the U.S. As a result, we recorded an impairment charge of $0.3 million to write-down the property to fair value less costs to sell. We sold the facility and received net cash proceeds of $0.7 million during July 2021.

Operating income increased $6.4 million from the first quarter of fiscal 2021 to the first quarter of fiscal 2022, primarily due to higher gross profit and lower restructuring expenses, partially offset by higher SG&A expenses.

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Heavy Duty Equipment
	Three months ended June 30,
	2021				2020
(in millions)	_’s	% of sales			_’s		% of sales
Net sales			100.0	%				100.0	%
Cost of sales			88.8	%				90.8	%
Gross profit			11.2	%				9.2	%
Selling, general and administrative expenses			6.7	%				9.7	%
Restructuring expenses			0.1	%				1.5	%
Operating income (loss)			4.4	%		)		-2.0	%

All values are in US Dollars.

HDE net sales increased $78.3 million, or 63 percent, from the first quarter of fiscal 2021 to the first quarter of fiscal 2022, primarily due to higher sales volume. HDE sales in the first quarter of fiscal 2021 were negatively impacted by the COVID-19 pandemic. Sales to commercial vehicle, off-highway, and automotive and light vehicle customers increased $32.9 million, $26.5 million, and $7.4 million, respectively.

HDE cost of sales increased $67.0 million, or 60 percent, from the first quarter of fiscal 2021 to the first quarter of fiscal 2022, primarily due to higher sales volume. As a percentage of sales, cost of sales decreased 200 basis points to 88.8 percent. Beyond the favorable impact of the higher sales volume, cost savings from procurement initiatives favorably impacted cost of sales by approximately $2.0 million. These favorable drivers were partially offset by higher material and tariff costs, which negatively impacted cost of sales by approximately $8.0 million.

As a result of the higher sales and lower cost of sales as a percentage of sales, gross profit increased $11.3 million and gross margin improved 200 basis points to 11.2 percent.

SG&A expenses increased $1.6 million compared with the first quarter of the prior year. The increase in SG&A expenses was primarily due to higher compensation-related expenses.

Restructuring expenses during the first quarter of fiscal 2022 totaled $0.2 million, a decrease of $1.7 million compared with the first quarter of fiscal 2021, and primarily consisted of equipment transfer costs.

Operating income of $8.9 million represents an $11.4 million improvement from the prior-year operating loss of $2.5 million and was primarily due to higher gross profit and lower restructuring expenses, partially offset by higher SG&A expenses.

Automotive
	Three months ended June 30,
	2021					2020
(in millions)	_’s		% of sales			_’s		% of sales
Net sales				100.0	%				100.0	%
Cost of sales				84.7	%				92.3	%
Gross profit				15.3	%				7.7	%
Selling, general and administrative expenses				12.7	%				13.6	%
Restructuring expenses				0.1	%				0.2	%
Impairment charges (reversals) – net		)		-2.4	%				-
Operating income (loss)				4.9	%		)		-6.1	%

All values are in US Dollars.

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Automotive net sales increased $24.1 million, or 39 percent, from the first quarter of fiscal 2021 to the first quarter of fiscal 2022, primarily due to higher sales volume and, to a lesser extent, a $6.7 million favorable impact of foreign currency exchange rates. Sales volumes in the first quarter of fiscal 2021 were negatively impacted by the COVID-19 pandemic. Sales in Europe and North America increased $23.9 million and $1.8 million, respectively. Sales in Asia decreased $1.6 million.

Automotive cost of sales increased $15.7 million, or 27 percent, from the first quarter of fiscal 2021 to the first quarter of fiscal 2022, primarily due to higher sales volume. As a percentage of sales, cost of sales decreased 760 basis points to 84.7 percent, primarily due to lower depreciation expenses. Depreciation expenses decreased $4.5 million compared with the first quarter of fiscal 2021. We ceased depreciating the long-lived assets within the liquid- and air-cooled automotive businesses when they were classified as held for sale in fiscal 2021. We completed the sale of the air-cooled automotive business on April 30, 2021.

As a result of the higher sales and lower cost of sales as a percentage of sales, gross profit increased $8.4 million and gross margin improved 760 basis points to 15.3 percent.

SG&A expenses increased $2.6 million compared with the first quarter of the prior year. The increase in SG&A expenses was primarily due to higher compensation-related expenses.

The net impairment reversal of $2.1 million in the first quarter of fiscal 2022 primarily related to assets in our liquid-cooled automotive business. As a result of modifying the sale perimeter with the buyer, we reevaluated the long-lived assets within the businesses that will no longer be sold to the prospective buyer and reversed $7.4 million of previously-recorded impairment charges to adjust the asset groups to their estimated fair value. This impairment reversal was partially offset by $5.3 million of impairment charges related to other assets held for sale in the Automotive segment.

Operating income of $4.2 million represents an $8.0 million improvement from the prior-year operating loss of $3.8 million and was primarily due to higher gross profit and the net impairment reversal, partially offset by higher SG&A expenses.

Liquidity and Capital Resources

Our primary sources of liquidity are cash flow from operating activities, our cash and cash equivalents of $49.0 million as of June 30, 2021 and an available borrowing capacity of $199.4 million under our revolving credit facility. Given our extensive international operations, approximately $46.0 million of our cash and cash equivalents is held by our non-U.S. subsidiaries. Amounts held by non-U.S. subsidiaries are available for general corporate use; however, these funds may be subject to foreign withholding taxes if repatriated. We believe our sources of liquidity will provide sufficient cash flow to adequately cover our funding needs on both a short-term and long-term basis.

Net Cash Provided by Operating Activities

Net cash used for operating activities for the three months ended June 30, 2021 was $10.1 million, which represents a $22.4 million decrease compared with net cash provided by operating activities in the same period in the prior year. This decrease in operating cash flow was primarily due to unfavorable net changes in working capital, partially offset by the favorable impact of higher earnings. The unfavorable changes in working capital during the first three months of fiscal 2022, compared with the same period in the prior year, included higher inventory levels and higher payments for incentive compensation and employee benefits. The higher inventory levels in fiscal 2022 have resulted from higher unit costs and increased quantities on hand for raw materials and other purchased component inventory.

