Founded in 1916,
Modine Manufacturing Companyis a global leader in thermal management systems and components, bringing heating and cooling technology and solutions to diversified global markets. We operate on five continents, in 17 countries, and employ approximately 11,300 persons worldwide. Our primary product groups include i) powertrain cooling and engine cooling; ii) coils, coolers, and coatings; and iii) heating, ventilation and air conditioning. Our products are used in on- and off-highway original-equipment vehicular applications. In addition, we provide our thermal management technology and solutions to a wide array of commercial, industrial, and building heating, ventilating, air conditioning, and refrigeration markets.
Fiscal 2020 brought challenges, including market weakness in key vehicular end markets and the COVID-19 pandemic, which negatively impacted our businesses, beginning in the fourth quarter in
Asiaand Europe. In response to these challenges, we have rapidly implemented cost-savings measures to mitigate the impacts of lower customer demand. These measures have included, but are not limited to, production staffing adjustments, furloughs, shortened work weeks, and temporary salary reductions at all levels of our organization. We are reducing operating and administrative expenses, including travel and entertainment expenditures, and lowering the annual compensation paid to the Board of Directors. We have also taken steps specifically aimed to preserve cash and maximize our liquidity. In addition, we are focused on reducing capital expenditures by delaying certain projects and the purchase of some program-related equipment and tooling. Both the vehicular market weakness and the impacts of the COVID-19 pandemic during fiscal 2020 placed significant strain on our previously-announced evaluation of strategic alternatives for the automotive business. As a result, we have paused this process until economic conditions improve. We remain committed, however, to exiting the automotive business in a manner that is in the best interest of our shareholders. As we steer our business through these uncertain times in light of the COVID-19 pandemic, we are focused on leveraging the advantages we have. We have made significant strides in becoming an industrial thermal management company and possess superior technology that we can apply to targeted end markets. We are confident in our Company's strong foundation, comprised of our effective leadership team, committed workforce, and engaged board of directors. Through our strong foundation, we believe we can create and maintain shareholder value even in these times of unprecedented uncertainty.
Développement de nouveaux produits et technologies
Our ability to develop new products and technologies based upon our building block strategy for new and emerging markets is one of our competitive strengths. Under this strategy, we focus on creating core technologies that form the basis for multiple products and product lines across multiple business segments. Each of our business segments have a strong heritage of new product development, and our entire global technology organization benefits from mutual strengths. We own four global, state-of-the-art technology centers, dedicated to the development and testing of products and technologies. The centers are located in
Racine, Wisconsin, Grenada, Mississippi, Pocenia, Italyand Bonlanden, Germany. Our reputation for providing high quality products and technologies has been a Company strength valued by our customers.
Nous bénéficions toujours de relations avec des clients qui reconnaissent
La valeur de nous est de participer directement à la conception, au développement et
processus de validation. Cela a abouti et nous espérons que cela continuera
se traduisent par des relations clients solides et à long terme avec les entreprises qu’elles apprécient
partenariats avec leurs fournisseurs.
Planification stratégique et développement de l’entreprise
We employ both short-term (one-to-three year) and longer-term (five-to-seven year) strategic planning processes, which enable us to continually assess our opportunities, competitive threats, and economic market challenges. 24 -------------------------------------------------------------------------------- Table of Contents We devote significant resources to global strategic planning and development activities to strengthen our competitive position. We expect to continue to pursue organic- and external-growth opportunities, particularly to grow our global, market leading positions in our industrial businesses. As an example, we recently announced that we are changing how we will go to market to existing and potential new data center customers and are expanding our data center offerings into the North American market. We are bringing together the full systems capability and established roots of our BHVAC segment in the data center space with the global manufacturing expertise and customer relationships within CIS. We expect strong growth opportunities in the North American data center market as the industry is growing exponentially in order to keep up with the ever-increasing reliance on digital technologies.
Discipline opérationnelle et financière
We operate in a dynamic, global marketplace; therefore, we manage our business with a disciplined focus on increasing productivity and reducing waste. The nature of the global marketplace requires us to move toward a greater manufacturing scale in order to create a more competitive cost base. In order to optimize our cost structure and improve efficiency of our operations, we have executed restructuring activities in our VTS and CIS segments during recent years. We have also developed a single focus approach to the data center market by combining the resources and capabilities of our BHVAC and CIS teams. In addition, as costs for materials and purchased parts may rise from time to time due to increases in commodity markets, we seek low-cost sourcing, when appropriate, and enter into contracts with some of our customers that provide for commodity price adjustments, on a lag basis. We follow a rigorous financial process for investment and returns, intended to enable increased profitability and cash flows over the long term. We place particular emphasis on working capital improvement and prioritization of our capital investments. Our executive management incentive compensation (annual cash incentive) plan for fiscal 2020 was based upon consolidated operating income growth and a cash flow margin metric. These performance goals drive alignment of management and shareholders' interests in both our earnings growth and cash flow targets. In addition, we provide a long-term incentive compensation plan for officers and certain key employees to attract, retain, and motivate employees who directly impact the long-term performance of our company. The plan is comprised of stock awards, stock options, and performance-based stock awards. The performance-based stock awards for the fiscal 2020 through 2022 performance period are based upon a target three-year average annual revenue growth and a target three-year average consolidated cash flow return on invested capital.
Information sectorielle – Stratégie, conditions et tendances du marché
Each of our operating segments is managed by a vice president and has separate strategic and financial plans, and financial results, all of which are reviewed by our chief operating decision maker. These plans and results are used by management to evaluate the performance of each segment and to make decisions on the allocation of resources. Effective
April 1, 2020, we began managing our automotive business separate from the VTS segment as we target the sale or eventual exit of the automotive business. We will report financial results for the automotive segment beginning in the first quarter of fiscal 2021.
Solutions thermiques embarquées (58% des ventes nettes au cours de l’exercice 2020)
Our VTS segment provides powertrain and engine cooling products, including, but not limited to, radiators, charge air coolers, condensers, oil coolers, EGR coolers, and fuel coolers, to OEMs in the automotive, commercial vehicle, and off-highway markets in
North America, South America, Europe, and Asia. In addition, our VTS segment also serves Brazil'sautomotive and commercial vehicle aftermarkets. Sales volume in the VTS segment decreased during fiscal 2020, as compared with the prior year. In particular, sales to commercial vehicle and off-highway customers decreased significantly compared with the prior year, resulting from weakness in the global vehicular markets and the planned wind-down of certain commercial vehicle programs. In addition, to a lesser extent, sales volume decreased to automotive customers in fiscal 2020. During fiscal 2020, we recorded asset impairment charges totaling $8 million, primarily related to manufacturing facilities in Austriaand Germanythat are expected to be negatively impacted by planned wind downs of certain commercial vehicle and automotive programs. 25 -------------------------------------------------------------------------------- Table of Contents We previously announced our evaluation of strategic alternatives for the automotive business. As a result of the widespread economic impacts of the COVID-19 pandemic, we have paused this process, yet we remain committed to exiting this business in a manner that is in the best interest of our shareholders. We intend to resume this process once we determine that market conditions will support our effort to maximize the value of our business. It is possible that our exit strategy may ultimately include a combination of both selling and winding-down or closing portions of the automotive business. We remain committed to executing on the best strategic alternative for the automotive business in order to both optimize our VTS segment's financial performance and maximize shareholder value.
