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5. Modine Manufacturing Company Business Report FY ended Mar. 2015

Modine Manufacturing Company Business Report FY ended Mar. 2015

Factors
1) Net Sales
-The Company's net sales in the fiscal year ended March 31, 2015 increased by 1.3% over the previous year to USD 1,496.4 million. Sales had increased in the Company's Building HVAC, Asia, and North America segments. These increases were offset by lower sales in the Company's South America segment. Additionally, the Company's sales increases in the Europe segment were offset by a USD 35 million impact in unfavorable currency rate exchanges. Currency rate exchanges had a negative impact of USD 43 million to the Company's sales.

2) Operating Income
-The Company's operating income in the fiscal year ended March 31, 2015 increased by 41.7% compared to the previous fiscal year to USD 52.7 million. Factors contributing to the increased operating income include increased sales volumes, lower restructuring expenses, and the sale of a wind tunnel in Europe. These gains were partially offset by higher impairment charges and higher selling, general, and administrative expenses.

3) Europe
-In the fiscal year ended March 31, 2015, sales for the Company's Europe segment were USD 578.2 million, a decrease of 1.1%. While the segment had increased sales volumes in the commercial vehicle and automotive markets, lower tooling sales and a USD 35 million negative impact from foreign currency exchange rate changes offset these gains.

4) North America
-The Company's North America segment had sales of USD 573.5 million in the fiscal year ended March 31, 2015, an increase of 0.8 % over the previous year. Sales increased due to higher sales volumes to the commercial vehicle market. However, weaker sales to the off-highway vehicle market partially offset the gains.

5) South America
-In the fiscal year ended March 31, 2015, sales for the Company's South America segment decreased 23.5% to USD 93.9 million. A weaker Brazilian economy led to decreased sales volumes to commercial vehicle, off-highway, and automotive customers. Additionally, the increased strength of the U.S. dollar versus the Brazilian real caused a negative USD 9 million impact from the change in currency exchange rates.

6) Asia
-Sales for the Company's Asia segment in the fiscal year ended March 31, 2015 totaled USD 81.2 million, an increase of 13.6% from the previous year. New automotive program launches in China and increased sales volumes in India were slightly offset by lower off-highway market sales in China and Korea.

Restructuring

-The Company announced its intention to close its manufacturing facility in McHenry, Illinois, U.S. The closure is expected to affect approximately 135 full-time employees. The Company plans to transfer production from the McHenry facility to other facilities in North America, including those in Nuevo Laredo, Mexico; Lawrenceburg, Tennessee; and Jefferson City, Missouri. Components produced at the McHenry plant include parallel flow and serpentine condensers, oil coolers and radiators. The Company plans to close the plant over an approximately 18-month period. (From a press release on April 23, 2014)

Contracts

-The Company announced that it has won a significant cooling module contract with China Anhui Jianghuai Automobile Co., Ltd. Production is expected to begin in China in 2016. (From a press release on October 27, 2014)

Recent Developments outside the U.S.

-In the fiscal year ended March 31, 2015, 64% of the Company's total sales came from customers outside of the U.S. Foreign operations generated 55% of the Company's total sales, while exports from the U.S. generated the remaining 9%.

-The Company completed the consolidation of two of its manufacturing facilities in Germany into a single facility in the fiscal year ended March 31, 2015.

-Due to weakening economic conditions in Brazil, the Company's South America segment began implementing various restructuring and cost reduction measures to reduce its cost structure. This included reducing the number of employees at its South America operations.

-Production levels at the Company's manufacturing facilities in Chennai, India, and in China have all increased compared to the previous fiscal year and are expected to continue to increase in the fiscal year ending in March 31, 2016.

-Over the last three fiscal years, the Company's R&D expenditures have been between 4 and 5% of the Company's net sales.

R&D Structure

-The Company's primary research facilities are located in Racine, Wisconsin, U.S. and Bonlanden, Germany. Additional technical centers are located in Sao Paulo, Brazil; Leeds, U.K.; and Changzhou, China.

-The Company has over 600 engineers working in research and development.

-To achieve efficiencies and lower developmental costs, the Company's research and engineering groups work closely with its customers on special projects and systems designs. These projects have included aluminum radiators, charge air coolers, waste heat recovery systems, and exhaust gas recirculation technology for various vehicular markets.

R&D Activities

-The Company's current R&D activities are focused primarily on the areas of powertrain cooling, engine products and building HVAC products.

Product Development

E-Fan cooling module for public transportation vehicles
-At the 2014 American Public Transportation Association (APTA) Expo, the Company displayed its E-Fan Module, a cooling module developed specifically for the public transportation sector. The E-Fan Module uses the Company's tube-fin aluminum radiator and Bullet Nose charge-air cooler to provide increased service life and reduced weight. The module also provides lower maintenance costs and reduced noise by eschewing the conventional hydraulic fan and belt drive system. With these improvements, E-Fan technology provides fuel savings of up to 15%. (From a press release on August 28, 2014)

Patents

-The Company has over 2,200 global patents.

-The Company's capital expenditures in the fiscal year ended March 31, 2015 went primarily towards tooling and equipment purchases related to program launches with the Company's customers. A significant investment was also made to expand the Company's manufacturing facility in Nuevo Laredo, Mexico.

Investments outside the U.S.

<Mexico>
-The Company is expanding its manufacturing facility in Nuevo Laredo, Mexico. The expansion will add 80,000 square feet of operating space which will be used to manufacture parallel-flow tubes. The expansion is expected to be completed first quarter of 2015.

Data

Number of Employees

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