Financial overview

in million dollars	FY2007	FY2006	Factors
Overall
Sales	1,849.4	1,722.3	Sales volumes were positively affected by strong foreign volumes in Europe and Brazil, as well as steady growth in the Company's Commercial Products business.
Operating Income	(21.1)	45.2	The decrease in earnings from continuing operations was driven by a decline in gross margins related to weak North American truck volumes, manufacturing inefficiencies experienced as part of plant closures and consolidations and pricing pressure from customers.  In addition, impairment charges of $47.4 million were recorded primarily in North America and South Korea due to reduced outlook for these businesses.
Sales by Segment (Selected)
OE- Asia	268.4	219.9	Based on continued strength in condenser and bus air conditioning products.
OE-Europe	751.0	588.7	Based on strength in powertrain cooling products, engine related products and condenser sales volumes.  Exchange rate change of $21 million had a favorable impact on net sales in fiscal 2007.
OE- North America	521.1	667.9	The sales decline is largely due to the downturn in the North American truck market following the January 1, 2007 emission regulations.  In addition, sales in the automotive market are down due to higher gas prices and a consumer shift from light trucks and full SUVs to cars and small SUVs.
OE- South America	133.0	77.2	Based on continued strength in the Brazilian agricultural and commercial vehicle markets, along with strength in the overall Brazilian economy.  In addition, foreign currency exchange rate changes favorably impacted sales by $17 million.

Contracts
-In September 2007, the Company announced that it has been awarded programs by Mitsubishi FUSO Truck and Bus Corporation valued at approximately $15 million over five years. Leveraging its strong presence in Asia, Modine will supply heating, ventilation, and air conditioning (HVAC) modules to Mitsubishi FUSO's Kawasaki, Japan, plant. The passenger thermal management systems will be assembled at Modine's Shanghai, China, facility using the latest technology heat exchangers from the company's Asan City, South Korea, design center. Mitsubishi FUSO Truck awarded Modine business for the HVAC system for the Canter light duty truck program, beginning in 2009 and extending to 2014. It is the company's first thermal management business award from a Japanese truck customer. (From a press release on Sep. 19, 2007)

-In February 2008, the Company announced that it has been awarded a series of programs to supply exhaust gas recirculation (EGR) cooling solutions to meet U.S. EPA 2010 on-highway vehicle and Tier 4 off-highway equipment emissions standards. The new programs, which consist of medium and heavy-duty engine applications for a variety of customers, total approximately $125 million in annualized revenues. Production is expected to begin in the Company's Joplin, Missouri, manufacturing facility in mid 2009 and extend through 2015. A majority of the new programs represents incremental business that supports its goal of generating 4 to 6 percent annual revenue growth. (From a press release on Feb. 14, 2008)

-In February 2008, the Company announced it has won programs from Great Wall Motor in Baoding, Hebei Province, China valued at approximately $14 million to supply exhaust gas recirculation (EGR) coolers for 2.0L diesel engines. These programs will begin in 2009 and extend over the next five years. The EGR coolers will be manufactured beginning in 2009 at Modine's Changzhou manufacturing plant, located in Changzhou, JiangSu Province, China. The facility leverages Modine's engineering and testing capabilities located in Asan City, South Korea. This incremental business supports Modine's strategic goal of generating 4 to 6 percent annual organic revenue growth. (From a press release on Feb. 28, 2008)

Restructuring
The Company is implementing a number of cost and operational efficiency measures that will be designed to improve the Company窶冱 longer term competitiveness. The following actions have been identified:
-Manufacturing realignment 窶 The Company announced the closure of the Camdenton, Missouri; Pemberville, Ohio; and Logansport, Indiana facility within the Original Equipment 窶 North America segment and the Tubingen, Germany manufacturing plant within the Original Equipment 窶 Europe segment. These closures are in addition to the previously announced four plant closures in North America, of which the Jackson, Mississippi and Clinton, Tennessee facility closures are still in process.
Portfolio rationalization 窶 the Company completed the sale of its Electronics Cooling business on May 1, 2008.

R&D Expenditure

in million dollars	March 2008	March 2007	March 2006
R&D expenditure	93.2	82.3	79.4

R&D Structure
-A newly formed vehicular HVAC group has grown out of the R&D area.  Knowledge developed from R&D activities will be used to develop improved HVAC product platforms, including products to comply with potential anti-idling legislation for heavy duty vehicles.  Energy efficiency legislation is also driving opportunities for high performance, lightweight heat exchangers in commercial markets.  The Company continues to refine the product development process for all of its markets, including the use of virtual simulation to increase efficiency and reduce time to market with new designs.
It has been granted 2,355 worldwide patents over its life.

Capital Expenditures

in thousand dollars	March 2008	March 2007	March 2006
Original Equipment-Asia	19,328	8,681	5,504
Original Equipment-Europe	32,768	22,096	28,063
Original Equipment-North America	23,073	25,486	19,945
South Americas	7,742	3,339	-
Commercial Products	1,595	6,824	3,946
Fuel Cell	589	546	-
Corporate and administrative	1,408	15,114	18,341
Eliminations	-	(58)	-
Capital expenditures-continuing operations	86,503	82,028	79,799
Capital expenditures-discontinued operations	510	724	4,071
Total capital expenditures	87,013	82,752	79,870

Overseas Investment
-The Company is constructing new manufacturing facilities in China and India, and establishing a corporate office in China.  The new manufacturing facility in Changzhou, China began production in the third quarter of fiscal 2008, and the Chennai, India facility is scheduled to being production in the second quarter of fiscal 2009.
Construction is currently underway for the Company's new Gyongyos, Hungary facility within this region, with production scheduled to begin in fiscal 2009.