Solutions commerciales et industrielles (31% des ventes nettes au cours de l’exercice 2020)
Our CIS segment provides a broad offering of thermal management products to the HVAC&R markets, including solutions tailored to indoor and mobile climates, food storage and transport-refrigeration, and industrial processes. CIS's primary product groups include coils, coolers, and coatings. Our coils products include custom-designed condensers, evaporators, round-tube solutions, as well as steam and water/fluid coils. Our coolers include commercial refrigeration units, which are used across the food supply chain, products for precision climate control for other applications such as data center cooling, carbon dioxide and ammonia unit coolers, remote condensers, transformer oil coolers, and brine coolers. In addition, we offer proprietary coating solutions for corrosion protection, prolonging the life of heat-transfer equipment. During fiscal 2020, CIS segment sales volume decreased to both commercial HVAC&R and data center customers. The lower sales volume to commercial HVAC&R customers was largely attributable to general market weakness. In particular, the
U.S.refrigeration transport market declined compared with the prior year. The lower data center sales primarily resulted from a significant decline in sales to an individual data center customer in fiscal 2020. The lower sales to this customer primarily resulted from the customer's temporary lull in additional investment, after strong capacity expansion in the prior year. Looking ahead, while the duration and severity of the impacts of COVID-19 on the markets we serve are currently uncertain, our team is focused on improving financial results through manufacturing efficiencies, vertical integration projects and pricing strategies. We will continue to support our customers with innovative products, such as coils with smaller diameter tubing, to help them meet increasingly-stringent environmental requirements. Also, we have increased our product offerings that feature low Global Warming Potential refrigerants, which are more environmentally friendly than traditional refrigerants, and will continue to support the transition to natural refrigerants through our comprehensive line of commercial cooler products. We aim to capitalize on opportunities arising from energy and environmental regulations and believe we are well-positioned to be the partner of choice for our customers.
Construction d’un système de CVC (11% des ventes nettes au cours de l’exercice 2020)
Our BHVAC segment manufactures and distributes a variety of original equipment and aftersales HVAC products, primarily for commercial buildings and related applications in
North America, the U.K., mainland Europe, the Middle East, Asia, and Africa. We sell and distribute our heating, ventilation and cooling products through wholesalers, distributors, consulting engineers, contractors and building owners for applications such as warehouses, repair garages, greenhouses, residential garages, schools, data centers, manufacturing facilities, hotels, hospitals, restaurants, stadiums, and retail stores. Our heating products include gas (natural and propane), electric, oil and hydronic unit heaters, low- and high-intensity infrared, and large roof-mounted direct- and indirect-fired makeup air units. Our ventilation products include single-packaged vertical units and unit ventilators used in school room applications, air-handling equipment, and rooftop packaged ventilation units used in a variety of commercial building applications. Our cooling products include precision air conditioning units used primarily for data center cooling applications, air- and water-cooled chillers, and ceiling cassettes, which are used in a variety of commercial building applications. Economic conditions, such as demand for new commercial construction, building renovations, including HVAC replacement, growth in data centers and school renovations, and higher efficiency requirements, are growth drivers for our building HVAC products. During fiscal 2020, sales increased in North America, primarily driven by increased sales of ventilation and heating products. These higher sales in North Americawere partially offset by lower sales in the U.K., primarily due to lower sales of air conditioning and ventilation products. 26 -------------------------------------------------------------------------------- Table of Contents We are focused on being a leader in the development of sustainable HVAC solutions for our customers. As recently announced, we are targeting to expand our data center cooling business into the North American market. We have established roots in the data center space and plan to leverage our North American presence, including our manufacturing footprint and thermal management expertise, to deploy integrated data center cooling solutions to the U.S. market. We are seeing heightened demand in the data center markets, particularly in light of the increasing reliance on virtual capabilities resulting from stay-at-home edicts associated with the COVID-19 pandemic.
Résultats commerciaux consolidés
Fiscal 2020 net sales decreased
$237 million, or 11 percent, from the prior year, primarily due to lower sales in our VTS and CIS operating segments, partially offset by higher sales in our BHVAC segment. Foreign currency exchange rate changes negatively impacted sales in fiscal 2020 by $46 million. Cost of sales decreased $179 million, or 10 percent, from last year, primarily due to lower sales volume. Gross profit decreased $58 millionand gross margin declined 90 basis points to 15.6 percent. SG&A expenses increased $6 million, primarily due to separation and project costs associated with our review of strategic alternatives for the VTS segment's automotive business, which increased approximately $29 millioncompared with fiscal 2019. The higher separation and project costs were partially offset by lower-compensation related expenses. Operating income during fiscal 2020 decreased $72 millionto $38 million, primarily due to lower gross profit and higher SG&A expenses. The COVID-19 pandemic began negatively impacting our business beginning with our Asian and European markets in the fourth quarter of fiscal 2020. Both weakness in key vehicular markets and the impacts of the COVID-19 pandemic placed significant strain on our previously-announced evaluation of strategic alternatives for the automotive business within the VTS segment. As a result, we paused this process until economic conditions improve. We remain committed, however, to exiting the automotive business in a manner that is in the best interest of our shareholders. Once we resume the process, it is possible that our exit strategy may ultimately include a combination of both selling and winding-down or closing portions of the automotive business. We have spent considerable time and money separating the automotive business and preparing for a potential sale. We have dedicated resources to physically separate the automotive manufacturing operations, including resources for IT systems and separate business processes, and have also established new legal entities. We believe these resource investments are critical to exiting the automotive business. We remain committed to our strategy of becoming a diversified industrial company and executing on the best strategic alternative for the automotive business in order to both optimize our VTS segment's financial performance and maximize shareholder value. As a result of the impacts of the COVID-19 pandemic, we suspended production at certain manufacturing facilities in China, India, Italy, Spain, Germany, the Netherlands, Austria, Hungary, the U.S., Mexicoand Brazildue to local government requirements or customer shutdowns and are operating other facilities in the U.S.and abroad at reduced capacity levels. Although the temporarily-closed facilities have since reopened, many are operating at a significantly reduced volume because of low customer demand. Beginning largely in April 2020and in an effort to mitigate the negative impacts of COVID-19 on our financial results, we have taken actions, including, but not limited to, production staffing adjustments, furloughs, shortened work weeks, and temporary salary reductions at all levels of our organization. In addition, we are reducing operating and administrative expenses, including travel and entertainment expenditures, and lowering the annual compensation paid to the Board of Directors. We are also focused on reducing capital expenditures by delaying certain projects and the purchase of some program-related equipment and tooling. 27 -------------------------------------------------------------------------------- Table of Contents The following table presents our consolidated financial results on a comparative basis for fiscal years 2020 and 2019. A detailed comparison of our consolidated fiscal 2019 and 2018 financial results can be found in the Management's Discussion and Analysis of Financial Condition and Results of Operations section in the Company's 2019 Annual Report on Form 10-K filed with the SECon May 23, 2019. Years ended March 31, 2020 2019 (in millions) $'s % of sales $'s % of sales Net sales $ 1,976100.0 % $ 2,213100.0 % Cost of sales 1,668 84.4 % 1,847 83.5 % Gross profit 308 15.6 % 366 16.5 % Selling, general and administrative expenses 250 12.6 % 244 11.0 % Restructuring expenses 12 0.6 % 10 0.4 % Impairment charges 9 0.4 % - - (Gain) loss on sale of assets (1 ) - 2 0.1 % Operating income 38 1.9 % 110 5.0 % Interest expense (23 ) -1.1 % (25 ) -1.1 % Other expense - net (5 ) -0.2 % (4 ) -0.2 % Earnings before income taxes 10 0.5 % 81 3.7 % (Provision) benefit for income taxes (12 ) -0.6 % 5 0.2 % Net (loss) earnings $ (2 )-0.1 % $ 863.9 % Fiscal 2020 net sales of $1,976 millionwere $237 million, or 11 percent, lower than the prior year, primarily due to lower sales in our VTS and CIS segments and a $46 millionunfavorable impact of foreign currency exchange rate changes, partially offset by higher sales in our BHVAC segment. Sales decreased $175 millionand $84 millionin our VTS and CIS segments, respectively. Sales increased $9 millionin our BHVAC segment. Fiscal 2020 cost of sales of $1,668 milliondecreased $179 million, or 10 percent, primarily due to lower sales volume and a $39 millionfavorable impact of foreign currency exchange rate changes. As a percentage of sales, cost of sales increased 90 basis points to 84.4 percent and was negatively impacted by approximately 80 basis points due to higher labor and inflationary costs and, to a lesser extent, by sales mix. These negative impacts were partially offset by favorable material costs, which impacted costs of sales by approximately 30 basis points. The favorable material costs primarily resulted from lower commodity pricing, which more than offset the negative impacts of tariffs. In addition, we recorded $3 millionof costs at Corporate for program and equipment transfers associated with the separation of the VTS segment's automotive business in preparation for a potential sale.