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Capital Expenditures

Capital expenditures of $11.4 million during the first three months of fiscal 2022 increased $2.3 million compared with the same period in the prior year.

Debt

Our credit agreements require us to maintain compliance with various covenants, including a leverage ratio covenant and an interest expense coverage ratio covenant discussed further below. Also, as specified in the credit agreement, the term loans may require prepayments in the event of certain asset sales. In addition, at the time of each incremental borrowing under the revolving credit facility, we must represent to the lenders that there has been no material adverse effect, as defined in the credit agreement, on our business, property, or results of operations.

The leverage ratio covenant within our primary credit agreements requires us to limit our consolidated indebtedness, less a portion of our cash balance, both as defined by the credit agreements, to no more than three and one-quarter times consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”). We are also subject to an interest expense coverage ratio covenant, which requires us to maintain Adjusted EBITDA of at least three times consolidated interest expense. As of June 30, 2021, our leverage ratio and interest coverage ratio were 2.0 and 10.8, respectively. We expect to remain in compliance with our debt covenants during fiscal 2022 and beyond.

Forward-Looking Statements

This report, including, but not limited to, the discussion under Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains statements, including information about future financial performance, accompanied by phrases such as “believes,” “estimates,” “expects,” “plans,” “anticipates,” “intends,” and other similar “forward-looking” statements, as defined in the Private Securities Litigation Reform Act of 1995. Modine’s actual results, performance or achievements may differ materially from those expressed or implied in these statements, because of certain risks and uncertainties, including, but not limited to, those described under “Risk Factors” in Item 1A. in Part I. of the Company’s Annual Report on Form 10-K for the year ended March 31, 2021. Other risks and uncertainties include, but are not limited to, the following:

Market Risks:

•	The impact of the COVID-19 pandemic on the national and global economy, our business, suppliers, customers, and employees;
•	Economic, social and political conditions, changes, challenges and unrest, particularly in the geographic, product and financial markets where we and our customers operate and compete, including, in particular, foreign currency exchange rate fluctuations; tariffs (and any potential trade war resulting from tariffs or retaliatory actions); inflation; changes in interest rates; recession and recovery therefrom; restrictions and uncertainty associated with cross-border trade, public health crises, such as pandemics and epidemics, including the ongoing COVID-19 pandemic; and the general uncertainties about the impact of regulatory and/or policy changes, including those related to tax and trade, the COVID-19 pandemic and other matters, that have been or may be implemented in the U.S. or abroad, as well as continuing uncertainty regarding the short- and long-term implications of “Brexit”;
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•

The impact of the COVID-19 pandemic on the national and global economy, our business, suppliers, customers, and employees;

•

Economic, social and political conditions, changes, challenges and unrest, particularly in the geographic, product and financial markets where we and our customers operate and compete, including, in particular, foreign currency exchange rate fluctuations; tariffs (and any potential trade war resulting from tariffs or retaliatory actions); inflation; changes in interest rates; recession and recovery therefrom; restrictions and uncertainty associated with cross-border trade, public health crises, such as pandemics and epidemics, including the ongoing COVID-19 pandemic; and the general uncertainties about the impact of regulatory and/or policy changes, including those related to tax and trade, the COVID-19 pandemic and other matters, that have been or may be implemented in the U.S. or abroad, as well as continuing uncertainty regarding the short- and long-term implications of “Brexit”;

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•	The impact of potential price increases associated with raw materials, including aluminum, copper, steel and stainless steel (nickel), and other purchased component inventory including, but not limited to, increases in the underlying material cost based upon the London Metal Exchange and related premiums, fabrication, or freight costs. These prices may be impacted by a variety of factors, including changes in trade laws and tariffs, the behavior of our suppliers and significant fluctuations in demand. This risk includes our ability to successfully manage our exposure and our ability to adjust product pricing in response to price increases, whether through our quotation process or through contract provisions for prospective price adjustments, as well as the inherent lag in timing of such contract provisions; and
•	The impact of current and future environmental laws and regulations on our business and the businesses of our customers, including our ability to take advantage of opportunities to supply alternative new technologies to meet environmental and/or energy standards and objectives.
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•

The impact of potential price increases associated with raw materials, including aluminum, copper, steel and stainless steel (nickel), and other purchased component inventory including, but not limited to, increases in the underlying material cost based upon the London Metal Exchange and related premiums, fabrication, or freight costs. These prices may be impacted by a variety of factors, including changes in trade laws and tariffs, the behavior of our suppliers and significant fluctuations in demand. This risk includes our ability to successfully manage our exposure and our ability to adjust product pricing in response to price increases, whether through our quotation process or through contract provisions for prospective price adjustments, as well as the inherent lag in timing of such contract provisions; and

•

The impact of current and future environmental laws and regulations on our business and the businesses of our customers, including our ability to take advantage of opportunities to supply alternative new technologies to meet environmental and/or energy standards and objectives.

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Operational Risks:

•	The overall health and continually increasing price-down focus of our vehicular customers in light of economic and market-specific factors, and the potential impact on us from any deterioration in the stability or performance of any of our major customers;
•	The impact of any problems with suppliers meeting our quantity, quality, price and timing demands, and the overall health of our suppliers, including their ability and willingness to supply our volume demands if their production capacity becomes constrained;
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•	Our ability to maintain current customer relationships and compete effectively for new business, including our ability to offset or otherwise address increasing pricing pressures from competitors and price reduction and overall service pressures from customers, particularly in the face of macro-economic instability;
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•	The impact of product or manufacturing difficulties or operating inefficiencies, including any program launch and product transfer challenges and warranty claims and delays or inefficiencies resulting from restrictions imposed in response to the COVID-19 pandemic;
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•	The impact of any delays or modifications initiated by major customers with respect to program launches, product applications or volume requirements;
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•	Our ability to consistently structure our operations in order to develop and maintain a competitive cost base with appropriately skilled and stable labor, while also positioning ourselves geographically, so that we can continue to support our customers with the technical expertise and market-leading products they demand and expect from Modine;
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•	Our ability to effectively and efficiently modify our cost structure in response to sales volume increases or decreases and to complete restructuring activities and realize the anticipated benefits of those activities;
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•	Costs and other effects of the investigation and remediation of environmental contamination; particularly when related to the actions or inactions of others and/or facilities over which we have no control;
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•	Our ability to recruit and maintain talent, including personnel in managerial, leadership, operational and administrative functions, in light of tight global labor markets;
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•	Our ability to protect our proprietary information and intellectual property from theft or attack by internal or external sources;
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•	The impact of any substantial disruption or material breach of our information technology systems, and any related delays, problems or costs;
•	Increasingly complex and restrictive laws and regulations, including those associated with being a U.S. public company and others present in various jurisdictions in which we operate, and the costs associated with compliance therewith;
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•	Work stoppages or interference at our facilities or those of our major customers and/or suppliers;
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•	The constant and increasing pressures associated with healthcare and associated insurance costs; and
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•	Costs and other effects of litigation, claims, or other obligations.
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Strategic Risks:

