# DEAR SHAREHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/NYSE_MOD_2021/NYSE_MOD_2021.mmd` · pages 3-9_

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DEAR SHAREHOLDERS

First of all, allow me to say how pleased and honored I am to be leading this great company and serving all of you. We started our fiscal year responding to the initial impact of the pandemic, sending employees home to shelter in place, and temporarily closing various plants around the world. Our focus was on the health and safety of our employees and stakeholders.

I'm so pleased with how the organization came together and met the many challenges presented in those early days, often while working remotely. One of those challenges involved the automotive exit strategy, which was necessarily paused during the height of the crisis. Once we were able to resume activities, the team moved forward with marketing two smaller deals.

After a challenging first quarter, we emerged stronger than expected in the second quarter. By the end of the fiscal year, we had reached agreements to sell both the liquid-cooled and air-cooled automotive businesses in two separate transactions. We recently closed on the sale of the air-cooled business, and continue to diligently execute on the remainder of our automotive exit strategy. Although the challenges were substantial, we delivered on our commitments. I am impressed by the performance of this team and confident in their ability to achieve great things even under less than ideal circumstances.

I am frequently asked what drew me to this opportunity and to be honest, it seemed to be a perfect fit. I've spent the past 20 years of my career accelerating growth using tools and processes designed to unlock value. In my experience, 80/20 has been an excellent first step in this process. The 80/20 practice is a systematic way of examining a business using data analytics to focus resources on the products and markets with the highest growth and best returns. The more I studied Modine, the more I was convinced that reducing complexity, improving our commercial acumen and redesigning our organizational structure would unlock and unleash the potential inherent in this business. Going forward, we will transform our business by aligning our resources around our best opportunities in our strongest and most attractive markets.

Have there been any surprises since I joined Modine? In a word, yes.

I am pleasantly surprised by the many strengths of this organization, including superior products and technologies, a strong and knowledgeable employee base, and a collaborative culture with a willingness to change. Over the past few months, I've visited most of our North American facilities and it is clear that we are experienced operators with the ability to manage and overcome the obstacles inherent in running a global business. This company has tremendous assets and great potential. Now that the automotive exit is well underway, it is time to focus and provide resources to those parts of the business that are ripe for growth.

## THE YEAR IN REVIEW

Overall, because of the pandemic, sales decreased eight percent to \(1.8 billion and adjusted EBITDA decreased six percent to \)165 million. Most of this decrease resulted from the economic slowdown and related plant closures in our first fiscal quarter. Our cash flow performance was particularly strong this year, due primarily to the spending controls enacted in response to the pandemic. Free cash flow increased \(130 million to \)117 million.

Looking across our segments, our Building HVAC business continued to shine, with sales up nine percent from the prior year. This was driven by a nearly 40 percent increase in sales to the data center market, primarily to co-location customers. The continued success of this business is key to Modine, and will be one of our early areas

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of focus for growth. Sales in other segments were down year-over-year with the Commercial and Industrial Solutions (CIS) segment down 15 percent, Heavy Duty Equipment (HDE) down nine percent and Automotive down ten percent. We expect our end markets to continue to improve in Fiscal Year 2022 leading to a return to pre-COVID level growth.
It is still early in this process but the future is bright. We navigated the pandemic with a focus on employee safety while remaining committed to serving our customers and protecting our financial security. This involved a great deal of flexibility and commitment from our workforce and they certainly rose to the challenge. Our talent is our greatest resource and I am passionate about

# "It is time to focus and provide resources to those parts of the business that are ripe for growth."

## AN INFECTION POINT

This is an inflection point for Modine. Much of our work over the past several years has been reactive in nature, countering the negative forces that have impacted our margins and limited our growth. This forced us to continually focus on improving our cost structure and operating efficiency to remain competitive in challenging markets. As we worked to strengthen and diversify our business, we made the important decision to exit the automotive business. While that is a key step in our transformation, it is only the beginning.

As we pivot away from some of these markets, we can be more proactive in our choices. We can put our best talent and technology to work in those areas with the best underlying growth trends.

## A NEW JOURNEY

Here at Modine, we often talk about being on a journey. We are clearly at the beginning of this journey, deciding on a destination and planning our route. We are analyzing the data to segment our business by end-market and evaluating what we need to do more of, and what we need to stop. Now is the time to chart a new course and execute our growth strategy.

We will run the business with a different organizational structure based on markets, with general managers empowered to make decisions and held accountable for results. We will unleash our entrepreneurial spirit and deliver products that provide mission critical solutions. This structure will improve our key account and channel management, reducing complexity and accelerating our decision making. We will get the right people in the right roles, redeploying our talented resources to areas with the greatest market potential. In addition, we will evaluate where we need to grow faster and will look for inorganic opportunities to add to the portfolio.
having a human capital management strategy that gets the right people in the right jobs. The transformation of our business creates a great opportunity for our employees to become more engaged as we focus on the new technologies that will allow our customers to operate in this changing world. We thrive on innovation, and we will continue to build and develop the right team to lead us into the future.

Here at Modine, our strength is our ability to design products that better the world around us. Whether it's improving indoor air quality or facilitating the transition to alternative powertrains, our customers turn to us in response to ever-increasing regulations, and because creating a cleaner environment is the right thing to do. We improved lives throughout the pandemic by providing products that helped to purify the air and keep vaccines cold during transport. We'll continue to focus on those opportunities that improve our world including better ventilation in our schools, more energy efficient data centers, and cleaner running electric vehicles. We will accomplish this by designing systems for our customers that reduce water and energy consumption, lower harmful emissions, and use more environmentally friendly refrigerants. This is our purpose, and why I'm so excited to be part of this great company.

There is a lot of work to do but we have the right tools in the toolbox and a team ready and willing to change. We will get there together.

Thank you for your ongoing support.

Sincerely,

Neid Brill
Neil D. Brinker / President and Chief Executive Officer

Mudun Linne

Marsha C. Williams / Chairperson, Board of Directors