En raison de la baisse des ventes et de la hausse des coûts de vente en pourcentage des ventes,
exercice 2020. profit brut réduit
le point de base est de 15,6%.
Les coûts de PSA pour l’exercice 2020 ont augmenté
principalement en raison des coûts de séparation et de projet enregistrés dans l’association de sociétés
avec notre revue des alternatives stratégiques pour le segment automobile VTS
un travail qui a grossi
rembourse partiellement les coûts inférieurs liés aux frais, qui ont été réduits
appartenant auparavant à des installations de production
changements de taux de change
Restructuring expenses totaled
$12 millionduring fiscal 2020 and increased $2 millioncompared with the prior year. The fiscal 2020 restructuring expenses primarily consisted of severance expenses related to targeted headcount reductions in the VTS segment and equipment transfer and plant consolidation costs in the CIS segment. The fiscal 2020 headcount reductions were in response to lower market demand and in support of our objective to reduce operational and SG&A cost structures. During fiscal 2021, we approved headcount reductions in the VTS and CIS segments and, as a result, we expect to record approximately $4 millionof severance expenses during the first quarter of fiscal 2021.
Au cours de l’exercice 2020, nous avons comptabilisé le total des charges de dépréciation
principalement lié à deux usines de production dans le segment VTS.
28 -------------------------------------------------------------------------------- Table of Contents Operating income of
$38 millionduring fiscal 2020 decreased $72 millioncompared with the prior year. This decrease was primarily due to an increase of $32 millionof separation and project costs associated with our review of strategic alternatives for our automotive business and lower earnings in our VTS and CIS segments, which decreased $37 millionand $20 million, respectively, partially offset by higher earnings in our BHVAC segment, which increased $9 million. The provision for income taxes was $12 millionin fiscal 2020, compared with a benefit for income taxes of $5 millionin fiscal 2019. The $17 millionchange was primarily due to the absence of income tax benefits totaling $25 millionrecorded in the prior year and income tax charges totaling $10 millionin the current year, partially offset by lower operating earnings in fiscal 2020. The $25 millionof income tax benefits recorded in fiscal 2019 related to the recognition of tax assets for foreign tax credits and a manufacturing deduction in the U.S.and our accounting for the Tax Act. The $10 millionof income tax charges in fiscal 2020 were comprised of net charges totaling $7 millionresulting from adjustments of valuation allowances on certain deferred tax assets in the U.S.and in a foreign jurisdiction and $3 millionassociated with legal entity restructuring in preparation for a potential sale of our automotive business. See Note 7 of the Notes to Consolidated Financial Statements for additional information.
Résultats du secteur d’activité
A detailed comparison of our segment financial results for fiscal 2019 and 2018 can be found in the Management's Discussion and Analysis of Financial Condition and Results of Operations section in the Company's 2019 Annual Report on Form 10-K filed with the
SECon May 23, 2019. Effective April 1, 2020, we began managing our automotive business separate from the other businesses within the VTS segment. We are managing the automotive business as a separate segment as we target the sale or eventual exit of the automotive businesses. Beginning for fiscal 2021, we will report the financial results for the automotive business as the Automotive segment. The remaining portion of the previous VTS segment will be named the Heavy-Duty Equipment segment and will include the heavy-duty commercial vehicle and off-highway businesses. VTS Years ended March 31, 2020 2019 (in millions) $'s % of sales $'s % of sales Net sales $ 1,177100.0 % $ 1,352100.0 % Cost of sales 1,032 87.7 % 1,165 86.2 % Gross profit 145 12.3 % 187 13.8 % Selling, general and administrative expenses 100 8.5 % 113 8.3 % Restructuring expenses 10 0.8 % 9 0.7 % Impairment charges 8 0.7 % - - Gain on sale of assets (1 ) -0.1 % - - Operating income $ 282.3 % $ 654.8 % VTS net sales decreased $175 million, or 13 percent, in fiscal 2020 compared with the prior year, primarily due to lower sales volume, a $31 millionunfavorable impact of foreign currency exchange rate changes, and, to a lesser extent, unfavorable customer pricing largely resulting from contractually-scheduled price-downs. Sales to commercial vehicle, off-highway, and automotive customers decreased $64 million, $60 million, and $34 million, respectively. These sales declines largely result from weakness in global vehicular markets and the planned wind-down of certain commercial vehicle programs. VTS cost of sales decreased $133 million, or 11 percent, primarily due to lower sales volume and a $26 millionfavorable impact of foreign currency exchange rate changes. As a percentage of sales, cost of sales increased 150 basis points to 87.7 percent. Beyond the unfavorable impact of the lower sales volume, higher labor and inflationary costs and unfavorable customer pricing negatively impacted cost of sales by approximately 90 basis points and 70 basis points, respectively. Higher depreciation costs, primarily resulting from recent manufacturing capacity expansion in Chinaand Hungary, also negatively impacted cost of sales to a lesser extent. These negative impacts were partially offset by favorable material costs, which impacted cost of sales by approximately 30 basis points, improved operating efficiencies and cost savings from procurement initiatives. The favorable material costs primarily resulted from lower commodity pricing, which more than offset the negative impacts of tariffs.
En raison de la baisse des ventes et de la hausse des coûts de vente en pourcentage de
ventes, bénéfice brut en baisse
points 12,3 pour cent.
29 -------------------------------------------------------------------------------- Table of Contents VTS SG&A expenses decreased
$13 millioncompared with the prior year yet increased 20 basis points as a percentage of sales. The decrease in SG&A expenses was primarily due to lower compensation-related expenses, which decreased approximately $9 million, lower environmental charges related to previously-owned manufacturing facilities in the U.S, which decreased approximately $3 million, and a $3 millionfavorable impact of foreign currency exchange rate changes. Restructuring expenses during fiscal 2020 increased $1 million, primarily due to higher severance expenses resulting from targeted headcount reductions in Europeand in the Americas. During fiscal 2020, we recorded asset impairment charges totaling $8 million, primarily related to manufacturing facilities in Austriaand Germanyto write down property and equipment assets to fair value. We anticipate future cash flows at these facilities will be negatively impacted by planned wind downs of certain commercial vehicle and automotive programs.
