# DEAR
SHAREHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/NYSE_MOD_2019/NYSE_MOD_2019.mmd` · pages 3-9_

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DEAR
SHAREHOLDERS

![](images/3_1.jpg)

## FISCAL YEAR 2019 WAS
FULL OF BIG WINS FOR OUR
ORGANIZATION WITH OUR
SECOND CONSECUTIVE YEAR
OF RECORD REVENUE AND
EARNINGS.

Sales increased 5 percent to \(22.2 billion and we reported adjusted operating income of \)132 million—a 10 percent increase from the prior year. We closed out the year with adjusted earnings per share of \(1.57—up \)0.03 from the prior year.

Looking across our segments, our Building HVAC and Commercial and Industrial Solutions (CIS) businesses reported record-setting sales and great overall profitability. Meanwhile, our Vehicular Thermal Solutions (VTS) segment saw tremendous growth in a number of key markets, including China. However, overall profitability was hampered by tariffs and other ongoing challenges that directly impacted this part of our business.

While there is success to celebrate, our work is nowhere near complete. Never satisfied with the status quo, we're always innovating and always improving. As we look ahead to the coming year, we will continue to build on our Strengthen, Diversify and Grow (SDG) strategy by pursuing opportunities that best align with our vision for the future.

## BUILDING OUR PORTFOLIO

Our industrial businesses have propelled our organization forward toward our vision of becoming the fastest-improving diversified global industrial thermal management company. In FY2019, our CIS business had a record-breaking year with $708 million in net sales. This segment is delivering exactly what we wanted—more diversification in our portfolio, more earnings power, and better cash flow. Our Building HVAC segment also had a record-breaking year, with sales of $212 million, up 11 percent as compared to the prior year. This segment continues to excel in its markets, benefiting from a strong North American heating season and by continued growth and market share gains in the U.K.

Importantly, the success of these businesses is also providing Modine with the option to consider other opportunities to further diversify our business. Today, we are better positioned to take a critical look at our entire business portfolio. As previously announced, we have performed a strategic review of our products and end markets to ensure we have the right mix of business that will not only continue to build and move Modine forward, but drive maximum value back to our shareholders.

## MOVING OUR FOCUS

Today, our vision is clearer than ever. As we look ahead, we cannot help but look at our past. We've built our business on a foundation that is deeply rooted in the vehicular industry. We're proud of who we are and where we came from. Our 100+ year connection to this industry provided us with the experience, talent and resources to persevere in tough economic times. However, as a company, we've never used our history as an excuse to rest on our laurels. At Modine, we're always improving and always moving forward.

We are excited by the many opportunities we see with our off-highway and commercial vehicle customers in our vehicular segment, and remain

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committed to this business. The way these markets operate, and the mindset of their end-users, align strongly with our purely industrial customers. In the coming year, we plan to shift VTS resources towards these more favorable markets.

In today's environment, the automotive market is proving to be a challenge when we consider our vision for the future. The way Modine operates, sells, and invests within this market is vastly different from any other part of our business. These operational differences, when combined with growing tariffs and increasingly demanding capital investment, are causing us to think critically about this part of our business, and to evaluate our strategic options including a potential sale. Imperative to our decision will always be the interests of our shareholders and customers worldwide. We promise to keep you informed as we move through this process.

## BUILDING CULTURE

Since implementing our Modine Operating System (MOS) nearly 14 years ago, we've steadily been building our company's culture. Centered on MOS principles and a model of mentored leadership, our culture is maturing globally, to a point where a mindset of continuous improvement now permeates our entire organization. However, as always, there is room for improvement.

As a company, we will continue to develop our people and strengthen our culture, beginning with our leadership team and cascading through every level of our business. We feel our future success is dependent on our ability to not only lead, but mentor, in order to build a trusting environment where everyone feels empowered and encouraged to bring ideas, issues, and solutions forward. We have an ambitious vision for the future and we will only succeed if we move together as a united force where we all play an active role in building our business through ongoing continuous improvement.

## ALWAYS MOVING. ALWAYS BUILDING.

Every day, we continue to move incrementally closer to our goal of becoming a top-quartile performing company with a strong, well-diversified portfolio. Continuous improvement is at the core of who we are. Moving forward, we will continue to deliver on our promises and build our business in a way that instills confidence amongst our shareholders so they can count on us for stable growth in earnings and cash returns.

In the coming year, we will be working globally to determine how we can best put our resources to work to yield the best returns possible. Our vision is to purposefully grow in areas where we can establish meaningful market positions and yield predictable year-to-year performance. We are confident that increased cash flow, when combined with the tremendous talent we have within the company, will enable Modine to not only participate in the ongoing innovation of new products, but in exciting opportunities for inorganic growth.
Today, Modine is stronger than ever. Our recent track record of success through our ongoing SDG strategy confirms that we are on the right path and gives us the confidence to make critical decisions about our future. We feel there is a tremendous amount of value still to be unlocked in this business. Looking ahead, we are excited by the opportunities in front of us to add value to our shareholders as we continue to build our business and move the thermal management industry forward. Together, we celebrate the great successes Modine experienced this year. Thank you for your ongoing support.

Sincerely,

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Thomas A. Burke
President and Chief Executive Officer

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Marsha C. Williams
Lead Independent Director