•	Our ability to successfully complete the pending sale of our liquid-cooled automotive business, including the receipt of governmental and third-party approvals and the risk that the sale will not close because of a failure to satisfy one or more of the closing conditions (including governmental and third-party approvals) on a timely basis or at all, and our ability to successfully exit our other automotive businesses in a manner that is in the best interest of our shareholders;
•	Our ability to successfully realize anticipated benefits from our increased “industrial” market presence, with our BHVAC and CIS businesses, while maintaining appropriate focus on the market opportunities presented by our vehicular businesses;
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•	Our ability to identify and execute growth and diversification opportunities in order to position us for long-term success; and
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•	The potential impacts from any actions by activist shareholders, including disruption of our business and related costs.
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Financial Risks:

•	Our ability to fund our global liquidity requirements efficiently for Modine’s current operations and meet our long-term commitments in the event of disruption in or tightening of the credit markets or extended recessionary conditions in the global economy;
•	The impact of potential increases in interest rates, particularly in LIBOR and the Euro Interbank Offered Rate (“EURIBOR”) in relation to our variable-rate debt obligations, and of the continued uncertainty around the utilization of LIBOR or alternative reference rates;
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•	The impact of changes in federal, state or local tax regulations that could have the effect of increasing our income tax expense;
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•	Our ability to comply with the financial covenants in our credit agreements, including our leverage ratio (net debt divided by Adjusted EBITDA, as defined in our credit agreements) and our interest coverage ratio (Adjusted EBITDA divided by interest expense, as defined in our credit agreements);
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•	The potential unfavorable impact of foreign currency exchange rate fluctuations on our financial results; and
•	Our ability to effectively realize the benefits of deferred tax assets in various jurisdictions in which we operate.
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Forward-looking statements are as of the date of this report; we do not assume any obligation to update any forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Company’s quantitative and qualitative disclosures about market risk are incorporated by reference from Part II, Item 7A. of the Company’s Annual Report on Form 10-K for the year ended March 31, 2021. The Company’s market risks have not materially changed since the fiscal 2021 Form 10-K was filed.

Item 4. Controls and Procedures.

Evaluation Regarding Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report on Form 10-Q, management of the Company, under the supervision, and with the participation, of the Company’s President and Chief Executive Officer and Executive Vice President, Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures, at a reasonable assurance level, as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the President and Chief Executive Officer and Executive Vice President, Chief Financial Officer have concluded that the design and operation of the Company’s disclosure controls and procedures were effective, at a reasonable assurance level, as of June 30, 2021.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting during the first quarter of fiscal 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

ISSUER PURCHASES OF EQUITY SECURITIES

The following describes the Company’s purchases of common stock during the first quarter of fiscal 2022:

Period	Total Number of<br><br>Shares Purchased	Average<br><br>Price Paid<br><br>Per Share	Total Number of<br><br>Shares Purchased<br><br>as Part of Publicly<br><br>Announced Plans<br><br>or Programs	Maximum Number (or<br><br>Approximate Dollar<br><br>Value) of Shares<br><br>that May Yet Be<br><br>Purchased Under the<br><br>Plans or Programs (a)
April 1 – April 30, 2021	_______	_______	_______	$50,000,000
May 1 – May 31, 2021	27,646 (b)	$17.49	_______	$50,000,000
June 1 – June 30, 2021	32,031 (b)	$17.59	_______	$50,000,000
Total	59,677 (b)	$17.54	_______
(a)	Effective November 5, 2020, the Board of Directors approved a two-year, $50.0 million share repurchase program, which allows the Company to repurchase Modine common stock through solicited and unsolicited transactions in the open market or in privately-negotiated or other transactions, at such times and prices and upon such other terms as the authorized officers of the Company deem appropriate.
---	---
(b)	Consists of shares delivered back to the Company by employees and/or directors to satisfy tax withholding obligations that arise upon the vesting of stock awards. The Company, pursuant to its equity compensation plans, gives participants the opportunity to turn back to the Company the number of shares from the award sufficient to satisfy tax withholding obligations that arise upon the termination of restrictions. These shares are held as treasury shares.
---	---

Item 5. Other Information.

As announced on August 4, 2021, the Company has appointed Eric S. McGinnis to the position of Vice President, Building HVAC. In connection with this appointment, effective August 10, 2021, Matthew J. McBurney, a named executive officer of the Company, will no longer serve in that role. The Company anticipates that Mr. McBurney will remain with the Company to assist with the transition and work on special projects.

The terms of any separation arrangement with Mr. McBurney have not been determined as of the time of this filing, and will be provided by the Company in a Current Report on Form 8-K if and to the extent required under applicable regulations when such information becomes available.

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Item 6. Exhibits.