Au cours de l’exercice 2020, nous avons conclu la vente d’une production précédemment fermée
Operating income in fiscal 2020 decreased
$37 millionto $28 million, primarily due to lower gross profit and higher impairment charges, partially offset by lower SG&A expenses. CIS Years ended March 31, 2020 2019 (in millions) $'s % of sales $'s % of sales Net sales $ 624100.0 % $ 708100.0 % Cost of sales 531 85.1 % 593 83.8 % Gross profit 93 14.9 % 115 16.2 % Selling, general and administrative expenses 57 9.2 % 61 8.6 % Restructuring expenses 2 0.3 % - - Impairment charges 1 0.1 % - 0.1 % Operating income $ 335.3 % $ 537.5 % CIS net sales decreased $84 million, or 12 percent, in fiscal 2020 compared with the prior year, primarily due to lower sales volume and a $12 millionunfavorable impact of foreign currency exchange rate changes. Sales to commercial HVAC&R and data center cooling customers decreased $43 millionand $38 million, respectively. CIS cost of sales decreased $62 million, or 10 percent, primarily due to lower sales volume and an $11 millionfavorable foreign currency exchange rate impact. As a percentage of sales, cost of sales increased 130 basis points to 85.1 percent, primarily due to the unfavorable impact of lower sales volume and unfavorable sales mix.
En raison de la baisse des ventes et de la hausse des coûts de vente en pourcentage de
ventes, bénéfice brut en baisse
points 14,9 pour cent.
Coûts SG&A CIS réduits
augmenté de 60 points de base en pourcentage des ventes. Réduction SG&A
les coûts sont principalement dus à la baisse des coûts liés à la rémunération, qui
Restructuring expenses during fiscal 2020 increased
$2 million, primarily due to higher equipment transfer and plant consolidation costs. We are currently transferring product lines to our manufacturing facility in Mexicoin order to achieve operational improvements and organizational efficiencies.
Au cours de l’exercice 2020, nous avons enregistré
usine de production précédemment fermée à
Les revenus d’exploitation de l’exercice 2020 ont diminué
en raison de la baisse du bénéfice brut, partiellement compensée par la baisse des coûts PS.
Table of Contents BHVAC Years ended March 31, 2020 2019 (in millions) $'s % of sales $'s % of sales Net sales
$ 221100.0 % $ 212100.0 % Cost of sales 150 67.7 % 149 70.1 % Gross profit 72 32.3 % 63 29.9 % Selling, general and administrative expenses 35 15.8 % 35 16.4 % Loss on sale of assets - - 2 0.8 % Operating income $ 3616.5 % $ 2712.6 % BHVAC net sales increased $9 million, or 4 percent, in fiscal 2020 compared with the prior year, primarily due to higher sales in the U.S., which increased $14 million, partially offset by lower sales in the U.K., which decreased $5 million. The higher sales in the U.S.were primarily driven by the increased sales of ventilation and heating products. The lower sales in the U.K.were primarily due to lower sales of air conditioning and ventilation products and a $3 millionunfavorable impact of foreign currency exchange rate changes, partially offset by higher data center sales.
Le coût de vente du BHVAC a augmenté
2020. En pourcentage, les coûts de vente ont été réduits de 240 points de base
67,7%, principalement en raison d’un mix commercial favorable et d’un client favorable
En raison de la hausse des ventes et de la baisse des coûts de vente en pourcentage de
ventes, bénéfice brut en hausse
pointe à 32,3 pour cent.
Les frais de vente, frais généraux et administratifs de BHVAC sont restés conformes à ceux de l’année précédente, mais ont été réduits de 60%.
points de base en pourcentage des ventes.
Au cours de l’exercice 2019, nous avons vendu notre entreprise en
enregistre une perte de
Bénéfice d’exploitation au cours de l’exercice 2020
en raison de la marge brute plus élevée.
Liquidité et ressources en capital
Our primary sources of liquidity are cash flow from operating activities, our cash and cash equivalents as of
March 31, 2020of $71 million, and an available borrowing capacity of $118 millionunder our revolving credit facility. Given our extensive international operations, approximately $31 millionof our cash and cash equivalents are 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. In response to lower customer demand resulting from the COVID-19 pandemic, we have taken actions to reduce operating expenses, conserve cash and maximize liquidity. These actions have included, but are not limited to, production staffing adjustments, furloughs, shortened work weeks, and temporary salary reductions at all levels of our organization. In addition, we are reducing operating and administrative expenses. Further, as described below, we are focused on reducing our capital expenditures and have executed amendments to our primary credit agreements to help ensure liquidity through financial covenant flexibility during the next two fiscal years. Together with anticipated cash flow from operations, we currently believe we have sufficient available cash and access to both committed and uncommitted credit facilities to adequately cover our funding needs on both a short- and long-term basis. However, we are continuing to monitor the impacts of COVID-19 on our business and the credit and financial markets. 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 and could adversely affect our access to capital and/or financing. 31 -------------------------------------------------------------------------------- Table of Contents Net Cash Provided by Operating Activities Net cash provided by operating activities in fiscal 2020 was $58 million, a decrease of $45 millionfrom $103 millionin the prior year. This decrease in operating cash flow was primarily due to lower operating earnings in the current year and payments for separation and project costs associated with our strategic review of alternatives for the VTS segment's automotive business, partially offset by favorable net changes in working capital. The favorable changes in working capital, as compared with the prior year, included lower employee benefit and incentive compensation payments. Net cash provided by operating activities in fiscal 2019 was $103 million, a decrease of $21 millionfrom $124 millionin fiscal 2018. This decrease in operating cash flow primarily resulted from unfavorable changes in working capital, partially offset by the favorable impact of stronger earnings. The unfavorable changes in working capital, as compared with the prior year, included higher incentive compensation and other employee benefit payments and higher inventory levels associated with higher sales levels.
Dépenses en capital
Capital expenditures of
$71 millionduring fiscal 2020 decreased $3 millioncompared with fiscal 2019, primarily due to lower capital investments in our VTS segment compared with the prior year, particularly in Chinaand North America. Similar to prior years, our capital spending in fiscal 2020 primarily occurred in the VTS segment, which totaled $53 million, and included tooling and equipment purchases in conjunction with new and renewal programs with customers, as well as $7 millionof capital investments associated with preparing our automotive business for a potential sale. In response to the economic impacts of the COVID-19 pandemic, we are taking steps to preserve our financial liquidity. As part of this initiative, we are focused on reducing our capital expenditures by delaying certain projects and the purchase of certain program-related equipment and tooling. At March 31, 2020, our capital expenditure commitments totaled $12 millionand primarily consisted of commitments for tooling and equipment expenditures in support of new and renewal programs in the VTS segment. Debt Our total debt outstanding increased $33 millionto $482 millionat March 31, 2020compared with the prior year, primarily due to additional borrowings during fiscal 2020. In response to the economic impacts of the COVID-19 pandemic, we executed amendments to our primary credit agreements in May 2020to provide additional covenant flexibility. The amendments temporarily raise the leverage coverage ratio limit during the next two fiscal years. Our credit agreements require us to maintain compliance with various covenants. 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. Under our primary credit agreements in the U.S., we are subject to a leverage ratio covenant, which requires us to limit our consolidated indebtedness, less a portion of our cash balance, both as defined by the credit agreements, in relation to our consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments ("Adjusted EBITDA"). The leverage ratio covenant limit was 3.25 to 1 through the fourth quarter of fiscal 2020. 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 March 31, 2020, we were in compliance with our debt covenants; our leverage ratio and interest coverage ratio were 2.4 and 8.1, respectively. In May 2020, as noted above, we executed amendments to our primary credit agreements that provide additional financial covenant flexibility during the next two fiscal years in light of the risks and uncertainties associated with the COVID-19 pandemic. We believe this additional flexibility will enable us to be compliant with our debt covenants, even if the adverse effects of the COVID-19 pandemic on our business are more severe than we currently anticipate. However, failure to comply with the debt covenants could result in an event of default, which, if not cured or waived, could result in us being required to repay borrowings before their due date. Under the amended agreements, the leverage ratio covenant limit is temporarily raised. For fiscal 2021, the leverage ratio covenant limit is 4.00 to 1, 4.75 to 1, 5.25 to 1, and 5.75 to 1 for the first, second, third, and fourth quarters, respectively. In fiscal 2022, the leverage ratio covenant limit is 4.75 to 1, 3.75 to 1, and 3.50 to 1 for the first, second and third quarters, respectively, and subsequently returns to 3.25 to 1 for the fourth quarter of fiscal 2022. We expect to remain in compliance with our debt covenants during fiscal 2021 and beyond.
Voir la note 17 pour les notes aux états financiers consolidés pour plus d’informations
des informations concernant nos accords de prêt.
32 -------------------------------------------------------------------------------- Table of Contents Off-Balance Sheet Arrangements None. Contractual Obligations March 31, 2020 Less than 1 More than 5 (in millions) Total year 1 - 3 years 4 - 5 years years Long-term debt
$ 468.9 $ 15.2 $ 42.6 $ 294.4 $ 116.7Interest associated with long-term debt 89.3 17.7 33.4 24.5 13.7 Operating lease obligations 71.8 12.8 20.7 12.1 26.2 Capital expenditure commitments 12.0 12.0 - - - Other long-term obligations (a) 9.9 1.9 3.1 3.0 1.9 Total contractual obligations $ 651.9 $ 59.6 $ 99.8 $ 334.0 $ 158.5
(a) Comprend les obligations de location-financement et autres passifs à long terme.
Our liabilities for pensions, postretirement benefits, and uncertain tax positions totaled
$145 millionas of March 31, 2020. We are unable to determine the ultimate timing of payments for these liabilities; therefore, we have excluded these amounts from the contractual obligations table above. We expect to contribute $20 millionto our U.S.pension plans during fiscal 2021.
Principales conventions comptables
The following critical accounting policies reflect the more significant judgments and estimates used in preparing our consolidated financial statements. Application of these policies results in accounting estimates that have the greatest potential for a significant impact on our financial statements. The following discussion of these judgments and estimates is intended to supplement the significant accounting policies presented in Note 1 of the Notes to Consolidated Financial Statements. In addition, recently issued accounting pronouncements that either have or could significantly impact our financial statement are disclosed in Note 1 of the Notes to Consolidated Financial Statements.
Reconnaissance des revenus
In fiscal 2019, we adopted new revenue recognition accounting guidance. In accordance with this new accounting guidance, we recognize revenue based upon consideration specified in a contract and as we satisfy performance obligations by transferring control over our products to our customers, which may be at a point in time or over time. The majority of our revenue is recognized at a point in time, based upon shipment terms. A limited number of our customer contracts provide an enforceable right to payment for performance completed to date. For these contracts, we recognize revenue over time based upon our estimated progress towards the satisfaction of the contract's performance obligations. We record an allowance for doubtful accounts for estimated uncollectible receivables and we accrue for estimated warranty costs at the time of sale. We base these estimates upon historical experience, current business trends, and current economic conditions.
Dépréciation des immobilisations
We perform impairment evaluations of long-lived assets, including property, plant and equipment and intangible assets, whenever business conditions or events indicate that those assets may be impaired. We consider factors such as operating losses, declining financial outlooks and market conditions when evaluating the necessity for an impairment analysis. When the net asset values exceed undiscounted cash flows expected to be generated by the assets, we write down the assets to fair value and record an impairment charge to current operations. We estimate fair value in various ways depending on the nature of the underlying assets. Fair value is generally based upon appraised value, estimated salvage value, or selling prices under negotiation, as applicable. 33 -------------------------------------------------------------------------------- Table of Contents The most significant long-lived assets we evaluated for impairment indicators were property, plant and equipment and intangible assets, which totaled
$448 millionand $106 million, respectively, at March 31, 2020. Within property, plant and equipment, the most significant assets evaluated are buildings and improvements and machinery and equipment. Our most significant intangible assets evaluated are customer relationships, trade names, and acquired technology, the majority of which are related to our CIS segment. We evaluate impairment at the lowest level of separately identifiable cash flows, which is generally at the manufacturing plant level. We monitor manufacturing plant financial performance to determine whether indicators exist that would require an impairment evaluation for the facility. This includes significant adverse changes in plant profitability metrics; substantial changes in the mix of customer products manufactured in the plant; changes in manufacturing strategy; and the shifting of programs to other facilities under a manufacturing realignment strategy. When such indicators are present, we perform an impairment evaluation. During fiscal 2020, we recorded asset impairment charges totaling $8 million, primarily related manufacturing facilities in Austriaand Germanywithin the VTS segment. See Note 5 of the Notes to the Consolidated Financial Statements for additional information.
We perform goodwill impairment tests annually, as of
March 31, unless business events or other conditions exist that require a more frequent evaluation. We consider factors such as operating losses, declining financial and market outlooks, and market capitalization when evaluating the necessity for an interim impairment analysis. We test goodwill for impairment at a reporting unit level. Reporting units resulting from recent acquisitions generally represent the highest risk of impairment, which typically decreases as the businesses are integrated into the Company and positioned for future operating and financial performance. We test goodwill for impairment by comparing the fair value of each reporting unit with its carrying value. We determine the fair value of a reporting unit based upon the present value of estimated future cash flows.
the fair value of a reporting unit exceeds the carrying value of the reporting unit's net assets, goodwill is not impaired. However, if the carrying value of the reporting unit's net assets exceeds its fair value, we would conclude goodwill is impaired and would record an impairment charge equal to the amount that the reporting unit's carrying value exceeds its fair value. Determining the fair value of a reporting unit involves judgment and the use of significant estimates and assumptions, which include assumptions regarding the revenue growth rates and operating profit margins used to calculate estimated future cash flows, risk-adjusted discount rates, business trends and market conditions. We determine the expected future revenue growth rates and operating profit margins after consideration of our historical revenue growth rates and earnings levels, our assessment of future market potential and our expectations of future business performance. The discount rates used in determining discounted cash flows are rates corresponding to our cost of capital, adjusted for country-specific risks where appropriate. While we believe the assumptions used in our goodwill impairment tests are appropriate and result in a reasonable estimate of the fair value of each reporting unit, future events or circumstances could have a potential negative effect on the estimated fair value of our reporting units. These events or circumstances include lower than forecasted revenues, market trends that fall below our current expectations, actions of key customers, increases in discount rates, and the continued economic uncertainty and impacts associated with the COVID-19 pandemic. We cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of goodwill. At
March 31, 2020, our goodwill totaled $166 millionrelated to our CIS and BHVAC segments. Each of these segments is comprised of two reporting units. We conducted annual goodwill impairment tests during the fourth quarter of fiscal 2020 by applying a fair value-based test and determined the fair value of each of our reporting units exceeded the respective book value.