(a) Exhibits:

Exhibit<br><br>No.	Description	Incorporated Herein By<br><br>Reference To	Filed<br><br>Herewith
10.1	Form of Fiscal 2022 Modine Performance Cash Award Agreement		X
10.2	Form of Fiscal 2022 Modine Incentive Stock Option Award Agreement		X
10.3	Form of Fiscal 2022 Modine Non-Qualified Stock Option Award Agreement		X
10.4	Form of Fiscal 2022 Modine Restricted Stock Unit Award Agreement		X
10.5	Change in Control Agreement dated as of June 4, 2021, by and between Modine Manufacturing Company and Neil D. Brinker	Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated June 4, 2021
31.1	Rule 13a-14(a)/15d-14(a) Certification of Neil D. Brinker, President and Chief Executive Officer.		X
31.2	Rule 13a-14(a)/15d-14(a) Certification of Michael B. Lucareli, Executive Vice President, Chief Financial Officer.		X
32.1	Section 1350 Certification of Neil D. Brinker, President and Chief Executive Officer.		X
32.2	Section 1350 Certification of Michael B. Lucareli, Executive Vice President, Chief Financial Officer.		X
101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).		X
101.SCH	Inline XBRL Taxonomy Extension Schema		X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document		X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document		X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document		X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document		X
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)		X

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MODINE MANUFACTURING COMPANY

(Registrant)

By: /s/ Michael B. Lucareli

Michael B. Lucareli, Executive Vice President, Chief Financial Officer*

Date: August 5, 2021

* Executing as both the principal financial officer and a duly authorized officer of the Company

Exhibit 10.1

MODINE MANUFACTURING COMPANY

PERFORMANCE CASH AWARD

AWARD AGREEMENT

We are pleased to inform you that you have been granted an opportunity to earn a Performance Cash Award of Modine Manufacturing Company (the “Company”), subject to the terms and conditions of this Award Agreement. This Award Agreement is not subject to the Modine Manufacturing Company 2020 Incentive Compensation Plan (the “Plan”), but all terms used in this Award Agreement and not otherwise defined herein shall have the same meanings as set forth in the Plan.

Full name of Grantee:
Date of Award:
Target amount of Performance Cash:
Performance Period:	April 1, 2021 to March 31, 2024

1. Performance Cash Award. You are hereby granted a Performance Cash Award, subject to the terms and conditions of this Award Agreement. “Performance Cash” means a cash award that is conditioned upon the satisfaction of one or more pre-established Performance Goals. The amount of Performance Cash that will be earned hereunder if the Target Performance Goals are achieved is set forth above.

2. Terms of Performance Cash Award and Performance Goals. You have been granted an opportunity to earn a cash payment under this Performance Cash Award. The actual amount of Performance Cash that would be earned by you will be determined as described below, based upon the actual results for the Performance Period set forth above compared to the Performance Goals set forth below, provided that you remain an employee of the Company or a Subsidiary for the entire Performance Period (subject to the provisions below regarding death, Disability or retirement) and the achievement of the Performance Goals is greater than the Threshold amount specified below (the “Conditions”). If either of these Conditions is not satisfied, then except as otherwise provided in this Award Agreement, no Performance Cash shall be earned. The Performance Goals for this Performance Cash Award are: Cash Flow Return on Invested Capital (“Cash Flow ROI”) and Average Annual Adjusted EBITDA Growth (“Revenue Growth”), with each having a 50% weight. The Threshold Performance Goals are the minimum Performance Goals necessary for the Performance Period that must be achieved by the Company in order for you to qualify for any Performance Cash and the Maximum Performance Goals are the minimum Performance Goals for the Performance Period in order for you to qualify for the maximum amount of Performance Cash earned under this Performance Cash Award.

Performance Goal: Cash Flow ROI	Performance Cash Award Earned Based on<br><br> <br>Achievement of Performance Goal
Threshold: 7.0%	5% of Target amount of Performance Cash
Target: 10.5%	50% of Target amount of Performance Cash
Maximum: ≥14.0%	100% of Target amount of Performance Cash
Performance Goal: Average Annual<br><br> <br>Adjusted EBITDA Growth	Performance Cash Award Earned Based on<br><br> <br>Achievement of Performance Goal
---	---
Threshold: 2.0%	5% of Target amount of Performance Cash
Target: 7.0%	50% of Target amount of Performance Cash
Maximum: ≥12.0%	100% of Target amount of Performance Cash

“Cash Flow ROI” or “Cash Flow Return on Invested Capital” means the sum of Adjusted Free Cash Flow plus Cash Interest, all divided by Average Capital Employed. Adjusted Free Cash Flow equals “Net cash provided by operating activities”, less “Expenditures for property, plant and equipment” (both as reported externally for the Company’s audited financial statements), plus or minus Permitted Adjustments (defined below) and Cash Interest equals cash paid for interest expense related to outstanding debt. Average Capital Employed for each fiscal year equals total debt plus shareholders’ equity averaged over five points (i.e., the last day of each fiscal quarter and prior fiscal year-end); and where shareholder’s equity excludes shareholder equity attributable to noncontrolling interests. Permitted Adjustments include:

Restructuring Charges

•	Fees and expenses for restructuring consultants or financial advisors
•	Employee severance, outplacement and related benefits
---	---
•	Employee insurance and benefits continuation
---	---
•	Contractual salary continuation for terminated employees
---	---
•	Equipment transfers and facility preparation
---	---
•	Environmental services (e.g., plant clean-up prior to sale)
---	---

Acquisition and Divestiture Charges

•	Fees and expenses for transaction advisors (i.e., financial advisors, consultants, lawyers an accountants)
•	Integration expenses
---	---
•	Other incremental costs and charges that are non-recurring and directly related to the transaction
---	---

Other

•	Fees and expenses for strategy advisory services associated with a specific transaction or unique project
•	Unusual, non-recurring or extraordinary cash and non-cash charges or income
---	---

Adoption of New Accounting Standards

•	The impact of the adoption of new U.S. GAAP accounting standards and significant changes in the Company’s accounting methods.

Divestitures

•	The impact of significant divestitures, such that annual metrics will be calculated on a “continuing operations” basis for the periods following divestiture.

Notwithstanding the foregoing, the Committee may disregard all or part of any Permitted Adjustment as separately applicable to each performance metric if doing so would decrease the amount payable under this Performance Cash Award.

“Average Annual Adjusted EBITDA Growth” means the simple three-year arithmetic average of the Company’s Adjusted EBITDA Growth during the Performance Period, as reported externally for the Company’s audited financial statements. Adjusted EBITDA Growth equals current-year Adjusted EBITDA minus prior-year Adjusted EBITDA, with that total divided by prior-year Adjusted EBITDA. Adjusted EBITDA equals “Operating Income” plus “Depreciation and Amortization Expenses”, both as reported externally for the Company’s audited financial statements, plus or minus Permitted Adjustments.