From time to time, we make strategic acquisitions that have a material impact on our consolidated results of operations or financial position. We allocate the purchase price of acquired businesses to the identifiable tangible and intangible assets acquired and liabilities assumed in the transaction based upon their estimated fair values as of the acquisition date. We determine the estimated fair values using information available to us and engage third-party valuation specialists when necessary. The estimates we use to determine the fair value of long-lived assets, such as intangible assets, can be complex and require significant judgments. While we use our best estimates and assumptions, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statement of operations. We also estimate the useful lives of intangible assets to determine the amount of amortization expense to record in future periods. We periodically review the estimated useful lives assigned to our intangible assets to determine whether such estimated useful lives continue to be appropriate. 34 -------------------------------------------------------------------------------- Table of Contents Warranty Costs We estimate costs related to product warranties and accrue for such costs at the time of the sale, within cost of sales. We estimate warranty costs based upon the best information available, which includes statistical and analytical analysis of both historical and current claim data. We adjust our warranty accruals, which totaled
$8 millionat March 31, 2020, if it is probable that expected claims will differ from previous estimates.
Obligations de retraite
Our calculation of the expense and liabilities of our pension plans is dependent upon various assumptions. At
March 31, 2020, our pension liabilities totaled $134 million. The most significant assumptions include the discount rate, long-term expected return on plan assets, and mortality rates. We base our selection of assumptions on historical trends and economic and market conditions at the time of valuation. In accordance with U.S.GAAP, actual results that differ from these assumptions are accumulated and amortized over future periods. These differences impact future pension expenses. Currently, participants in our domestic pension plans are not accruing benefits based upon their current service as the plans do not include increases in annual earnings or for future service in calculating the average annual earnings and years of credited service under the pension plan formula. For the following discussion regarding sensitivity of assumptions, all amounts presented are in reference to our domestic pension plans, since our domestic plans comprise all of our pension plan assets and the large majority of our pension plan expense. To determine the expected rate of return on pension plan assets, we consider such factors as (a) the actual return earned on plan assets, (b) historical rates of return on the various asset classes in the plan portfolio, (c) projections of returns on those asset classes, (d) the amount of active management of the assets, (e) capital market conditions and economic forecasts, and (f) administrative expenses paid with the plan assets. The long-term rate of return utilized in both fiscal 2020 and 2019 was 7.5 percent. For fiscal 2021, we have also assumed a rate of 7.5 percent. A change of 25 basis points in the expected rate of return on assets would impact our fiscal 2021 pension expense by $0.4 million. The discount rate reflects rates available on long-term, high-quality fixed-income corporate bonds on the measurement date of March 31. For fiscal 2020 and 2019, for purposes of determining pension expense, we used a discount rate of 4.0 percent. We determined these rates based upon a yield curve that was created following an analysis of the projected cash flows from our plans. See Note 18 of the Notes to Consolidated Financial Statements for additional information. A change in the assumed discount rate of 25 basis points would impact our fiscal 2021 pension expense by less than $1 million.
Impôts sur le revenu
We operate in numerous taxing jurisdictions; therefore, we are subject to regular examinations by federal, state and non-
U.S.taxing authorities. Due to the application of complex and sometimes ambiguous tax laws and rulings in the jurisdictions in which we do business, there is an inherent level of uncertainty within our worldwide tax provisions. Despite our belief that our tax return positions are consistent with applicable tax laws, it is possible that taxing authorities could challenge certain positions. Our deferred tax assets and liabilities reflect temporary differences between the amount of assets and liabilities for financial and tax reporting purposes. We adjust these amounts to reflect changes in tax rates expected to be in effect when the temporary differences reverse. We record a valuation allowance if we determine it is more likely than not that the net deferred tax assets in a particular jurisdiction will not be realized. This determination, which is made on a jurisdiction-by-jurisdiction basis, involves judgment and the use of significant estimates and assumptions, including expectations of future taxable income and tax planning strategies. We believe the assumptions that we used are appropriate and result in a reasonable determination regarding the future realizability of deferred tax assets. However, future events or circumstances, such as lower-than-expected taxable income or unfavorable changes in the financial outlook of our operations in certain jurisdictions, could cause us to record additional valuation allowances.
Voir l’annexe 7 pour les notes aux états financiers consolidés pour plus d’informations
informations concernant l’impôt sur le revenu.
35 -------------------------------------------------------------------------------- Table of Contents Other Loss Reserves We maintain liabilities and reserves for a number of other loss exposures, such as environmental remediation costs, self-insurance reserves, uncollectible accounts receivable, regulatory compliance matters, and litigation. Establishing loss reserves for these exposures requires the use of estimates and judgment to determine the risk exposure and ultimate potential liability. We estimate these reserve requirements by using consistent and suitable methodologies for the particular type of loss reserve being calculated. See Note 20 of the Notes to Consolidated Financial Statements for additional information regarding contingencies and litigation.
Déclarations pour l’avenir
This report, including, but not limited to, the discussion under Item 7. 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 this report and identified in our other public filings with the
U.S. Securities and Exchange Commission. Other risks and uncertainties include, but are not limited to, the following:
Risques de marché:
• L’impact de la pandémie COVID-19 sur l’économie nationale et mondiale, la nôtre
entreprise, fournisseurs, clients et employés;
• conditions économiques, sociales et politiques, changements, défis et troubles,
en particulier sur les marchés géographiques, manufacturiers et financiers où nous sommes
les clients font des affaires et sont concurrentiels, notamment en devises étrangères
les fluctuations des taux de change; les droits de douane (et toute guerre commerciale potentielle en résultant
tarifs ou représailles); inflation; les changements de taux d’intérêt;
récession et reprise de celle-ci; limitations et incertitudes associées à
le commerce transfrontalier, les crises de santé publique, telles que les pandémies et les épidémies,
y compris la pandémie de COVID-19 en cours; et les incertitudes générales concernant
l’impact des changements réglementaires et / ou politiques, y compris ceux liés à la fiscalité
et le commerce, la pandémie de COVID-19 et d’autres questions qui étaient ou pourraient être
mis en œuvre en
quant aux implications à court et à long terme du «Brexit»;
• l’impact d’éventuelles hausses de prix liées aux matières premières,
y compris aluminium, cuivre, acier et acier inoxydable (nickel) et autres
les stocks de composants achetés, y compris, mais sans s’y limiter, une augmentation
les coûts des matériaux de base basés sur
primes ou coûts de fabrication. Ces prix peuvent être affectés par une multitude
facteurs, y compris les changements dans les lois commerciales et les tarifs, le comportement que nous avons
fournisseurs et les fluctuations importantes de la demande. Ce risque inclut le nôtre
la capacité de gérer avec succès l’exposition et notre capacité à adapter les produits
prix en réponse à des augmentations de prix, soit par le biais de notre processus de cotation
ou par le biais de dispositions contractuelles pour d’éventuels ajustements de prix, ainsi que
retard inhérent à la rédaction de ces dispositions contractuelles; je
• L’impact des lois et réglementations environnementales actuelles et futures sur les nôtres
les affaires et les affaires de nos clients, y compris notre capacité à prendre le relais
l’avantage de pouvoir proposer de nouvelles technologies alternatives pour répondre
normes et objectifs environnementaux et / ou énergétiques.
• État de santé général et concentration croissante des voitures sur la baisse des prix
clients à la lumière des facteurs et potentiels économiques et spécifiques au marché
impact sur nous de toute détérioration de la stabilité ou des performances de l’un des
our major customers; 36
• Problèmes inattendus avec des fournisseurs qui respectent notre temps, quantité, qualité et
les exigences de prix et la santé globale de nos fournisseurs, y compris leur capacité
et une volonté de répondre à nos besoins en volume si leur capacité de production est
• Notre capacité à maintenir les programmes utilisateurs actuels et pour lesquels nous sommes compétitifs
nouvelles affaires, y compris notre capacité à compenser ou à résoudre les problèmes
pressions sur les prix et réductions de prix des concurrents et services généraux
pressures from customers, particularly in the face of macro-economic instability;
• Difficultés inattendues de fonctionnement ou de production ou de fonctionnement
les inefficacités, y compris les lancements inattendus de programmes et les transferts de produits
défis et garanties et retards ou inefficacités qui en résultent
les restrictions imposées en réponse à la pandémie de COVID-19;
• Retards ou modifications inattendus initiés par les principaux clients dans le respect
lancer la programmation, les applications de produits ou les applications;
• Notre capacité à structurer de manière cohérente nos activités de développement et de développement
maintenir une base de coûts compétitive avec une main-d’œuvre qualifiée et stable,
et en même temps nous nous positionnons géographiquement pour continuer
soutenir nos clients avec une expertise technique et des produits de pointe
ils recherchent et attendent de Modina;
• Notre capacité à réduire efficacement et efficacement la structure des coûts
réponse à la baisse des ventes et à l’achèvement des activités de restructuration et
réaliser les avantages escomptés de ces activités;
• Coûts et autres effets des enquêtes et mesures correctives environnementales
contamination; surtout quand il se rapporte aux actions ou inactions des autres
et / ou des installations sur lesquelles nous n’avons aucun contrôle;
• Notre capacité à recruter et à maintenir des talents, y compris des cadres,
leadership and administrative functions, in light of tight global labor markets;
• Notre capacité à protéger nos informations exclusives et notre propriété intellectuelle
contre le vol ou l’attaque de sources internes ou externes;
• L’impact de perturbations importantes ou de violations importantes de nos informations
les systèmes technologiques et les retards, problèmes ou coûts associés;
• Lois et réglementations de plus en plus complexes et restrictives, y compris celles
lié à être
juridictions dans lesquelles nous opérons et coûts de conformité
• Retards ou perturbations dans nos installations ou dans nos plus grandes
clients et / ou fournisseurs;
• Pressions constantes et croissantes liées à la santé
insurance costs; and
• Coûts et autres effets de litiges, poursuites ou autres imprévus
obligations. Strategic Risks:
• Notre capacité à sortir avec succès de l’activité automobile dans notre segment VTS
in a manner that is in the best interest of our shareholders in order to optimize the segment's future financial performance;
• Notre capacité à réaliser avec succès les avantages escomptés de notre
présence «industrielle» sur le marché, avec nos sociétés CIS et BHVAC, tout en
maintenir une concentration appropriée sur les opportunités de marché offertes par nos VTS
• Notre capacité à reconnaître et à exécuter les opportunités de croissance et de diversification
order to position us for long-term success; and 37
• les impacts potentiels des actions imprévues des militants,
y compris l’interruption de nos activités et les coûts associés.
• Notre capacité à financer efficacement nos besoins mondiaux de liquidité pour Modine
opérations en cours et respecter nos obligations à long terme, en particulier à la lumière
volatilité importante et pression négative sur les marchés financiers
le résultat de la pandémie COVID-19 et en cas de perturbations ou de tensions
of the credit markets or extended recessionary conditions in the global economy;
• Impact des augmentations potentielles des taux d’intérêt, en particulier dans le LIBOR et
Taux interbancaire offert en euros (« EURIBOR ») par rapport à notre taux variable
obligations de dette et incertitude constante quant à l’utilisation
LIBOR ou taux de référence alternatifs;
• Notre capacité à respecter les dispositions financières modifiées dans notre solvabilité
accords, y compris notre ratio d’impact (endettement net divisé par le BAIIA ajusté,
tels que définis dans nos accords de prêt) et notre taux de couverture des intérêts
EBITDA divisé par les intérêts, tels que définis dans nos accords de prêt);
• impact négatif potentiel des fluctuations des taux de change
sur nos résultats financiers; je
• Notre capacité à réaliser efficacement les avantages des actifs d’impôts différés
les différentes juridictions dans lesquelles nous opérons.
Les déclarations pour l’avenir seront à partir de la date du présent rapport; nous ne supposons pas
toute obligation de mettre à jour les déclarations prospectives.
POINT 7A. ÉLIMINATION QUANTITATIVE ET QUALITATIVE DU RISQUE DE MARCHÉ.
In the normal course of business, we are subject to market exposure from changes in foreign currency exchange rates, interest rates, commodity prices, credit risk and other market changes.
Risque de change
We are subject to the risk of changes in foreign currency exchange rates due to our operations in foreign countries. We have manufacturing facilities in
Brazil, China, India, Mexico, and throughout Europe. We also have joint ventures in Chinaand South Korea. We sell and distribute products throughout the world and also purchase raw materials from suppliers in foreign countries. As a result, our financial results are affected by changes in foreign currency exchange rates and economic conditions in the foreign markets in which we do business. Whenever possible, we attempt to mitigate foreign currency risks on transactions with customers and suppliers in foreign countries by entering into contracts that are denominated in the functional currency of the entity engaging in the transaction. In addition, for certain transactions that are denominated in a currency other than the engaging entity's functional currency, we may enter into foreign currency derivative contracts to further manage our foreign currency risk. In fiscal 2020, we recorded a net gain of less than $1 millionwithin our statement of operations related to foreign currency derivative contracts. In addition, our consolidated financial results are impacted by the translation of revenue and expenses in foreign currencies into U.S.dollars. These translation impacts are primarily affected by changes in exchange rates between the U.S.dollar and European currencies, primarily the euro, and changes between the U.S.dollar and the Brazilian real. In fiscal 2020, more than 50 percent of our sales were generated in countries outside the U.S.A change in foreign currency exchange rates will positively or negatively affect our sales; however, this impact will be offset, usually to a large degree, with a corresponding effect on our cost of sales and other expenses. In fiscal 2020, changes in foreign currency exchange rates unfavorably impacted our sales by $46 million; however, the impact on our operating income was less than $3 million. Foreign currency exchange rate risk can be estimated by measuring the impact of a near-term adverse movement of 10 percent in foreign currency exchange rates. If these rates were 10 percent higher or lower during fiscal 2020, there would not have been a material impact on our fiscal 2020 earnings. We maintain foreign currency-denominated debt obligations and intercompany loans that are subject to foreign currency exchange risk. We seek to mitigate this risk through maintaining offsetting positions between external and intercompany loans; however, from time to time, we also enter into foreign currency derivative contracts to manage the currency exchange rate exposure. These derivative instruments are typically not accounted for as hedges, and accordingly, gains or losses on the derivatives are recorded in other income and expense in the consolidated statements of operations and typically offset the foreign currency changes on the outstanding loans. 38 -------------------------------------------------------------------------------- Table of Contents Interest Rate Risk We seek to reduce the potential volatility of earnings that could arise from changes in interest rates. We generally utilize a mixture of debt maturities and both fixed-rate and variable-rate debt to manage exposure to changes in interest rates. Interest on both our term loans and borrowings under our primary multi-currency revolving credit facility is based upon a variable interest rate, primarily either LIBOR or EURIBOR, plus 137.5 to 250 basis points, depending on our leverage ratio. For purposes of calculating the variable interest rate under our current credit agreement, LIBOR cannot be less than one percent. As a result, we are subject to risk of fluctuations in LIBOR and EURIBOR and changes in our leverage ratio, which would affect the variable interest rate on our term loans and revolving credit facility and could create variability in interest expense. As of March 31, 2020, our outstanding borrowings on variable-rate term loans and the revolving credit facility totaled $189 millionand $127 million, respectively. Based upon our outstanding debt with variable interest rates at March 31, 2020, a 100-basis point increase in interest rates would increase our annual interest expense in fiscal 2021 by approximately $3 million.