If actual Cash Flow ROI or EBITDA Growth for the Performance Period is between Threshold and Target and/or between Target and Maximum, the amount of Performance Cash earned shall be determined on a linear basis. In the event that the Company’s actual Cash Flow ROI or EBITDA Growth does not meet the Threshold for the Performance Period, no Performance Cash shall be earned relative to such metric under this Performance Cash Award. In the event that the Company’s actual Cash Flow ROI or EBITDA Growth exceeds the Maximum for the Performance Period, only the Maximum percentage of the Target amount of Performance Cash set forth above shall be earned relative to such metric.

3. Payment of Performance Cash. Performance Cash earned shall be paid after the end of the Performance Period as soon as administratively practicable after the Committee has approved and certified the amount of Performance Cash that has been earned hereunder or, in the event of payment covered under Paragraph 4 below, within thirty (30) days of the date of your termination of employment.

4. Change in Control. Notwithstanding anything in this Agreement to the contrary, upon a Change in Control, all outstanding Performance Cash Awards shall be deemed to have satisfied the Target Performance Goals and shall be paid pro-rata based upon the period worked during the Performance Period as of the date of an involuntary termination of your employment by the Company or a Subsidiary without Cause within one year following a Change in Control.

5. Death or Disability. Notwithstanding anything in this Agreement to the contrary, upon your termination of employment due to death or Disability (as defined herein), a prorated portion (based on the period working during the Performance Period) of the Performance Cash granted to you hereunder shall vest based on the Company’s actual achievement of the Performance Goals at the end of the Performance Period as certified by the Committee, and payment will be made to you after the Committee has approved and certified the amount of Performance Cash that has been earned hereunder. For purposes of this Award Agreement, “Disability” shall mean “permanent and total disability” as defined in Section 22 (e)(3) of the Code.

6. Retirement. Notwithstanding anything in this Agreement to the contrary, upon your retirement (with Committee approval), the Committee may, in its sole discretion, vest some or all of the Performance Cash granted to you hereunder and payment shall be made on such terms and conditions as the Committee may deem appropriate; provided, however, such payment shall be made in a manner that is exempt from or complies with Section 409A of the Code.

7. Forfeiture. Other than as described above in Paragraph 4 regarding a Change in Control or Paragraphs 5 or 6 regarding death, Disability or retirement, upon your termination of employment with the Company or a Subsidiary for any reason during the Performance Period, you will forfeit all Performance Cash covered by this Agreement.

8. Transfer. This Performance Cash Award shall be nontransferable. Notwithstanding the foregoing, you shall have the right to transfer this Performance Cash Award upon your death, either by the terms of your will or under the laws of descent and distribution.

9. No Obligation of Employment. This Performance Cash Award shall not impose any obligation on the Company to continue your employment with the Company or any Subsidiary.

10. Controlling Provisions. In the event of a conflict between the terms of this Award Agreement and any employment agreement or change in control agreement between you and the Company, this Award Agreement shall control.

11. Forfeiture Under Recoupment Policy. The Company shall have the power and the right to require you to forfeit and return the Performance Cash paid hereunder consistent with any recoupment policy maintained by the Company under applicable law, as such policy is amended from time to time.

12. Amendment. The Committee may from time to time amend, modify, suspend or terminate this Award Agreement; provided, however, that no such action shall adversely affect the Grantee without the Grantee’s consent.

13. Use of Words. The use of words of the masculine gender in this Award Agreement is intended to include, wherever appropriate, the feminine or neuter gender and vice versa.

14. Successors. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company.

15. Taxes. The Company may require payment of or withhold any tax which it believes is required as a result of this Performance Cash Award, and the Company may defer making payment with respect to Performance Cash earned hereunder until arrangements satisfactory to the Company have been made with respect to such tax withholding obligations.

Committee Discretion. Notwithstanding anything in this Agreement, the Committee retains the discretion to make negative adjustments to the final determination of the achievement of any Performance Goals.

17. No Legal or Tax Advice. Notwithstanding anything stated in this Award Agreement, the Company is not providing any legal or tax advice related to this Performance Cash Award or any value received therefrom. Nothing stated in this Award Agreement is intended to cover any legal or tax situation. You are encouraged to consult your own legal and/or tax advisors to address any questions or concerns you may have regarding this Award Agreement or any value received therefrom.

Controlling Law. The law of the State of Wisconsin, except its law with respect to choice of law, shall be controlling in all matters relating to this Agreement.

By your electronic agreement and the signature of the Company’s representative below, you and the Company agree that this Performance Cash Award awarded to you under this Award Agreement is subject to the terms and conditions hereof. You hereby agree to accept as binding any decision of the Committee with respect to the interpretation of this Award Agreement, or any other matters associated therewith.

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed as of ________, 2021.

MODINE MANUFACTURING COMPANY
By:	/s/Neil D. Brinker
	Neil D. Brinker
	President and Chief Executive Officer

Exhibit 10.2

MODINE MANUFACTURING COMPANY

2020 INCENTIVE COMPENSATION PLAN

INCENTIVE STOCK OPTION

AWARD AGREEMENT

We are pleased to inform you that you have been granted an Option to purchase shares of Common Stock of Modine Manufacturing Company (the “Company”), subject to the terms and conditions of the Modine Manufacturing Company 2020 Incentive Compensation Plan (the “Plan”) and of this Award Agreement. Unless otherwise defined herein, all terms used in this Award Agreement shall have the same meanings as set forth in the Plan.

Full name of Grantee:
Date of Award:
Exercise price per share:
Total number of shares:
Total exercise price:

1. Option. Pursuant to the Plan, you are hereby granted the option to purchase shares of Common Stock on the terms and conditions set forth in this Award Agreement. The Option is intended to qualify as an Incentive Stock Option within the meaning of Section 422 of the Code to the extent it meets the requirements thereof, including the $100,000 per year limitation in Code Section 422(d). Any portion of the Option that does not qualify as an Incentive Stock Option shall be a Nonqualified Stock Option. This Option is intended to qualify as an Incentive Stock Option so that you may obtain preferential tax treatment and, consequently, certain limitations on disposition must be observed. In order to obtain preferential tax treatment, shares of Common Stock obtained upon exercise of the Option may not be disposed of within twenty-four (24) months after the Date of Award or within twelve (12) months after exercise of the Option.