Risques liés aux biens et à l’approvisionnement
We are dependent upon the supply of raw materials and supplies in our production processes and, from time to time, enter into firm purchase commitments for aluminum, copper, nickel, and natural gas. Commodity price risk is most prevalent to our vehicular businesses, which provide customized production and service parts to customers under multi-year programs. In order to mitigate commodity price risk specific to these long-term sales programs, we maintain contract provisions with certain customers that allow us to prospectively adjust prices based upon raw material price fluctuations. These prospective price adjustments generally lag behind the actual raw material price fluctuations by three months or longer, and typically the contract provisions are limited to the underlying material cost based upon the
London Metal Exchangeand exclude additional cost elements, such as related premiums and fabrication. For our industrial businesses, we predominantly seek to mitigate commodity price risk by adjusting product pricing in response to any applicable price increases. In an effort to manage and reduce our costs, we have been consolidating our supply base. As a result, we are dependent upon limited sources of supply for certain components used in the manufacture of our products, including aluminum, copper, steel and stainless steel (nickel). We are exposed to the risk of suppliers of certain raw materials not being able or willing to meet strong customer demand (including the potential effects of trade laws and tariffs), as they may not increase their output capacity as quickly as customers increase their orders, and of increased prices being charged by raw material suppliers. In addition, we purchase parts from suppliers that use our tooling to create the parts. In most instances, and for financial reasons, we do not have duplicate tooling for the manufacture of the purchased parts. As a result, we are exposed to the risk of a supplier being unable to provide the quantity or quality of parts that we require. Even in situations where suppliers are manufacturing parts without the use of our tooling, we face the challenge of obtaining consistently high-quality parts from suppliers that are financially stable.
utiliser un programme de gestion des risques des fournisseurs qui utilise des
des outils tiers pour identifier et atténuer les situations avec les fournisseurs à haut risque.
Le risque de crédit
Credit risk represents the possibility of loss from a customer failing to make payment according to contract terms. Our principal credit risk consists of outstanding trade accounts receivable. At
March 31, 2020, 34 percent of our trade accounts receivable balance was concentrated with our top ten customers. These customers operate primarily in the automotive, commercial vehicle, off-highway, data center cooling and commercial air conditioning markets and are influenced by similar market and general economic factors. In the past, credit losses from our customers have not been significant, nor have we experienced a significant increase in credit losses in connection with the COVID-19 pandemic. 39 -------------------------------------------------------------------------------- Table of Contents We manage credit risk through a focus on the following:
• Trésorerie et placements – Nous examinons les dépôts en espèces et les placements à court terme
s’assurer que les banques ont des cotes de crédit acceptables et constituent des investissements à court terme
ils sont conservés dans des instruments sécurisés ou garantis. Nous pensons que nos investissements dans
la trésorerie et les investissements doivent être stables
• Créances clients – Avant d’approuver les prêts, nous évaluons chacun
l’acheteur, compte tenu de la situation financière de l’acheteur, du paiement
expérience et informations de crédit. Après l’approbation du prêt, actif
surveiller la situation financière du client et les nouvelles commerciales applicables;
• Actifs de retraite – Nous avons retenu les services de conseillers externes pour nous aider à gérer
actifs dans nos régimes de retraite. Nous l’utilisons pour prendre des décisions d’investissement
un protocole de gestion des risques établi axé sur la protection du plan
actifs contre le risque négatif. Nous nous assurons que les investissements dans ces plans
assurer une diversification appropriée, les investissements sont surveillés
les équipes de placement et les gestionnaires de portefeuille adhèrent aux investissements établis
politique. Nous pensons que les fonds du plan sont soumis à des investissements appropriés
politiques et contrôles; je
• Assurance – Nous surveillons nos assureurs pour l’assurer
des estimations financières acceptables pour nous. Nous n’avons identifié aucun
préoccupations à ce sujet sur la base de nos critiques.
De plus, nous sommes également exposés aux risques liés à nos exigences
clients pour abaisser les prix de nos produits. Nous essayons de compenser cela
risque avec des contrats fermes avec nos clients chaque fois que possible, mais ceux-ci
les accords contiennent parfois des dispositions pour de futures baisses de prix.
Risque économique et de marché
Economic risk represents the possibility of loss resulting from economic instability in certain areas of the world or downturns in markets in which we operate. We sell a broad range of products that provide thermal solutions to customers operating in diverse markets, including the automotive, commercial vehicle, off-highway, and commercial, industrial, and building HVAC&R markets. The COVID-19 pandemic has negatively impacted these markets; the duration and severity of the impacts of COVID-19 on these markets are currently uncertain. We are monitoring economic conditions in the
U.S.and abroad and the impacts associated with the COVID-19 pandemic. Considering our global presence, we also encounter risks imposed by potential trade restrictions, including tariffs, embargoes, and the like. We continue to pursue non-speculative opportunities to mitigate these economic risks, and capitalize, when possible, on changing market conditions. We pursue new market opportunities after careful consideration of the potential associated risks and benefits. Successes in new markets are dependent upon our ability to commercialize our investments. Current examples of new and emerging markets for us include those related to electric vehicles, coils and coolers in certain markets, and coatings. Our investment in these areas is subject to the risks associated with technological success, customer and market acceptance, and our ability to meet the demands of our customers as these markets grow.
Contrats à terme de couverture et de change
Nous utilisons des instruments financiers dérivés comme outil de gestion de certains instruments financiers
des risques. Nous interdisons l’utilisation de dérivés dérivés.
Commodity derivatives: From time to time, we enter into over-the-counter forward contracts related to forecasted purchases of aluminum and copper. Our strategy is to reduce our exposure to changing market prices of these commodities. In fiscal 2020 and 2019, we designated certain commodity forward contracts as cash flow hedges for accounting purposes. Accordingly, for these designated hedges, we record unrealized gains and losses related to the change in the fair value of the contracts in other comprehensive income (loss) within shareholders' equity and subsequently recognize the gains and losses within cost of sales as the underlying inventory is sold. In fiscal 2020, 2019 and 2018, net gains and losses recognized in cost of sales related to commodity forward contracts were less than
$1 millionin each year. 40 -------------------------------------------------------------------------------- Table of Contents Foreign currency forward contracts: We use derivative financial instruments in a limited way to mitigate foreign currency exchange risk. We periodically enter into foreign currency forward contracts to hedge specific foreign currency-denominated assets and liabilities as well as forecasted transactions. We have designated certain hedges of forecasted transactions as cash flow hedges for accounting purposes. Accordingly, for these designated hedges, we record unrealized gains and losses related to the change in the fair value of the contracts in other comprehensive income (loss) within shareholders' equity and subsequently recognize the gains and losses as a component of earnings at the same time and in the same financial statement line that the underlying transactions impact earnings. In fiscal 2020, 2019, and 2018, net gains and losses recognized in sales and cost of sales related to foreign currency forward contracts were less than $1 millionin each year. We have not designated forward contracts related to foreign currency-denominated assets and liabilities as hedges. Accordingly, for these non-designated contracts, we record unrealized gains and losses related to the change in the fair value of the contracts in other income and expense. Gains and losses on these non-designated foreign currency forward contracts are offset by foreign currency gains and losses associated with the related assets and liabilities. Counterparty risks: We manage counterparty risks by ensuring that counterparties to derivative instruments maintain credit ratings acceptable to us. At March 31, 2020, all counterparties had a sufficient long-term credit rating. 41
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