2. Vesting Schedule. The Option granted pursuant to this Award will vest according to the following schedule, provided, however, that, except as otherwise provided in Section 11.02 of the Plan or in this Award Agreement, you must be employed by the Company or a Subsidiary on each vesting date for that portion of the Option to vest. If you separate from service due to Disability (as defined below), death, or your retirement (with Committee approval) prior to any Vesting Date, any unvested portion of the Option shall become fully and immediately exercisable. For purposes of this Award Agreement, “Disability” shall mean “permanent and total disability” as defined in Section 22 (e)(3) of the Code.

Number of Shares of Common Stock	Vesting Date
25% of the total number of shares
25% of the total number of shares
25% of the total number of shares
25% of the total number of shares

3. Time of Exercise. Vested Options may be exercised (in the manner provided in paragraph 4 hereof) in whole or in part, from time to time after the Vesting Date.

4. Method of Exercising Option. Subject to the limitations stated elsewhere in this Award Agreement or in the Plan, this Option will be exercisable as to all or a portion of the Common Stock in accordance with the vesting schedule above in Paragraph 2. In no event will the Option be exercisable if it would result in a violation of federal or state securities laws or would occur later than ten (10) years from the date of grant. The Option may be exercised in whole or in part by delivery to the Company or its designee of (a) written notice identifying the Option and stating the number of shares with respect to which it is being exercised, and (b) payment in full of the exercise price of the shares then being acquired; provided, however, that you may pay the exercise price either in cash, by transferring to the Company shares of stock of the Company at their Fair Market Value as of the date of exercise of the Option ("Delivered Stock"), a combination of cash and Delivered Stock, or such other forms or means that the Company determines are consistent with the Plan's purpose and applicable law. Notwithstanding the foregoing, the Company may arrange for or cooperate in permitting broker-assisted cashless exercise procedures. No person shall acquire any rights or privileges of a shareholder of the Company with respect to any shares of Common Stock until such shares have been duly issued. The Company shall have the right to delay the issue or delivery of any shares to be delivered hereunder until (a) the completion of such registration or qualification of such shares under federal, state or foreign law, ruling or regulation as the Company shall deem to be necessary or advisable, and (b) receipt from you of such documents and information as the Company may deem necessary or appropriate in connection with such registration or qualification or the issuance of shares hereunder.

5. Expiration Date. Upon a termination of your employment for any reason (except termination of employment for Cause), this Option shall expire one (1) year from the date of termination of your employment. Upon your termination of employment for Cause, this Option shall immediately expire. Notwithstanding anything herein contained to the contrary, this Option shall not be exercisable subsequent to ten (10) years after the date of grant. Your Option will become nonqualified (i.e., lose preferential tax treatment) if it is not exercised within three (3) months after a termination of employment or within one (1) year after a termination of employment due to Disability.

6. Transfer of Option. The Option shall be nontransferable and shall, except in the case of death or Disability, be exercisable only by you during your lifetime. Notwithstanding the foregoing, you shall have the right to transfer the Option upon your death, either by the terms of your will or under the laws of descent and distribution. In the case of your Disability, the Option shall be exercisable by your personal representative. Upon your death, the Option shall be exercisable by your personal representative, administrator, or other representative of your estate, or the person or persons to whom this Option shall pass by will or under the laws of descent and distribution.

7. Transfer of Stock. If you dispose of any of the Common Stock acquired upon exercise of the Option within twenty-four (24) months after the date the Option was granted or within twelve (12) months after exercise of the Option, then, you shall promptly notify the Company of the number of shares so disposed of, the dates of disposition, and the consideration, if any, received for such shares. In order to comply with federal income tax law, the Company may take such action as it deems appropriate to ensure notice to the Company of any disposition of the Common Stock with the time periods described.

8. No Unlawful Issue of Shares. If, in the opinion of its counsel, the issue or sale of any shares of its stock hereunder pursuant to the Option shall not be lawful for any reason, including the inability of the Company to obtain, from any regulatory body having jurisdiction, authority deemed by such counsel to be necessary to such issuance or sale, the Company shall not be obligated to issue or sell any such shares pursuant to the exercise of the Option.

9. No Obligation of Employment. The Option shall not impose any obligation on the Company to continue your employment with the Company or a Subsidiary.

10. Controlling Provisions; Plan Controls. In the event of a conflict between the terms of this Award Agreement and any employment agreement or change in control agreement between you and the Company, this Award Agreement shall control. This Option is qualified in its entirety by reference to the terms and conditions of the Plan under which it is granted, a copy of which you may request from the Company. The Plan empowers the Committee to make interpretations, rules and regulations thereunder and, in general, provides that the determinations of such Committee with respect to the Plan shall be binding upon you. The Plan is hereby incorporated herein by reference.

11. Change in Control. The vesting of the Option in the event of a Change in Control is governed by Section 11.02 of the Plan.

12. Forfeiture Under Recoupment Policy. The Company shall have the power and the right to require you to forfeit this Option, return the shares of Common Stock issued pursuant to an exercise of this Option or any proceeds therefrom consistent with any recoupment policy maintained by the Company under applicable law, as such policy is amended from time to time.

13. Use of Words. The use of words of the masculine gender in this Award Agreement is intended to include, wherever appropriate, the feminine or neuter gender and vice versa.

14. Successors. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company.

15. Taxes. The Company may require payment of or withhold any tax that it believes is required as a result of the grant or exercise of the Option, and the Company may defer making delivery with respect to shares issuable hereunder until arrangements satisfactory to the Company have been made with respect to such tax withholding obligations.

16. No Legal or Tax Advice. Notwithstanding anything stated in this Award Agreement, the Company is not providing any legal or tax advice related to this Option or any Common Stock that may be obtained upon exercise of this Option. Nothing stated in this Option is intended to cover any legal or tax situation. You are encouraged to consult your own legal and/or tax advisors to address any questions or concerns you may have regarding this Option or any Common Stock that may be obtained upon the exercise of this Option.

17. Personal Information. Solium Capital LLC and Equiniti Trust Company assist the Company in the operation of the Plan and the administration of the Option granted pursuant to this Award Agreement. If you choose to participate in the Plan, you acknowledge and consent to the Company sharing your name, email, and information regarding the grant of the Option under this Award Agreement with both Solium Capital LLC and Equiniti Trust Company.

By your electronic agreement and the signature of the Company’s representative below, you and the Company agree that the Option which has been awarded to you under this Award Agreement is subject to the terms and conditions of the Plan, a copy of which is available to you upon request. As provided in the Plan, you hereby agree to accept as binding any decision of the Committee with respect to the interpretation of the Plan and this Award Agreement, or any other matters associated therewith.

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed as of _________, 2021.

MODINE MANUFACTURING COMPANY
By:	/s/Neil D. Brinker
	Neil D. Brinker
	President and Chief Executive Officer

Exhibit 10.3

MODINE MANUFACTURING COMPANY

2020 INCENTIVE COMPENSATION PLAN

NON-QUALIFIED STOCK OPTION

AWARD AGREEMENT

Full name of Grantee:
Date of Award:
Exercise price per share:
Total number of shares:
Total exercise price:

Option. Pursuant to the Plan, you are hereby granted the option to purchase shares of Common Stock on the terms and conditions set forth in this Award Agreement. The Option granted hereunder shall be a Non-Qualified Stock Option.

Number of Shares of Common Stock	Vesting Date
25% of the total number of shares
25% of the total number of shares
25% of the total number of shares
25% of the total number of shares

3. Time of Exercise; Exercise Limitation. Vested Options may be exercised (in the manner provided in paragraph 4 hereof) in whole or in part, from time to time after the Vesting Date; provided, however, that should you become an executive officer of the Company, you may be subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, which require that the Option may not be exercised by you within six (6) months after the Grant Date.

7. No Unlawful Issue of Shares. If, in the opinion of its counsel, the issue or sale of any shares of its stock hereunder pursuant to the Option shall not be lawful for any reason, including the inability of the Company to obtain, from any regulatory body having jurisdiction, authority deemed by such counsel to be necessary to such issuance or sale, the Company shall not be obligated to issue or sell any such shares pursuant to the exercise of the Option.

8. No Obligation of Employment. The Option shall not impose any obligation on the Company to continue your employment with the Company or a Subsidiary.

9. Controlling Provisions; Plan Controls. In the event of a conflict between the terms of this Award Agreement and any employment agreement or change in control agreement between you and the Company, this Award Agreement shall control. This Option is qualified in its entirety by reference to the terms and conditions of the Plan under which it is granted, a copy of which you may request from the Company. The Plan empowers the Committee to make interpretations, rules and regulations thereunder and, in general, provides that the determinations of such Committee with respect to the Plan shall be binding upon you. The Plan is hereby incorporated herein by reference.

10. Change in Control. The vesting of the Option in the event of a Change in Control is governed by Section 11.02 of the Plan.

11. Forfeiture Under Recoupment Policy. The Company shall have the power and the right to require you to forfeit this Option, return the shares of Common Stock issued pursuant to an exercise of this Option or any proceeds therefrom consistent with any recoupment policy maintained by the Company under applicable law, as such policy is amended from time to time.

12. Use of Words. The use of words of the masculine gender in this Award Agreement is intended to include, wherever appropriate, the feminine or neuter gender and vice versa.

13. Successors. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company.

14. Taxes. The Company may require payment of or withhold any tax that it believes is required as a result of the grant or exercise of the Option, and the Company may defer making delivery with respect to shares issuable hereunder until arrangements satisfactory to the Company have been made with respect to such tax withholding obligations.

15. No Legal or Tax Advice. Notwithstanding anything stated in this Award Agreement, the Company is not providing any legal or tax advice related to this Option or any Common Stock that may be obtained upon exercise of this Option. Nothing stated in this Option is intended to cover any legal or tax situation. You are encouraged to consult your own legal and/or tax advisors to address any questions or concerns you may have regarding this Option or any Common Stock that may be obtained upon the exercise of this Option.

16. Personal Information. Solium Capital LLC and Equiniti Trust Company assist the Company in the operation of the Plan and the administration of the Option granted pursuant to this Award Agreement. If you choose to participate in the Plan, you acknowledge and consent to the Company sharing your name, email, and information regarding the grant of the Option under this Award Agreement with both Solium Capital LLC and Equiniti Trust Company.

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed as of ________, 2021.

MODINE MANUFACTURING COMPANY
By:	/s/Neil D. Brinker
	Neil D. Brinker
	President and Chief Executive Officer

Exhibit 10.4

MODINE MANUFACTURING COMPANY

2020 INCENTIVE COMPENSATION PLAN

RESTRICTED STOCK UNIT AWARD

AWARD AGREEMENT

We are pleased to inform you that you have been granted a Restricted Stock Unit Award subject to the terms and conditions of the Modine Manufacturing Company 2020 Incentive Compensation Plan (the “Plan”) and of this Award Agreement. Unless otherwise defined herein, all terms used in this Award Agreement shall have the same meanings as set forth in the Plan.

Full name of Grantee:
Date of Award:
Total number of Restricted Stock Units:

1. Restricted Stock Unit Award. Pursuant to the Plan, you are hereby granted a Restricted Stock Unit Award (“Award”), subject to the terms and conditions of this Award Agreement and the Plan. Accordingly, you are hereby granted the aggregate number of Restricted Stock Units (“RSUs”) set forth above, subject to the restrictions and conditions set forth in this Award Agreement.

2. Restricted Period. Upon the expiration of the Restricted Period (as described in the chart below) applicable to the number of RSUs specified in the chart below, you shall receive one share of Common Stock for each RSU for which the Restricted Period has expired. For purposes of this Award Agreement, the Restricted Period shall mean the period beginning on the date of this Award set forth above and ending as set forth below:

Number of RSUs that Vest	Restricted Period Expiration
25% of the total number of RSUs
25% of the total number of RSUs
25% of the total number of RSUs
25% of the total number of RSUs

Except as otherwise provided in Section 8.02(f) or Section 11.02 of the Plan, in the event of your termination of employment with the Company or a Subsidiary for any reason (other than due to Disability (as defined below), death, or (with Committee approval) your retirement) prior to the expiration of the Restricted Period for any RSUs, you shall forfeit to the Company all RSUs for which the Restricted Period has not expired and the right to receive any Common Stock with respect to such RSUs. If you separate from service with the Company or a Subsidiary due to Disability, death, or (with Committee approval) your retirement prior to the end of the Restricted Period for any RSUs, your Restricted Stock Unit Award shall vest in full. For purposes of this Award Agreement, “Disability” shall mean “permanent and total disability” as defined in Section 22 (e)(3) of the Code.

3. Shareholder Status. You shall not have any voting or other ownership rights in the Company arising from the grant of RSUs under this Agreement, unless and until such RSUs are settled pursuant to Section 4, below. Further, you shall not be entitled to dividend equivalents during the period you hold RSUs.

4. Settlement and Delivery. As soon as administratively practicable after the expiration of the Restricted Period, the Company shall ascribe to you (or, in the event of your death, your beneficiary) a share of Common Stock for each RSU that vests as a result of the expiration of the Restricted Period in a book entry on the records kept by the Company’s transfer agent or such other method of delivering shares of Common Stock subject to this Award, as determined by the Committee.

5. Transfer. This Restricted Stock Unit Award shall not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by you other than in the event of your death. Except for the designation of your beneficiary in the event of your death, the purported assignment, alienation, pledge, attachment, transfer or encumbrance of the Award or this Award Agreement shall be void and unenforceable against the Company. This provision shall not prevent you from transferring the shares of Common Stock issued hereunder after the expiration of the Restricted Period.

6. No Obligation of Employment. This Restricted Stock Unit Award shall not impose any obligation on the Company to continue your employment with the Company or any Subsidiary.

7. Controlling Provisions; Plan Controls. In the event of a conflict between the terms of this Award Agreement and any employment agreement or change in control agreement between you and the Company, this Award Agreement shall control. This Award Agreement is qualified in its entirety by reference to the terms and conditions of the Plan under which it is granted, a copy of which you may request from the Company. The Plan empowers the Committee to make interpretations, rules and regulations thereunder and, in general, provides that the determinations of such Committee with respect to the Plan shall be binding upon you. The Plan is incorporated herein by reference.

8. Change in Control. The vesting of the Award in the event of a Change in Control is governed by Section 11.02 of the Plan.

9. Forfeiture Under Recoupment Policy. The Company shall have the power and the right to require you to forfeit and return the shares of Common Stock issued as a result of the vesting of any Award or any proceeds therefrom consistent with any recoupment policy maintained by the Company under applicable law, as such policy is amended from time to time.

10. Use of Words. The use of words of the masculine gender in this Award Agreement is intended to include, wherever appropriate, the feminine or neuter gender and vice versa.

11. Successors. This Award Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company.

12. Taxes. The Company may require payment of or withhold any tax which it believes is required as a result of the Award and/or the issuance of Common Stock resulting from the vesting of the RSUs that are the subject of this Award, and the Company may defer making delivery with respect to shares issuable hereunder until arrangements satisfactory to the Company have been made with respect to such tax withholding obligations.

13. No Legal or Tax Advice. Notwithstanding anything stated in this Award Agreement, the Company is not providing any legal or tax advice related to this Award or any Common Stock that may be obtained upon vesting of this Award. Nothing stated in this Award is intended to cover any legal or tax situation. You are encouraged to consult your own legal and/or tax advisors to address any questions or concerns you may have regarding this Award or any Common Stock that may be obtained upon vesting of this Award.

14. Personal Information. Solium Capital LLC and Equiniti Trust Company assist the Company in the operation of the Plan and the administration of the Restricted Stock Unit Award granted pursuant to this Award Agreement. If you choose to participate in the Plan, you acknowledge and consent to the Company sharing your name, email, and information regarding the grant of the Restricted Stock Unit Award under this Award Agreement with both Solium Capital LLC and Equiniti Trust Company.

By your electronic agreement and the signature of the Company’s representative below, you and the Company agree that the Restricted Stock Unit Award awarded to you under this Award Agreement are subject to the terms and conditions of the Plan, a copy of which is available to you upon request. As provided in the Plan, you hereby agree to accept as binding any decision of the Committee with respect to the interpretation of the Plan and this Award Agreement, or any other matters associated therewith.

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed as of ________, 2021.

MODINE MANUFACTURING COMPANY
By:	/s/Neil D. Brinker
	Neil D. Brinker
	President and Chief Executive Officer

Exhibit 31.1

Certification

I, Neil D. Brinker, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Modine Manufacturing Company for the quarter ended June 30, 2021;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the<br> circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of<br> operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and<br> 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to<br> the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance<br> regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and<br> procedures, as of the end of the period covered by this report based on such evaluation; and
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d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth<br> fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit<br> committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the<br> registrant’s ability to record, process, summarize and report financial information; and
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b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: August 5, 2021
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/s/ Neil D. Brinker
Neil D. Brinker
President and Chief Executive Officer

Exhibit 31.2

Certification

I, Michael B. Lucareli, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Modine Manufacturing Company for the quarter ended June 30, 2021;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in<br> light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,<br> results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules<br> 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material<br> information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide<br> reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure<br> controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the<br> registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s<br> auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
---	---
a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely<br> affect the registrant’s ability to record, process, summarize and report financial information; and
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b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: August 5, 2021
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/s/ Michael B. Lucareli
Michael B. Lucareli
Executive Vice President, Chief Financial Officer

Exhibit 32.1

Certification

Pursuant to 18 United States Code § 1350

In connection with the quarterly report of Modine Manufacturing Company (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Neil D. Brinker, President and Chief Executive Officer of the Company certify, pursuant to 18 U.S.C. § 1350, that, to the best of my knowledge:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: August 5, 2021
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/s/ Neil D. Brinker
Neil D. Brinker
President and Chief Executive Officer

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Exhibit 32.2

Certification

Pursuant to 18 United States Code § 1350

In connection with the quarterly report of Modine Manufacturing Company (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael B. Lucareli, Executive Vice President, Chief Financial Officer of the Company certify, pursuant to 18 U.S.C. § 1350, that, to the best of my knowledge:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: Augusta 5, 2021
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/s/ Michael B. Lucareli
Michael B. Lucareli
Executive Vice President, Chief Financial Officer